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Assessing the U.S. House of Representatives’ SPACE Act of 2015 (H.R. 2262) and the related U.S. Senate Bill (S. 1297), Part IV – Providing for or Allocating On-Orbit (or In-Space) Jurisdiction

© Matthew Schaefer. All rights reserved.

On-Orbit (or as some like to call it, “In-Space”) jurisdiction or regulatory authority seems like legal jargon but it is an important issue. Under Art. VI of the OST, the United States is obligated to “authorize and continually supervise” it’s non-governmental, including commercial, actors space activities. For launch activities and re-entry activities, the Congress has expressly allocated licensing authority to the FAA. However, the legislative history of amendments to the Commercial Space Launch Act indicates that Congress did not intend to allocate licensing authority to the FAA for in-space or on-orbit activities.

Certainly, Congress has allocated licensing authority over selected activities in-space or on-orbit to particular federal agencies. The FCC licenses or allocates radio frequency use connected with space activities (both launch and in-space). NOAA licenses remote sensing satellites, or, more accurately, those satellites capable of sensing the Earth. The FCC and FAA impose debris mitigation requirements on licensees. But outside of spectrum use, remote sensing and debris mitigation, currently no Executive Branch agency maintains clearly delineated authority to license or regulate on-orbit or in-space activities. Those activities might include asteroid mining, on-orbit servicing of satellites, active space debris removal, space hotels and private research labs, amongst others.

The lack of on-orbit or in-space licensing authority likely does not impact sub-orbital flights because one might say the launch and reentry of such vehicles is relatively seamless — with tourists enjoying 5-10 minutes of weightlessness.  Indeed, the regulations actually define “launch” of a reusable launch vehicle for sub-orbital flight as only ending when the vehicle touches down – so the launch license already covers everything, i.e. in essence, at least from a regulatory perspective, there is no in-space activity or reentry in such a case. But for the other activities, the United States obligation to “authorize and continually supervise” may not be provided for in the current U.S. system.

Some have suggested leveraging launch licensing authority, perhaps under the guise of the payload safety review, to at least create non-interference zones. Indeed, the FAA does institute a non-interference zone around the ISS.   And, FAA said as much to Bigelow Aerospace in its request in the form of a payload safety review. At the time the FAA response became public earlier this year, I blogged the following:

“The US government (FAA AST in consultation with State Dept., Dept. of Defense, NASA, NOAA and other agencies) is saying that it will use its current launch licensing authority as best it can to protect space facilities, hardware and personnel by ensuring zones of non-interference with commercial operations.  The zones of non-interference will only apply vis a vis others being licensed by FAA AST, largely US corporations.  The decision is a sign that the US government is fully engaged in this issue and recognizes the importance of protecting and stimulating private sector investments in new space activities; it puts some “meat” on the “bones” of long-standing US policy to “advance U.S. leadership in the generation of new [space] markets.”  Hopefully, the federal government’s engagement in this issue leads to further steps in the next year or two by the US Congress: ….[including] to establish a licensing or registration regime for on-orbit or in-space activities that does not over-regulate in a manner that stifles investments in new activities but allows the US government to meet its minimal obligations under the Outer Space Treaty Art. VI to “authorize and continually supervise” US commercial activities in outer space.”

However, the FAA is understandably hesitant/resistant to stretch such leveraging authority too far – into a wholesale regulation of on-orbit activities – given the legislative history/intent. House Committee Report 105-347, part of the legislative history of the 1998 amendments adding “reentries” to FAA’s “launch” licensing authority, states:

“The Committee wishes to make clear that the Secretary has no authority to license or regulate activities that take place between the end of the launch phase and the beginning of the reentry phase, such as maneuvers between two Earth orbits or other non-reentry operations in Earth orbit; or after the end of a launch phase in the case of missions where the payload is not a reentry vehicle.”

Neither H.R.2262 and S.1297 go so far as to allocate or delegate on-orbit or in-space authority to any Executive Branch agency. H.R. 2262 in the property rights section of the bill (Sec. 202) calls for the following:

“Report Required.–Not later than 180 days after the date of the enactment of this section, the President shall submit to Congress a report that contains recommendations for–

(1) the allocation of responsibilities relating to the  exploration and utilization of space resources among Federal agencies; and

(2) any authorities necessary to meet the international  obligations of the United States with respect to the exploration and utilization of space resources. (emphasis added).”

Thus, the required report does not address authorities or jurisdiction over on-orbit activities generally, rather only with respect to exploration and utilization of space resources. Another section of H.R. 2262 (Sec. 109 labeled orbital traffic management) calls for a study by an independent contractor related to US space traffic management and orbital debris practices and authorities over space traffic and debris in the agencies. It thus touches on but does not fully encompass the broader issue of authority or jurisdiction over on-orbit or in-space activities.

S.1297 addresses on-orbit or in-space regulatory authority in broader terms than the House bill. Sec. 7 of S.1297 provides:

“Not later than 120 days after the date of enactment of this Act, the Director of the Office of Science and Technology Policy, in consultation with the Secretary of State, the Secretary of Transportation, the Administrator of the National Aeronautics and Space Administration, the heads of other relevant Federal agencies, and the commercial space sector, shall—

(1) assess current, and proposed near-term, commercial non-governmental activities conducted in space;

(2) identify appropriate oversight authorities for the activities described in paragraph (1);

(3) recommend an oversight approach that would prioritize safety, utilize existing authorities, minimize burdens, promote the U.S. commercial space sector, and meet the United States obligations under international treaties; and

(4) submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Science, Space, and Technology of the House of Representatives a report on the assessment and recommended approaches. (emphasis added).”

The Senate’s language (in S.7) is likely preferred to the House bill’s (Sec. 202) narrow property-rights only view of the need for an Executive Branch report on-orbit regulatory authority, specifically any new authorities needed. Asteroid mining is only one of many future on-orbit activities as noted above. The Senate bill focuses on current and “near-term” new activities – without defining what “near term” means (i.e. 3 years? Five years? Ten years?) – and what authorities will be needed for those. S. 7, Clause 3’s direction to “recommend an oversight approach that would prioritize safety, utilize existing authorities, minimize burdens, promote the U.S. commercial space sector, and meet the United States obligations under international treaties,” seems sound as well. Whether the Administration can issue such a report within 120-180 days might be questioned as it’s a difficult, sensitive issue when one is essentially debating which agency has (or should have) what powers.

Clearly, any on-orbit licensing will require an inter-agency process given the expertise within different agencies and the variety of on-orbit activities planned for the future. Moreover, ultimately it will be Congress that will have to act to give on-orbit or in-space regulatory authority to an Executive Branch agency (that will run the inter-agency process). Congress need not lay out the who (what agency), how, and what (needs be licensed or regulated) immediately. There is always a possibility to use (or even very modestly stretch?) current authorities for some activities that creep up earlier than expected. Moreover, many on-orbit activities are in still in the planning or early developmental stages.   Some investors may want certainty as to the on-orbit or in-space licensing processes earlier rather than later; but most may wish for a delay to prevent any risk of adoption of an inappropriate or overly complex framework, created without benefit of first seeing the activities that come to market.  Likewise, some government agencies may wish to have a framework in place sooner rather than later to minimize any diplomatic complaints, possibly serve as a model for other nations, and ensure compliance with international obligations. There are hints of this tension in the Senate bill as it requires a report by the Executive Branch, thus seeming to want to push the process along sooner, but the focus on current and “near term” activities suggests some sympathy to treading more slowly as activities occur. In sum, a framework for regulation of on-orbit activities is not immediately necessary, but putting in place a process to push forward the discussion is likely a very good idea.

A reporting requirement, like that found in Sec. 7 of S.1297, can potentially push forward the debate. A detailed report could give Congress sufficient information to eventually establish a framework and delegate on-orbit authority to an agency before new on-orbit activities become a reality (and if necessary before investment in such activity is hindered, or diplomatic costs become significant, from the lack of a framework). The House bill’s section 109 – focused on orbital debris and space traffic management — can likely live separately in a common bill with Sec. 7 of S.1297 focused on on-orbit jurisdiction and authority more broadly.

Make no mistake – any on-orbit authority or framework ultimately adopted can be “lite” or “light” in nature (i.e. minimally burdensome). It need not be heavy handed or onerous for the US to live up to its obligations to “authorize and continually supervise” its commercial space activities in Art. VI of the OST. That language does not require 24-7 monitoring and it does not mean chewing gum or brushing one’s teeth in space needs authorization.  The lead sentence of OST Art. VI provides: “States Parties to the Treaty shall bear international responsibility for national activities in outer space, including the moon and other celestial bodies, whether such activities are carried on by governmental agencies or by non-governmental entities, and for assuring that national activities are carried out in conformity with the provisions set forth in the present Treaty.”  Thus, the “authorize and continually supervise” language does require is for the US to have a system in place that ensures that its commercial actors comply with other obligations within the OST – and those are rather limited. For example, the US needs to ensure commercial actors comply with the two-way anti-contamination obligations in Art. IX (“avoid … harmful contamination [of celestial bodies] and also adverse changes in the environment of the Earth resulting from the introduction of extraterrestrial matter…”), and the like.  But also make no mistake – Art. VI is an obligation of the United States that it must live up to – and should want to — since we certainly want other countries doing so to prevent reckless actors or activities in space, particularly given the US is the largest user of space.  Moreover, it is likely the case that beginning a process to address in-orbit regulatory authority will dampen some, but certainly not all, of the diplomatic complaints surrounding the property rights portion of any bill, if they survive a likely House-Senate conference committee.

[For those interested in more international space law background on the issue of in-space or on-orbit jurisdiction, please keep an eye out for my colleague Frans von der Dunk’s article in Vol. 40 of the Journal of Space Law due out in print early next year.]

More blog posts analyzing H.R. 2262 & S. 1297 coming soon; if you are interested in earlier blogs just scroll down from the current one. Blogs already posted on H.R. 2262 & S. 1297 include:

Part I: Liability for Space Flight Participant Injury

Part II: Third-Party Liability

Part III: MPL Calculations

Part IV: On-Orbit or In-Space Jurisdiction/Regulatory Authority

(©Matthew Schaefer. All rights reserved).

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Competitiveness in the Launch Services Industry – Impact of Various Factors in the Launch Contract and in Liability Provisions of Government Launch Regulations

As I mentioned in my last blog, the ABA Air and Space Forum had an interesting Space Law Symposium last week.  Included among the panels was one on launch vehicle contracts that had representatives from SpaceX, Arianespace, and ILS.  One important perspective to examine and compare some of the topics covered and main points made at the ABA Symposium’s launch contracts panel is competitiveness.  Keep in mind price is likely the primary factor in customer decisions, but price can be influence by many other factors:

  1. Dispute Settlement: Arbitration is the typical dispute settlement mechanism chosen in launch contracts, although disputes are often settled more informally. No surprise given that many customers are repeat customers and arbitration has become a bit more litigation-like, in terms of increase costs, length of proceedings, etc. It used to be thought that arbitration was preferable to litigation in part because companies were better able to preserve existing business relations, but in the space industry launch companies are leery of even resorting to the arbitration clause except in the most extreme circumstances due to the desire to keep existing customers and the competition among launch companies (i.e. fear of customer contracting with a competitor).
  2. Export Credit: Both the US Ex-Im Bank and the French export credit agency (COFACE) are involved in satellite manufacture and launch financing. Indeed, Ex-Im’s satellite financing is the fastest growing sector in its portfolio. This development eliminates the competitiveness disadvantage that would occur to US launch companies and satellite manufacturers if COFACE was in the game and Ex-Im Bank was not. ILS in turn is interested in taking advantage of a new Russian export loan guarantee program. Interestingly, COFACE financing can even indirectly benefit US launch providers. For example, COFACE was involved in financing Iridium satellites built by Thales Alenia and launched by SpaceX. Sure enough, since the financial crises of 2008, export credit agencies are playing an increasingly important role in satellite deals.
  3. Space Insurance & Re-Launch Guarantees: Although launch companies often offer re-launch guarantees, they are rarely part of the launch contract as they are not a popular option among launch customers. Customers prefer to purchase launch insurance in a package of insurance coverages that might lessen total insurance cost and keeping in mind that re-launch guarantees do not come for free – one way or another they have to be built into the launch price. Thus, launch companies are not competing amongst one another through the offering of re-launch guarantees – offering such policies has little to no impact on competitiveness. (One additional interesting note – a few customers do not purchase launch insurance and simply self-insure against such a possibility or assume the risk).
  4. Third-Party Liability: France caps third-party liability of Arianespace launches at roughly 60 million euro. Arianespace purchases insurance for that amount but is not responsible for any damages exceeding that amount. Russia, in essence, caps liability for large rocket launches such as the Proton at $300 million dollars. In the United States, a three-tiered regime exists: In the first tier, launch companies must obtain insurance covering the Maximum Probable Loss (MPL) –it averages around $80-90 million, although recent SpaceX launches have MPL’s as low as $36 million. In the second tier, the US government promises to indemnify companies for the next $2.8 billion in third-party damages, although it is important to realize that in order for this promise to be realized it will take an appropriation law passed by Congress.  Further, this promise of indemnification has lapsed for short periods and has only been extended for one to three years when renewals have occurred recently. The current promise of indemnification expires January 2017. In the third-tier, that applies whenever third-party damage exceeds the first-two tiers ($2.8 billion plus MPL), the liability reverts to the operator. In short, US launch industry’s competitors benefit from a third-party liability cap while the US launch industry relies on limited promises of government indemnification. Since liability regimes impact contractual negotiations and could ultimately impact launch price, US industry is placed at a competitive disadvantage in this respect.

(c) Copyright: Matthew Schaefer.  All Rights Reserved.