When Congress returns after the elections next month, they will have full agenda of legislation to deal with, including export control reform and the extension of commercial launch indemnification. (credit: J. Foust)

A space policy to-do list for after the election

by Jeff Foust
Monday, October 15, 2012

In just over three weeks Election Day arrives in the United States, bringing with it the end of a long campaign season. That’s sad news for political consultants and junkies, and the advertising agencies and media outlets that have profited from the surge of ads for local, state, and national candidates; for most everyone else, though, Election Day will arrive with, at least, a sigh of relief.

The outcome of the election, though, is not the last major political event of 2012. Shortly after Election Day, Congress will return for a “lame duck” session to handle a long list of unfinished business from earlier this year. The biggest focus will be on fiscal issues, including last-ditch efforts to avoid “sequestration”—the automatic across-the-board spending cuts that will be triggered in January if Congress does not pass legislation to override those cuts with an alternative package of spending cuts. While sequestration has obvious effects for space policy, including cutting NASA spending by more than eight percent as compared to 2012, there are other, lesser-known issues related to space that Congress will need to deal with before the end of the year.

Extending indemnification

One topic that requires legislative action by Congress before the year ends is a relatively obscure issue: commercial launch indemnification. Companies performing commercial launches are required under law to be financially responsible for any third-party losses up to a value called the “maximum probable loss” (MPL) that is calculated by the FAA’s Office of Commercial Space Transportation (FAA/AST) as part of the launch licensing process. Companies usually handle that responsibility through insurance policies. The federal government would then cover any losses in excess of the MPL up to about $2.7 billion in current dollars before responsibility reverts to the launch provider.

In practice, there’s never been an accident with third-party losses that have exceeded the MPL, but the industry feels having indemnification in place is important to protect the industry and keep it competitive with launch service providers in other nations. While the industry has sought to make the indemnification provision permanent, Congress has instead extended the provision from time to time, usually for three to five years. The last extension, passed in late 2009, expires at the end of this year.

The concern in industry, through, is that with two and a half months to go, no legislation to extend indemnification has been introduced in either the House and Senate. With many other pressing issues on the agenda for the upcoming lame duck session, there’s a fear that Congress may not get to an extension before the indemnification provision expires.

Greg Rasnake, who handles legislative and media issues for FAA/AST, said last Tuesday that Congress’s focus last month on bigger issues, such as a continuing resolution to keep the government funded when the new fiscal year began on October 1, meant it didn’t have time to deal with “smaller, parochial bills” like launch indemnification. He advised participants of the Business and Legal Working Group of the Commercial Space Transportation Advisory Committee (COMSTAC) at their meeting in Washington that launch indemnification wasn’t the only issue needing attention before the end of the year: “there are other programs that always face sort of an end-of-the-year extension that needs to occur.” He noted that committees in the House and Senate are both looking at some kind of indemnification legislation, even though nothing so far has been introduced.

At the meeting of the full COMSTAC the next day, Ed Feddeman, staff director of the space and aeronautics subcommittee of the House Science, Space, and Technology Committee, sounded optimistic that some kind of indemnification extension will get through Congress before the end of the year. “We’re all keenly aware the indemnification needs to be renewed before the end of this year,” he said, adding that he has been discussing the issue both with Democratic staff on the committee as well as his counterparts in the Senate. “I am optimistic that we will have a bill through before Congress adjourns at the end of this year.”

While both industry and the administration have sought relatively long-term extension—FAA/AST officials, in congressional testimony earlier this year, said they supported a five-year extension—Congress is likely to pass a shorter one: perhaps as short as one year, and likely no more than two or three years, Feddeman said. While the specifics of the indemnification bill are still being negotiated, Feddeman said it would likely be a “simple extension with perhaps a couple of minor bells and whistles hung on the side.”

One of those “bells and whistles,” Feddeman said, may be a study to look at whether the indemnification provision should be retained at all. “Some of our members were asking actually an interesting threshold question: is indemnification still needed?” he said. “That’s a question a lot of the freshman Republicans typically ask now about any program, and I think it’s a good health check.”

If it’s included, it won’t be the first time Congress has raised the question about the need for indemnification. The 2004 law that extended indemnification for five years included a provision that called for a study about the “liability risk sharing regime”, as indemnification is also known, including “methods by which the current system could be eliminated”. The resulting study, completed by The Aerospace Corporation in 2006, concluded that eliminating indemnification was not, at that time, a good option. “At some point in its development, the U.S. commercial launch industry may be able to shoulder more (and maybe all) of its liability risk,” it concluded. “But that point is not on the immediate horizon.”

Another issue with extending indemnification may be additional language the Senate is interested in adding to the bill. “They have some other provisions that I think they want to hang on the bill,” he said, adding that he wasn’t familiar with exactly what they might be proposing. One possibility that has raised concerns in parts of the industry is that the Senate may seek to revisit the extension of the so-called “learning period” that limits the FAA’s ability to enact regulations regarding the safety of commercial spaceflight participants. That period (sometimes called a moratorium, although there are exceptions in the event of a serious accident) was included in the 2004 Commercial Space Launch Amendments Act and would have expired this December, but the FAA reauthorization bill passed earlier this year extended it to October 2015.

“I know there are some who see a nexus between the issues” of launch indemnification and the extension of the learning period, Feddeman said at Wednesday’s COMSTAC meeting. “Our members perhaps do not.” However, discussion at a hearing earlier this year of a potential backlash in the event of an commercial human spaceflight accident may have raised a concern among some in Congress, he suggested. “Some others also heard that same note, though, and I think we’re having to talk through that between now and the end of this year.”

One other issue may be how FAA/AST calculates the MPL. A report earlier this year by the Government Accountability Office largely endorsed the current indemnification regime, but argued that the FAA should update its methodology for calculating MPL to better estimate the potential losses from casualties and property damage in the event of a launch accident. At the COMSTAC working group meeting Tuesday, FAA officials said they were looking at more sophisticated approaches to calculating MPL values, including a “risk profile” method that makes use of Monte Carlo simulations, but are not yet convinced those alternatives are preferable to the existing approach.

A last shot for a while at export control reform

A second issue Congress will deal with after the election is somewhat more familiar to the space community: export control reform. For over a decade the US space industry and its advocates have sought to undo the provision in a fiscal year 1999 defense authorization bill that moved satellites and related components onto the US Munitions List (USML), and thus under the more restrictive requirements of the International Traffic in Arms Regulations (ITAR). That move, the industry argued, made it more difficult for companies, particularly smaller ones that make satellite components, to sell their products to customers in other nations, even close allies, thus hurting American competitiveness.

The more recent milestone for export control reform efforts took place in May, when the House approved HR 4310, its version of a defense authorization bill (formally known as the National Defense Authorization Act, or NDAA) that included a section that returned to the president the ability to determine the export controls for satellites and related components (see “Renewed hope for export control reform”, The Space Review, May 29, 2012). A standalone bill is also under consideration in the Senate, introduced in May by Sen. Michael Bennet (D-CO), although a more likely route to passage is to include similar language in the Senate version of the NDAA.

The Senate’s current draft of its version of the NDAA, S.3254, doesn’t include export control reform language, but the bill has yet to be considered by the full Senate; a full week of debate on the bill is scheduled for after the election, said speakers at a meeting of COMSTAC’s Export Control Working Group in Washington on Tuesday. There are several options for including the provision, from “pre-conferencing” with the House to work out differences before the Senate passes the bill (allowing the House to then pass the Senate version without a formal conference committee) to the more traditional approach of the Senate passing its version and then working out any differences with the House version in conference. Even if the Senate version of the NDAA doesn’t include export control reform language, that could still be added in conference with the House, as the House version does include it.

While observers believe the prospects of reform are more promising now than ever before, disputes between Congress and the White House could yet block passage. At the COMSTAC working group meeting, Eric Hirschhorn, Under Secretary of the Commerce Department’s Bureau of Industry and Security (BIS), said the administration had issues with the language in the House version of the NDAA. “Unfortunately, the House bill also included some unacceptable positions that, in their current form, would cripple the broader export control reform initiative, including the satellite portion,” he said. “We oppose the other provisions in their current form. We are open to compromise, and we hope to find a compromise.”

Hirschhorn said that the administration’s specific concern with the House language was the requirement to “enumerate to the extent practicable” everything that the administration seeks to transfer from the USML to the Commerce Control List (CCL). (That’s a reference to Section 1243 of the House version of the NDAA, which requires a notice to Congress “to the extent practicable, an enumeration of the item or items to be removed and describe the nature of any controls to be imposed on the item or items under any other provision of law.”) Hirschhorn said the administration was concerned about the potential paperwork burden that provision might create. He said the administration was also concerned the bill would limit the administration’s ability to use waivers to the Tiananmen sanctions in place since 1990, which have never been used for satellite exports to China.

Later at the same working group meeting, though, Tom Moore, a Republican member of the staff of the Senate Foreign Relations Committee, fired back. “They will not compromise,” he said of the administration. “There will be time for improvement [of the House bill]. But I just have to be very frank: the administration has done a very poor job of explaining the particulars to me and to other people who care a lot about this.” The administration, he concluded, “needs to do a better job in terms of negotiating with us and asking us, rather than telling us, and to date they have not done that.”

In addition to the dispute between the administration and members of Congress, there’s also concerns about disputes within Congress itself that could also block the passage of reform. “I have dire concerns relative to the communication, or lack thereof, between the administration and Congress, between the two branches, as well as between the Armed Services Committee, which handles the NDAA, and the Foreign Affairs/Foreign Relations Committees, who actually have purview over the export control issue,” said Mike Gold, chairman of the export control working group, at the full COMSTAC meeting on Wednesday.

So what are the odds that, after a decade of effort, export control reform does makes its way into law? At a space law conference in Washington on Thursday organized by the University of Nebraska’s Space, Cyber, and Telecommunications Law program, speakers on an export control panel offered a range of predictions. Frank Slazer, vice president of space systems for the Aerospace Industries Association, said tying export control reform to the NDAA was a good approach, since the bill, while not absolutely required, has been passed by Congress each year for decades. “The idea that they wouldn’t do one this year is pretty unlikely,” he said, but cautioned, “this is a year of superlatives.”

Dennis Burnett, vice president for trade and export controls for EADS North America, said his understanding, based on conversations with people on Capitol Hill, is that the Senate will pass a version of the NDAA with export control reform that doesn’t contain the reporting requirements that the administration has complained about; this, he said, would be done through pre-conferencing with the House to avoid a formal conference committee. “Some other people,” he cautioned, “who have worked on the Hill a long time have told me there’s no way in hell” export control reform, or much of anything other than fiscal issues like sequestration, will pass Congress before the end of the year.

Franceska Schroeder, a lawyer with Fish and Richardson who deals with export control issues, said she spoke recently with a State Department official who thought there was a 50-50 chance the reform passes this year, which gave her some optimism about its prospects. “Usually the response is that there’s no chance in you-know-what” it passes, she said. “I still don’t think it’s going to pass—me personally—but hearing 50-50 gives me some hope.”

At the COMSTAC meeting, Gold, too, was optimistic, even while emphasizing the high stakes involved. “If there was ever a time to get behind the reform effort—call your senator, call your congressman—now is it,” he said. “I am told by congressional staff that if we don’t succeed with this NDAA effort, it will be at least another two to three years before we can rally another serious go at the legislation.”

“It is all down to this one last shot,” he concluded.

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 NewSpace Journal 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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