Editorial: Halting Launch Indemnification’s Perennial Countdown Once and for All

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The U.S. Congress on March 27 finally renewed the charter and increased the lending authority of the Export-Import Bank of the United States, whose government-backed loans are playing an increasingly common role in the foreign sales of all manner of aerospace products, including satellites.

While Congress deserves credit for preventing the bank’s charter from expiring come May, U.S. launch service providers are watching another legislative countdown that also deserves swift attention.

U.S. lawmakers have until December to renew launch indemnification, a risk-sharing regime enacted in 1988. The law requires launch operators to take out insurance covering up to $500 million in third-party liability claims resulting from commercial launch or re-entry mishap; losses above that amount — but no more than $1.5 billion in 1988 dollars — would be covered by the U.S. government, subject to congressional appropriations.

The U.S. Federal Aviation Administration (FAA), which licenses commercial launches and regulates the industry, calls this “conditional payment of excess third-party claims.”

It’s worth noting that in more than 50 years of launching rockets into space from the United States, there have been no launch-related fatalities or injuries to uninvolved third parties, otherwise known as the general public. What’s more, there have been no third-party damages of any type from FAA-licensed commercial launches that would have come close to triggering the indemnification provision by exceeding what insurers and the FAA deemed the “maximum probable loss.”

That does not mean, however, as some U.S. lawmakers have recently suggested, that launch indemnification is no longer needed, or that the launch industry has somehow outgrown the need for this type of regulatory support.

The U.S. commercial satellite launch industry — such as it still exists — is anything but robust. The FAA licensed just a single commercial launch in 2011, and that involved a Russian-Ukrainian rocket lifting off from a sea-based platform that sets sail from a U.S. port. The prior two years were busier, with a total of nine launches between them. But two of those launches were U.S. government weather satellites bought under delivery-on-orbit contracts; two were NASA-funded test flights of the Falcon 9 rocket developed by Space Exploration Technologies Corp. (SpaceX); and one was an Intelsat satellite carrying an important U.S. Air Force payload.

Purely commercial launches have been few and far between for U.S. providers, but that could be changing. SpaceX has followed up multi-launch deals with low Earth orbit constellation operators Iridium Communications and Orbcomm by signing contracts with the likes of geostationary satellite operators SES, Asiasat and Thaicom.

Indemnification allows SpaceX to assure its commercial customers they won’t be sued in the event something goes horribly, unimaginably wrong.

Wilbur Trafton, the former Sea Launch president and Boeing executive who now chairs the FAA’s Commercial Space Transportation Advisory Committee, says companies like SpaceX need launch indemnification in order to compete internationally.

“Everybody else has this,” Trafton told the House Science space and aeronautics subcommittee during a March 20 hearing to review the FAA Office of Commercial Space Transportation’s 2013 budget request. “Without it, our industry will suffer. Russia takes care of theirs, Europe takes care of theirs, China takes care of their launch providers. We need to do the same.”

Congress has renewed launch indemnification five times in the last 20 years. It’s high time that lawmakers make this protection a permanent feature of the U.S. launch industry’s regulatory landscape.