US companies already find it challenging to compete in the commercial launch market; losing indemnification, they argue, would make a bad situation even worse. (credit: Lockheed Martin)

Boring but important policy developments

by Jeff Foust
Monday, November 2, 2009

One of the sections of The Week, the weekly magazine that aggregates news stories and commentary from publications around the world, is titled “Boring but Important”. It’s intended to highlight news items that aren’t as flashy or compelling as the leading news items, but are still worth learning about. (Coincidentally, the latest issue’s “Boring but Important” section calls out last week’s Ares 1-X test flight and the ongoing debate about the future of the nation’s space policy.)

Space policy itself has its share of “boring but important” issues. While most attention has recently focused on the Augustine committee and how the White House and Congress may change NASA’s exploration plans and funding level, there are a number of other issues that don’t get the same level of attention but nonetheless are important. A couple of those issues are making slow but—hopefully—steady progress, as discussed last week at a Washington meeting.

Launch indemnification

A little-known provision of federal law—even for some in the space industry—provides some protection to commercial launch providers in the event of a catastrophic accident. Launch providers are required to carry insurance against any losses incurred by third parties as a result of a launch accident, up to a level called the maximum probable loss (MPL), as determined by the FAA’s Office of Commercial Space Transportation during the launch licensing process. Should an accident result in losses above that MPL level, the government would have the option to pay any claims above that level, up to an additional $1.5 billion (in 1998 dollars; about $2 billion today). In the highly unlikely event that damages exceed even that level, responsibility for the additional claims would fall back to the launch provider.

That provision, in place since the late 1980s, is considered essential by the US commercial launch industry. While the government has never had to pay out any claims, the existence of government indemnification assures providers that they’ll be able to get sufficient insurance, particularly given the limited insurance capacity in the space market. Without it, those in the industry fear, the US commercial launch sector would become even less competitive with international providers who have similar protection.

One problem with the indemnification provision is that it is not permanent: it must be renewed by Congress every few years, providing a periodic battle between those in industry who would like to see a longer, if not permanent, extension, versus those who wonder whether the provision is no longer necessary. That’s what is happening now, although it appears the status quo—another relatively short-term extension—will again prevail.

Congress last dealt with the indemnification provision in 2004, providing a five-year extension that runs through the end of this year. With another extension needed, the House passed by a voice vote last month HR 3819, a remarkably succinct bill that does nothing more than extend the provision by another three years, through the end of 2012. The Senate will likely approve the bill in the near future as well.

“The commercial space transportation liability and insurance regime has worked, [and] has not cost the American taxpayer a single dollar in claims payments to date,” Congressman Bart Gordon, chairman of the House Science and Technology Committee and the member who introduced the bill, in a statement after the House passed the bill.

For the industry, the extension is a mixed bag. They do not get the long-term extension that they are seeking. However, unlike the previous extension, the bill doesn’t mandate a study of whether government indemnification is still required, moves that in the past have raised concerns that Congress might seek to phase out indemnification at some point.

“It’s not exactly what we’re looking for, but it certainly is a helpful extension,” said Chris Kunstadter, vice president of XL Insurance and chair of the risk management working group of the Commercial Space Transportation Advisory Committee (COMSTAC) during a presentation at the COMSTAC meeting in Washington last week.

Asked at the meeting why the indemnification provision is being extended for only three years, Kunstadter suggested that it was perceived as a “stopgap measure” while larger policy issues associated with the change in administrations are worked out. “We certainly would have liked an unlimited extension and would have been happy with a 10- or 20-year extension; five years would have been acceptable,” he said. “Three years is what we got.”

Export control reform

A decade-long concern for the US space industry has been export control regulations. Since satellites and related components were put under the jurisdiction of the International Traffic in Arms Regulations (ITAR), space businesses, including manufacturers or commercial satellites and their subsystems, have raised the alarm that the stricter ITAR rules were hurting their ability to sell to customers outside the US, even to close allies. Companies, industry organizations, and their supporters have sought for much of this time to at least partially roll back those changes to enhance their competitiveness.

While the drumbeat for reform isn’t necessarily as loud as it was a few years ago, thanks in part to procedural changes that have reduced the backlog of, and waiting time for, export license applications, there is now real evidence of progress towards the reforms the industry has sought. A section of HR 2410, a State Department authorization bill that the House approved in June, deals with export control and includes a number of key reforms that the industry has been seeking.

“It accomplishes many, if not almost all, of the things that people in the export control reform movement have been dreaming of for quite a while,” said Mike Gold, director of the Washington office of Bigelow Aerospace and a leading advocate for export control reform, during a presentation at the COMSTAC meeting last week.

One key component is what Gold called a “review and revision” of the US Munitions List (USML), the compilation of components that are subject to ITAR. The bill would require a review of at least 20 percent of the USML every year for five years to determine if items should be removed from the list. After the five-year period the review would start over to allow updates based on advances in technology.

Another aspect of the bill would give the President the ability to remove satellites and related components from the USML, although it would still not allow the export of such items to China. The bill language would also require the public release of what are known as commodity jurisdiction determinations, when the State Department evaluates whether a specific technology belongs on the USML or not.

The good news for export control reform advocates is that the bill has passed the House. The bad news, as Gold explained, is that the Senate has taken no action on the bill yet, and there’s no indication when—or even if—they will take up the legislation before the end of the next year. “To be honest, we haven’t even heard any good rumors as to if this is something that rises to the level of priority” that the Senate will take action on, Gold said.

Key to the future of the bill is Senator John Kerry (D-MA), chairman of the Senate Foreign Relations Committee. “If Senator Kerry chooses to prioritize export control reform, it most likely will get done,” Gold said.

Gold also noted there is a review of export control policy going on within the new administration, although that may be of limited effectiveness for the space industry since the inclusion of satellites and related components on the USML was done in legislation and therefore must be undone that way. However, he said that the actual law does provide some “wiggle room” for the administration to change how it implements that law, if it so chooses. “If there isn’t a legislative fix, there is still the possibility—certainly not a strong possibility, but the potential anyway—of the executive branch doing something helpful unilaterally,” he said.

To some, it might appear the administration is already doing that, with its presidential determination in September that shifted authority for approving missile and space technology exports to China from the President to the Secretary of Commerce (see “How competitive is commercial launch?”, The Space Review, October 19, 2009). However, Gold said that this was not a significant shift in policy. “There has been no substantive change whatsoever in our export control policy relative to China, or space and missile technology as a whole at all,” he said. “The only thing that was done was virtually a superficial change” and was not an indication of any potential changes in export control policy.

While export control reform efforts continue, Gold noted he is about to have published a law review article that argues that ITAR itself is unconstitutional as a prior restraint on free speech. “If you were to challenge ITAR under the First Amendment, it would collapse like a house of cards,” he claimed. “That’s another reason for reform: we need a regime that could pass constitutional muster.”

Jeff Foust (jeff@thespacereview.com) is the editor and publisher of The Space Review. He also operates the Spacetoday.net web site and the Space Politics and Personal Spaceflight weblogs. Views and opinions expressed in this article are those of the author alone, and do not represent the official positions of any organization or company, including the Futron Corporation, the author’s employer.

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