U.S. House Approves Commercial Launch Indemnity Extension through 2014

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WASHINGTON — A bill that would extend the U.S. government’s commercial space launch indemnity regime, under which taxpayers assume liability for launch-related damages that exceed a $500 million threshold, would remain unchanged through 2014 under a bill that passed the House of Representatives unanimously late Nov. 14.

The six-line bill (H.R. 6586) was introduced in the House Nov. 8 by Rep. Steven Palazzo (R-Miss.), chairman of the House Science space and aeronautics subcommittee. Other than extending the sunset date, the bill makes no changes to the U.S. government’s commercial launch indemnification program, which is set to expire Dec. 31.

Before it can be signed into law, the bill must be approved by the Senate, which adjourned Nov. 15 for the U.S. Thanksgiving holiday without scheduling a vote on the House bill. Congress is set to reconvene Nov. 26.

Under the indemnification regime, the U.S. government must cover any damages to uninvolved parties resulting from commercial launch activities above the $500 million level, to a maximum of $2.7 billion. The indemnification is considered necessary to keep the U.S. commercial launch industry viable.

“If this program were allowed to lapse, it would threaten our domestic market for launches, as the cost of insurance would significantly increase,” Palazzo said on the House floor ahead of the bill’s passage Nov. 14.

Congress has extended commercial space launch indemnity five times since it was established in 1988 as part of the Commercial Space Launch Act Amendments. The last indemnity extension was in 2009.

Per U.S. law, commercial space launch providers must insure against the maximum probable loss associated with every domestic launch they conduct. The maximum probable loss for a single launch is capped at $500 million.

The government’s method for calculating maximum probable loss has not changed substantially in more than two decades. A July report from the Government Accountability Office (GAO) recommended that U.S. officials review the methodology and update it where appropriate.

The ranking Democrat on the House Science space and aeronautics subcommittee, Rep. Jerry Costello of Illinois, supported Palazzo’s bill but rose during floor proceedings to voice a concern that some in his party expressed during hearings on the indemnity issue earlier this year.

“I am concerned that taxpayer liability exposure is growing at the same time the industry and its associated insurance market is maturing,” Costello said. “I hope that we can begin to address these issues before the next [indemnity] extension is necessary in 2014.”

Most commercial space launches are conducted outside the United States. France-based Arianespace, which launches from French Guiana near the equator, is the market leader. Those commercial launches that do take place in the United States are licensed by the Federal Aviation Administration’s (FAA) Office of Commercial Space Transportation, which has licensed only five orbital launches since 2011.

Three of these were for Sea Launch AG, a Switzerland-based company that deploys its oceangoing launch platform from a port in Long Beach, Calif., making the United States the launching state for licensing purposes.

The other two FAA-licensed orbital launches since 2011 were performed by Space Exploration Technologies Corp. (SpaceX), which made cargo deliveries to the international space station this May and October. Despite the fact that NASA is the primary customer, U.S. regulators consider these to be commercial launches because of the way the contracts are structured.

In the near term, U.S. commercial launches will be mostly limited to those performed for NASA by Hawthorne, Calif.-based SpaceX and Orbital Sciences Corp. of Dulles, Va. The companies hold commercial-like NASA contracts for a combined 20 cargo resupply flights to the international space station.

SpaceX has flown two of its 12 contracted flights. Orbital, once it finishes required demonstration flights, is expected to begin station cargo runs in 2013.