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Citation: 61 Fed. Reg. 38994 1996
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### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Proposed Rules

This effort to insulate the United States Government and its agencies, personnel and contractors involved in DOT-licensed launch activities from a significant measure ofexposure to liability, loss or injury resulting from licensed activities is important because ofthe Government's liability exposure. This exposure derives from two sources. Under international treaty, especially the Treaty on Principles Governing the Activities ofStates in the Exploration and Use ofOuter Space, including the Moon and Other Celestial Bodies (Outer Space Treaty) (entered into force October 1967), and the Convention on International Liability for Damage Caused by Space Objects (Liability Convention) (entered into force September 1972), the United States Government has accepted certain obligations to compensate parties outside the United States for damage, including personal injury and loss of life, caused by space objects launched from the United States orby persons or entities whose activities are supervised

or overseen by the United States Government. In addition, when the Government is involved in private
sector launch activities through use of its property, facilities, equipment or personnel to support and facilitate those activities, the United States Government risks damage or injury to its own property and personnel and legal liability for other losses. Itis the Office's view that, under the 1988 Amendments, risk for these losses should be allocated primarily to the nongovernmental launch participants, subject to three important exceptions, and the statutory requirements for insurance and waivers ofclaims must be construed and implemented to effect this allocation of risk. (The term "nongovernmental" is used throughout this discussion to mean launch participants other than U.S. Government, its agencies, contractors and subcontractors, and the employees ofeach.)

The three important exceptions are those risks that the U.S. Government affirmatively accepts under the Act. They are: (1) The risk otherwise borne by the U.S. commercial launch industry ofcatastrophic losses and unlimited liability associated with commercial launch activities, up to the statutory limit of$1.5 billion above required third-party liability insurance, subject to enactment oflegislation, 49 U.S.C. 70113(a); (2) the risk ofproperty damage

or loss to United States Government launch property or facilities in excess of required insurance, 49 U.S.C. 701 12(b)(2); and (3) acceptance of liability for death, bodily injury or property damage or loss thatresults from the willful misconduct ofthe United States Government or its agents, 49 U.S.C. 70112(e).

The Office believes that acceptance of these risks by the United States Government is necessary in order to accomplish the goals underlying the 1988 Amendments; that is for the U.S. commercial launch industry to compete effectively against foreign launch services providers that offer certain financial assurances from their governments,' and to limit the amount ofliability insurance that must be obtained to protect launch participants without, in industry's words, their "betting the company" on each launch.

Not surprisingly, the linchpin ofthe allocation ofrisk regime in industry's view hasbeen the United States Government's agreement to protect launch participants against the risk of catastrophic losses and unlimited liability associated with commercial launch activities. Pursuant to the 1988 Amendments, the Department seeks to provide this protection, or so-called "indemnification," bypreparing a compensation plan that the President submits to Congress for review and approval, and, if necessary, enactment ofadditional legislative authority providing for the payment ofclaims. Significantly, the 1988 Amendments do not expressly mandate indemnification oflaunch participants and, unlike the 1988 Price-Anderson Amendments. Pub. L. 100-408, the notion ofa "contract of indemnification" does not appear. Rather the 1988 Amendments lay out a mechanism by which Congress may enact legislation to appropriate the requested funds. Accordingly, it would be inappropriate to referto thepayment ofexcess claims provisions without recognizing therole Congress must play in enacting appropriations. Nevertheless, it is the Office's view that the 1988 Amendments represent an undertaking byCongress to allocate to the United States Government the risk ofcertain losses, including damage to

1At the time the 1988 Amendments were enacted, entrants to the commercial launch industry expressed deep concern over potentially openended exposure to liability for damages associated with launch activities that could undermine the position ofUnited States firms vis-a-vis their foreign competitors. For example, while customers ofArianespace benefited from full indemnification by the French Government for all third-party liability that exceeded required insurance levels of 400 million French francs (approximately $65 million in 1988), corresponding protection was not available to customers ofemerging commercial launch services providers in the United States. Consequently, from a commercial perspective, foreign launch services providers possessed a significant competitive advantage over U.S. firms. Government property in excess of required Government property insurance, and excess third-party claims. In this manner, commercial launch operators, their customers, and the contractors and subcontractors of each may be relieved from some ofthe risk associated with commercial launch activities. In return, the United States Government is protected from liability and loss byrequired insurance at no cost to the Government


### Risk-Based Insurance Requirements

One ofthe principal features ofthe 1988 Amendments is theDepartment's mandate toestablish risk-based insurance requirements. Under the Act, the amount ofrequired insurance is prescribed based on the Department's determination ofthe "maximum probable loss" that would result from licensed activities.

Before enactment ofthe 1988 Amendments, section 16 ofthe Act prescribed general liability insurance requirements. It specified that any person launching a launch vehicle or operating a launch site under a license issued by the Department have in effect liability insurance, at least in the
amount that the Department considered necessary for the licensed launch or operation, considering the international obligations ofthe United States. 2 These obligations include, in particular, any United States obligations as a signatory
to the Liability Convention.

On May 7, 1985, the Office published

an Advance Notice ofProposed Rulemaking on third-party liability insurance requirements for commercial space launch activities (the ANPRM), 50 FR 19280, focusing exclusively on implementation issues relating to section 16 ofthe Act.

The ANPRM reflected the Office's conclusion that liability insurance should be adequate to compensate parties not participating in licensed launch activities for losses or damages resulting from those activities. The Office sought to identify considerations other than international obligations of the United States to be taken into
account. Other general issues highlighted in the ANPRM were: (1) Whether evidence ofinsurance (including significant levels ofrisk retention) should be the exclusive

2Each person who launches a launch vehicle or operates a launch site under a license issued or transferred under this Act shall have in effect liabilityinsurance at least in such amount as is considered by the Secretary tobe necessary for such launch or operation, consideringthe international obligations ofthe United States. The Secretary shall prescribe such amount after consultation with the Attorney General and otherappropriate agencies." 49 U.S.C. App. 2615. 

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means ofdemonstrating financial responsibility; and (2) whether the Office should require launch services providers to obtain the maximum amount ofliability insurance commercially available at reasonable
rates (the standard employed byNASA in requiring insurance for commercial payloads launched on the Space Shuttle),or, alternatively, whether the Office should conduct an analysis ofthe risks arising from a launch and set appropriate financialresponsibility requirements based upon that analysis. The ANPRM also sought comments on whether the Office should vary liability insurance requirements by vehicle class and the duration oflicensed activities, and what factors the United States Government should consider in deciding whether to seek compensation from responsible parties for damages for which the United States may be held liable under United States or international law.

Ten private parties submitted
comments in response to the ANPRM. They included one commercial operator ofaprivatized United States expendable launch vehicle (ELV) launch system, three entrepreneurial launch firms, two space insurance brokers, two government aerospace contractors, and two law students.

Most ofthe comments addressed the
amount ofliability insurance the Office should require and the appropriate standard for making that determination. Only three ofthe commenters, the insurance brokers and an entrepreneurial launch services provider, supported utilization of NASA's approach ofrequiring that launch services providers obtain the maximum amount ofinsurance commercially available at reasonable rates. One insurance broker favored applying this standard to the actual launch phase only, arguing thatrisk analysis should be employed in setting requirements for on-orbit liability coverage. All ofthe other launch and aerospace firms that commented favored the risk analysis approach.

Commenters differed on the issue of duration ofrequired insurance coverage. One commenter favored requiring coverage only for the launch phase, another preferred the useful life ofa payload, and athird recommended insurance be maintained as longas a physical objectremains in space. Only
two commenters addressed the question ofwhether the Office should distinguish amongthe differentELV launch systems in setting third-party liability insurance requirements, both favoring making such distinctions ifjustified by risk analysis. In addition to the issues on which the ANPRM requested comment, five commenters argued that the United States Government should indemnify private launch firms and their
contractors for damages that exceed the
amount ofrequired coverage. One
commenter urged that the United States either re-interpret its responsibilities under, or withdraw from, the Liability Convention.

Following publication ofthe ANPRM, and in light ofmost commenters' endorsement ofinsurance requirements based on an analysis ofrisk, the Office developed a risk analysis approach to determining acceptable levels ofpublic exposure to hazards associated with commercial launches, and it began applyingrisk analysis techniques on an application-specific basis. The Office's risk analysis approach was based upon extensive studies ithad conducted on the risks associated with commercial launches and launch operations, and on the utility ofvarious analytical techniques for quantifying them. These studies include athree-volume report, dated May 1988, entitled "Hazard Analysis ofCommercial Space Transportation" and an "Assessment of Third Party Liability Insurance Associated with Commercial Expendable Launch Vehicles," each of which is available from the Office.

At the time the 1988 Amendments

were enacted, the Office was preparing

arulemaking action to establish risk analysis as the preferred method for determining appropriate levels of insurance for licensed activities. The need to propose adoption ofthis approach became moot. In requiring maximum probable loss determinations, Congress effectively codified the Office's approach by mandating risk analysis as the basis on which the Department establishes required levels offinancial responsibility under the Act.

This rulemaking is intended to provide definition to the statutory term, "maximum probable loss," in terms of the Office's approach to prescribing insurance requirements for each launch license issued. "Maximum probable loss" does not mean maximum possible loss, that is, a "worst case" scenario regardless oflikelihood. The Office determines maximum probable loss for licensed launch activities by analyzing the known hazards, and theprobability ofloss, associated with specific launch activities. A detailed explanation of maximum probable loss methodology is presented in the section-by-section analysis below. Implementation Issues Following the 1988 Amendments

In early 1989, the RiskManagement Working Group ofthe Commercial Space Transportation Advisory Committee (COMSTAC) 3 developed implementation positions on the 1988 Amendments, including a recommendation that the scope of required liability insurance coverage be
commensurate with the scope of potential liability ofthose persons involved in providing launch servicesthe licensee, its customer, the U.S. Government, and the contractors and subcontractors ofeach-resulting from activities carried out under the license. In its view, potential liability arose with the licensee's entry upon the launch complex. Additionally, the waiver of claims provisions and the so-called "indemnification" provisions ofthe Act

were viewed asbeing equally broad in scope. The COMSTAC further recommended that post-launch protection under the Act remain in place for at least three years following ignition ofthe launch vehicle for flight.

In carrying out its licensing responsibilities, the Office began issuing licenses in 1989, authorizing a specific launch and preparatory launch site operations associated with the conduct ofthat launch. This approach was intended to satisfy industry's expectations, including those voiced by COMSTAC, and be consistent with the Department's understanding ofthe 1988 Amendments. Within two years, the Office issued the first ofseveral operator licenses issued to date. Under this approach, the Office licensed and established financialresponsibility requirements for site operations associated with the conduct ofa program ofcommercial launches for a two-year period.

This approach to licensing reflected

an understanding between the Office and the U.S. Air Force, as the Department ofDefense (DOD)element responsible formanagement ofthe Eastern Range, encompassing Cape Canaveral Air Station, and the Western Range, encompassing Vandenberg Air Force Base, to avoid conflicting insurance and liability requirements when commercial launch operators

3The COMSTAC, a duly chartered federal advisory committee consistingofpublic and private
sectorrepresentatives appointed by the Secretary to advise on matters affecting the commercial space transportation industry, has taken a very activerole in reviewing and commenting on the Office's implementation ofthe 1988Amendments. Based on its reviews, the COMSTAC submitted formal recommendations to the Secretary. These recommendations are availablein the docket for thisproposed rulemaking. 

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conduct operations on Air Force ranges in support ofcommercial launch activities under arange use agreement. Despite thisunderstanding with the Air Force, certain questions remain between the Office and the AirForce as well as other Federal agencies that operate and manage Federal range facilities.

A September 1992 COMSTAC resolution reaffirmed COMSTAC's view that the financial responsibility regime should be construed broadly so as to

cover all activities conducted by a licensee on aFederal range. Under this view, referred to as "gate-to-gate" licensing, all ofa licensee's activities conducted on a Federal range in support ofits commercial launch operations would be subject to DOT-determined financial responsibility requirements and eligibility for so-called indemnification. To address this and other uncertainties associated with the intended scope ofthe 1988 Amendments, the resolution recommended that the Department seek clarification by legislative means.
October 27-28, 1994 Public Meeting

The Office convened a two-day public meeting on October 27-28, 1994, to elicit industry views on, among other things, a range ofissues associated with implementation ofthe 1988 Amendments. The meeting concentrated

on licensing issues associated with commercial launch operations and the commercial operation oflaunch sites. One ofthe focal points ofthe meeting

was a discussion ofthe appropriate scope ofa license authorizing commercial launch activities and its relationship to financial responsibility and allocation ofrisk requirements.

At thepublic meeting and in written
comments submitted to the docket, industry remained fairly consistent in its view that the Office's licensing authority should be broadly construed
to address risks associated with the flight ofa launch vehicle and pre-flight hazardous operations in order to protect public health and safety. One
commenter suggested that, as a starting point, it would be useful to look at those unusually hazardous activities for which the Government agrees to offer indemnification under other authority, such as Public Law 85-804, in attempting to determine therange of activities properly encompassed by the Department's licensing authority.

Two launch services providers and

one DODelement commented that all pre-launch processing on a Federal range should be licensed for purposes of the Act's financial responsibility requirements and setting the levels of required insurance. Other commenters observed that it is no longer sufficient to limit DOT licensing to activities done

on aFederal rangebecause, increasingly, launch operators are engaging in hazardous pre-launch processing activities offthe range, either
to reduce their costs or because they are not permitted to use Government facilities where comparable, off-range commercial services exist. A number of commenters, including aDOD element,

an insurance broker, aprospective commercial spaceport operator and two launch services providers, suggested that DOT-licensed activities should include hazardous, as distinct from ultra-hazardous, operations defined in
terms ofrisk, not geography, because the Office's mandate is protection ofpublic safety. The prospective spaceport operator also suggested using the license

as akind ofsafety net to avoid gaps in regulatory oversight. In contrast, another Government agency representative offered a different approach, noting that other regulatory regimes would apply to hazardous operations when conducted somewhere other than at a Federal range.

As an example ofhazardous operations requiring licensing, anumber ofcommenters, including a payload processing facility, stated thatpayload processing, whether conducted on a Federal range or at a privately operated facility located offthe Federal range, should be covered by a DOT license. One launch company noted that manufacturing is not sufficiently hazardous asto warrant DOT licensing, but certain testing is. However, a prospective spaceport operator noted that manufacturing may be hazardous and, if so, should be covered by a DOT license. Another prospective spaceport operator stated that licensing matters should be separated from the issue of indemnification altogether, and noted that one could conceive oflicensed activity without indemnification ifthe purpose oflicensing is protection of public safety. The commenter suggested

anarrower approach than that of licensing all activities conducted by a launch licensee on aFederal range, noting that material may be stored at the range for along time in advance ofa scheduled launch.

Two DOD elements advocated that the Office establish maximum probable loss requirements for allcommercial activities conducted on aFederal range facility. One ofthe agencies also indicated that the Office should set maximum probable loss requirements any time Government property would be placed atrisk for commercial purposes, including coverage for commercial development and 

### demonstration activities conducted on a Federal range.

One launch services provider noted thebenefits to thepublic ofrequiring statutory financial responsibility and allocation ofriskrequirements, along with so-called indemnification, in that third-party recovery for losses need not depend upon the financialhealth ofa launch company.For example, without Government regulation, small start-up companies with limited financial means mightbuy less insurance than theOffice would otherwiseprescribe in insurance requirements.

Another launch services provider noted thatthefinancial responsibility requirements should be coextensive with a license. Thatis, the Government should provide indemnification to the extent activities arecovered by a license.Likewise, accordingto the launch services provider,ifthere isno indemnification offered bythe Government for an activity then itcan be inferred that the Office has not licensed that activity. The commenter noted thatthis isnot clear today.

In arelated rulemaking, the Office is planning to address, more specifically, such issues as the appropriate scope of

a license to conduct commercial launches and the activities subject tothe Department's licensing authority. As part ofthatrulemaking, the Office intends to address comprehensively those comments received atthe public meetingconcerning the appropriate scope ofa license and licensable activities. The instantrulemaking focuseson implementation offinancial responsibility requirements and the allocation ofrisks that attend licensed launch activities, as those activities are defined in alicense issued bythe Office.
TheProposed Regulations ScopeandObjectives

The proposed regulations are intended to implement thefull range of statutorily-imposed financial responsibility requirements and carry outthe Department's responsibility under the Act toprotect U.S. interests when Government property or personnel isinvolved in supporting licensed launch activities. Theproposed regulations also clarify themeans by which the commerciallaunch industry and itscustomers areprovided with the

assurances and protections thathave been considered critical to their survival.

This rulemaking does not address financialresponsibility requirements for the operation ofalaunch site. To date, all U.S. commercial launches have taken place from U.S. Government facilities. 

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The Office believes that this fact will change in the not too distant future. Plans for developing state-sponsored spaceports in five states are under way and the Office is currently developing regulations that would apply to prospective applicants for licenses to operate launch sites or spaceports. The Office is also in theprocess of developing policies applicable to the appropriate implementation offinancial responsibility requirements for launch site operators, including spaceports, consistent with the Act. As part ofthis effort, the Office requests comments on the full range offinancial responsibility and risk allocation issues associated with licensing the operation ofa launch site.

More specifically, under the Act, a licensee is required to obtain two forms ofinsurance (or otherwise demonstrate financial responsibility) to compensate for certain claims "resulting from an activity carried out under the license"- liability insurance thatprotects participants in launch services from third-party liability and property insurance that protects Government property. 49 U.S.C. 70112(a). No distinction is made in the Actbetween the holder ofa license to launch a launch vehicle and the holder ofa license to operate a launch site. As one commenter pointed out at the October 1994 public meeting, the legislative history accompanying the 1988 Amendments provides no guidance as to whether, orhow, financial responsibility and allocation ofrisk requirements would apply to a licensed operator ofa launch site.

One view under consideration by the Office is that the insurance that is required under a license to conduct licensed launch activities would be sufficient to protect United States interests as well as those ofa licensed launch site operator. This view presumes that the potentially catastrophic risks that the 1988 Amendments intended to address are those associated with hazardous launch operations, and that the risks attendant
to the industrial activity ofmanaging a launch site can be managed effectively through available industrial risk insurance as a cost ofdoingbusiness, and through contractual agreements between the site operator and its
customers and contractors. Risks to the launch site operator change when licensed launch activities are conducted
atthe site, and the launch site operator should be protected as an additional insured under the launch licensee's liability policybecause ofthe launch site operator's involvement in launch services. With respect to risks associated 

### with other activities, alaunch site operator can protect itselfby requiring adherence to its own safety procedures and requirements and through business decisions regarding the need to obtain insurance.

At thepublic meeting, one commenter representing aprospective spaceport licensee suggested an approach consistent with this view. The
commenter noted that site operations
not related to a particular launch may not be covered by the Act, and thatthe launch operator and launch site operator, rather than the Office, can allocate responsibilities between themselves. Launch-specific activities carried out at the site would be covered under the Act, in the commenter's view. However, another commenter atthe public meeting noted that a statesponsored spaceport could serve a consortium ofcommercial users, and the relationship between them may not be one ofprime contractor and subcontractor. Another prospective state-sponsored spaceport representative commented that there is no need for the Office to license a spaceport operator if it is under the supervision and oversight ofanother Federal agency, such as the Air Force, and conducting operations as
a subcontractor to the launch company. Similarly, a DODelement commented that the Office should review safety operations ofa state-sponsored spaceport located on aFederal range facility only for purposes ofdetermining maximum probable loss.

Additional comments are solicited on the appropriate implementation ofthe financial responsibility and allocation of risk regime with respect to licensed launch site operators, including statesponsored spaceports. Comments should address the requirements that would apply to an operator ofa commercial launch sitelocated on private property and that located on or adjacent to aFederal range facility.

Implementation bythe Office ofthe financial responsibility and allocation of risk requirements through license orders has resulted in some uncertainty and controversy over the scope ofrequired insurance as well as the Government's obligation to cover excess third-party claims. Some issues result directly from the terminology used in the Act and have been voiced by both the Office and industry in a variety offora, such as the October 1994 public meeting and COMSTAC meetings. Others have been aired by industry, from time to time, expressing disagreement with or
concern over the Office's implementation ofthe requirements. In

come instances, industry has offered a view contrary to that held by the Office, 

### asreflected in license orders.In others, industry has complained thatlack of clarity leavesboth industry and theU.S. Government vulnerable to unintended disputes overthe appropriate mechanism forcompensating claims.

The proposed regulations, as well as theAct, acknowledge that the commercial space industry mustbear certain risks and costs associated with launch activities. However, the Office believes theserisks and costs to be reasonable in light ofthepotential benefits industry receives.4

### Moreover, the Office believes thatissuing regulations will result in an additional benefit to the commercial space industry.That is, theincreased certainty and claritythat willresult from issuance offinalregulations should prove beneficial to industry by allowing it to managerisks appropriately, through insurance and otherbusiness decisions and compete effectively in an increasingly competitive world market. Atthe same time,the Office remains mindful ofthe Government's unique interests and concerns.

In addition toprotecting the United States Government from certain liability risks, this rulemakingproposal also recognizes the importance ofvaluable national range assets to the continued growth, vitality, viability and competitiveness oftheU.S. commercial launch industry. One ofthe principal objectives ofthe statutory requirements isto ensure thatthese assets are protected, and thatin the event of damageorloss, funds are available to restore the affected launch property to itspresent condition and use.Thus, when Government facilitiesor personnel are involved in licensed launch activities, theDepartment is authorized to establish requirements for proofoffinancial responsibility and other assurances necessary toprotect the Government and its executive agencies and personnel from liability, death, bodily injury, orproperty damage

orloss as a result oflicensed activities. However, the Government is not relieved ofliability thatresults from willfulmisconduct ofthe Government

orits agents.

In protecting the interests of Government personnel, the statutory financialresponsibility and allocation of riskrequirements alsorecognize the role Government contractors and subcontractors, and their respective employees, perform in supporting commerciallaunch-related operations

onFederal range facilities on behalfof

4An economic impact assessment has been prepared and is available in the public docket for thisproposed rulemaking for review and comment. 

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the Government. For this reason, in establishing financial responsibility and allocation ofrisk requirements, the Department also ensures that their interests areprotected. The Office solicits views on whether its approach
to protecting Government contractors' and subcontractors' interests should be adopted in a final rule.

To facilitate the reader's review ofthis proposal, the Office's rationale for allocating and addressing certain risks is presented below under appropriate topic headings, preceding the sectionby-section analysis. This approach should prove useful to thereader in understanding how certain risks would be addressed through both the required demonstration offinancial responsibility and waivers ofclaims amongthe launch participants. The section-by-section analysis that follows describes and discusses specific provisions ofthe proposed implementing regulations which, taken together, effectuate the intent ofthe Act.

ProtectionofGovernmentPersonnel

In providing direct support for commercial launch operations, either through its agencies or contractors, the U.S. Government necessarily exposes itselfand certain Government personnel
to potential losses and liabilities. Accordingly, under the approach the Office has adopted in theproposed regulations, certain Government personnel need to be afforded a variety ofprotections through the financial responsibility and allocation ofrisk regime. These protections are necessary to ensure that the U.S. Government does
not bear any greater risk than it affirmatively accepts under the statute.

Through the proposed regulations, risks to Government personnel, including employees ofGovernment
contractors and subcontractors, posed by their involvement in licensed launch activities are addressed as follows:

1. Government personnel, including employees ofthe Government, its agencies, and its contractors and subcontractors, involved in licensed launch activities, would be included within the definition ofthird parties.

2. Government personnel, including employees ofthe Government, its agencies, and its contractors and subcontractors, involved in licensed launch activities, would be named as additional insured under the required third-party liability policy.

3. Claims for damage or loss to property belonging to the Government, its agencies, contractors and subcontractors, involved in licensed launch activities, would be covered under the required Government property policy, even ifthe damage or loss is caused by Government personnel, including employees ofthe Government, its agencies, and its
contractors and subcontractors, involved in licensed launch activities, absent their willful misconduct.

These three forms ofprotection from risk are explained below, in order. 1. The proposed regulations would clarify that Government employees are included within the definition ofthird parties. This is significant because it

means that Government employees' claims for property damage orbodily injury would be compensated under the third-party liability insurance policy (or other demonstration offinancial responsibility) required ofthe licensee up to the limit the Office establishes, within the statutory ceiling, based upon the Office's determination ofmaximum probable loss. (An explanation ofthe Office's risk-basing methodology for settinginsurance requirements is set forth in the section-by-section analysis, below.)

The definition ofthird parties would also include employees ofU.S. Government contractors and subcontractors involved in licensed launch activities to ensure that their claims would also be covered bythe required third-party liability insurance policy, in accordance with the statue.

This approach is in accord with the definition of "third party" contained in the statute, 49 U.S.C. 70102(11), and the legislative history which expressly
states that "Government personnel directly associated with the commercial launch operations are still classified as third parties." S. Rep. No. 100-593, 100 Cong., 2d Sess. 8 (1988). This protection is necessary to minimize the risk the U.S. Government would otherwise bear if it were to accept responsibility for these claims under the Act.

Currently, through a reciprocal waiver ofclaims agreement executed bythe Office on behalfofthe U.S. Government, the United States waives and releases claims it may have against the licensee and customer and their respective
contractors and subcontractors, and agrees to be responsible, for property damage it sustains in excess ofrequired insurance, and for bodily injury or property damage sustained by its employees in excess ofrequired insurance. 5 The Government is required

5The reciprocal waiver ofclaims agreement is used by the Office to implement the Government's statutory responsibility to waive claims. 49 U.S.C. 70112(b)(2) requires a Government waiver only to the extent claims exceed the amount ofinsurance that is required to protect Government property. However, under current practice, the agreement provides that claims forinjury orlosses suffered by to extend this waiver ofclaims and assumption ofresponsibility to its
contractors and subcontractors. This practice would be altered under the proposed regulations in the following way. Because claims ofGovernment employees and employees of Government contractors and subcontractors against the other launch participants would be covered as thirdparty claims under the liability insurance policy that the licensee obtains, the U.S. Government would not be required to assume responsibility for them as part ofthe reciprocal waiver of claims required in 49 U.S.C. 70112(b)(2). This approach deviates from the current practice ofthe Office but, we believe, more precisely reflects the intent ofthe statute.

Given that Government personnel are deemed third parties, theirclaims against the other launch participants would be presented as part ofthe successful third-party claims forwhich industry would seek payment from the Government under thepayment of

excess claims provision ofthe statute (so-called "indemnification"). In
essence, the Government's agreement to protect launch participants from thirdparty claims in excess ofrequired insurance would extend to cover the outstanding claims ofits employees, and Government contractor and subcontractor employees, afterthe limits ofthe insurance policy obtained by the licensee have been reached.

An alternative view-that Government personnel should notbe considered third parties-has been suggested byrepresentatives ofthe commercial space launch industry. This view suggests that the 1988 Amendments assigned to the United States Government an assumption of responsibility and risk for losses sustained by Government personnel, including Government employees and employees ofGovernment contractors and subcontractors, who are involved in licensed activities. This assumption of risk would be in addition to the three

areas ofrisk the Government has agreed
to accept under the Act, as delineated above. The Office does not agree.

Considering Government personnel as third parties enables their claims to be covered by required third-party liability insurance under 49 U.S.C.

employees ofthe Government are waived only to the extentthose claims exceed the required amount ofthird-party liability insurance. One reason the Office has taken this approach is that if Government employee claims forbodily injury or property damage were compensated under the property policy rather than the liability policy, the Government's waiver ofclaims for property damage could betriggered too soon leaving Government claims for property damage or loss uncompensated. 

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701 12(a)(3)(A)(i). Absent this protection for Government employees, the Government would be assuming an unfunded contingent liability for the successful claims ofGovernment employees against other launch participants, without explicit statutory authority for doing so. This is contrary to appropriations laws. The Office does
not believe that explicit statutory authority is provided by the Government waiver ofclaims provision ofthe Act, which limits the Government's waiver to excess property damage claims. 49 U.S.C. 70112(b)(2). Absent this protection for employees of Government contractors and subcontractors, additional costs to protect Government contractors and subcontractors from these risks would likely be passed to the Government, defeating the statutory directive to protect the Government from certain liability risks, at no cost to the Government.

In the Office's view, this approach is beneficial to both the U.S. Government and nongovernmental launch participants. Nongovernmental launch participants are protected from claims by Government personnel, including employees ofthe Government's
contractors and subcontractors, for loss ofinjury,by means ofrequired liability insurance and procedures for U.S. Government payment ofexcess thirdparty claims, up to $1.5 billion above the required amount ofliability insurance. The U.S. Government is protected in the event its personnel, as well as those operating on behalfofthe Government, are exposed to risk of property damage or bodily injury because their claims willbe compensated under the liability policy the licensee obtains at no cost to the Government. Considering Government personnel as third parties is not intended to supplant the individual rights ofGovernment employees to file claims under the Federal Employees' Compensation Act (FECA),or the rights ofGovernment contractor employees under workers compensation laws.

2. Government personnel would be protected from third-party liability, absent their willful misconduct. The
statute explicitly requires that the Government, "executive agencies and personnel, contractors, and subcontractors ofthe Government" be protected under an insurance policy required under section 70112(a), "to the
extent oftheirpotential liability for involvement in launch services, at no cost ofthe Government." 49 U.S.C. 701 12(a)(4). Therefore, under the liability policy, Government personnel areboth protected parties, or additional insureds, and potential claimants. 3. Under the property policy required under 49 U.S.C. 70112(a)(1)(B), United States Government property is protected from damage from any source as aresult oflicensed activities, that is, even ifthe damage is caused byGovernment personnel, absent their willful misconduct. PropertyProtection forGovernment Launch Participants

In addition to protection from thirdparty liability, as explained above, Government launch participants are protected from therisk oftheir own property losses where their property, facilities, equipment or personnel, are used to support commercial launch operations. In the Office's view, this risk is allocated primarily to the licensee, who is required under 49 U.S.C. 701 12(a)(1)(B) to obtain liability insurance (orotherwise demonstrate financial responsibility), up to the $100 million statutory ceiling, to compensate for the maximum probable loss from claims by the U.S. Government against

aperson for damage or loss to Government property resulting from an activity carried out under the license. The Government waives claims for property damage to the extent those claims exceed the required amount of insurance or result from willful misconduct ofthe government or its agents.

This requirement to protect Government property addresses an important objective-to assure that facilities used by commercial launch operators can be restored promptly to current launch-ready status. These facilities are considered critical to U.S. national security interests and funds
must be readily available to repair them in the event they are damaged as aresult ofcommercial launch activities.

Two recurring issues are the scope of Governmental property that must be protected by property insurance and the
extent to which Government property that is either on a Federal range but not used to support alicensee's launch, or offthe Federal range entirely, is required to be covered by insurance. Government property on a Federal range that is not used for commercial launch support purposes may include anything from aU.S. Post Office to launch vehicles or components that are intended for useexclusively in Government launch operations.

The Office's view is that any U.S. Government property that is on a Federal range facility is exposed to damage or loss as a result oflicensed launch activities conducted on that facility. Accordingly, coverage for all such property mustbe provided to

ensure the U.S. Government is fully compensated. The onlyexception would be for a Government payload where the Government is the customer for the licensed launch activity. (A discussion ofhow different types of Government property on a Federal range facility are considered in establishing insurance requirements for Government property is presented in the section-bysection analysis accompanying proposed §440.7, Determination of Maximum Probable Loss.)

It is also the Office's view that Government range facility assets that are noton the launch facility from which the launch takes place, but are identified asbeing exposed to damage

or loss as a result oflicensed launch activities, should also be covered by the required property insurance. For example, a licensed launch at Cape Canaveral Air Station, Florida, could expose Government assets on neighboring Kennedy Space Center (KSC)to damage or loss. Under the proposed regulations, the Office would include these assets in determining appropriate insurance levels for Government property and prescribe that property at KSCbe covered. The Office believes that this approach is necessary and reasonable to carry out the statutory mandate ofprotecting Government range assets exposed to risk from commercial launch activities. Similarly,

a licensed launch conducted at a commercially operated launch site or spaceport situated on, or adjacent to, a Federal range facility, would expose the Federal range facility to risk ofdamage

or loss. Accordingly, insurance to protect the Federal range facility placed atrisk would be required even ifthere

were no Government involvement in supporting licensed launch activities conducted at the commercial launch site.

In the Office's view, Government property that is involved in licensed launch activities but is located at a site that is remote from the launch site would be covered by the third-party liability insurance protection required ofthe licensee because risk to that property should be no greater than the risk posed to other third-party property. Government property meeting this description would include, forexample, remote Government tracking stations and other support facilities located downrange from the Federal range facility at which the launch takes place.

Accordingly, Government property that is not located on the Federal range facility from which the launch takes place or not located at aneighboring 

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Federal range facility would be included under the third-party liability insurance protection required ofthe licensee. This would include any unrelated Government property located outside of

aFederal range facility, such as a U.S. Post Office building.

Ithas been suggested that the additional cost ofcovering all Government property, wherever located, would be prohibitive. However, the Office views the U.S. Government as situated similarly to any other third party for purposes ofcalculating maximum probable loss for property damage claims offthe range, subject to the limited exception noted above for nearly Federal range facility assets located in close proximity to, or adjacent to, aFederal range. This is because the probability ofdamaging unrelated government property away from the launch site is no different from that ofdamaging private property offthe launch site. The Office does not believe that this coverage should increase the
cost ofliability insurance or expand the risks covered by the policy.

In summary, all Government property

on aFederal range facility, whether or not involved in licensed launch activities, mustbe covered by the required Government property insurance policy (or other demonstration offinancial responsibility). Federal range facility
assets adjacent to or in close proximity to the launch site where licensed launch activities take place would also be covered byrequired property insurance. Government property located away from the Federal range facility that is used to support licensed launch activities, such

as downrange tracking stations, are not covered by therequired Government property insurance policy, nor is Government property that is located off the Federal range facility and totally unrelated to licensed launch activities. Instead, with respect to these Government assets, the Government is a third party and its claims for loss or damage would be covered under the required third-party liability insurance policy (ofother demonstration of financial responsibility), up to the limits required bythe Office.

Some ofthe confusion surrounding the required coverage ofGovernment property results from the manner in which licensees have satisfied the financial responsibility requirements for protecting Government property. Some licensees have obtained two types of policies to address Government property. Onepolicy typically provides coverage for United States Government property, including property ofUnited States Government contractors and 

### subcontractors, thatthe licensee utilizes

or otherwise has in its care, custody or control atthe site where licensed launch activities take place. The second policy provides third-party liability coverage for allother property, including Government property located elsewhere

on the Federal range facility. In the first policy, the United States and its
contractors and subcontractors are the named insureds; in the second policy, the additional insureds are the same parties as those protected in satisfying the third-party liability insurance requirement. This approach accommodates certain customary insurance practices in covering property losses but is not required by the Office.

However, where alicensee elects to protect certain Government property under its third-party liability insurance policy, coverage cannot be allowed to limit or dilute the availability of insurance proceeds to cover third-party liability claims. To avoid this possibility, some licensees have submitted aliability insurance certificate indicating two levels of coverage, i.e., one amount to cover claims for damage to Government property that is not in the licensee's
care, custody or control and another
amount for "other' third-party liability, claims.

The proposed regulations would continue the Office's current practice, implemented through license orders, of requiring coverage for property of Government contractors and subcontractors under the Government property policy. The Office's rationale for doing so includes the following considerations. Absent certain protections for Government contractors and subcontractors, the Government would bear greater risk and incur greater expense than is contemplated under the statute's risk and incurgreater expense than is contemplated under the statute's risk allocation regime. Section 701 12(b)(2) ofthe Act requires the Secretary ofTransportation to enter into reciprocal waivers ofclaims under the licensee, its customer, and the
contractors and subcontractors ofeach, "for the Government, executive agencies ofthe Government involved in launch services, and contractors and subcontractors involved in launch services. * * *" The waiver applies only to the extent that claims are more than the amount ofGovernment property insurance or other demonstration offinancial responsibility required under 49 U.S.C. 70112(a)(1)(B). By waiving claims "for" its contractors and subcontractors involved in launch services, the Government passes certain rights and responsibilities to its contractors and subcontractors, consistent with those the Government accepts, including the waiver ofclaims for property damage above required insurance. In light ofthe waiver the Government undertakes on behalfofits contractors, the Government would necessarily assume greater risk or costs ifthe Government's
contractors and subcontractors were not also protected byrequired Government property insurance. Ifthere were no insurance protection provided by the licensee forproperty ofGovernment
contractors and subcontractors involved in launch services, those parties would be likely to seek compensation for their losses from the Government. Thus, the Government would be accepting therisk ofproperty losses in excess ofrequired insurance,plus,ad a practical matter, responsibility for property losses incurred by its contractors and subcontractors. Alternatively, Government contractors and subcontractors could purchase property insurance protection, as a licensee has suggested; however, the cost would likelybe passed through to the Government as an allowable cost under

a contract with the Government. This is contrary to the statutory directive that the Government be afforded certain protections atno cost to the Government.

In determining to adopt this approach in the proposed regulation, the Office also considered whether coverage for property ofGovernment contractors and subcontractors could be provided under the third-party liability insurance protection the licensee is required to obtain. This approach is contrary to the definition of "third party" contained in the statute at 49 U.S.C. 70102(11) and

was not further considered.

There is one important distinction in the requirement to protect property of Government contractors and subcontractors in the Office's view, however. That is, with respect to the Government and its agencies, all Government property on a Federal range facility must be protected. With respect to Government contractors and subcontractors, only property on a Federal range facility belonging to those
contractors and subcontractors involved in licensed launch activities must be covered under the property policy. Government contractors and subcontractors that do not support licensed launched activities or whose property is located away from aFederal range facility would be protected as third parties under the liability policy, and theirclaims for injury, damage or loss would be compensated bythe required third-party liabilitypolicy. For 

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example, a food concessionnaire located

on aFederal range facility would be considered athird party for purposes of insurance and risk allocation.

One licensee has noted its disagreement with the Office's requirement. In the licensee's view, requiring this coverage is contrary to the
statute and legislative history. The licensee has sought clarification ofthe Office's requirements to avoid the potential for duplicative, or possibly unnecessary, coverage under the liability and property policies.

The Office disagrees with the licensee's contention for the reasons explained above. The U.S. Government utilizes contractors and subcontractors in carrying out certain activities at Federal range facilities. Accordingly, for purposes ofrisk allocation and protection ofthe U.S. Government, its contractors and subcontractors stand in the shoes ofthe Government and its agencies involved in launch services. The Office believes that any other view would defeat reasonable implementation ofthe Amendments.

The Office believes that a variety of risk management approaches to protecting Government property may be acceptable as long as the statutory objectives are achieved; that is, providing for the compensation of property damage sustained by the United States, its agencies involved in launch services, and its contractors and subcontractors, resulting from activities carried outunder the license and ensuring that policy proceeds will be made available to the Government to effect needed repairs in the event ofany damage resulting from licensed launch activities. These objectives can best be
met through a non-fault, nonsubrogation, comprehensive all-risk type ofproperty policy that would compensate the U.S. Government on behalfofitselfand Government launch participants, as additional insureds, in the event ofany occurrence resulting in property damage, regardless offault, absent willful misconduct bythe Government or its agents. In order to satisfy statutory objectives, thepolicy
must respond to damage causedby Government launch participants, as well

as Government personnel, i.e., employees ofthe Government and its
contractors and subcontractors. An exception may be allowed where insurance is not available because ofa policy exclusion that is determined by the Secretary ofTransportation to be usual for the type ofinsurance involved. In those instances, the Secretary, following consultation with other interested Federal agencies, may waive claims for property damage from the first dollar ofloss. In all other circumstances, coverage must be provided to protect U.S. Government property from any damageincurred during or as aresult oflicensed launch activities, regardless offault, absent willful misconduct bythe Government

or its agents.
GovernmentCustomer

When the licensee's customer is a United States Government agency, the agency is treated the same as any nongovernmental customer for purposes ofdetermining the appropriate amount ofproperty insurance required ofthe licensee and in terms ofthe U.S. Government's waiver ofclaims or property damage or less above the required amount ofproperty insurance under 49 U.S.C. 70112(b)(2). That is, a Government payload is not covered by the required Government property insurance and the United States Government agency-customer accepts responsibility for property damage to the payload. Forother purposes, the government agency customer is an agency ofthe United States involved in licensed activities. This is an important distinction because employees ofa U.S. Government agency are third parties and their claims against other launch participants for bodily injury or property damage are covered by the third-party liability policyrequired under 49 U.S.C. 70112(a)(1)(A), even when the agency that employs them is involved in the launch as the customer. The basis for the Office's distinction is grounded in appropriations law. An agreement on the part ofthe United States Government to be responsible for claims ofits employees for injury or damage from the first dollar ofloss, other than employee claims compensated under FECA, would be an unfunded contingent liability which, in the Office's view, is not statutorily sanctioned. Rather, through statutorilymandated insurance insurance protections, waiver ofclaims requirements and payment ofexcess claims provisions, Congress has limited the unfunded contingent liability the U.S. Government may accept. The Office believes its approach to protecting the U.S. Government when it is a customer ofcommercial launch services providers is consistent with the limit ofrisk the Government has agreed to accept under the statute.

To summarize the Office's view ofthe statutory allocation ofrisk regime, whereas nongovernmental parties involved in licensed launch activities accept responsibility for property damage or loss they sustain and for injury or loss sustained by their employees, the United States Government is covered on both
accounts by insurance secured by the licensee. Should the loss exceed the amount ofrequired insurance that a licensee has secured to cover such claims, then the Government assumes responsibility for loss ofor damage to its property (and property ofits contractors and subcontractors) in accordance with required reciprocal waivers ofclaims under 49 U.S.C. 70112(b)(2). Should the loss exceed the required insurance a licensee has secured to cover third-party liability, then the Government, in effect,

assumes limited responsibility for losses above that amount sustained by Government personnel by agreeing to pay excess third-party claims. At the

same time, nongovernmental parties are effectively protected from claims for Government property losses byrequired insurance and the Government's waiver ofclaims in excess ofinsurance; and from third-party claims, including claims ofGovernment personnel, by required liability insurance and by procedures for U.S. Government payment ofthird-party claims up to $1.5 billion in excess ofinsurance. Section-by-Section Analysis

Part 440, Subpart A-Financial Responsibility forLicensed Launch Activities

Section440.1-Scope; Basis

Proposed §440.1 identifies the activities to which the Office's proposed financial responsibility and allocation of risk requirements would apply as all commercial space launch activities that

are authorized to be carried outunder

a launch issued by the Office.

Section440.3-Definition

Section 440.3 defines terms used in part 440 that are not otherwise defined in 14 CFR Ch. III. Terms defined in §401.5 ofthe Commercial Space Transportation Licensing Regulations have the same meaningfor purposes of thispart unless otherwise indicated. Some ofthe terms, as defined in the proposed regulation, are selfexplanatory and required no additional elaboration. Other terms are discussed below.

The term "contractors and subcontractors" is defined in this section to address parties intended to be covered by the phrase "contractors and subcontractors involved in launch services" in 49 U.S.C. 70112 and 70113. Thisis important because these
contractors and subcontractors have certain responsibilities and enjoy certain benefits under the statute relating specifically to therequirements 

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for insurance (orother form offinancial responsibility), reciprocal waivers of claims and the U.S. Government's payment under certain circumstances of successful third party claims in excess ofrequired liability insurance.

As used in the Act, the term "contractors and subcontractors" is generally modified bythe phrase, "involved in launch services." The term "launch services" is defined by the Act
to include "(A) activities involved in the preparation ofalaunch vehicle and payload for launch; and (B) the conduct ofa launch." 49 U.S.C. 70102(5). When this term is coupled with "contractors and subcontractors" for purposes of sections 70112 and 70113 ofthe statute,

aliteral reading could narrowly limit the group ofcovered contractors and subcontractors to service providers involved strictly in on-site launch preparatory and support activities. The Office does not believe that this interpretation is consistent with the overall objective ofthe financial responsibility and payment ofexcess claims provisions ofthe statute, which is to ensure financial protection and an equitable sharing ofrisks among the parties exposed to potentially catastrophic losses from a launch accident. The group ofcovered parties should not be limited only to the most obvious and visible launch participants that are engaged in preparingthe launch vehicle and payload for launch and conducting the launch at the launch range. This group should also encompass, for example, the manufacturer that produces a component part for installation in the launch vehicle or payload, or the supplier that delivers a piece of equipment or other physical object used
to prepare for or conduct a launch, as well as the contractor that constructs or refurbishes a launch pad specifically for licensed launch activities. In other words, to the extent a third-party loss is attributable to the direct or direct involvement ofcontractors or subcontractors who have provided goods or services in connection with licensed launch activities, the required insurance should cover their resulting liability. It is important to note that the statute addresses claims that result from

an activity carried outunder a license. Third-party claims that do notresult from licensed activities are not addressed by the financial responsibility requirements ofthe statute. For example, third-party claims that arise duringthe manufacture ofacomponent part would not be covered byrequired insurance.

Accordingly, the term "contractors and subcontractors" as setforth in proposed §440.3 would include all contractors and subcontractors at any tier thatparticipate in or contribute to the conduct oflicensed launch activities, including suppliers of property and services and component manufactures ofalaunch vehicle or payload. The Office requests comments

on the practical ability to protect all of these parties through required insurance.

The definition ofthe term "customer" in proposed §440.3 is intended to respond to concerns that the protections afforded "the customer" under the statutory allocation ofrisk regime be available not only to the party that actually contracts with the commercial launch services provider and prospective licensee, but also to the intended beneficiary or recipient of launch services when the latter party is different from the former. For example, this situation typically arises in the
context of "turnkey" contracts for on orbit delivery ofa satellite. Under this type ofarrangement, the ultimate owner/operator ofthe satellite contracts with a satellite manufacturer to produce the satellite and secure launch services
to deliverthe satellite to a prescribed orbit. The satellite manufacturer purchases launch services directly from

acommercial launch services provider, and transfers title to the satellite only after successful completion ofthe launch and on-orbit tests to confirm that the satellite is functioning properly. For this reason, the term "customers" also includes aperson to whom theprocurer oflaunch services conditionallysells, leases, assigns, or otherwise transfers its rights in the payload or apart thereof. Another example is thepurchaser ofan interest in the satellite, e.g., transponders, from the party that owns the satellite whether that party has purchased launch services directly or has contracted for on-orbit delivery on
a "turnkey" basis. Another example is the customer who has placed its property on board the payload in order
to receive an on-orbit service, such as microgravity experiments. The Office believes that these parties should be viewed as "customers" in order to enable U.S. commercial launch services providers to compete with foreign operators, consistent with one ofthe objectives ofthe 1988 Amendments. The proposed definition of "customer" therefore includes the person who
enters into a launch services agreement with the licensee, as well as anyperson to whom the customer has, conditionally or otherwise, sold, leased, assigned or otherwise transferred any of its rights in the payload to be launched. The term "customer" does not include the ultimate beneficiary ofthe payload services, as opposed to launch services, because doing so could theoretically include any person who

uses a television or makes alongdistance telephone call, and goes beyond the intended scope ofthe Act.

When the licensee's customer is a U.S. Government agency, it is not intended that the agency be treated any differently from anongovernmental customer with respect to the payload. Thus, as discussed in greater detail in the accompanying supplementary information under the heading, "Government Customer," and in the analysis of§440.17 oftheproposed regulations, the Government payload is
notcovered by required Government property insurance and the U.S. Government agency involved accepts responsibility for property damage to the payload. Forother purposes, the Government customer is an agency of the United States involved in licensed launch activities and, as such, it is a named insured in required insurance and its employees are deemed third parties.

A definition ofthe term "Government personnel" hasbeen included in proposed §440.3 for purposes of identifying those employees ofthe Government and its contractors and subcontractors entitled to protection and coverage byrequired insurance.

A definition ofthe term "hazardous operations" is included to add clarity to the list ofinformation required bythe Office to perform a determination of maximum probable loss. The definition proposed is consistent with the Office's study, "Hazard Analysis ofCommercial Space Transportation," prepared in May 1988, and is intended to capture activities that create a potential for an accident that would result in damage or injury.

The term "liability" refers to any legal obligation, whether arising under United States, international or foreign law, to pay claims for bodily injury or property damage resulting from licensed launch activities.

The term "licensed launch activities" is intended to reflect the activities subject to the Department's authority under the Act to license the launch of

a launch vehicle. For purposes of applying the proposed regulations, it focuses specifically on activities authorized to be conducted under a particular license issued by the Office.

The term "maximum probable loss" (orMPL) refers to the Office's determination, in the form ofa dollar amount, ofthe greatest potential losses forbodily injury and property damage 

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that can reasonably be expected to occur
as a result oflicensed launch activities. The Office determines the value ofthe maximum probable loss attributable to licensed launch activities by analyzing the known hazards, the consequences (amountofloss), and probability ofloss associated with such activities. It does
not mean maximum possible loss, that is, a "worst case" scenario regardless of likelihood. Rather, assessing maximum probable loss employs risk analysis methodology. The analysis takes into account the characteristics ofone or

more launches in similar circumstances, the proximity ofpersons and property

on and around the launch site and the likelihood ofinjury and damage within

an established probability threshold. (A

more elaborate explanation ofthe Office's methodology for determining the value ofmaximum probable loss is provided in the section-by-section analysis accompanying §440.7.)

Through risk analysis, the Office determines two results: the probability

an undesirable event will occur and the consequences (measured as the amount ofloss) ofthat event. The Office then compares these results to a threshold probability ofoccurrence selected by the Office in order to determine whether the results arereasonable to expect, or probable, and therefore warrant financial protection against their

occurrence. Typically, the larger, or
more catastrophic, the potential loss or damage, the less likely it is to occur. The threshold probability is the probability value selected by the Office
at and below which loss or damage that

can be reasonably expected to occur is measured. Loss or damage that has a likelihood ofoccurring that is equal to

or greater than the threshold probability is considered probable. Accordingly, insurance to protect against that amount ofdamage or loss is required. Loss or damage that has a likelihood of occurring that is less than the threshold probability is not reasonably likely to

occur and is therefore considered improbable. Accordingly, insurance to protect against such loss or damage is not required. In summary, maximum probable loss is the dollar value determined by the Office as the upper bound ofloss that can reasonably be expected to result from licensed launch activities. Loss or damage exceeding the upper bound would result from events that are so very unlikely as to be unreasonable to expect. That is, they are not sufficiently probable.

Currently, the Office utilizes two different threshold probabilities in determining third-party and Government property maximum probable loss. The threshold probability used for determining third-party MPL, exclusive ofGovernment personnel, is

on the order ofone in ten million. The threshold probability for determining Government property MPL and thirdparty MPL for Government personnel is

on the order ofone in one hundred thousand. The thresholds are defined to accommodate the difficulty ofsetting precise bounds on risks that, by definition, are somewhat remote.

The Office's selection ofon the order ofone in ten million as the threshold probability (theprobability of occurrence) for determining third-party MPL is based upon the Government's experience in supporting launch activities atFederal ranges. Because of the stringent safety requirements used at Federal range facilities, the general public in the vicinity ofthe range has little chance ofbeing adversely affected by a launch event. As aresult, the likelihood ofa third-party casualty resulting from alaunch from a Federal range should be no greater than on the order ofone in one million. Ifthe Office used one in one million asthe threshold probability for determining third-party MPL, no third-party loss would reasonably be expected to occur, the MPL would be zero, and no third-party liability insurance would be required. The Office does not believe that this was the result Congress intended in adopting maximum probable loss as thebasis for settingfinancial responsibility requirements. Accordingly, the Office's view is that the Act requires a reasonable and measurable amount of financial responsibility bylicensees and has selected the very low threshold of

on the order ofone in ten million probability ofoccurrence as the threshold probability that achieves this result. The MPL determination using this threshold signifies that there is less than on the order ofa one in ten million chance that claims for third-party losses would exceed the required amount of insurance. Stated another way, the insurance requirement setby the Office is the maximum magnitude ofloss such that there is less than on the order of

one in ten million chance ofexceeding this amount.

The Office utilizes on the order ofone in one hundred thousand as the threshold probability for determining Government property insurance requirements because Federal range facilities, bytheir very nature and intended purpose, will be exposed to hazardous activities and may suffer

some damage. Thus, the Government appropriately accepts greater risk than third parties and the MPL is determined using the higher threshold probability. This assumption ofsome amount ofrisk may, in part, account for the lower statutory ceiling on insurance requirements and the Government's waiver ofclaims for damage above the
amount ofrequired insurance. Similarly, Government personnel, including employees ofGovernment
contractors and subcontractors, accept greater risk than the general public or other third parties through their exposure to or involvement in hazardous operations. For thisreason, the third-party MPL determination includes risks to Government personnel measured at theprobability threshold of

on the order ofone in one hundred thousand, rather than on the order of

one in ten million.

In the Office's experience, this approach results in insurance requirements that are reasonable, within the statutory ceiling forrequired insurance, and adequate to protect U.S. Government interests.

The proposed definition ofthe term "third party" reflects the definition contained in 49 U.S.C. 70102(11). However, the Office's definition of "third party" clarifies the statutory definition by expressly including as third parties United States Government personnel, including employees of Government contractors and subcontractors, to the extent that they

are directly involved in providing launch support or launch services for licensed launch activities. The purpose ofthe definition is to ensure that liability insurance, or other form of acceptable financial responsibility, required under §440.5(b) ofthe proposed regulations is available to

cover the claims ofGovernment personnel, as well as persons not involved in licensed launch activities, who are injured or otherwise sustain a loss as a consequence ofthose activities. Government personnel who contract personally and directly with alicensee

or othernongovernmental launch participant to provide a service are not considered Government personnel for purposes ofthese regulations when performing that service. In addition, the proposed definition would expressly exclude employees ofother launch participants because their claims for injury or loss are not intended to be included in the Office's determination ofrequired third-party liability insurance. Responsibility for employee losses is assumed by each employer under the reciprocal waiver ofclaims required under §440.17 oftheproposed regulations, and those employee claims

are not eligible for payment bythe U.S. Government in the event ofexcess thirdparty claims. 

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The term "United States" is intended to refer to the United States Government in its entirety and as the collective sum ofits various parts.
Section440.5-General

Although issuance ofa license constitutes legal authorization to carry out the activities specified therein, certain conditions mustbe satisfied for the licensee to proceed with authorized activities.

Section 440.5(a), as proposed, would establish the fundamental requirement that authorization to conduct licensed launch activities pursuant to a license issued by the Office is contingent upon the licensee's demonstration offinancial responsibility and compliance with risk allocation requirements as set forth in proposed regulations. In addition to insurance required bythis part, a licensee may be required by other agencies ofthe United States Government to obtain other types of liability or property insurance covering activities involving United States launch property, launch services or personnel. Other insurance requirements may include workers compensation, unemployment insurance, employer's liability, comprehensive automobile liability, environmental liability, or insurance required byFederal, State or local environmental protection laws and regulations. These other insurance requirements are not set forth in license orders issued by the Office;however, licensees are not relieved ofthe requirement to comply with them.

In addition, as further explained in the section-by-section analysis accompanying §440.15(b), the financial responsibility requirements prescribed under the proposed regulations would preempt those provisions in agreements between the licensee and the United States, or any agency thereof,involving United States launch property or launch services that address financial responsibility, allocation ofrisk, and related matters covered by49 U.S.C. 70112 and 70113. The objective ofthis preemption is to avoid duplicative requirements, but not to relieve the licensee ofcontractual or legal obligations intended to address interests other than those served by the statute.

Section 440.5(b) would codify the Office's existing practice ofsetting the required amount offinancial responsibility in license orders. As a procedural matter, the Office has relied

on the issuance oflicense orders to supplement the license and prescribe specific terms, conditions and limitations, including financial responsibility requirements, on a caseby-case basis. Many ofthese terms and conditions would now be set forth in rules ofgeneral applicability. The
amount offinancial responsibility that
must be obtained would continue to be
setforth in a license order. The license order would generally be issued concurrently with the license, although there may be circumstances when it would follow issuance ofthe license. The Office may also revise financial responsibility requirements in a subsequent license order in the event of

achange in exposed property or risks affectingthe required amount of coverage. In any event, to the extent the license order reflects the Office's determination ofmaximum probable loss, the timing ofits issuance would be subject to the provisions ofproposed §440.7.

Propose §440.5(c) states the fundamental principle that evidence of financial responsibility provided bythe licensee is no substitute for actual financial responsibility ofthe licensee. In the event the licensee fails to obtain

or maintain insurance or financial responsibility in amounts and according
to the terms and conditions prescribed, the licensee would bear therisk and be liable for claims resulting from licensed launch activities that would otherwise have been covered. In addition, in the
event ofa defense raised, or exclusion,
to coverage under the policy that relieves the insurer from compensating claims, the licensee would remain responsible for satisfyingthe claim. The only exception to this fundamental principle provided under the statue is where the Secretary ofTransportation specifically determines that an exclusion is usual for the type of insurance involved, and the United States Government agrees to provide for paying claims from the first dollar of loss. As explained in the section-bysection analysis accompanying §440.19,

apolicy exclusion would be considered "usual" onlyif insurance covering the excluded risk is not commercially available at reasonable rates. The licensee is required to submit a certification to that effect when demonstrating compliance with financial responsibility requirements. No final determination is made bythe Department unless and until an occasion arises when the Department is called upon to prepare a compensation plan covering excluded claims. Ifit then becomes evident that insurance was, in fact, available at commercially reasonable rates, the Government need
not pay claims from the first dollar of loss and the licensee remains responsible for the liability. Failure by the licensee to comply with theserequirements may result in suspension orrevocaton ofthe license and also subjects the licensee to other penalties asprovided in section 405.7 of this chapter.

Section440.7-Determination of Maximum ProbableLoss
Section 440.7, asproposed, describes the Office's procedures for assessing and issuing adetermination ofmaximum probable loss (MPL) on which financial responsibility requirements are based. Section 440.7(a) would provide that a determination ofmaximum probable loss resulting from licensed launch activities forms the basis ofthe financial responsibility order issued by the Office.

Section 440.7(b) would provide the timingfor the Office's issuance ofthe MPL determination, consistent with the Act. The Actprovides that MPL determinations mustbe made no later than 90 days after alicensee or transferee requires it and has submitted all ofthe information needed to make a determination. In practice, the Office begins the risk analysis required for the MPL determination duringthe 180-day license application review period. Doing

so enables the Office to issue financial responsibility requirements concurrently with a license so asnot to delay commencement oflicensed launch activities.

On a very few occasions, the Office has been unable to issue the MPL determination concurrently with the license. This result may occur for several reasons. In order to conduct the analyses, the Office requires from the applicant information described in Appendix Ito the proposed regulations and may also request information from Federal range facilities involved in proposed launch activities or exposed to risk ofdamage or loss as aresult of proposed activities. Incomplete information, either from the applicant or from the Federal range facility, can extend the amount oftime necessary for the Office to complete and issue the MPL determination. Typically, a delayed determination results from submission by the applicant of incomplete information on which to perform the necessary risk analyses. Until the Office has complete and sufficient information the 90-day period does not begin. A delayed determination

as aresult ofincomplete information is
notuntimely. In addition, the Act requires that the Office consult with heads ofother appropriate Federal agencies in issuing financial responsibility requirements. The Office's practice hasbeen to share its 

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MPL analyses with affected Federal agencies and request comments within three weeks. The Office's experience has shown that three weeks may not be sufficient for other Federal agencies to complete their reviews and issuance of the MPL determination may necessarily be delayed.

Accordingly, proposed §440.7(b) would provide that the Office notify a licensee or transferee ofany delays in issuing the MPL determination beyond the statutory 90-day period. The Office intends that this provision would be invoked only in circumstances beyond the Office's control, such as protracted consultation with otherFederal agencies.

Proposed §440.7(c) refers to Appendix I to theproposed regulations which prescribes information requirements for issuing amaximum probable loss determination. Appendix I is intended to be a comprehensive list ofinformation requirements, some of which could be waived by the Office if,

as a result ofconsultation with the applicant, the Office finds that the information is not necessary in light of the particular launch proposal. Once information is provided, the person requesting the MPL determination is responsible for reporting any changes that could affect the outcome oftherisk analyses.

As provided in proposed §440.7(d), the Office may amend or adjust its maximum probable loss determination
to reflect any new information relevant
to an accurate assessment ofrisk. In lieu ofsubmitting duplicative information, a person requesting a MPL determination who has previously been issued one may certify that there hasbeen no change from information previously submitted. This provision is intended to reduce the regulatory burden on licensees who conduct similar launch activities under separate licenses.

An MPL determination must accompany every license authorizing launch activities and is therefore typically performed in conjunction with the Office's review ofa license application. Section 440.7(e) would address the situation in which the Office is requested to issue a determination ofmaximum probable loss resulting from activities that are not the subject ofa specific license application. A determination made under this section would not be governed by the 90-day requirement set forth in §440.7(b). Methodology for Determining Maximum Probable Loss

The Office derives the value ofthe maximum probable loss that may result to third parties and Government property from licensed launch activities through case-by-case risk analyses. The Office considers factors rangingfrom the kinds ofhazardous operations, as defined in proposed §440.9, to be conducted under alicense, to the number ofthird parties that may be exposed to risk in the event ofa launch accident. Failure modeling techniques, the Office's experience in preparing

numerous MPL determinations, and engineeringjudgment all play roles in the final determination. A more complete description ofthe Office's approach to hazard analysis and risk analysis techniques appears in a study, entitled "Hazard Analysis of Commercial Space Transportation," released bythe Office in May 1988. A copy may be obtained from the Office upon request. In addition, the Office is preparing a comprehensive description ofits procedural methodology for determining maximum probable loss in

a separate report to be made available to the public.A briefsummary ofthe Office's approach to determining MPL is presented below to explain the underlying rationale for the information requirements referenced in proposed §440.7(c) and listed in appendix I to part 440.

In addition to information required from the applicant, the office obtains certain information from the Federal range facility in order to assess properly the value ofGovernment property exposed to risk. This information is not reflected in regulatory requirements. Typically, this information consists of identification offacilities the Federal range facility has authorized for useby the licensee and the value ofthose facilities, other range facilities that the Federal range facility identifies as exposed to risk as aresult ofthe licensee's proposed launch activities due to their proximity to the licensee's hazardous operations, the number of Government personnel that the Federal range facility believes would be exposed
to risk, and range-required risk mitigation measures.

Much ofthe information required to complete the MPL determination is provided aspart ofthe application to conduct alaunch. However, because any person can request a maximum probable loss determination at any time, information requirements for obtaining

adetermination are included aspart of this proposed regulation. The proposed information requirements are not intended to place an additional or duplicative burden on prospective licensees and can be satisfied by specific reference to the license application. Appendix Idescribes the fullrange of information required from an applicant
to complete the MPL determination. In certain circumstances, not allofthe information would be required and the Office will advise the applicant accordingly during pre-application consultation. For example, where a launch from an isolated location would
notexpose any identifiable Government property to risk,the Office would waive those information requirements directed
at assessing risk to Federal range facility assets. A launch proposal may involve vehicles and risks similar to those previously considered by the Office and the Office maywaive information requirements it believes would be unnecessary or duplicative in light of existing analyses. Where the Office can determine, on the basis ofthe launch proposal, that certain risks need not be considered in order to calculate MPL, the Office will waive the requirements that pertain to those risks.

The complexity ofthe MPL analysis will depend upon therisks that attend

a specific launch proposal. Atits most complicated, acomplex launch vehicle involvinghazardous operations and flight paths that expose people and property on and off-range to risk,the Office is able to employ a variety ofrisk analysis tools, such as computer models that estimate impact probabilities, potential property damage and casualty expectations. For all proposals, government property and third-part losses are considered in separate MPL analyses.

The Office's objective is to determine the value ofthe maximum magnitude of loss that is sufficiently probable to warrant financial responsibility protection. That is, within the stated probability thresholds, as defined in proposed §440.3, the Office must establish amaximum value ofloss. By corollary, the maximum magnitude of loss within the probability threshold drives the MPL value. This means that the Office need not consider every single accident scenario that falls within the threshold probability. Those having relatively minimal damage consequences need not be individually considered. Rather, the office's focus is

on finding the maximum value ofloss that would result from an accident that is within the specified threshold probability ofoccurrence. The Office does so by identifying specifically the hazardous activities to be conducted under alicense, Government and thirdparty property placed atrisk by those activities, and the number ofthird parties placed at risk. Then, the Office identifies a range ofaccident or failure scenarios and estimates the probability 

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ofoccurrence for each scenario. The Office then estimates the value ofloss for various accident scenarios.

The Office utilizes several methodologies, in order ofpreference, to estimate the probability ofoccurrence of the different scenarios. The order of preference begins with actual experience or existing models, and descends to expert probability analysis

as the second best alternative, followed by professional engineeringjudgment.

Estimating the value ofloss for each accident scenario is done similarly, using different methodologies in an order ofpreference. Actual experience is most reliable and is used wherever it exists and is directly applicable to a launch proposal. Forpre-flight licensed launch activities, the Office uses estimates that are informed by facility damage tables developed for the Federal range facilities, building design specifications, and engineering judgment. Computer models, such as the Facility Damage and Personnel Injury (DAMP)programs, may be used
to estimate damage during and immediately following vehicle life-off. For third-party casualties, the Office develops an Expectation ofCasualty figure for off-range population and Government personnel atrisk.

As noted above, low loss scenarios need not be considered unless a possible accident scenario involves losses that, when combined, maybe significant in determining the value of the maximum probable loss. However, in many instances, accident scenarios

are mutually exclusive. For example, a pre-flight accident that destroys the launch vehicle means there will be no launch, and there is no need to aggregate the damage from a pre-flight accident ofthis nature and a postlaunch accident in determining the maximum value ofloss.

In summary, the Office performs a detailed estimate ofproperty damage and casualties for the different accident scenarios that fall within the threshold probability ofoccurrence in order to determine the maximum value ofloss. The MPL valuebecomes the amount associated with the most costly accident scenario falling within the threshold probability ofoccurrence.
Government Property

The Office's maximum probable loss determination for Government property damage takes into account U.S. Government property situated on a Federal range facility, wherever located. As noted above in the Supplementary Information, the Office includes as part ofits determination Government range assets on adjacent Federal range facilities that are exposed to risk of damage or loss as a result oflicensed launch activities.

The Office historically has not considered temporarily placed or "transient" Government property, including launch vehicles and payloads, in calculating the maximum probable loss determination. The Office bases its approach on several considerations. First, the Federal range facility is responsible for maintaining a schedule oflaunch activities. The Government is therefore aware ofupcoming commercial launch activities and, by exposing its transient or movable property to the possibility ofdamage or loss due to commercial launch activities, accepts certain risks. Second, readily movable property may no longer be present atthe time the licensee ultimately conducts licensed launch activities. Ifthat property were included in the MPL determination, the licensee may be unfairly burdened with too great

an insurance requirement. One alternative would be to adjust, either upward or downward, the amount of property insurance that would be required just prior to commencing licensed activities. This approach is arguably contemplated by the statue, which provides for the Secretary to amend the maximum probable loss determination when new information so warrants. However, lastminute adjustments to the MPL determination due to the Government's action of placing its property at risk,could prove administratively burdensome for both the Office and the licensee, whose launch could be delayed by havingto demonstrate additional financial responsibility due to last minute changes in requirements. Third, including transient or Government property temporarily located on the Federal range, such aslaunch vehicles and payloads, could readily drive the MPL value above the $100 million statutory ceiling for required insurance. Although the Act contains provisions whereby the Department is directed to review annually the statutory ceilings

on required insurance and report to Congress proposed adjustments to conform with changed liability expectations and the insurance market, the Office views the $100 million statutory ceiling on the Government property insurance requirement as a clear indication that Congress did not intend for these Government assets, which typically cost in excess of$100 million each, to be included as part of the range assets on which the MPL determination is based.

The Office makes an important distinction between transient, movable property that is notincluded in the MPL determination and property that has been placed in a storage facility on the Federal range. The latter is included in the MPL determination. The rationale for the Office's distinction is that certain facilities are intended, by design, to house Government property on a temporary or long-term basis. However, where Government property has been stored in afacility not designed or intended for storage, thereby exposing the property to additional risk, the Office believes itwould be unreasonable
to impose the cost ofthis additional risk

on the licensee. The Office therefore excludes the stored property from its MPL determination. In addition, to the
extentthis stored property, such as rocket motors orexplosives, may contribute to the possible extent of damage to Government facilities, the Office does notfactor the additional losses that may be attributed to that property in determining the MPL value.

In taking the approach ofexcluding certain transient, movable Government property, the Office is aware that failure
to include itcould expose the Government to greater risk ofloss. However, the Office believes that its approach reflects the intent underlying the comparatively low statutory ceiling

on the Government property insurance requirement, and is reasonable in light ofthe Government's assumption ofrisk in placing property on the Federal range facility in a manner that exposes it to damage or loss from commercial launch activities. Forthese reasons, the Office believes that its approach is the better

one.Nevertheless, it is important to bear in mind that, whether or notthe value ofcertain property is included in makingthe MPL determination, damage

or loss to any Government property, whether fixed ormovable, located on the Federal range facility must be coveredby the insurance policy the licensee obtains under 49 U.S.C. 70112(a)(1)(B). Comments arerequested

on the Office's approach to considering non-fixed Government property in determining Government property insurance requirements.
CurrentReplacement Value

In determining maximum probable lose forGovernment property, the Office bases its findings on the current replacement value ofthe property. The notion ofcurrent replacement value takes into account the current use and function ofa Government facility, not its originally intended use. Forexample, the current replacement value for a facility that was originally built to support engineering operations but is no longer needed forthat purpose and is 

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now used as an excess storage facility would most likelybe lower than its original construction cost, even ifa launch accident meant its total loss. The Office's rationale is that the cost of restoring property to its original use when the Government itselfhas chosen
not to maintain theproperty in its original condition imposes an unfair
cost on the licensee. The reverse situation may also occur, whereby restoring property to its current use may cost more than restoring itto its original

use. This could occur where property has been up-graded or modified to support another purpose than originally intended. In that event, the Office believes that it is fair and appropriate to require insurance that covers the maximum probable loss to the property's current value, up to the statutory ceiling. In all circumstances, the Office consults with Federal range authorities in valuing Government property. Third-Party Property Damage

Under the proposed regulations, third-party property includes all property owned bypersons or entities other than the licensee and its customer, and the contractors, subcontractors, and employees ofeach, involved in licensed launch activities, the Government's
contractors and subcontractors involved in licensed launch activities, and the Government (except for property located

on aFederal range facility). Itincludes the personal property belonging to Government personnel involved in licensed launch activities, and all offrange private and public property other than property on nearby or adjacent Federal range facilities for which Government property insurance coverage is required.

The risk analysis performed to determine the value ofthird-party property maximum probable loss utilizes three approaches to estimating property values: (1) Specific determinations, (2) averaging, and (3) setting an upper bound or ceiling. The Office selects the appropriate methodology to use on a case-by-case basis, taking into account such factors as the availability ofinformation, the launch site, and the range ofrisks to third parties presented by a particular launch proposal. The Office may use all three methods ofestimating third-party property losses in one MPL determining, depending upon the type and amount ofproperty exposed to loss

or damage as aresult oflicensed launch activities. In all instances, the Office utilizes a conservative approach to

ensure the adequacy and sufficiency of its MPL determination and third-party liability financial responsibility requirement.

The first estimation methodology, specific determinations, entails obtaining actual property values and determining the likelihood and consequences ofan accident affecting that property. This method is typically used for very high-value property in the

area that would be most exposed to risk. The second method, averaging, can be accomplished in several ways. One way is to average estimated property values in ahomogeneous area through such

means as county or city tax assessment records. Another is to assume that an accident will occur in the high-value part oftherisk area and determine the average ofthe high-value property exposed to risk. This conservative approach assures that the MPL determination will be sufficient to cover losses to this high-value property. The third method, setting an upper bound, also yields a conservative result. This approach utilizes the Office's experience by considering the nature and size ofthe area exposed to risk, e.g., urban, suburban, rural, industrial, farm,

or some combination, and comparing it
to third-party property considered at risk in pastMPL analyses and to know values ofGovernment property placed
atrisk. Setting an upper bound involves

aqualitative assessment ofthe value of third-party property at risk and isbased

on the Office's extensive experience in assessing risk. Third-Party Casualties

The Office must also consider thirdparty casualties in determining maximum probable loss to third parties. Doing so requires an analysis ofthe number ofpersons exposed to risk and assigning avalue oflife. Department guidance issued in 1993 for preparing economic evaluations suggests using $2.5 million asthe value oflife in estimating one's willingness to pay for safety measures in order to reduce one's probability ofdeath. However, the Office is mindful ofthe distinction between the value oflife used for purposes ofestimating the cost ofsafety requirements in regulations and for seeking damages in civil litigation. Accordingly, the Office utilizes the somewhat higher figure ofthree million dollars asthe value ofalife to assure a conservative, but reasonable, result.

The Office requests comments on the appropriate means ofassessing the value ofthird-party property and the value oflife for purposes ofdetermining maximum probable loss to third parties. In their comments, commenters are requested to consider the impact on insurance requirements that could result from achange in methodology.

Section440.9-InsuranceRequirements forLicensedLaunchActivities

This section would establish in a regulation financial responsibility requirements in the form ofinsurance as
a condition ofevery license issued by the Office authorizing commercial space launch activities. A licensee would also be allowed to demonstrate an equivalent
amount offinancial responsibility through means other than insurance.

Proposed §440.9(b) would establish the requirement that alicensee obtain a policy ofliability insurance to pay claims ofthird parties for bodily injury

orproperty damage resulting from licensed launch activities. In accordance with 49 U.S.C. 70112(a)(4), the parties protected under the insurance policy as insureds, or additional insureds, are the United States, its agencies, and its
contractors and subcontractors, and theirrespective personnel, involved in licensed launch activities; and the licensee, the customer, and their respective contractors and subcontractors involved in licensed launch activities. Because Government personnel, as defined in proposed §440.3, are included within the proposed definition of "third party," Government personnel maybe both third-party claimants whose claims are compensable byrequired liability insurance, as well as additional insureds.

Under proposed §440.9(c), the
amount ofrequired insurance is based

on the Office's determination of maximum probable loss from thirdparty claims resulting from licensed launch activities. As provided by statute, the amount ofcoverage required by the Office may not exceed $500 million, or the maximum liability insurance available on the world market
atreasonable cost. It should be noted that the maximum limit on insurance applies to the aggregate ofclaims for any particular launch, as provided by49 U.S.C. 70112(a)(3). A policy may cover
more than one launch. However, the
amount ofinsurance prescribed by the Office in a license order must be available to coverthe total ofthird-party claims resulting from each launch event. For example, if alicensee intends to conduct a series oflaunches under an operator license and third-party claims resulting from the first launch are compensated by the liability policy, the
amount ofcoverage for each succeeding launch mustbe the amount required by the license order. Coverage may notbe reduced by the amount ofclaims paid 

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as a result ofprevious launch activities conducted under the same license.

Section 440.9(d) would establish in a regulation the requirement that a licensee must obtain apolicy of insurance to compensate for damage to

or loss ofproperty at a Federal range facility that is owned, leased or occupied by, or in the care, custody or control of,the United States, its agencies, and its contractors and subcontractors involved in licensed launch activities, that results from licensed launch activities. The maximum probable loss determination to support this requirement focuses on valuable national assets located at Federal range facilities that are put at greatest risk by licensed activities; however, all Government property (and that ofits agencies, contractors and subcontractors involved in licensed launch activities) ata Federal range facility mustbe protected. This would include Government range facilities surrounding or adjacent to the proposed launch site. The Office's experience in administering financial responsibility requirements to protect Government property has been previously described in the supplementary information accompanying this proposal under the heading, "Property Protection for Government Launch Participants." The Office does not object to any reasonable approach on the part ofa licensee that is taken to meet thisrequirement as long

as the ultimate objective is achieved, that is, providing for the compensation ofproperty damage sustained at Federal range facilities by the United States, its agencies, contractors and subcontractors involved in licensed launch activities, resulting from activities carried out under a license. However, the Office believes that, at a minimum, naming the U.S. Government and its agencies,
contractors and subcontractors, involved in licensed launch activities,

as additional insureds is necessary to accomplish this objective. Comments

arerequested on whether the Government should also be named the loss payee and be responsible for administering payment ofinsurance proceeds to its contractors and subcontractors.

Under proposed §440.9(e), the
amount ofrequired insurance would be based on the Office's determination of maximum probable loss attributable to property damage claims ofthe United States, its agencies involved in launch services, and its contractors and subcontractors involved in licensed launch activities; however, the amount would not exceed $100 million. As noted in the analysis accompanying proposed §440.9(c), the maximum limit on insurance applies to the aggregate of claims for any particular launch. Covered claims are those against a person, including Government employees, for damage or loss to Government property, including the property ofGovernment contractors and subcontractors, resulting from licensed launch activities. In thisrespect, the named insureds are different from those

on the liability policy. Section 440.9(f)would provide that, in lieu ofobtaining policies of insurance, the licensee may demonstrate financial responsibility in an alternative form-such as insurance purchased from arisk retention group authorized under the Risk Retention Amendments of 1986, surety bonds, letters ofcredit,

or some combination-that reflects substantially the same terms and conditions ofthe requirements set forth in these regulations. Whatever the form offinancial responsibility proposed in lieu ofinsurance, the licensee must demonstrate that it meets the requirements for financial responsibility. Section 6 ofthe 1988 Amendments to the Commercial Space Launch Act provides special incentives to certain satellites affected by National Security Decision Directive 254. This directive, issued by President Reagan in August 1986, following the Challenger accident, essentially ended NASA's role in launching commercial and foreign satellites. Section 6 ofthe 1988 Amendments provides that if certain eligibility criteria are met, the requirement that the licensee obtain property insurance covering loss ofor damage to United States Government property does not apply. The Office believes that there are no remaining "eligible satellites" that have notbeen launched orotherwise accounted for and no provision is made in the proposed rulemaking to cover them. Comments are requested asto whether this provision may be properly omitted in final regulations.

Section 440.11-DurationofCoverage; Modifications

Proposed §440.11(a) would specify when financial responsibility must be in place. Section 440.11(a), as proposed, would provide that required insurance coverage or other form offinancial responsibility must attach upon commencement oflicensed launch activities, and remain in full force and effect until the later of: (i) The completion oflicensed launch activities,

as defined by the Office in a regulation,

or (ii) untilrisk resulting from licensed launch activities to third parties and Government property is sufficiently small, as determined bythe Office through the risk analysis conducted to determine maximum probable loss, that financial responsibility is no longer necessary. The duration offinancial responsibility requirements for a particular launch is specified bythe Office in a license order.

The statutory requirement for a licensee to obtain insurance or otherwise demonstrate financial responsibility refers to providing compensation for claims "resulting from

an activity carried out under the license." 49 U.S.C. 70112(a)(1). Based upon this language, the Office's view is that insurance requirements attach upon commencement oflicensed launch activities but donot necessarily cease upon completion ofa licensed launch, defined for orbital launches as the point when any remaining fuel is emptied from the upper stage, the vehicle tank is vented and otherwise "safed," and the upper stage is no longer subject to the operator's control. Hazard analyses performed bythe Office to determine maximum probable loss have shown that the greatest exposure for which insurance is typically required exists at the time oflift-off and flight, and that there is virtually no quantifiable risk to third parties or to United States Government property after completion ofa nominal launch. The Office has found that thirty days is an appropriate amount oftime in which to determine whether an orbital launch has been nominal or whether an anomaly has occurred that could affect risks to third parties or the Government. For this
reason, historically, the Office has provided in license orders applicable to orbital launches that insurance coverage is required to attach upon commencement oflicensed activities and remain in force "for a period of thirty (30) days following payload insertion into orbit." For suborbital launches, insurance has been required
to be maintained at least until motor impact and payload recovery. However, in the event ofalaunch anomaly, the Office may amend the license order to require that the licensee maintain insurance until the Office determines that risks to third parties and Government property are sufficiently small that insurance is no longer needed.

When the licensee is no longer required to maintain insurance under the license, both the Government's waiver ofexcess property damage claims under §440.17(c), and the Government payment ofexcess thirdparty claims provisions under §440.19, would apply from the first dollar ofloss. However, it is important to note that the 

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Act requires that the third-party claim result from the licensed activity in order for the Government payment ofexcess third-party claims provision to apply. When that nexus no longer exists, neither does the Government's acceptance oftherisk of such claims. In every instance, a factual determination would be required as to whether a sufficient nexus exists between the licensed activity and the third-party claim. In terms ofbusiness planning, it has been the Office's experience that for nominal launches, licensees may procure insurance for periods oftime in

excess ofthirty days in accordance with individual risk management practices because the premium rate difference to

cover any additional period oftime tends to be negligible.

As noted in thepreceding Supplementary Information, questions have arisen over time with respect to the appropriate scope ofa license authorizingpre- and post-flight ground operations and associated requirements for insurance coverage. As to pre-flight activities, the Office intends to address the question ofthe appropriate scope of

alicense authorizing launch activities in

a separate rulemaking.With respect to post-launch ground operations, the Office believes that damage to Government property or property of Government contractors and subcontractors, as well as to third parties, could occur during clean-up and from removal oflaunch-related equipment and material and that insurance should remain in place to protect against such claims. In this regard, it is significant to note that the Act requires financial responsibility to protect against claims "resultingfrom an activity carried out under license" (emphasis supplied) (49 U.S.C. 701 12(a)(1)). Comments arerequested

on the proposed duration ofrequired insurance with respect to ground operations, including clean-up and removal oflaunch-related equipment from the launch site. Comments are also requested on the extent to which insurance should be required to compensate claims ofthird-parties and the Government for short-term environmental damage, or alternatively, whether clean-up or short-term environmental damage to Government property should be charged to the licensee as a direct cost.

The Office is also requesting comments on the extent to which insurance to protect against claims for long-term environmental or property damage should be required, its availability, and mechanisms for assuring adequate coverage has been obtained. The Office is aware that longterm environmental damage risks are typically excluded from launch insurance coverage because of,among other things, the difficulties ofinsuring against claims that may not arise until long after therisk period (generally launch plus a number ofdays) is concluded. Commenters should address whether such claims should be included in determining maximum probable loss for licensed launch activities and whether the existing statutory ceilings

are adequate if such claims are included. In considering the issue,
commenters arerequested to suggest mechanisms for ensuring that funds are available to address long-term environmental damage that results from commercial launch activities. Commenters are also requested to address whether and the extent to which insurance to protect against property damage that results from orbital debris longafter alaunch has been completed should be required. Section 440.11(b), asproposed, would provide that the licensee may not replace, cancel, change or withdraw the insurance or other form offinancial responsibility required, or in any way modify it to reduce the limits ofliability

or the extent ofcoverage, and that any form offinancial responsibility may not be permitted to expire prior to the time specified by the Office in a license order, unless the Office is notified in advance and expressly approves ofthe modification. The purpose ofthis requirement is to ensure that the licensee has adequate coverage in place that meets the requirements ofthe applicable license order.

Section 440.13-StandardConditionsof Coverage

Proposed §440.13(a) identifies the
terms and conditions that must be included in any insurance policy obtained to satisfy the requirements of proposed §440.9. With some modification, the proposed terms and conditions ofinsurance coverage have been required by the Office in license orders issued on a case-by-case basis in order to carry out the office's responsibilities under the statute, and to the Office's knowledge, have not been difficult to obtain. Section 440.13(a)(1) would provide in

aregulation that any required policy of insurance must provide that bankruptcy

or insolvency ofthe insured (licensee)

or any additional insured does not relieve the insurer ofany ofits obligations under the policy. This requirement is commonly found in liability insurance policies. Its presence is desirable because under common law, if an insurance agreement were construed as only an agreement to indemnify against loss, under certain circumstances the insurer could avoid payment ofthird-party claims altogether where the insured was declared insolvent. This condition is intended to

remove any doubt that thepolicy insures against liability to pay damages and is not merely an agreement to indemnify against loss.

Section 440.13(a)(2), as proposed, would provide that the policy limits for any required insurance policy apply separately to each occurrence and in the aggregate with respect to claims resulting from licensed activities associated with a particular launch. Thisprovision would furtherthe intent of49 U.S.C. 70112(a)(3), which prescribes insurance ceilings applicable
to "the totalclaims related to one launch, * * *" As noted above, where insurance is obtained by a licensee for

a number oflaunches under an operator license, the limits ofthe policy must be available for each licensed launch and may notbe reduced due to claims resulting from aprior occurrence.

Proposed §440.13(a)(3) would state that any required policy ofinsurance
mustprovide for thepayment ofclaims from the first dollar ofloss, without regard to any deductible, to the policy limits, except in the limited circumstances allowed in the regulation. The Office discourages the useofa deductible because ofthe clear statutory mandate to ensure comprehensive protection for all insureds from liability for third-party claims and prompt restoration ofUnited States range assets. Ifthis coverage entails additional costto the licensee, it is not unreasonable relative to the policy objectives underlying the statute. Risk retention arrangements between the licensee and its insurer may be used as a means of reducing the policy premium.

Nevertheless, the Office understands that licensees may desire a small deductible amount from their coverage in order to reduce policypremiums and the Office has included aprovision in the proposal that would allow the reasonable use ofdeductible amounts. However, to ensure that statutory objectives are achieved, a deductible would be allowed only ifthe amount of the deductible is placed in a an escrow account established to cover claims resulting from licensed launch activities

or ifthe licensee can demonstrate to the office that ithas that amount readily available to it, with no prior liens or obligations on the funds. The Office believes that use ofa deductible is appropriate only for comparatively small sums and should notbe used as

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Comments are requested on whether the proposed approach is reasonable. Where Government property is concerned,
commenters should bear in mind the objective that proceeds mustbe made immediately available to restore Government property to its prior condition and use, and that any delays (e.g., in the event assets must be liquidated to pay claims) would be
counter to the statute. The Government may also be exposed to claims by its
contractors and subcontractors for their property damage where insurance proceeds are not immediately available
to cover those loses. Any inability to obtain promptly full payment ofsuch claims could expose the Government to administrative and legal expenses the Government seeks to avoid through required insurance.

Section 440.13(a)(4), as proposed, limits the defenses available to the insurer to avoid paying claims under the policy. It states that arequired policy of insurance must provide that the actions ofthe insured or any additional insured shall not result in invalidation ofthe policy; however, an insured or additional insured itselfmay be denied coverage under apolicy for claims against it in the event ofany breach or violation by it ofany warranties, declarations, or conditions contained in the policy. Action by the insured includes nonpayment ofthe policy premium. Thus, although the Office views the licensee as ultimately responsible for paying additional insureds under the policy as a result of the licensee's nonpayment ofthe premium.

As a general rule, liability and property insurance policies issued by insurance underwriters contain certain standard exclusions ofcoverage as well

as particular exclusion depending on the activities for which insurance is sought. Proposed §440.13(a)(5) acknowledges that the insurance policies required under §440.9 may contain certain exclusion from coverage. Those exclusion must be specified.

In the event ofa claim forproperty damage or bodily injury that is not covered by insurance, the liability for such damage and injury would ordinarily fall on the licensee or additional insured in the absence of

some form ofindemnification. The Secretary ofTransportation is empowered, under 49 U.S.C. 70113(a)(2), to provide for payment of third-party claims that are the subject of insurance policy exclusions that "are usual for the type ofinsurance involved" and for which insurance is therefore not available to cover the claim. 49 U.S.C. 70113(a)(2). In addition, under 49 U.S.C. 70112(b)(2), the Secretary may, following interagency consultation, waive claims for property damage not covered by required property insurance byreason ofexclusions that are "usual for the type ofinsurance involved" such that insurance is not available. 49 U.S.C. 701 12(b)(2). As a result, aclaim thatis
not compensated by insurance because it falls within an insurance exclusion determined by the Office to be usual would essentially permit first-dollar payment bythe United States Government without regard to the thresholds provided, respectively, in 49 U.S.C. 701 13(a)(1) and 701 12(b)(2).

However, in determining what may be considered usual exclusions for the type ofinsurance involved, the Office is necessarily mindful ofthe direction from Congress that first-dollar payments by the United States for such exclusions should not be an inducement for insurers to begin restrictingthe scope of coverage in their insurance contracts with licensees. Moreover, payments for claims excluded from third-party liability coverage, like payments generally ofthird-party claims in excess ofrequired insurance under 49 U.S.C. 70113, are subject to certain conditions including Congressional approval ofa compensation plan and appropriation of funds.

There are no identical exclusions found in each and everypolicy. Variations exist amongU.S., London, continental European and other

overseas insurance markets. Moreover, exclusions may be added by an insurer depending on theparticular market and types ofrisks involved, or can often be "bought out" by an endorsement or by

a separate policy. Also, exclusions may be added or existing exclusions modified as aresult ofjudicial interpretations the insurance market neither intended nor anticipated in settingits premium rates. Based on insurance market conditions and loss experience, future exclusions may vary from customary or usual exclusions today. Consequently, the proposed regulations define ausual exclusion as
one for which coverage is not commercially available at reasonable
rates. Licensees must certify atthe time they demonstrate compliance with insurance requirements that insurance covering the excluded risks is unavailable at reasonable rates in order for the United States Government to provide for payment ofclaims from the first dollar ofloss. However, the licensee's certification does not finally resolve that a particular exclusion will be deemed to be "usual." That is, in the
event the Office determines that insurance was available atreasonable rates the Secretary need not provide for payment ofclaims from the firstdollar ofloss. Comments arerequested on other appropriate criteria for determining whether an exclusion may be considered "usual."

Proposed §§ 440.13(a)(6)-416.13(a)(8) would prescribe, in regulations, additional insurance requirements that have been customarily imposed by the Office in license orders in carrying out its statutory mandate.

Comments are requested on any other
terms and conditions that would be appropriate to require in rules ofgeneral applicability.

Section440.15-Demonstration of Compliance

As proposed, §440.15(a) would require the licensee to demonstrate that ithas complied with the insurance and allocation ofrisk requirements under the proposed regulations no later than thirty days before commencing licensed launch activities. However, a license order may require a licensee to demonstrate compliance in less than thirty days where the license orlicense order is issued less than thirty days before the licensee intends to commence licensed launch activities. It is strongly recommended that licensees submit required documentation demonstrating compliance with theserequirements well in advance ofthe thirty-day period
to ensure that the Office has adequate opportunity to review the submission and confirm compliance by the time the licensee wishes to commence licensed activities. It has been the Office's experience that thirty days is a reasonable length oftime to address any issues that arise as aresult ofthe licensee's submission. Where alicensee

uses a form offinancial responsibility other than insurance to demonstrate compliance, the Office require sixty days to review the submission and

ensure its sufficiency.

Section 440.15(b) would establish in a regulation that once the licensee has fully demonstrated compliance with part 440 financial responsibility and allocation ofrisk requirements, these requirements preempt any conflicting or inconsistent requirements in any agreements the licensee may have previously entered into with other agencies ofthe United States concerning

access to or use ofUnited States launch property or launch services. This express preemption is necessary because there hasbeen a significant
amount ofconfusion in the past concerning the effect ofsimilar or additional insurance requirements imposed by agreements governing 

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access toUnited States launch facilities. As stated above in the section-bysection analysis accompanying §440.5(c), the object ofthispreemption is to avoid imposing duplicative and inconsistent obligations on the licensee, but not to relieve the licensee of contractual or legal obligations intended
to address interests other than those served by the statute. The Office evidences its determination that a licensee has fully complied with part 440 requirements in a letter issued to the licensee.

Under the proposal §440.15(c) would establish requirements for alicensee to provide the Office with proofof insurance. Itis extremely important for the Office to secure adequate assurance that the licensee has obtained the insurance required under the regulations. However, the Office believes that it is unnecessary and impractical to review each policy constituting part ofan insurance submission to ensure compliance. Accordingly, proposed §440.15(c) and (d) would provide for certain certifications and representations from the licensee and its insurer, respectively. The licensee must certify that ithas obtained insurance in conformance with thepart 440 regulations and the applicable license order. In addition, the licensee must file with the Office one or more certificates ofinsurance evidencing coverage, as prescribed by the Office, under currently effective and properly endorsed policies applicable to licensed launch activities. A certificate of insurance must specify any policy exclusions or limitations in detail, in accordance with proposed §440.13(a)(5a). In addition, the licensee would be required to certify that insurance is not commercially available
atreasonable rates in order for the exclusion to be found usual for the type ofinsurance and the United States Government to provide forpayment of claims from the first dollar ofloss. The licensee would also be required to submit duly executed waiver ofclaims agreements, signed by the licensee and its customer. The licensee's certifications must be signed by a duly authorized officer ofthe licensee and may be submitted in one document.

Section 440.15(d), as proposed, would specify certain insurance certificate requirements. Each certificate of insurance must be signed by the insurer and accompanied by a signed opinion of the insurer stating that thepolicy obtained bythe licensee complies with the requirements set forth in part 440.

Section 440.15(e) would further require the licensee to maintain, and make available for inspection by the Office upon request, all required policies ofinsurance and other documents necessary to demonstrate compliance with part 440requirements. Although this section essentially imposes a mandatory recordkeeping requirement upon the licensee, the Office believes that the maintenance and administration ofthese records by the licensee is consistent with the Office's regulatory authority to monitor compliance with the license. Moreover, it is considerably less burdensome and time-consuming for both the Office and the licensee than requiring submittal of allthe policy documents to the Office.

Proposed §440.15(f)recognizes that the licensee may propose to satisfy financial responsibility requirements in

aform other than insurance. A licensee may do so, provided it otherwise satisfies regulatory requirements. In practice, licensees have furnished insurance in order to meet the financial responsibility requirements prescribed by the Office pursuant to the statue. Under existing insurance market conditions, third-party liability insurance is obtainable to prescribed limits at reasonable cost. A presentation by the Risk Management Working Group ofthe COMSTAC at its meeting on May 18, 1995, projected market capacity as sufficient to satisfy launch insurance demand in 1995. In addition, property insurance, where required, may be accommodated within the licensee's existing property and casualty insurance program and is therefore easily obtained.

While the Act does state that a licensee may demonstrate financial responsibility in a form other than insurance, itdoes not specify what other forms offinancial responsibility would be acceptable. A number ofalternatives

arepossible and the Office necessarily will examine any proposal for demonstrating financial responsibility through alternative means on a case-bycase basis to determine whether it otherwise satisfies the requirements for demonstrating financial responsibility.

Section 440.17-ReciprocalWaiverof ClaimsRequirements

This section, as proposed, establishes requirements for reciprocal waivers of claims among launch participants. These requirements are additional conditions ofalicense.

Proposed §440.17(b) would implement 49 U.S.C. 70112(b)(1), which requires the licensee to implement reciprocal waivers ofclaims with its
contractors and subcontractors, its customers, and the contractors and subcontractors ofits customer, whereby each party agrees to be responsible for loss or damage it sustains. Parties to a waiver ofclaims agreement waive two types ofclaims: Claims fortheir own property damage, and claims they may have against another launch participant

as aresult oflosses for property damage

orbodily injury sustained by their employees, resulting from licensed launch activities.

49 U.S.C. 70112(b)(2) requires the Secretary ofTransportation, for the United States, its agencies involved in licensed launch activities, and its
contractors and subcontractors, to enter intoreciprocal waivers ofclaims with the licensee, its customer, and their respective contractors and subcontractors involved in launch services. In the Office's view, the purpose ofthis provision is to establish the Government's waiver ofclaims against the private sector launch participants and acceptance of responsibility for property damage that exceeds the level ofGovernment property insurance obtained by the licensee under 49 U.S.C. 70112(a)(1)(B).

The approach taken in proposed §440.17(c), ofrequiring a formal threeparty agreement amongthe United States, the licensee and its customer, deviates from the form suggested by a literalreading ofthe Act. However, the Office believes that this approach is the
most desirable and efficient one to effectuate the overall purpose ofthe statutory reciprocal waiver ofclaims requirements: To limit the universe of potential claims that could arise out of licensed launch activities, and to eliminate the need for each participant in licensed launch activities to obtain separate liability insurance protection against such claims. This approach has also proved manageable for the launch services industry in executing agreements with customers and the U.S. Government.

Section 440.17(c), as proposed, would require that the licensee, its customer and the Department ofTransportation

on behalfofthe U.S. Government enter into a three-party agreement as setforth in appendix II to part 440. The form of the Agreement for Waiver ofClaims and Assumption ofResponsibility (Agreement) presented in Appendix II deviates from the current practice ofthe Office and is intended to clarify the scope ofthe waiver that the United States provides when it is involved in licensed launch activities, and the waiver itrequires in return. Simply put, the Department ofTransportation, on behalfofthe United States, its agencies involved in licensed launch activities, and its contractors and subcontractors, would agree to waive claims against the 

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licensee, itscustomer and the contractors and subcontractors ofthe licensee and its customer, and accept responsibility for losses toproperty of the Government launch participants, only to the extent that such claims exceed the levelofinsurance the licensee must obtain under §440.9(d). As a reciprocalundertaking, the licensee and its customer each would waive claims against the otherparty and the United States and its agencies involved in licensed launch activities, and against the contractors and subcontractors ofeach ofthoseparties, and acceptresponsibility fordamage to its own property and losses sustained by its own employees, respectively.

Whereas other parties tothe threeparty reciprocal waiver ofclaims agreement would agreeto waive and acceptresponsibility forclaims for property damage or bodily injury sustained by itsemployees, the U.S. Government need not do so. Because Government personnel arethird parties, their claims forbodily injury or property damage would be compensated by thethird-party liability insurance the licensee isrequired to obtain. Claims in

excess ofrequired insurance would become eligible for paymentby the Government under thepayment of

excess claims provisions ofthe statute. 49 U.S.C.70113. Although the approach reflected in theproposed form of Agreement isnot currently reflected in existing license orders, the Office believes it more accurately reflects the allocation ofrisks intended bythe statute and correctly responds to the Government's inability under appropriations law to accede to unfunded contingent liability,unless so authorized.

In addition, undertheproposed from oftheAgreement, the licensee and its customer would further agree toextend,

orflow down, thewaiver obligations to their respective contractors and subcontractors, and all threeprincipals to theAgreement-including the Department-would agree toindemnify the otherparties from claims by their contractors and subcontractors arising out oftheindemnifying party's failure properly to implement orextend the waiver.

One launch company has objected to the indemnification provisionsrequired under the three-party reciprocal waiver ofclaims agreement currently employed by the Office and included in this proposal for all interparty waiver of claims agreements. In the launch company's view, this provision is not required by statute and adds liability and risk over and above that imposedby

abreach ofcontractremedy, which the launch company believes would be the appropriate remedy for failure to flow down the cross-waiver requirement.

The Office's view is that acontractual undertaking to indemnify another party for one's own failure to implement properly the agreements flow-down requirements is preferable. It would provide a strong incentive for parties to be attentive to the flow-down requirement. This is significant because ofthe limitation on the Office's ability to monitor each licensee's and customer's cross-waivers with their myriad contractors and subcontractors. It would also provide aready remedy for parties who sustain loss because of another party's failure to flow down the cross-waiver requirement.

In those situations where the licensee's customer is a Government agency, theprovisions applicable to the customer are the same as those for an agency involved in licensed launch activities for purposes ofthe reciprocal waiver ofclaims requirement. However, because the Government property insurance requirement does not cover the Government payload, the Government waives claims for property damage and assumes responsibility for damage or loss to the payload from the first dollar ofloss. Some concern has been expressed within the commercial space launch industry over the assumption of responsibility for employee losses required ofsignatories to the waiver of claims agreement. In the Office's view, this is a risk that can be effectively managed without imposing unreasonable economic burdens on launch participants.

The assumption ofresponsibility by nongovernmental launch participants for their own employees' losses represents amutual undertaking byeach entity to cover losses ofits employees. Although employees of nongovernmental launch participants would not be "third parties" whose claims are compensated under the liability insurance required under the proposed regulations, launch participants could protect themselves by ensuring that their general liability policies would respond to compensate such claims. The Office believes that a variety ofmeasures maybe utilized by launch participants to manage the mandatory assumption ofresponsibility. At the same time, the objective ofthe risk allocation scheme-to limit the need for each launch participant to obtain broad liability coverage to protect itselffrom the universe ofpotential third-party claims-would be realized. The Office requests comments on its approach to implementing the waiver of claims and assumption ofresponsibility requirements ofthe Act. In doing so, commenters should bear in mind that there is no indication in the Act or its legislative history that employees of nongovernmental launch participant, unlike employees ofGovernment launch participants, are intended to be included in the definition of "third parties" for purposes ofthese regulations. Nor is there any indication that the Government would agree to pay theirclaims as excess third-party claims (so-called "indemnification") to the
extentemployees' claims exceed required insurance. Moreover, considering employees oflaunch participants asthird parties under the statutory definition would run counter to the assumption ofresponsibility for theirloses mandated bythe statute. Also, if such employees were included

as "third parties," the amount ofthirdparty liability coverage the licensee would be required to obtain would likely increase significantly.

It is important to note that not all private participants in licensed launch activities are necessarily expected to accede to the reciprocal waiver of claims scheme in order to effect its purpose. Only those participants who have their personnel or property involved in licensed launch activities, and who may make claims against other participants as aresult ofloss or damage sustained by their personnel or property in the event ofan accident, should be expected to enter into reciprocal waivers ofclaims. Ifall participants having personnel orproperty involved in licensed launch activities have acceded to thereciprocal waiver scheme, they would be foreclosed from making any claims against each other.

A question hasbeen raised by a payload company asto the Office's requirements when multiple customers contract with a launch operator for launch services or there is more than

one customer's payload on the launch manifest for a single launch. In those
cases, executing a single waiver of claims agreement that includes each
customer as a party to the agreement, or executing separate but appropriately modified agreements, would serve to

ensure allparties have been included and protected as intended.

There has been some question asto the meaning and appropriate implementation ofthe provision in 49 U.S.C. 70112(b)(2), which requires the Secretary to enter into reciprocal waivers ofclaims "for" the Government's contractors and subcontractors involved in launch services. The Office has interpreted this provision to mean that contractors and 

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subcontractors oftheUnited States are intended tobeincluded asbeneficiaries ofthewaiver ofclaims by the licensee, the customer and their respective contractors and subcontractors; and that the United States, through its appropriate agencies involved in licensed activities, isresponsible for protecting their interests.

Theproposed form ofAgreement set forth in Appendix IIto theproposed regulation continues thecurrent practice ofexcluding from thewaiver and assumption ofresponsibility claims for bodily injury orproperty damage resultingfrom willful misconduct ofthe parties. It also continues thecurrent practice ofrequiring thatparties waive claims, regardless offault. Questions have been raised as to whether claims resultingfrom gross negligence are also excluded from theintended scope ofthe waiver. The Office believes that carving out an exception forgross negligence from the reciprocal waiver ofclaims could result in parties attempting, in effect, tonullify or avoid required waivers ofclaims byalleging sufficient evidence ofgross negligence to withstand legal challenge, thereby defeating oneofthepurposes ofthe Agreement. The Office has not elected to do so in theproposed form of Agreement.

The Office believes its approach is consistent with the statutory intent of requiring launch participants toenter into ano-fault waiver ofclaims agreement in order to eliminate theneed for additionalinsurance toprotect against claims for damage caused by a party to thelaunch to any other party to thelaunch and to limitthetotal universe ofclaims resultingfrom a launch. Comments are solicited from the public on theproposed Agreement implementing 440.11(b),which is set out in Appendix II totheproposed regulation. Ifdiffers from theform that currently accompanies financial responsibility license orders but more closely conforms to the Office's view of the objectives ofthe statutory waiver requirements. Apart to theAgreement wishing tomodify its form maypetition the Associate Administratorunder the procedures set forth in 404.3 ofthe Regulations.
Section440.19-UnitedStatesPayment ofExcess Third-PartyLiabilityClaims

Payment bythe United States of successful claims ofthird parties resultingfrom licensed launch activities, asprovided in 49U.S.C. 70113, is subject to appropriations laws

orenactment ofother legislative authorityproviding forthepayment of claims submitted aspart ofa compensation plan prepared by the Office. The total amount ofexcess thirdparty claims that may be paid by the United States will not be greater than $1,500,000,000 (as adjusted for inflation occurring afterJanuary 1, 1989) above the amount ofinsurance required under §440.9(c). However, to the extent a third-party claim results from the willful misconduct ofalaunch participant, the Government is not required to provide for payment ofthe claim. The statute limits this exception to willful misconduct by a licensee or transferee; however, the Office believes that any launch participant's willful misconduct relieves the Government from providing for payment ofthirdparty claims against that launch participant under 49 U.S.C. 70113(a)(2).

In the event a successful claim is not covered by required insurance due to a policy exclusion that is found to be usual because insurance is not commercially available at reasonable cost, the Government would pay such claims from the first dollar ofloss up to $1,500,000,000 (as adjusted for inflation occurring afterJanuary 1, 1989), again, subject to appropriate legislative action.

Excluded from the statutory obligation ofthe Secretary of Transportation to provide for payment ofsuccessful third-party claims are claims against contractors and subcontractors ofthe United States and its agencies involved in licensed activities. It has been suggested that this exclusion was inadvertent, and the Office believes that this is thebetter view. On the other hand, the Office is mindful ofthe availability of Government indemnification that may benefit such contractors and subcontractors pursuant to statutes other than 49 U.S.C. Subtitle IX. However, provision ofthis protection by the Government to its contractors and subcontractors may be made only under certain narrow circumstances, and is not routinely done. Where itis not done, a Government contractor or subcontractor would be required to purchase liability insurance to protectitselffrom thirdparty claims in excess ofthe liability policy obtained by the licensee, and would pass the cost through to the Government as an allowable costunder the contract. Therefore, absent legislative clarification, the Office is of the view that the United States would afford its contractors and subcontractors the protections offered to other launch participants under the payment of

excess claims provisions ofthe statute, afterthe limits ofthe liability policy obtained bythe licensee have been reached. However, this approach is not intended to interfere with or encumber the Government's enforcement of contractual rights and remedies with respect to its contractors. Public
comment is sought as to whether this interpretation of49 U.S.C. 70113 is in keeping with the overall risk allocation scheme ofthe Act.

Under proposed §440.19(d), the Government would pay claims from the first dollarofloss upon expiration ofthe prescribed period oftimefor which the licensee is responsible for maintaining financial responsibility. Industry representatives have suggested that the Government's obligation to pay claims remains for three years following the launch event. However, the statutory payment ofexcess claims provision is limited to a successful claim ofathird party against a launch participant "resulting from an activity carried out under the license * * * for death, bodily injury or property damage or loss resulting from an activity carried out under the license." The statute further limits payment ofexcess claims "to the
extentthe total amount ofsuccessful claims related to one launch" exceeds the required amount ofthird-party liability insurance and is not more than $1,500,000,000 above that amount. 49 U.S.C. 70113(a). The Office believes that theseprovisions may be intended as a limitation on the claims that would be eligible for so-called indemnification by the Government. The Office requests comments on the nexus that must exist between a third-party claim and the licensed launch activity in order for the claim to be eligible for payment bythe Government.

Proposed §440.19(e) would establish procedural conditions for invokingthe Government's payment ofexcess thirdparty claims provisions ofthe Act, including notice and participation or assistance in the defense bythe United States ofany claim or lawsuit by athird party arising out oflicensed launch activities. This is consistent generally with the Government's usual practice forresponding to similar claims.

Some industry representatives, as well as the COMSTAC, have recommended that the statutory provisions for Government payment of

excess third-party claims should be memorialized in a contract between the United States Government and the intended beneficiaries ofthese provisions, similar to the indemnification agreements the Nuclear Regulatory Commission is required to enter into on behalfofthe United States under the 1988 Price-Anderson Amendments, Pub. L. 100-408, to protect licensed operators ofnuclear reactors from catastrophic losses. The Office believes that 49 U.S.C. 70113 

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does not constitute or establish an indemnification obligationon the part ofthe United States like that set forth in the Price-Anderson regime which, amongother things, expressly requires a contractual undertaking and specifies necessary contractual provisions. 42 U.S.C. 2210. In contrast, 49 U.S.C. 70113 is largely procedural in nature. Any payment that the Secretary proposes be madeunder the statute is contingent on Congressional approval of

acompensation plan and appropriation offunds or other legislative authority. Accordingly, the recommendation to reflect the Government's agreement for payment ofexcess claims in a contract is not included in this proposal.

As provided the statute and proposed section 440.19(f), in the event of catastrophic losses, the Office would prepare a compensation plan specifying the total amount ofclaims, suggesting

sources offunding that maybe available
to pay the claims, and proposing any legislation necessary to authorize appropriation offunds and otherwise implement the plan. In addition, as provided by the Act, the Office is authorized to withhold payment ofa claim that has notbeen decided by a Federal court ifthe Office finds the
amount is unreasonable.

The Office welcomes comments from the public on appropriate implementation of49 U.S.C. 70113 payment provisions. Comments would assistthe Office in developing a future rulemaking that would address, more specifically, the mechanism for seeking payment bythe Government ofexcess third-party claims. 

### Statutory Authorityfor This Proposed Rule

This proposal is issued pursuant to 49 U.S.C. Subtitle IX, ch. 701-Commerical Space Launch Activities, sections 70101-70119, formerly the Commercial Space Launch Act of 1984 (CSLA), as amended (49 U.S.C. App. 2601-2623). In 1988, Congress amended the CSLA by replacing general insurance requirements with a detailed financial responsibility and allocation ofrisk regime for licensed operations. The provisions, referred to as the 1988 Amendments, include procedures whereby the United States Government requires risk-based insurance to compensate for third-party liability and Government property damage claims, waives certain claims for its property damage and, subject to an appropriation law or other legislative authority, agrees to provide for payment ofthird-party claims in excess ofrequired liability insurance. In addition, the 1988 Amendments require launch participants to enter into reciprocal waivers ofclaims in which the parties agree to absorb certain losses and the nongovernmental launch participants agree to be responsible for claims of their employees for damage or loss.

The Office has been implementing the 1988 Amendments on a case-by-case basis, through license orders issued with each license authorizing commercial space launch activities. Based upon its experience, the Office proposes to standardize requirements into rules ofgeneral applicability, wherever practicable.

Under 49 U.S.C. Subtitle IX, ch. 701, the Secretary is responsible for licensing and otherwise regulating commercial space launches and the commercial operation oflaunch sites carried out within the United States orby its citizens. In doing so, the Secretary is charged with protectingpublic health and safety, safety ofproperty, and United States national security and foreign policy interests, and must

ensure compliance with international treaty obligations ofthe United States, including the United Nations Treaties

on Outer Space. The Secretary is also responsible for establishing requirements for proofoffinancial responsibility and other assurances necessary to protect the Government and its agencies and personnel from certain losses as aresult oflicensed activities involving Government facilities or personnel. 49 U.S.C. 

### 70112(e).

The Associate Administrator for Commercial Space Transportation ofthe Federal Aviation Administration was delegated the Secretary's authority for carrying out the Secretary's responsibilities under the statute, effective November 15, 1995. The Commercial Space Transportation Licensing Regulations set forth in 14 CFR Ch. IIIapply to regulatory activities administered by the Office. 

### PaperWork Reduction Act
14 CFRpart 440, as proposed, contains information collection requirements. In accordance with the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 etseq., the information collection requirements associated with this rule arebeing submitted to the Office ofManagement and Budget for review. The required information will be used to determine appropriate levels offinancial responsibility and to determine whether licensees have complied with financial responsibility requirements as setforth in regulations and in alicense orderissued by the Office. The information to be collected includes data required for determining maximum probable loss, the three-party cross-waiver ofclaims agreement and evidence ofinsurance or other form of financial responsibility. Launch licensees must demonstrate financial responsibility at least 30 days before commencing licensed launch activities. The frequency ofrequired submissions may depend upon the frequency of licensed launch activities; however, a license may authorize more than one launch. Respondents are alllicensees authorized to conduct licensed launch activities. In addition to the licensee, its
customers and the contractors and subcontractors ofeach arerequired to enter into reciprocal waiver ofclaims agreements. Estimated Average Burden Hours Per Respondent: 261 hours.

The Office considers comments by the public on the proposed collection of information in order to evaluate the accuracy ofthe Office's estimate ofthe burden ofthe proposed collection of information, the quality, utility and clarity ofthe information to be collected, and possible ways to minimize the burden ofthe collection.

In submitting comments to OMB,
commenters should keep in mind that OMB is required to make adecision concerning the collection ofinformation contained in the proposed regulations between 30 and 60 days after publication ofthis document in the 

### FederalRegister.

Comments on theproposed information collection requirements should be submitted to: Office of Management and Budget, Washington, DC20503, Attention: Desk Officer for the Federal Aviation Administration, U.S. Department ofTransportation. It is requested that comments sent to OMB also be sent to the rulemaking docket for thisproposed action, Room 612, Federal Aviation Administration, U.S. Department ofTransportation, 800 Independence Avenue, SW., Washington, DC 20591. 

### ImpactAnalyses

Proposed changes to Federal regulations must undergo several economic analyses. First, Executive Order 12866 directs that agencies shall propose or adopt a regulation only upon
a determination that the benefits ofthe intended regulation justify its costs. Second, the Regulatory Flexibility Act of 1980requires agencies to analyze the economic effect ofregulatory changes

on small entities. Third, the Office of Management and Budget (OMB) directs agencies to assess the effect of regulatory changes on international trade. In addition, under regulatory policies and procedures ofthe Department ofTransportation (44FR 

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11034; February 26, 1979), this proposed rule is considered significant because there is substantialpublic interest in the rulemaking. This rule has been reviewed byOMB under Executive Order 12866.

EconomicImpacts

Executive Order 12866 directs that each Federal agency proposing to adopt

aregulation may do so only upon a reasoned determination that the benefits ofthe intended regulation justify its
costs. The Office has prepared a detailed analysis ofthe economic effects that would be associated with theproposed rule. Its findings are set forth in an economic impact assessment, copies of which are available from the FAA Rules Docket. As part ofits analysis, the Office considered alternatives, taking into
account that theprincipal requirements oftheproposed rule are mandated by
statute.

Under the 1988 Amendments, as implemented by the Office in regulations, required insurance would be available to compensate third parties, including certain Government personnel, who may sufferbodily injury

or property damage as a result of licensed launch activities. Additionally, required insurance protects alllaunch participants from third party claims and provides cost savings to each participant by relieving them ofthe need to obtain separate liability insurance covering those risks. Potential costs oflitigation should be eliminated as a result of required cross-waivers ofclaims among launch participants. There is a reallocation ofexpected costs ofclaims of$20,000 over afour-year period from the U.S. commercial space launch industry to the United States, as a consequence ofthe Government's payment ofexcess third-party claims under the Act, up to a $1.5 billion exposure for liability. Additional costs to the Government to administer requirements imposed under the 1988 Amendments and the proposed regulations are expected to have an upper limit of$673,000 over fouryears. Impactson SmallEntities

The Regulatory Flexibility Act of 1980 (RFA) was enacted by Congress to

ensure that small entities are not unnecessarily or disproportionately burdened by Federal regulations. The Office analyzed the economic impact of the proposed regulations on small commercial entities, as part ofits economic impact assessment. For purposes ofthe analysis, the Office utilized the Standard Industrial Classification codes and size standards for business entities relating to space 

### vehicles, which define small entities as those comprised offewer than 1000 employees. 13 CFR 121.601. Because the commercial launch industry isevolving

new ways ofdoingbusiness, theOffice alsoconsidered assmall commercial entities those firms offeringor planning to offercommercial space transportation services thathave not had long-term relationships with the U.S. Government

as acontractor-manufacturer of expendable launch vehicles or components, orhave not received rights to usegovernment-developed launch vehicles. These arefew in number.

The economic impacts on small commercial entities resultingfrom the 1988 Amendments tothe Act are largely benefits. The Office's analysis reveals only non-quantifiable costs to commercial entities as aresult ofthe proposed regulations. They include minimal paperwork costs and costs that may result from having to obtain insurance in advance oflicensed launch activities to demonstrate compliance with financial responsibility requirements. Neither ofthese costs would have adisproportionate impact

on smallcommercial entities. Based upon the Office's economic impact assessment, the Office has determined that theproposed rule would not have

a significanteconomic impact on a substantial number ofsmall entities.
InternationalTradeImpactAssessment

The impact oftheproposed rule on international trade is expected tobe beneficial. Theproposal rule would codify in regulations the financial responsibility and allocation ofrisk requirements imposed underthe 1988 Amendments to the Commercial Space Launch Act of 1984, codified at49 U.S.C. Subtitle IX,ch. 701. One ofthe primary objectives ofthe 1988 Amendments was toenable U.S. launch services providers to compete more effectively with foreign competitors.

Customers may enjoy enhanced understanding ofthe benefits and responsibilities that attend licensed launch activities carried out within the United States orby itscitizens. By clarifying the U.S. Government's agreement, subject to appropriations laws or other additional legislative authority, to provideforthe payment of

excess third-party claims above required insurance, theproposed regulations may enable U.S. companies to negotiate more effectively with foreign customers who must choose between U.S. and other competing launch services providers.
FederalismImplications

The proposed regulations would not have substantial directeffects on the states, on the relationship between the Federal government and the states, or on the distribution ofpower and responsibilities among the various levels ofgovernment. Therefore, in accordance with Executive Order 12612, it is determined that the proposed regulation does nothave sufficient federalism implications to warrant the preparation ofaFederalism Assessment.

List ofSubjects in 49 CFRPart440

Armed forces; Claims; Federal building and facilities; Government property; Indemnity payments; Insurance; Reporting and recordkeeping requirements; Rockets; Space transportation and exploration. Proposed Regulation

In consideration ofthe foregoing, the Office ofthe Associate Administrator for Commercial Space Transportation proposes to amend the Commercial Space Transportation Licensing Regulations, 14 CFR Ch. III, as follows:

1. Subchapter CofChapter III, Title 14, Code ofFederal Regulations, would be amended by adding a new part 440
to read as follows:


### PART440-FINANCIAL RESPONSIBILITY SubpartA-Financial Responsibilityfor Licensed LaunchActivities
Sec. 440. 1 Scope;Basis. 440. 3 Definitions. 440. 5 General. 440. 7 Determination ofmaximum probable loss. 440. 9 Insurance requirements forlicensed launch activities. 440. 11 Duration ofcoverage; modifications. 440. 13 Standard conditions ofinsurance coverage. 440. 15 Demonstration ofcompliance. 440. 17 Reciprocal waiver ofclaims requirement. 440. 19 United States payment ofexcess third-party liability claims. Authority: 49 U.S.C. 70101 70119;49 CFR 1.47. 

### §440.1 Scope; Basis.

This part sets forth financial responsibility and allocation ofrisk requirements applicable to commercial space launch activities that are authorized to be conducted under a launch license issued pursuant to this subchapter.
§440.3 Definitions.

(a) For purposes ofthis part- (1) Bodily injurymeans physical injury, sickness, disease, disability, shock, mental anguish, or mental injury sustained by any person, including death. 

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(2) Contractors andsubcontractors

means those entities that are involved at any tier, directly or indirectly, in licensed launch activities, and includes suppliers ofproperty and services, and the component manufacturers ofa launch vehicle or payload.

(3) Customermeans the person who procures launch services from the licensee, and any person to whom the
customer has sold, leased, assigned, or otherwise transferred its rights in the payload (or any part thereof) to be launched by the licensee, including a conditional sale, lease, assignment, or transfer ofrights.

(4)Federalrange facility means a Government-owned installation at which launches take place.

(5) Financialresponsibilitymeans statutorily required financial ability to meet liability as required under 49 U.S.C 70101-70119.

(6) Governmentpersonnelmeans employees ofthe United States, its agencies, and its contractors and subcontractors, involved in launch services for licensed launch activities. Employees ofthe United States include members ofthe Armed Forces ofthe United States.

(7) Hazardousoperationsmeans activities, processes, and procedures that, because ofthe nature ofthe equipment, facilities, personnel, or environment involved or function being performed, may result in bodily injury

or property damage.

(8) Liabilitymeans a legal obligation
to pay claims forbodily injury or property damage resulting from licensed launch activities.

(9) License means an authorization to conduct licensed launch activities, issued by the Office under this subchapter.

(10) Licensed launchactivitiesmeans the launch ofa launch vehicle as defined in a regulation or license issued by the Office and carried out pursuant to a license.

(11) Maximum probableloss (MPL)

means the greatest dollar amount ofloss for bodily injury orproperty damage that is reasonably expected to result from licensed launch activities;

(i) Losses to third parties, excluding Government personnel, that are reasonably expected to result from licensed launch activities are those having a probability ofoccurrence on the order ofno less than one in ten million.

(ii) Losses to Government property and Government personnel that are reasonably expected to result from licensed launch activities are those having a probability ofoccurrence on 

### the orderofno less than onein one hundred thousand. (12) Office means the Associate Administrator for Commercial Space Transportation oftheFederal Aviation Administration, U.S. Department of Transportation. (13) Propertydamagemeanspartial or total destruction, impairment, orloss of tangible property, real orpersonal. (14) Regulationsmeans the Commercial Space Transportation Licensing Regulations, codified at 14 CFRCh. III. (15) Thirdpartymeans. (i)Any person other than: (A) TheUnited States, its agencies, and its contractors and subcontractors involved in launch services for licensed launch activities; (B) Thelicensee and its contractors and subcontractors involved in launch services for licensed launch activities; and

(C)Thecustomer and itscontractors and subcontractors involved in launch services for licensed launch activities.

(ii) Government personnel, asdefined in this section, are third parties.For purposes ofthese regulations, employees ofother launch participants identified in paragraphs (a)(15)(i)(B) and (C)ofthis section arenot third parties.

(16) UnitedStatesmeans the United States Government, including its agencies.

(b) Except asotherwise provided in this section, any term used in this part and defined in 49 U.S.C.70101-70119,

or in §401.5 ofthis chapter shallhave the meaning contained therein. §440.5 General.

(a) No person shall commence or conduct launch activities that require a license unless thatperson has obtained

alicense and fully demonstrated compliance with the financial responsibility and allocation ofrisk requirements setforth in this part. (b) The Office shallprescribe the amountoffinancial responsibility a licensee is required to obtain, and any additions to ormodifications ofthe amount, in a license order issued concurrently with or subsequentto the issuance ofa license. (c) Demonstration offinancial responsibility under this part shallnot relieve thelicensee ofultimate responsibility for liability, loss, or damage sustained by theUnited States resultingfrom licensed launch activities, except to theextent that:

(1)Liability, loss, ordamage sustained by theUnited Statesresults from willful misconduct oftheUnited States orits agents, including Government personnel; (2) Covered claims bythird parties for bodily injury or property damage arising
outofany particular launch exceed the
amount offinancial responsibility required under §440.9(c) ofthis part and do notexceed $1,500,000,000 (as adjusted for inflation occurring after January 1, 1989) above such amount, and arepayable pursuant to 49 U.S.C. 70113 and §440.19 ofthis part;

(3) Covered claims for property loss or damage exceed the amount offinancial responsibility required under §440.9(e) ofthis part; or

(4) The licensee has no liability for claims by third parties for bodily injury

orproperty damage arising out ofany particular launch that exceed $1,500,000,000 (as adjusted for inflation occurring afterJanuary 1, 1989).

(d) A licensee's failure to comply with the requirements in this part may result in suspension orrevocation ofa license, and subjects the licensee to civil penalties asprovided in part 405 ofthis chapter.
§440.7 Determination of maximum probable loss.

(a) The Office shall determine the maximum probable loss (MPL) from claims by a third party for bodily injury

orproperty damage, and the United States, its agencies, and its contractors and subcontractors for covered property damage or loss, resulting from licensed launch activities. The maximum probable loss determination forms the basis for financial responsibility requirements issued in a license order. (b) The Office issues its determination ofmaximum probable loss no later than ninety days after a licensee or transferee has requested a determination and submitted allinformation required by the Office to make the determination. The Office shall consult with Federal agencies that are involved in, or whose personnel or property are exposed to risk ofdamage or loss as aresult of, licensed launch activities before issuing

a license order prescribing financial responsibility requirements and shall notifythe licensee or transferee iftimely issuance ofthe MPL determination is
notpossible due to interagency consultation.

(c) Information requirements for obtaining a maximum probable loss determination are set forth in Appendix Ito this part. Any person requesting a determination ofmaximum probable loss shall submitinformation in accordance with Appendix I requirements, unless the Office has waived requirements. In lieu of submittingrequired information, a person requesting amaximum probable loss determination may designate and 

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### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Proposed Rules

certify certain information previously submitted for a prior determination as complete, valid, and equally applicable
to its current request. The requester is responsible for the continuing accuracy and completeness ofinformation submitted under this part and shall promptly report any changes in writing.

(d) The Office shall amend a determination ofmaximum probable loss required under this section at any time prior to completion oflicensed launch activities as warranted by supplementary information provided to

or obtained bythe Office after the MPL determination is issued. Any change in financial responsibility requirements as
aresult ofan amended MPL determination shallbe set forth in a license order.

(e) The Office may make a determination ofmaximum probable loss at any time other than as set forth in paragraph (b) ofthis section upon request by any person. §440.9 Insurance requirements for 

### licensed launch activities.

(a) As a condition ofeach launch license, the licensee shall comply with insurance requirements set forth in this section and in a license order issued by the Office, or may otherwise demonstrate the required amount of financial responsibility.

(b) The licensee shall obtain and maintain in effect apolicy or policies of liability insurance, in an amount determined by the Office under paragraph (c) ofthis section, that protects the following persons as additional insureds to the extent oftheir respective potential liabilities against claims by a third party for bodily injury

or property damage resulting from licensed launch activities:

(1) The licensee, its customer, and their respective contractors and subcontractors;

(2) The United States, its agencies, and its contractors and subcontractors; and

(3) Government personnel. (c) The Office shallprescribe for each licensee the amount ofinsurance required to compensate the total of third-party claims for bodily injury or property damage resulting from licensed launch activities in connection with any particular launch. The amount of insurance required is based upon the Office's determination ofmaximum probable loss;however, it will not exceed the lesser of:

(1) $500 million; or (2) The maximum liability insurance available on the world market at a reasonable cost, as determined by the Office. (d) The licensee shall obtain and maintain in effect a policy or policies of insurance, in an amount determined by the Office under paragraph (e) ofthis section, that covers claims bythe United States, it agencies, and its contractors and subcontractors for property damage

or loss resulting from licensed launch activities. Property covered bythis insurance shall include all property owned, leased, or occupied by, or within the care, custody, or control of, the United States, its agencies, and its
contractors and subcontractors, at a Federal range facility. Insurance shall protect the United States, its agencies, and it contractors and subcontractors.

(e) The Office shallprescribe for each licensee the amount ofinsurance required to compensate claims for property damage under paragraph (d) of this section resulting from licensed launch activities in connection with any particular launch. The amount of insurance is based upon a determination ofmaximum probable loss; however, it will not exceed $100 million. (f)In lieu ofapolicy ofinsurance, a licensee may demonstrate financial responsibility in another manner meeting the terms and conditions applicable to insurance as setforth in this part. The licensee shall describe in detail the method proposed for demonstrating financial responsibility and how it assures that the licensee is able to cover claims as required under this part. 

### §440.11 Duration ofcoverage; modifications.

(a) Insurance coverage required under §440.9, or other form offinancial responsibility, shall attach upon commencement oflicensed launch activities, and remain in full force and effect until the later ofcompletion of licensed launch activities as defined by the Office in regulations, or until risk to third parties and Government property

as aresult oflicensed launch activities is sufficiently small, as determined by the Office through the risk analysis conducted to determine MPL, that financial responsibility is no longer necessary. The required duration of financial responsibility shall be specified in alicense order, and may be amended in the event alaunch anomaly results in additional risks to third parties or Government property. (b) Financial responsibility required under this part may not be replaced, canceled, changed, withdrawn, or in any way modified to reduce the limits ofliability or the extent ofcoverage, nor expire byits own terms, prior to the time specified in a license order, unless 

### the Office isnotified in advance and expressly approves the modification. §440.13 Standard conditionsof insurance coverage.

(a) Insurance obtained under §440.9 shall comply with thefollowing terms and conditions ofcoverage:

(1)Bankruptcy orinsolvency ofan insured, including any additional insured, shallnot relieve theinsurer or any oritsobligations under any policy.

(2) Policylimits shall apply separately to each occurrence and to thetotal claims arising outoflicensed launch activities in connection with any particular launch. (3)Except asprovided herein, each policy shall pay claims fromthe first dollarofloss, without regard to any deductible, to thelimits ofthe policy. A licensee may obtain a policy containing

a deductible amount ifthe amount of the deductible isplaced in an escrow account orotherwise demonstrated to theunobligated, unencumbered fundsof thelicensee, available to compensate claims at any time claims may arise.

(4)Policies shall notbeinvalidated by any action orinaction ofthelicensee or any additional insured, including nonpayment by thelicensee ofthe policy premium, and shall insure the licensee and each additional insured regardless ofany breach orviolation of any warranties, declarations, or conditions contained inthe policies by thelicensee or any additional insured (otherthan abreach ofviolation by the licensee or an additional insured, and then only as against thatlicensee or additional insured).

(5) Exclusions from coverage shallbe specified.

(6)Insurance shall beprimary without right ofcontribution from any other insurance thatis carried bythe licensee

or any additional insured. Each policy shall expressly provide that allofits provisions, except thepolicy limits, operatein the same manner as ifthere

were a separate policy with and covering thelicensee and each additional insured.

(7) Each policy shallbeplaced with

an insurer ofrecognized reputation and responsibility that islicensed todo business in any State, territory, possession ofthe United States, or the DistrictofColumbia.

(8)Except asto claims resultingfrom thewillfulmisconduct oftheUnited States or its agents, theinsurer shall waive any and all rights ofsubrogation against each oftheparties protected by required insurance. (b) [Reserved] 

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§440.15 Demonstration ofcompliance.

(a) A licensee must submit evidence offinancial responsibility and compliance with allocation ofrisk requirements under this part, as follows, unless a licensee order specifies fewer days due to the proximity ofthe licensee's intended date for
commencement oflicensed launch activities:

(1) The three-party cross-waiver of claims agreement required under §440.17(c) ofthispart shall be submitted atleast 30 days before
commencement oflicensed launch activities;

(2) Evidence ofinsurance shall be submitted atleast 30 days before
commencement oflicensed launch activities; and

(3) Evidence offinancial responsibility in a form other than insurance, ad provided under §440.9(f) ofthispart, shallbe submitted at least 60 days before commencement of licensed launch activities.

(b) Upon a complete demonstration of compliance with financial responsibility and allocation ofrisk requirements under this part, therequirements shall preempt any provisions in agreements between the licensee and an agency of
the United States governing access to or
use ofUnited States launch property or launch services for licensed launch activities which address financial responsibility, allocation ofrisk and related matters covered by49 U.S.C. 70112,70113.

(c) A licensee must demonstrate compliance as follows:

(1) The licensee shall provide proofof insurance required under §440.9 by:

(i) Certifying to the Office that ithas obtained insurance in compliance with the requirements ofthis part and any applicable license order;

(ii) Filing with the Office one or more certificates ofinsurance evidencing insurance coverage by one or more insurers under a currently effective and properly endorsed policy or policies of insurance, applicable to licensed launch activities, on terms and conditions and in amounts prescribed under this part, and specifying policy exclusions;

(iii) In the event ofany policy exclusions or limitations ofcoverage that may be considered usualunder §440.19(c) ofthispart, or for purposes ofimplementing the Government's waiver ofclaims forproperty damage under the Act, certifying that insurance covering the excluded risks is not commercially available at reasonable cost; and

(iv) Submitting to the Office, for signatureby the Department on behalf ofthe United States Government, the duly executed waiver ofclaims and assumption ofresponsibility agreement required by §440.17(c) ofthis part. (2) Certifications required under this section shall be signed by a duly authorized officer ofthe licensee.

(d) Certificate(s) ofinsurance required under paragraph (c)(1)(ii) ofthis section shall be signed by the insurer issuing the policy and accompanied byan opinion ofthe insurer that the insurance obtained bythe licensee complies with the specific requirements for insurance
setforth in this part and any applicable license order. (e) The licensee shall maintain, and make available for inspection by the Office upon request, all required policies ofinsurance and other documents necessary to demonstrate compliance with this part. (f) In the event the licensee demonstrates financial responsibility using means other than insurance, as provided under §440.9(f)ofthis part, the licensee shall provide proofthat it has met therequirements setforth in this part and in a license orderissued by the Office. 

### §440.17 Reciprocal waiverofclaims requirements.

(a) As a condition ofeach launch license, the licensee shall comply with reciprocal waiver ofclaims requirements as setforth in this section. (b) The licensee shall implement reciprocal waivers ofclaims with its
contractors and subcontractors, its customer(s) and the customer's
contractors and subcontractors, under which each party waives and releases claims against the other parties to the waivers and agrees to assume responsibility for property damage it sustains and for bodily injury or property damage sustained by its own employees resulting from licensed launch activities, regardless offault. (c) For each licensed launch in which the U.S. Government, its agencies, or its
contractors and subcontractors is involved in licensed launch activities or where property insurance is required under §440.9(d) ofthis part,the Department ofTransportation, the licensee, and its customer shall enter into athree-party reciprocal waiver of claims agreement in the form setforth in Appendix II to this part. Ifthe licensee's customer is an agency ofthe U.S. Government, the Agreement shall be modified to reflect that, for purposes ofthe Agreement, the customer is a Government agency involved in licensed launch activities except that the government customer waives claims and accepts responsibility for damage or loss to its property. (d) The licensee, its customer, and the United States but onlyto the extent provided in legislation, shall agree in any waiver ofclaims agreements required under this part to indemnify anotherparty to the agreement from claims by the indemnifying party's
contractors and subcontractors arising
outofthe indemnifying party's failure
to implement properly the waiver requirement.
§440.19 United States payment ofexcess 

### third-party liabilityclaims. (a) The United States shall pay successful claims (including reasonable expenses oflitigation or settlement) ofa third party against the licensee, the customer, and the contractors and subcontractors ofthe licensee and the customer, and the contractors and subcontractors ofthe United States and its agencies involved in licensed launch activities to the extent provided in an appropriation law orother legislative authority providing for payment of claims in accordance with 49 U.S.C. 70113, and to the extentthe total
amount ofsuch claims arising out ofany particular launch: (1) Exceeds the amount ofinsurance required under §440.9(b); and (2) Is notmore than $1,500,000,000 (as adjusted for inflation occurring after January 1, 1989) above that amount. (b) Payment by the United States under paragraph (a) ofthis section shall notbe made for any part ofsuch claims for which the bodily injury or property damage results from willful misconduct by the party seeking payment. (c) The United States shall provide for payment ofclaims by third parties for bodily injury ofproperty damage that

arepayable under 49 U.S.C. 70113 and
notcovered by required insurance under §440.9(b), withoutregard to the limitation under paragraph (a)(1) ofthis section, because ofan insurance policy exclusion that is usual. A policy exclusion is considered usual only if insurance coveringthe excluded risk is
notcommercially available at reasonable rates. The licensee must submit a certification in accordance with §440.15(c)(1)(iii) ofthis part for the United States to cover such claims.

(d) Upon the expiration ofthepolicy period prescribed in accordance with §440.11(a), the United States shall provide for payment ofclaims that are payable under 49 U.S.C. 70113 from the first dollarofloss up to $1,500,000,000 (as adjusted for inflation occurring after January 1, 1989). (e) Payment by the United States of

excess third-party claims under 49 U.S.C. 70113 shall be subject to: 

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### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Proposed Rules

(1) Prompt noticeby the licensee to the Office that the total amount of claims arising out oflicensed launch activities exceeds, or is likely to exceed, the required amount offinancial responsibility. For each claim, the notice must specify the nature, cause, and amount ofthe claim or lawsuit associated with the claim, and theparty

or parties who may otherwise be liable for payment ofthe claim;

(2) Participation or assistance in the defense ofthe claim or lawsuitby the United States, at its election;

(3) Approval by the Office ofany settlement, or part ofa settlement, to be paid by the United States; and

(4) Approval by Congress ofa compensation plan prepared by the Office and submitted by the President.

(f) The Office will: (1) Prepare a compensation plan outlining the total amount ofclaims and meeting therequirements set forth in49 U.S.C. 70113;

(2) Recommend sources offunds to pay the claims; and

(3) Propose legislation as required to implement the plan.

(g) The Office may withhold payment ofa claim if the Office finds thatthe
amount is unreasonable, unless itis the final order ofa United States Court. Appendix I-Information Requirements for ObtainingaMaximum Probable Loss Determination for Licensed Launch Activities

Any person requesting amaximum probable loss determination shall submit the following information to theOffice, unless the Office has waived aparticular information requirement under 14 CFR 440.7(c):
I. General Information

A. Mission description. 1.A description ofmission parameters, including:

a.Launch trajectory; b. Orbital inclination; and

c. Orbit altitudes (apogee andperigee). 2. Flight sequence. 3. Stagingevents and the time foreach event.

4. Impact locations. 5.Identification ofthelaunch range facility, includingthe launch complex on the range, planned date oflaunch, and launch windows.

6. Ifthe applicanthas previously been issued alicense toconduct launch activities usingthe same launch vehicle from the same launch range facility, a description ofany differences planned in the conduct of proposed activities.

B. Launch Vehicle Description. 1.General description oflaunch vehicle and its stages, includingdimensions.

2. Description ofmajor systems, including safety systems.

3. Description ofrocket motors and type of fuelused. 4. Identification ofallpropellants to be used and their hazard classification under the Hazardous Materials Table, 49 CFR 172.101.

5. Description ofhazardous components. C. Payload. 1. General description ofthe payload, including type (e.g., telecommunications,
remote sensing), propellants, and hazardous components ormaterials, such as toxic or radioactive substances.

D. Flight Termination System. 1. Identification of any flight termination system (FTS) on the launch vehicle, including a description ofoperations and component location on the vehicle.
II. Pre-flightProcessing Operations

A. General description ofpre-flight operations including vehicle processing consisting ofan operational flow diagram showing the overall sequence and location of operations, commencing with arrival of vehicle components at the launch range facility through final safety checks and countdown sequence, and designation of hazardous operations, as defined in 14 CFR 440.3. Forpurposes ofthese information requirements, payload processing,as opposed tointegration, is not ahazardous operation.

B. For each hazardous operation, including but not limited to fueling, solid rocket motor build-up, ordnance installation, ordnance checkout, movement ofhazardous materials, and payload integration:

1. Identification oflocation where each operation willperformed, including each building orfacility identified by name or number.

2. Identification offacilities adjacent to the location where each operation will be performed and therefore exposed torisk, identified by name or number.

3. Maximum number ofthird-party personnel, including but not limited to Government personnel, who may be exposed to risk duringeach operation. For Government personnel, identification ofhis

or her employer.

4. Identification oflaunch range facility policies or requirements applicable to the conduct ofoperations.
Il1.FlightOperations

A. Identification oflaunch range facilities exposed to risk during launch vehicle lift-off and flight.

B. Identification ofaccident failure scenarios, probability assessments for each, and estimation ofrisks to third parties and Government property due toproperty damage orbodily injury. Scenarios shall

cover therange oflaunch trajectories, inclinations and orbits for which authorization is sought in the license application. The estimation ofrisks for each scenario shalltake into account thenumber ofthird parties at risk as a result oflift-off and flight ofa launch vehicle (on-range, offrange, and down-range) and specific, unique facilities exposed to risk.

C. On-orbit risk analysis assessingrisks posed by a launch vehicle to operational satellites.

D. Reentry risk analysis assessing risks to third parties as a result to reentering debris orreentry ofthe launch vehicle or its components.

E. Trajectory data as follows: Nominal and 3-sigma lateral trajectory data in x, y, z and X, Y, Zcoordinates in one-second intervals, datato bepad-centered with xbeing along theinitial launch azimuth and continuing through impact for suborbital flights, and continuing through orbital insertion or the end ofpowered flight for orbital flights.

F. Tumble-turn data for guided vehicles only, as follows: Forvehicles with gimbaled nozzles, tumble turn data with zeta angles and velocity magnitudes stated. A separate table is required for each combination offail times (every two to four seconds), and significant nozzle angles (two ormore small angels, generally between one and five degrees).

G. Identification ofdebris lethal areas and theprojected number and ballistic coefficient offragments expected to result from flight termination, initiated either by command or self-destruct mechanism, for lift-off, land overflight, and reentry.

IV. Post-flight Processing Operations

A. General description ofpost-flight ground operations including overall sequence and location ofoperations for removal ofvehicle components and processing equipment from the launch range facility and for handling ofhazardous materials, and designation ofhazardous operations.

B. Identification of allfacilities used in conducting post-flight processing operations.

C.For each hazardous operation: 1. Identification oflocation where each operation is performed, including each building or facility identified by name or number.

2. Identification offacilities adjacent to location where each operation is performed and exposed to risk, identified by name or number.

3. Maximum number ofthird-party personnel, including but not limited to Government personnel, who may be exposed
to risk duringeach operation. For Government personnel, identification ofhis

orher employer.

4. Identification oflaunch range facility policies orrequirements applicable to the conduct ofoperations. Appendix II-Agreement forWaiver of Claims andAssumption of Responsibility

THIS AGREEMENT is entered intothis day of

- ,by and among [Licensee] (the "Licensee"), [Customer] (the "Customer") and the Department of Transportation, on behalfofthe United States Government (collectively, the "Parties"), to implement theprovisions ofsection 440.7(c) ofthe Commercial Space Transportation Licensing Regulations, 14 CFR Ch. III (the "Regulations").

In consideration ofthe mutual releases and promises contained herein, the Partieshereby agree as follows:
1. Definitions

"Customer" means the above-named Customer on behalfofthe Customer and any 

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### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Proposed Rules

person to whom the Customer has sold, leased, assigned, or otherwise transferred its rights in the payload (or any part thereof) to be launched by the licensee, including a conditional sale, lease, assignment, or transfer ofrights.

"License" means License No. issued

on - ,by the Associate Administrator for Commercial Space Transportation, Federal Aviation Administration, Department ofTransportation, to the Licensee, including all license orders issued in connection with the License.

"Licensee" means the Licensee and any transferee oftheLicensee under 49 U.S.C. Subtitle IX, ch. 701.

"United States Government" means the United States, its agencies involved in Licensed Launch Activities, and its
contractors and subcontractors involved in Licensed Launch Activities.

Except as otherwise defined herein, terms used in this Agreement and defined in 49 U.S.C. Subtitle IX, ch. 701 Commercial Space Launch Activities, or in the Regulations, shall havethe same meaning as contained in 49 U.S.C. Subtitle IX, ch. 701,

or the Regulations, respectively.
2. Waiver and Release of Claims

(a) Licensee hereby waives andreleases claims itmayhave against Customer, Customer's Contractors and Subcontractors, and the United States Government, for Property Damage it sustains and for Bodily Injury orProperty Damage sustained by its

own employees, resulting from Licensed Launch Activities, regardless offault.

(b) Customer hereby waives and releases claims itmayhave against Licensee, its Contractors and Subcontractors, and the United States Government, for Property Damage it sustains and for Bodily Injury or Property Damage sustained by its own employees, resulting from Licensed Launch Activities, regardless offault.

(c) The United States Government hereby waives and releases claims it mayhave against Licensee and Customer, and against their respective Contractors and Subcontractors, for Property Damage it sustains, to theextent that claims it would otherwise have for such damage exceed the
amount ofinsurance or demonstration of financial responsibilityrequired under section 440.9(e) ofthe Regulations, 14 CFR §440.9(e), regardless offault.
3. Assumption ofResponsibility

(a) Licensee and Customer shall each be responsible for Property Damage it sustains and for Bodily Injury or Property Damage sustained by its own employees, resulting from Licensed Launch Activities, regardless offault.

(b) The United States Government shall be responsible for Property Damage it sustains,
to the extent that claims it would otherwise have for such damage exceed the amount of insurance ordemonstration offinancial responsibility required under section 440.9(e) ofthe Regulations, 14 CFR §449.9(e), regardless offault.
4. Extension ofAssumption and Waiver

(a) Licensee shall extend the waiver and release ofclaims and the requirement ofthe assumption ofresponsibility as set forth in paragraphs 2(a) and 3(a), respectively, to its Contractors and Subcontractors by requiring them to waive and release all claims they may have against Customer, Customer's Contractors and Subcontractors, and the United States Government, and to agree to be responsible, for Property Damage they sustain and for Bodily Injury or Property Damage sustained by their own employees, resulting from Licensed Launch Activities, regardless offault.

(b) Customer shall extend the waiver and release ofclaims and the requirement ofthe assumption ofresponsibility as set forth in paragraphs 2(b) and 3(a), respectively, to its Contractors and Subcontractors by requiring them to waive and release all claims they may have against Licensee, the Licensee's Contractors and Subcontractors, and the United States Government, and to agree to be responsible, for Property Damage they sustain and for Bodily Injury or Property Damage sustained by their own employees, resulting from Licensed Launch Activities, regardless offault.
5. Indemnification

(a) Licensee shall hold harmless and indemnify Customer and its directors, officers, servants, agents, subsidiaries, employee and assignees, or any ofthem, and the United States Government and its directors, officers, servants, agents, subsidiaries, employee and assignees, or any ofthem, from and against liability, loss or damage arising out ofclaims that Licensee's Contractors and Subcontractors may have for Property Damage sustained by them and for Bodily Injury orProperty Damage sustained by their employees, resulting from Licensed Launch Activities.

(b) Customer shall hold harmless and indemnify Licensee and its directors, officers, servants, agents, subsidiaries, employees and assignees, or any ofthem, and theUnited States Government and its directors, officers, servants, agents, subsidiaries, employees and assignees, or any ofthem, from and against liability, loss or damage arising out ofclaims that Customer's Contractors and Subcontractors, or any person on whose behalfCustomer enters into this Agreement, may have for Property Damage sustained by them and for Bodily Injury or Property Damage sustained by their employees, resulting from Licensed Launch Activities.

(c) To the extent provided in advance in an appropriation law or to the extent there is enacted additional legislative authority providing for the payment ofclaims, the United States shall hold harmless and indemnify Licensee and Customer and their respective directors, officers, servants, agents, subsidiaries, employees and assignees, or any ofthem, from and against liability, loss or damage arising out ofclaims that any person

on whose behalfthe Department enters into this Agreement mayhave for Property Damage sustained by them, resulting from Licensed Launch Activities.
6. Assurances under 49 U.S.C. 70112(e)

Notwithstanding any provision ofthis Agreement to the contrary, Licensee shall hold harmless and indemnify the United States Government and its agencies, servants, agents, employees and assignees, or any of them, from and against liability, loss or damage arising out ofclaims for Bodily Injury or Property Damage, resulting from Licensed Launch Activities, regardless of fault, except to the extent that: (i) As provided in section 7(b) ofthis Agreement, claims result from willful misconduct ofthe United States Government or its agents; (ii) claims for Property Damage sustained by the United States Government exceed the
amount ofinsurance or demonstration of financial responsibility required under section 440.9(e) ofthe Regulations (14 CFR §440.9(e)); (iii) claims by a Third Party for Bodily Injury or Property Damage exceed the
amount ofinsurance or demonstration of financial responsibility required under section 440.9(c) ofthe Regulations (14 CFR §440.9(c)), and donot exceed $1,500,000,000 (as adjusted for inflation afterJanuary 1, 1989) above such amount, and are payable pursuant to theprovisions of49 U.S.C. 70113 and section 440.19 ofthe Regulations (14 CFR §440.19); or (iv)Licensee has no liability for claims exceeding $1,500,000,000 (as adjusted for inflation afterJanuary 1, 1989).
7. Miscellaneous

(a) Nothing contained herein shallbe construed as a waiver or release byLicensee, Customer or theUnited States Government of any claim by an employee ofthe Licensee, Customer or theUnited States Government, respectively, including a member ofthe Armed Forces ofthe United States, for Bodily Injury or Property Damage, resulting from Licensed Launch Activities.

(b) Notwithstanding any provision ofthis Agreement to the contrary, any waiver, release, assumption ofresponsibility or agreement to indemnify herein shall not apply to claims for Bodily Injury or Property Damageresulting from willful misconduct of any ofthe Parties, the Contractors and Subcontractors ofany ofthe Parties, and the directors, officers, agents and employees of any ofthe foregoing.

(c) In the event that more than one customer is involved in Licensed Launch Activities, references herein to Customer shall apply to, and be deemed to include, each such customer severally and notjointly.

(d) The Agreement shall be governed by and construed in accordance with United States Federal law.

In Witness Whereof, the Parties to this Agreement have caused theAgreement tobe duly executed by their respective duly authorized representatives as ofthe date written above.
Licensee By: Its:
Customer By: Its: Department ofTransportation By: Its: Associate Administrator for Commercial

Space Transportation, Federal Aviation Administration 

## 39020

### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Proposed Rules 39021

Issued in Washington, DC., this 17th day ofJuly 1996. PattiGraceSmith, ActingAssociateAdministratorfor CornmercialSpaceTransportation, Federal AviationAdministration. [FRDoc. 96 18532 Filed 7 24 96; 8:45 am] BILLING CODE 4910-13-MZ iL

AIM

39023 

# Thursday July 25, 1996



# Part IV


# Environmental Protection Agency

Cyanazine; Notice of Final Determination to Terminate Special Review of 

# Cyanazine; Notice of Voluntary Cancellation and Cancellation Order of Cyanazine Product Registrations; Notice

### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Notices

ENVIRONMENTAL PROTECTION AGENCY
[OPP-30000/60B; FRL-5385-7] Cyanazine; Noticeof Final Determination toTerminate Special Review ofCyanazine; Notice of Voluntary Cancellationand Cancellation OrderofCyanazine Product Registrations

AGENCY: Environmental Protection Agency (EPA). ACTION: Notice ofFinal Determination to Terminate Special Review; Notice of Voluntary Cancellation.

SUMMARY: This Notice announces the conclusion ofthe Special Review of cyanazine and EPA's acceptance of requests for thevoluntary cancellation ofcyanazine registrations. EPAis concluding the Special Review because theregistrants have agreed to voluntarily modify theterms and conditions ofthe cyanazine registrations

so thatuse ofthepesticide will not
cause unreasonable adverse effects on the environment. Theregistrants have agreed tovoluntarily amend their registrations andphase out cyanazine

useby gradually reducing application rates, implementing additional protective use restrictions duringthe phaseout, and voluntarily cancelling cyanazine registrations effective December 31, 1999. EPA is accepting these voluntary cancellations of technical and enduse pesticide products containing cyanazinepursuant to agreements by theregistrants.
FOR FURTHER INFORMATION CONTACT: By 

### mail: Joseph E. Bailey, Review Manager, Special Review and Reregistration Division (7508W), Office ofPesticide Programs, Environmental Protection Agency, 401 M St., S.W., Washington, DC20460. Office location, telephone number, and e-mail address: Special Review Branch, 3rd Floor,Crystal Station, 2800Jefferson DavisHighway, Arlington, VA 22202, Telephone: 703- 308-8173, e-mail: bailey.joseph@epamail.epa.gov. For a copy ofdocuments in thepublic docket, torequest information concerning the Special Review, ortorequest indices to the Special Review public docket, contact thePublic Response and Program Resources Branch, Field Operations Division (7506C), Office of Pesticide Programs, Environmental Protection Agency, 401 M St., SW., Washington, DC20460, Telephone: 703- 305-5805. SUPPLEMENTARY INFORMATION: 

### I. Introduction

A. RegulatoryBackground

This Notice ofFinal Determination concludes the Special Review of cyanazine which began in November 1994 when EPA issued the Notice of Initiation ofSpecial Review ofatrazine, simazine, and cyanazine (58 FR 60412, November 23, 1994) (FRL-4919-5). The Agency initiated the Special Review based upon concerns that cyanazine may pose a risk ofinducing cancer in humans from dietary, occupational, and residential exposure.

When EPA initiated this Special Review, E.I. duPont de Nemours and Company ("DuPont") and Ciba Geigy Corporation ("Ciba") were the only registrants ofcyanazine products. On August 2, 1995, DuPont voluntarily proposed to amend its cyanazine registrations to incrementally reduce cyanazine maximum application rates in 1997, 1998, and 1999, and to terminate the production ofcyanazine for use in the United States by the end of 1999. DuPont proposed that after December 31, 1999, the registrant would
not release for shipment any cyanazine formulated end use products for use in the United States. EPA would authorize distribution and sale through September 30, 2002, ofany existing stocks of cyanazine formulated end use products that were released for shipment on or before December 31, 1999. It also would authorize use ofthese products in accordance with theproduct labels through December 31, 2002. DuPont would modify the labels ofcyanazine formulated end use products released for shipment bythe registrant afterJuly 25, 1996, to specify the maximum application rates during thephaseout and to inform the public ofthe existing stocks provisions. It also would modify cyanazine labels to require use of application equipment with enclosed cabs for applicators beginning in 1998. Cyanazine technical products released for shipment byDuPont after July 25, 1996, would bear labels subjecting any end use products made from those technical products to the terms and conditions described in this paragraph. Finally, DuPontrequested that EPA accept the voluntary cancellation ofall registered DuPont cyanazine products effective on December 31, 1999. DuPont also waived any right to challenge EPA's final action on the Special Review or the
terms and conditions upon EPA's final acceptance oftheproposed amendments. On August 2, 1995, EPA accepted DuPont's proposal to amend the cyanazine registrations. On November 8, 1995, EPA announced receipt ofarequest from Cibato voluntarily cancel its only product containing cyanazine (60 FR 56333) (4984-1). The cancellation order for Ciba's sole product containing cyanazine was effective February 6, 1996.

After EPA initiated Special Review, Griffin Corporation ("Griffin") filed an application to register certain cyanazine pesticide products and subsequently agreed to the same terms and conditions ofregistration that were proposed by DuPont.EPA granted Griffin's applications and issued conditional registrations subject to those same terms and conditions.

On March 1, 1996, EPA issued a Notice ofPreliminary Determination to Terminate Special Review and aNotice ofReceipt ofRequests for Voluntary Cancellation ofcyanazine registrations (61 FR 8186) (5352-6).In this Notice, EPA explained that it was proposing to terminate the Special Review of cyanazine because, based upon the modified terms and conditions ofthe cyanazine registrations, the use of cyanazine willnot cause any unreasonable adverse effects on the environment. The complete terms and conditions to amend cyanazine registrations that were agreed to bythe registrants were provided in the Notice.

In the same Notice, EPA announced receipt ofrequests from DuPont and Griffin to voluntarily cancel their registrations pursuant to section 6(f) of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) (7 U.S.C. section 136d(f)). The requested voluntary cancellations would take effect on December 31, 1999.

The cyanazine product registrations that are subject to the modified terms and conditions ofregistrations as agreed
to byDuPont and Griffin, including voluntary cancellation effective on December 31, 1999, are listed below by registration number and product name.



### Registra- Product Name tion No.



### 352-470

352-475

352-495

352-500

352-577

1812-364 DuPont Bladex (R)4L Herbicide DuPont Cyanazine Technical DuPont Bladex (R)90 DF

Herbicide DuPont Extrazine (R)II

4L Herbicide DuPont Extrazine (R)II

DF Herbicide Griffin Cyanazine Technical 

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### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Notices



### Registra- Product Name tion No.

1812-365 Griffin Cynex DF 1812-366 Griffin Cynex 4L Herbicide Liquid 1812-367 Griffin Cynex Extra 4L 1812-368 Griffin Cynex Extra DF

B. LegalBackground
1. Summary ofSpecialReview Process.Special Review is a decisionmaking process designed to help EPA determine whether the Agency should initiate formal procedures, such as involuntary cancellation or suspension ofapesticide registration or the imposition ofmodified terms and conditions ofregistration because use of the pesticide may cause unreasonable adverse effects on the environment (40 CFR 154.1(a)).

EPA announces its decision to initiate the process by publishing aNotice of Special Review. EPA may initiate a Special Review if apesticide use under the existing terms and conditions of registration meets or exceeds the risk criteria specified in the regulations at 40 CFR 154.7. In the initial Notice, EPA solicits comments concerning therisks and benefits ofthe uses that are subject to Special Review (40 CFR 154.25).

In response to the Notice ofSpecial Review, the public may submit
comments pertinent to whether the use ofapesticide product as currently registered meets or exceeds the risk criteria as currently registered; whether any additional restrictions on the use of the product, in accordance with a pending application or amendment, would cause itto meet or exceed the risk criteria; whether the risks caused by

use ofthe product are unreasonable; and what regulatory action EPA should take (40CFR 154.26).

The regulations governing Special Review contemplate that EPA may terminate the process if the pesticides' registrants are willing and able to voluntarily eliminate anyunreasonable adverse effects without formal proceedings by voluntarily modifying the terms and conditions ofregistration

or voluntarily cancelling registrations. Section 154.1(a) ofthe regulations states that the issuance ofaNotice ofSpecial Review means that the Agency expects to initiate a formal proceeding unless "the Agency's initial determination was

erroneous

.... therisks can be reduced
to acceptable levels without the need for formal proceedings, or

... thebenefits ofthepesticide's use outweigh the risks." IfEPA determines that the risks can be reduced to acceptable levels because the registrants are able and willing to modify the terms and conditions of registration, then it will issue aNotice ofPreliminary Decision to Terminate Special Review. This Notice explains EPA's basis for concluding that the

measures agreed to by the registrants will reduce risks to an acceptable level and responds to significant comments received in response to the initial Notice ofSpecial Review. It also solicits public comments on EPA's position to terminate Special Review and its proposed resolution ofrisk concerns (59 FR 12188; March 27, 1985).

One ofthe riskreduction measures that a registrant may agree to is a voluntary cancellation under FIFRA section 6(f). This provision authorizes EPA to cancel a registration based upon the request oftheregistrant without regard for whether the pesticide poses
an unreasonable risk ofadverse effects. Other possible risk reduction measures that a registrant may agree to are modifications ofthe use ofthe pesticide that will reduce risk to an acceptable level, such asrequiring the use of respirators or reducing the amount of pesticide that may beused. Registrants generally agree to incorporate such voluntary risk reduction measures into the terms and conditions oftheir registration to insure future compliance. Sometimes registrants are unable or unwilling to voluntarily amend the existing terms and conditions of registration so that the products in question do not cause unreasonable adverse effects. Ifthis occurs, the regulations contemplate that the Agency will issue a Notice ofPreliminary Determination to Terminate Special Review and, among other things, will describe the regulatory measures that the Agency intends to initiate following termination ofthe process (40CFR 154.31).

After the close ofthe comment period for aNotice ofPreliminary Determination, EPA issues a Notice of Final Determination. This Notice includes the Agency's final determination and adiscussion ofthe

reasons for that determination, any comments submitted by the Secretary of Agriculture or the Scientific Advisory Panel, any significant public comments submitted in response to the Notice of Preliminary Determination, and instructions to registrants, applicants for registration, and other interested persons with respect to procedures that will be used to implement the final determination (40CFR 154.33).

Following termination ofSpecial Review, the Agency may either return the pesticide to the regular registration process or initiate formal proceedings. These formal proceedings include cancellation under FIFRA section 6(b), suspension under FIFRA section 6(c), denial ofaregistration application under FIFRA section 3(c)(6), orchange ofclassification under FIFRA section 3(d)(2). A more detailed description of the Special Review Process maybe found at40 CFRpart 154 and 61 FR 8187-8.

2. Voluntary CancellationProcess. FIFRA section 6(f)(1)(D) authorizes the Administrator to approve or deny a request for voluntary cancellation (7 U.S.C. section 136d(f)(10(D)). Unlike an involuntary cancellation under FIFRA section 6(b),FIFRA does notrequire the Administrator to make a finding that use ofthepesticide may generally cause unreasonable adverse effects on the environment to approve a voluntary cancellation request. Ifa registrant wishes to voluntarily cancel its registration, it may do so at any time under section 6(f),by submitting a request to EPA (7 U.S.C. section 136d(f)(1)(A)). The statute also contains provisions governing the publication of

a notice ofsuch a request which ensures that users and others will have adequate notice ofthe voluntary cancellation and timeto submit their own applications to

assume the registrations (7 U.S.C. section 136d(f)(1)). FIFRA does not require EPA to conduct ahearing on whether a voluntary cancellation request should be granted.
II. Summary ofNotice ofPreliminary Determination

In the Preliminary Determination, EPA reviewed the risks and benefits of phasing out and eventually cancelling cyanazine registrations pursuant to the
terms and conditions ofregistration agreed to by DuPont and Griffin. It concluded that thephaseout and cancellation will eventually reduce risk
to zero when the product may no longer be used. Prior to cancellation, EPA noted that progressive restrictions on the maximum amount ofcyanazine that maybe applied per acre, combined with closed cab requirements and depletion ofexisting stocks will progressively reduce risk (61 FR at 8200).

EPA also discussed the benefits of cyanazine use under the terms and conditions ofthe phaseout and cancellation. Itdetermined that the gradual phaseout will lessen the economic impact to growers who have used cyanazine when compared to an immediate cancellation. The phaseout should allow growers sufficient timeto find suitable alternative weed control strategies to replace cyanazine, causing 

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### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Notices

little disruption to agricultural production. The phaseout also makes it unnecessary to recall and dispose of unused product because itprovides advance notice ofthe ultimate cancellation and prohibition ofuse to distributors and growers.

Based upon the assessment ofrisks and benefits in light ofthe terms and conditions agreed to byDuPont and Griffin, EPA concluded that the use of cyanazine during the phaseout would
not pose any unreasonable adverse effects.

Il. Response toPublic Comments

A. AnalysisRequiredby SpecialReview Regulations

Griffin, citing 40CFR 154.1(a), asserts that afterEPA initiates Special Review it is prohibited from taking further steps to "cancel or alter aproduct registration if the record establishes that 'the Agency's initial determination was
erroneous ... or that the benefits ofthe pesticide's use outweigh the risks."'

The Agency disagrees with Griffin's characterization ofthis Special Review regulation. The regulation, cited in part by the commenter, reads:

The purpose ofthe Special Review process is tohelp theAgency determine whether to initiate procedures tocancel, deny, or reclassify registration ofapesticide product because uses ofthatproductmay cause unreasonable adverse effects on the environment in accordance with section 3(c)(6) and 6 of[FIIFRA]. Theprocess is intended to ensure that theAgency assesses risks thatmay beposed bypesticides and the benefits ofuse ofthosepesticides in an open and responsive manner. The issuance ofa Notice ofSpecial Review means that the Agency has determined that one or more uses ofapesticide may pose significant risks and that, followingcompletion oftheSpecial Review process, theAgency expects to initiate formal proceedings seekingto cancel, deny, reclassify, or require modifications to the registration ofthe product(s) in question unless ithas been shown during the Special Review thatthe Agency's initial determination was erroneous, thatthe risks

can be reduced to acceptable levels without the need forformal proceedings, orthat the benefits ofthepesticide's use outweigh the risks (40 CFR 154.1(a)).

This provision describes the actions that EPA believes may be necessary after termination ofSpecial Review depending upon the circumstances. It does not establish mandatory procedures that restrict the Agency's options once Special Review is initiated

as the commenter seems to suggest. Rather itdescribes possible steps that the Agency may consider taking after it terminates Special Review.

The regulation describes the steps that EPA expects to initiate after termination ofSpecial Review as "formal proceedings" to "cancel, deny, reclassify, or require modifications" to product registrations. The regulation contemplates that "formal proceedings" likely would not be appropriate ifthe Agency determines that one ofthe following occurs: (1) The decision to initiate Special Review is erroneous, (2) the risks cannot be reduced to acceptable levels without a formal proceeding, or (3) thebenefits outweigh the risks. Based upon this language, it is clear that the term "formal proceedings" means involuntary, EPAinitiated proceedings such asthe issuance ofa Notice ofIntent to Cancel under FIFRA section 6(b) or the required modification ofthe terms and conditions ofaregistration and does not include other measures that the registrants agree to such as voluntary cancellations under FIFRA section 6(f)

or voluntary modifications to product registrations. Ifany one ofthe three circumstances specified in therule exists, then formal involuntary proceeding would be unnecessary because the risk/benefit balance would
notjustify such an action.

Griffin's assertion that the regulation prohibits EPA from taking steps to cancel or alter aregistration ifthe Agency's initial risk determination is

erroneous or ifthe benefits outweigh the risks would produce an absurd result. Both the statute and the regulations contemplate that registrants may address unreasonable risks by amending their registrations to reduce risk or even by requesting voluntary cancellation of their registrations. Griffin's interpretation would effectively prevent EPA from accepting such risk reduction

measures once it has initiated Special Review and force it to initiate unnecessary measures such as a FIFRA section 6(b) cancellation. Such an interpretation of 154.1(a) is inconsistent with the meaning ofthe regulation and with congressional intent underlying FIFRA's voluntary cancellation provision.

EPA has determined that therisks posed by cyanazine can be reduced to acceptable levels without formal proceedings because ofthe voluntary cancellation and phaseout agreed to by both DuPont and Griffin. As a result, it does not need to initiate formal cancellation orother involuntary proceedings upon completion ofthe Special Review. Instead, EPA will
return the cyanazine registrations to the regular registration process. B. Applicabilityof Rulemaking ProvisionsoftheAdministrative Procedure Act (APA)

Griffin claims that the Special Review process constitutes rulemaking under the APA and that EPA must comply with the APA's notice and comment requirements when it conducts a Special Review. It also alleges thatEPA violated APArulemaking requirements in a number ofinstances by failing to provide background information that

was not cited in any Special Review Notice and by failingto respond to comments on various aspects ofthe Agency's risk assessment and on alternative methods ofaddressingrisks posed by cyanazine usage.

EPA has always taken the position that Special Review does not constitute APArulemaking but instead is an informal information gathering mechanism for assessing whether the

use ofspecific pesticides causes unreasonable adverse effects on the environment based upon the terms and conditions ofregistration. As noted in the regulations, Special Review is designed to help EPA decide whether to initiate aformal proceeding to cancel or reclassify an existingregistration or deny an application for aregistration (40CFR 154.1(a)).

The APA imposes notice-andcomment requirements onlyupon "legislative" rules. Seegenerally CommunityNutritionInstitutev. Young, 818 F.2d 943 (D.C. Cir. 1987). Legislative rules generally "create law," Gibson Wine Co. v. Synder, 194F.2d 329, 331 (D.C. Cir. 1952) and "grant rights, impose obligations, or produce other significant effects on private interests." Battertonv. Marshall,648 F.2d 694, 701-02 (D.C. Cir.1980); see alsoAmericanHospital Ass'n v.Bowen, 834 F.2d 1037, 1045 (D.C. Cir. 1987). Courts also give some deference to an agency's characterization ofits
statement although that characterization is not determinative. Community Nutrition,818 F.2d at 946.

Based upon these standards, it is clear that the Special Review process is not legislative rulemaking. Termination of Special Review does not itselfgrant a
new right orcreate anew legal obligation. Following the termination of Special Review, EPA may affect private rights but onlyby taking further steps to initiate an involuntary adjudicative process or byimplementing voluntary risk reduction measures. Accordingly, the Special Review process does not create anew law and thus, is not a legislative rule requiring notice and
comment. 

### 39026

### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Notices

The Ninth Circuit rejected an argument similar to that proposed by Griffin in a challenge to EPA's consideration ofpermit applications for storm water discharges under the Clean Water Act. NaturalResourcesDefense Council,Inc.v. EPA, 966 F.2d 1292, 1309 (9th Cir. 1992). NRDC argued that EPA's decision to approve or disapprove

agroup application was arule of "general applicability" and thus subject
to APA's notice and comment requirements. Id.The court rejected this argument. It first observed that "rulemaking ordinarily involves 'broad judgments, legislative in nature rather than the resolution ofaparticular dispute offacts."' Id. (citation omitted). The court held that EPA's decision on the permit application was "essentially

afactual determination," not rulemaking, because it focused on a specific factual question regarding whether the application adequately identified a second group that would be subject to more extensive data requirements. Id.The court also explicitly noted that EPA was not engaged in rulemaking even though the decision on the permit applications might affect a large number of applicants.

The principal case that Griffin relies upon, Waste Management, Inc. v. EPA, 669 F. Supp. 536 (D.D.C. 1987), does not support the conclusion that Special Review constitutes rulemaking. In WasteManagement,EPA was engaged in issuing aregulation governing ocean incineration. EPA decided to temporarily freeze all applications for

ocean incineration permitsuntil the final regulation was promulgated but it did not make any specific factual determinations regarding specific permit applications. The court held that this temporary freeze constituted APA rulemaking.

In contrast to the circumstances in WasteManagement,EPA is utilizing the cyanazine Special Review to analyze the risks and benefits ofcyanazine under the terms and conditions ofregistration. This analysis is preparatory either to initiating proceedings to address any unreasonable risk or implementing voluntary risk reduction measures and does not itselfimpose any limitations upon existing registrations. See, 40CFR 154.1(a). Such preliminary factual determinations are not rulemaking under the APA.

C.Risk/Benefit CommentsBeyond Scope of Agency Determination
1. Scope of Agency determination.A number ofcomments address matters beyond those at issue in the Agency's Final Determination. The regulations governing Special Review do notrequire the Agency to consider such immaterial
comments.

As EPA stated in the Notice of Preliminary Determination, the issue is whether the modified terms and conditions agreed to bythe registrants "will eliminate any unreasonable adverse effects posed by cyanazine registrations" (61 FR at 8200).Where the registrants agree to modify the terms and conditions ofregistration, the controlling issue is whether the use of cyanazine pursuant to the modifications poses any unreasonable adverse effects. IfEPA determines thatuse pursuant to the modified registrations continues to

cause unreasonable adverse effects despite the modifications, then it terminates Special Review and initiates other involuntary mechanisms to address the risk.On the other hand, if EPA determines that the use pursuant to the modified registrations eliminates any unreasonable adverse effects, then additional involuntary proceedings are unnecessary and the Agency would terminate Special Review and return the registrations to the registration process.

The regulations specifically require EPA to respond in the Notice ofFinal Determination to "significant public
comments submitted on the Notice of Preliminary Determination" (40CFR 154.33(a)(3)). Significant comments

concern a matter that is at issue in the proceeding or that is probative ofa matter atissue; in other words, those that raise matters material to EPA's Preliminary Determination. At this point, the only issue is whether the modified terms and conditions agreed to by the registrants will eliminate any unreasonable adverse effects caused by the useoftheproducts and the Agency will respond only to comments that address that issue.

This interpretation of§ 154.33(a)(3), which governs responses to significant comments, is consistent with other Special Review regulations. As discussed in Unit III.A. ofthis document, theregulations contemplate that EPA will likely terminate Special Review and not impose any involuntary actions upon apesticide registration if the registrant agrees to modify the terms and conditions ofregistration to reduce risk to an acceptable level. Some ofthe comments indicate a fundamental misunderstanding ofthe
nature ofSpecial Review. EPA review focuses on the risks and benefits ofa pesticide that result from the use ofthe pesticide under the terms and conditions ofthe existing registrations. At this point, the registrants have agreed to amend the terms and conditions that control the useofthe pesticide and EPA has accepted those amendments. Terms and conditions ofregistration that governed the use ofcyanazine before EPA accepted the amendments no longer exist and therefore have no effect upon the risks and benefits associated with the use ofcyanazine. Similarly, hypothetical alternative terms and conditions ofregistration suggested by
commenters do not address the issue of the risks and benefits associated with the use ofcyanazine under the modified
terms and conditions agreed to by the registrants. Thus comments pertaining
to previous terms and conditions of registration or to hypothetical alternative arrangements, and the risks

orbenefits associated with such terms and conditions, are immaterial to the Agency's decision to terminate the cyanazine Special Review.

2. Specificcomments. Some commenters focus on issues that EPA raised in the initial Notice ofSpecial Review and that concern the risks or benefits ofcyanazine usage under the old terms and conditions ofregistrations that existed at the time Special Review

was initiated. These issues do not address whether cyanazine usage poses any unreasonable adverse effects under the new terms and conditions agreed to by the registrants in 1995. Forexample, Griffin comments that EPA erroneously decided to initiate Special Review based upon a flawed risk assessment and provides a lengthy critique ofthat initial risk assessment. While such comments

were material to the Agency's initial Notice ofSpecial Review, they do not

concern the issue now before the Agency

-whether cyanazine poses any unreasonable adverse effects under the

new terms and conditions of registration.

Griffin and other commenters claim that the benefits ofcyanazine use may be higher than EPA first estimated in the Notice ofSpecial Review, asserting that the Agency did not calculate the relative
costs ofcyanazine and alternative pesticides correctly and did not recognize that cyanazine is "significantly superior" to alternatives. These claims are immaterial to the Agency's decision to terminate Special Review. EPAhas decided to terminate the process because the benefits of continued useunder the new terms and conditions ofregistration outweigh the risks. At thispoint it is inconsequential whether the benefits outweigh the risks by a greater margin than EPA earlier calculated because greater benefits would onlyprovide more support for the decision to terminate Special Review without initiatingformal proceedings. 

## 39027

### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Notices

Some additional commenters discuss alternative terms and conditions of registrations thatmight yield an acceptable risk/benefit balance. Atthis point, however, such alternatives are immaterial because the agreed upon modifications already insurethat cyanazine usage does not pose any unreasonable adverse effects. Given the registrants' agreement to these modifications, it isunnecessary forEPA to address these issues.

The comments directed towards the old terms and conditions ofcyanazine registration appear tobe directed at the decision oftheregistrants to voluntarily amend their cyanazine registrations rather than the Agency's decision to terminate Special Review. The termination ofSpecial Review will not prevent interested persons from applyingfor registrations with terms and conditions different from those currently in effect. Such an application may be filed at any time, even afterthe current registrations arecancelled. Ifthe application otherwise fulfills the prerequisites for registration, the Agency would consider therisks and benefits ofuse under theproposed terms and conditions and pursuant to FIFRA and theregulation including40 CFR 154.35. An applicant may contest the decision to deny an application as specified in FIFRA section 3(c)(6).
D.ResponsetoMaterialRisk/Benefit Comments

Griffin also addresses theeconomic impact ofthephaseout and voluntary cancellations and concludes that "EPA's conclusions concerning theeconomic impact ofthephase-out and registration cancellations likely are correct." In reaching this conclusion, the commenter relied in partupon the data that EPAused to determine cyanazine application rates as summarized in Table 5 ofthePreliminary Determination. It alsoutilized additional application rate data thatit obtained independently.

Based upon the information underlying Table 5,EPA agrees that its conclusions with respect to the economic impact ofthe modified terms and conditions ofregistration are correct. TheAgency hasnot analyzed the additional data utilized by Griffin because the comment states that it supports rather than contradicts the Agency's preliminary economic determination.
E.Secretaryof Agricultureand ScientificAdvisory Panel

The Special Review regulations require the Agency to respond toany comments submitted by theSecretary of Agriculture or the Scientific Advisory Panel (40CFR 154.33(a)(2)) but neither submitted comments. The regulations require EPA to referproposals to initiate involuntary proceedings such as a FIFRA section 6(b) cancellation to those bodies. The regulations, however, do
not impose such a requirement where,

ashere, the registrants have accepted voluntary modifications ofthe terms and conditions oftheir registrations followed by voluntary cancellations.


### IV. Decision RegardingSpecial Review

EPA has decided to terminate the cyanazine Special Review. This decision is based upon EPA's determination that the use ofcyanazine

on cotton, field and sweet corn, and sorghum in accordance with the voluntary cancellation and phaseout agreed to by the cyanazine registrants does not cause any unreasonable adverse effects.

The new terms and conditions of registration will gradually lower and then eliminate the risks caused by cyanazine. Maximum application rates will be reduced in 1997, 1998, and 1999, and applicators will be required to

use closed cab equipment beginning in 1998. Risks will eventually bereduced
to zero when the useprohibition takes effect in 2002. The requirement that cyanazine applicators useclosed cabs to apply the pesticide beginning in 1998 also will reduce occupational exposure to the substance. While there will be

some exposure to cyanazine during the phaseout, exposure and thus, risks will decline as application rates drop and existing stocks are depleted.

The phaseout ofcyanazine will lessen the economic impact to growers who have used cyanazine to control weeds. The phaseout should allow growers sufficient time to replace cyanazine with alternative weed control practices

so that there willbe little disruption to agricultural production. Another likely benefit ofthe incremental phaseout is depletion ofexisting stocks ofcyanazine

so there will be little unused product to recall and dispose ofafterthe cancellations take effect. Furthermore, the costs, time and uncertainties associated with an involuntary cancellation proceeding are avoided.

For all these reasons, EPAhas decided that the implementation ofthe
terms and conditions ofthe cyanazine voluntary cancellation and phaseout will prevent any unreasonable adverse effects which might otherwise be caused by the use ofcyanazine on corn, cotton, and sorghum. V. Decision RegardingVoluntary Cancellation and Use ofExisting Stocks

A. Voluntary Cancellation/Cancellation Order

EPA accepts the voluntary cancellation ofall cyanazine products as requested by the cyanazine registrants in accordance with FIFRA section 6(f). Both ofthe cyanazine registrants, DuPont and Griffin, have requested voluntary cancellations as terms and conditions oftheir registrations. EPA has not received any applications to

assume the existing registrations of cyanazine under the new terms and conditions ofregistration. Consequently, EPA accepts the voluntary cancellations effective December 31, 1999 and orders the cancellations to take effect on January 1, 2000.Those products for which EPA accepts the voluntary cancellation are listed byproduct registration number and product name in Unit I.A. ofthis Notice. When the voluntary cancellations take effect on December 31, 1999, the Agency will issue an order confirming the cancellations.

B. ExistingStocks

For any cyanazine formulated end use products that are released for shipment by a registrant on orbefore December 31, 1999, EPA authorizes the continued sale and distribution ofsuch products in the channels oftrade in accordance with theirlabels through September 30, 2002. EPA authorizes the continued use of such existing stocks in accordance with theirlabels through December 31, 2002. EPA prohibits the use ofcyanazine products after December 31, 2002. EPA is not establishing any existing stocks provisions for technical cyanazine products (DuPontRegistration Number 352-475 and Griffin Registration Number 1812-364); however, any technical or formulated end use cyanazine product maybe exported pursuant to FIFRA sections 3 and 17.
VI.Availability ofPublicDocket

EPA established a public docket, OPP30000/60, for the cyanazine Special Review. This public docket includes thisNotice and any other Notices associated with the cyanazine Special Review and EPA's decision to terminate the cyanazine Special Review. This docket also contains documents not considered Confidential Business Information that arepertinent to the cyanazine Special Review and copies of written comments or other material submitted to EPAby any person outside the government in response to the cyanazine Special Review. The docket is available for inspection from 8 a.m. to 

## 39028

### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Notices 

## 39029

4:30 p.m., Mondaythrough Friday, excluding legalholidays. Thepublic docket is located in Rm. 1132 ofthe Public Response and Program Resources Branch, Field Operations Division (7506C),Office ofPesticide Programs, Environmental Protection Agency, Crystal Mall#2, 1921 Jefferson Davis Highway, Arlington, VA 22202.

List ofSubjects

Environmental protection.
Dated: July 17, 1996. Lynn R.Goldman, AssistantAdministratorfor Prevention, PollutionandToxicSubstances. [FRDoc. 96 18921 Filed 7 24 96;8:45 am]

BILLING CODE 6560-50-FMmm

Z iL

AIM

39031 

# Thursday July 25, 1996



# Part V


# Environmental Protection Agency

40 CFR Part 51
Inspection/Maintenance Flexibility Amendments (Ozone Transport Region); Final Rule

## 39032 Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Rules and Regulations

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51 [FRL-5541-3] RIN2060-AG11 Inspection/Maintenance Flexibility Amendments (Ozone Transport Region)

AGENCY: Environmental Protection Agency. ACTION: Supplemental finalrule.

SUMMARY: Today's action revises the
motor vehicle Inspection/Maintenance (I/M)requirements by adding a special 

### low enhanced performance standard for qualified areas in Ozone Transport Regions (OTR). This additional performance standard applies to certain attainment, marginal and moderate

areas in the OTR. The purpose ofthis action is to allow OTRqualifying areas the flexibility to implement abroader range ofI/M programs than is currently 

### permitted. EFFECTIVE DATE: This rule will take effect


### on September 23, 1996. ADDRESSES: Materials relevant to this rulemaking are contained in the Public Docket No. A-95-08. The docket is 

### located at theAirDocket, Room M-1500 (6102),Waterside Mall SW, Washington, DC 20460. The docket maybe inspected between 8:30 a.m. and 12 noon and 

### between 1:30 p.m. until 5:30p.m. on weekdays. A reasonable fee may be charged for copying docket material. Electronic copies ofthepreamble and the regulatory text ofthisrulemaking

are available on the Office ofAir Quality Planning and Standards (OAQPS) Technology Transfer Network Bulletin Board System (TTN BBS) and the Office ofMobile Sources' World Wide Web cite, http://www.epa.gov/OMSWWW/. FOR FURTHER INFORMATION CONTACT: 

### Leila Cook, Office ofMobile Sources, National Vehicle and Fuel Emissions Laboratory, 2565 Plymouth Road, Ann Arbor, Michigan, 48105. Telephone (313)741-7820. SUPPLEMENTARY INFORMATION:
I.Table ofContents I. Summary ofRule III. Authority IV. Public Participation

A. Increased Flexibility B. Clarification of200,000 Population



### Requirement C. Duplicate Requirements D.Emission Reduction Credits E. Comparability ofBasicPrograms F.Effectiveness ofRSD G. Retests for RSDFailures H. OBD Tests I. Other Comments V. Economic Costs and Benefits VI. Administrative Requirements

A. Administrative Designation B. Reporting and Recordkeeping

Requirement C. Regulatory FlexibilityAct D.Unfunded Mandates Act E. SmallBusiness Regulatory
Enforcement Fairness Act

IL Summary of Rule
Under the Clean Air Act as amended in 1990 (the Act), 42U.S.C.7 401 etseq., the U.S. Environmental Protection Agency (EPA)published in the Federal Register on November 5, 1992 (40CFR part 51, subpart S) rules related to plans for Motor Vehicle Inspection and Maintenance (I/M) programs (hereafter referred to as the I/M rule; see 57 FR 52950). Today, EPA is revising this rule to provide greater flexibility to certain Ozone Transport Region (OTR)areas. Section 182ofthe Act is prescriptive regarding the various elements that are required as part ofan enhanced Inspection/Maintenance (I/M) performance standard. It also provides
states with flexibility in meeting the numerical performance standards for enhanced or basic I/M programs. States in the Ozone Transport Region (OTR) requested additional flexibility in implementing IM in areas which are in attainment, which are areas designated and classified as marginal ozone areas,

or which are designated and classified

asmoderate ozone areasunder 200,000 in population. These three types ofareas would be exempt from all I/M requirements but for their location in the OTR. These areas are included in the OTRenhanced IM requirements to help achieve overall attainment and maintenance goals for the region, which includes serious and severe ozone nonattainment areas.

With today's action, EPAis establishing an additional enhanced IM performance standard for qualified areas in the Northeast OTR, hereafter referred
to as the OTR low enhanced performance standard. The emission reduction targets for this program are less than both the low enhanced performance standard and the basic performance standard. There are two qualifications to be eligible for the OTR low enhanced performance standard. First, the standard applies only in attainment areas, marginal ozone nonattainment areas and certain moderate ozone nonattainment areas under 200,000 in an OTR. Moderate

areas ofthat size that were not previously required to, or had not in fact, implemented a basic I/M program under the pre-1990 Act can take advantage ofthe OTR low enhanced performance standard. The savings clause in section 182(a)(2)(B)(i) requires

areas that had or were required to have I/Mprograms before 1990 to retain programs ofat least that stringency. Because, as explained below, EPA believes the Act requires an enhanced I/Mprogram to be an enhancement over otherwise applicable I/Mrequirements,

areas subject to basicI/M or the savings clause cannot adopt a less stringent program. Any moderate area with urbanized areas having atotal population ofover 200,000 would also be required to implement basicI/M under section 182(b)(4) and therefore is ineligible for the OTR low enhanced performance standard. Second, the OTR low enhanced program must be supplemented by other measures in order to achieve emission reductions equal to or greater than that which would have occurred had aregular low enhanced I/Mprogram been implemented (as defined by40 CFR 51.351(g), see 60 FR48029). This is because the primary goal ofthe Act in establishingthe OTRprovisions and requiring enhanced I/Min areas with a 

### population of 100,000 ormore in the OTRwas to contribute to regional attainment. EPAbelieves that an area should be able to qualify for the additional flexibility provided under the OTRlow enhanced standard only ifit achieves, in some other way, the additional reductions that the otherwise 

### applicable low enhanced I/M program would achieve. Thus, the total emission reductions from the OTRlow enhanced I/Mprogram plus the additional

measures mustequal the tonnage reduction that aregular low enhanced program would have generated. However, since local reductions are not the crucial factor, a state may bubble surplus reductions from other areas not 

### required to implement I/Min the state. For example, a state could implement a statewide reformulated gasoline (RFG) program plus an OTR low enhanced I/Mprogram in subject areas or statewide and potentially achieve comparable reductions to a regular low enhanced program because ofthe additional reductions RFGwould achieve in areas not otherwise required
to have RFG. Equality ofemission reductions must be demonstrated over a timeperiod which aligns with the attainment deadlines of all OTR areas: from 2000 through 2007. Note that an I/ M program that meets the OTRlow enhanced performance standard must be implemented even ifother measures could achieve comparable emission reductions because the Act specifically

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requires an enhanced I/Mprogram in metropolitan areas with 100,000 population in the OTR. Also, measures to fillthe gap between OTRlow and regular low enhanced I/M may notbe otherwise required bythe Clean Air Act.

The OTRlow enhanced performance standard model program is composed of the following elements: Annual testing of 1968 and newer light duty vehicles and light duty trucks, OBD checks for 1996 and newer vehicles, remote sensing of 1968-1995 vehicles, catalyst checks on 1975 and newer vehicles, and PCV valve checks on pre-1975 vehicles. These elements collectively satisfy the Act's requirements for an enhanced I/M program performance standard. As with other performance standards, EPA does
not necessarily recommend implementing this particular program but rather encourages states to design a program that will achieve equal or greater emission reductions than the performance standard while providing for the specific needs ofthe area.

In the proposal, EPA noted that the emission reduction targets generated by this model program could not yet be precisely modeled butEPA estimated the targets to be less than those for the basic I/M program standard (which are approximately 6.3% for HC, 10.8% for CO, and 0.7% for NOx). EPA expects to issue draft guidance on remote sensing credits in the Summer of 1996. As soon
as a final guidance is issued, an analysis ofthe emission reduction targets generated bythis model program willbe placed in the docket. Even though the estimated emission reduction targets for the OTRlow enhanced standard are less than those forbasic I/M, EPAbelieves this standard meets the requirement of the Act for "enhanced" I/M. There are two important facts to consider in this regard: first, neither the Act nor the legislative history specifies thatthe emission reduction targets for enhanced I/M mustbe greater than basic in all

cases. EPAbelieves the Actprovides the agency latitude in establishing multiple performance standards to meet a wide range ofstate and local needs and conditions. Second, the areas eligible to take advantage ofthis performance standard were not required to nor did they implement I/M programs prior to 1990. So, in all cases, this standard establishes aprogram target that is indeed enhanced relative to what was present or required for the area before
enactment ofthe 1990 Clean Air Act Amendments or is otherwise required afterthe 1990 Clean Air Act Amendments. EPA did notreceive any public comments disagreeing with this legal interpretation. As is the case with allperformance standard model programs, EPA does not necessarily recommend implementation ofthe model program, since it is constrained in composition by law (e.g., EPA recommends not testing cars until they reach 4years ofage and recommends biennial testing asmore cost-effective; by contrast, allofthe enhanced I/Mperformance standards

arerequired bythe Act to reflect a model program that includes annual testing of all vehicles). In that the emission reduction targets for the OTR low enhanced performance standard are below thebasic level, the standard provides thebroadest possible latitude in program design. For example, some states in the OTR have existing decentralized, safety inspection programs. Comprehensive visual checks ofemission control devices, agas cap pressure test, the Act-mandated OBD check, and the Act-mandated on-road testing could be added to these programs which should then meet the OTR low enhanced standard, aslong as

aproper enforcement mechanism was in place. Many other possibilities exist for program designs that could also meet this performance standard.

While the OTR low enhanced performance standard is less demanding than the existing performance standard applicable to the affected areas, today's action still ensures that enhanced I/M programs in these areas meet all statutory criteria for EPA approval. A state's OTR low enhanced program is required, under section 182(c)(3)(C) of the Clean Air Act, to include computerized analyzers and on-road testing devices; computerized equipment and on-road testing devices

arerequired bythe current rule and apply to the OTR low enhanced program. A state's OTR low enhanced program shall also include a regulatory framework forwaivers, if waivers are to be issued, and an enforcement system through registration denial, (except for any program in operation before November 15, 1990 whose enforcement mechanism has been demonstrated to be

more effective than registration denial). Today's amendments leave requirements in this regard the same as for other enhanced I/M areas. As mandated bythe Act, in an OTRlow enhanced program, vehicle emissions shall be tested annually unless biennial testing will equal or exceed the reductions that can be obtained from annual inspections. A program could combine biennial inspections on the vehicles equipped with on-board diagnostic computers (OBD)with biennial evaporative system checks to achieve the necessary additional reductions. The OTRlow enhanced performance standard is based on centralized inspections ofOBDequipped vehicles and on-road remote sensing testing; EPA believes that this
meets the specific requirement that the performance standard be based on centralized testing.

Today's action also establishes quality

assurance requirements for OTRlow enhanced I/Mprograms that are commensurate with the emission reductions which the programs are intended to achieve. In particular,
current rules require enhanced I/M programs to be evaluated by conducting test-only IM240s on a random representative sample ofthe fleet (a minimum of0.1%) to verify that the emission reductions are occurring. EPA believes that the emission reductions from an OTR low enhanced program are small enough that this level ofeffort is
notjustified. The routine quality

assurance requirements ofthe original I/Mrule are also not necessarily appropriate in light ofthe low level of benefits oftheprogram.

This action also modifies the geographic exclusion rule forcounties within Metropolitan Statistical Areas (MSAs) in the Ozone Transport Region. The modification allows states to exclude counties that comprise less than 1% ofthe population ofthe MSA from program coverage. Inclusion of such a small fraction ofthe population is not worth the significant cost ofexpanding geographic coverage ofthe program to include such acounty.

This action requires that the implementation date for full testing in

areas opting for the OTR low performance standard be no later than the latest date by which full testing can
commence and still achieve sufficient reductions for all OTR areas to meet the performance standard by the Act's attainment and reasonable further progress deadlines, including the end of 1999 attainment date for serious ozone nonattainment areas. This willgenerally

mean a start date no later than January 1, 1999, for annual testingprograms, although EPA will accept field testing commencing as late as July 1, 1999 ifthe full I/Mreductions can be achieved by the serious area attainment deadline. Note that theperformance standard model program assumes a start date of January 1, 1999 because EPAbelieves Congress intended that the performance standard be based on at least one complete annual test cycle. With the requirement to offset the emissions difference between OTR low and regular low enhanced with other measures, this 

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## 39034 Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Rules and Regulations

date ensures that attainment in the region is not impaired.

Today's action also serves to provide other flexibilities to non-OTR states in designing quality assurance programs. The intent is to allow alternative quality

assurance procedures that are as effective as orbetter than those specified in the original I/M rule.


### III.Authority

Authority for the action proposed in this notice is granted to EPA by section 182 ofthe Clean Air Act as amended (42 U.S.C. 7401, etseq.). 

### IV. Public Participation

A. IncreasedFlexibility

All the commenters agreed with EPA's effort to provide states with greater flexibility and almost all felt that the new OTRlow enhanced performance standard was necessary to meet the unique needs ofstates within the Ozone Transport Region.

B. Clarification of200,000Population Requirement

1. Summary ofProposal

The proposal allowed attainment
areas, marginal ozone nonattainment

areas and moderate ozone nonattainment areas with a 1980 Census population ofless than 200,000 in the urbanized area to use the new OTR low enhanced performance standard.

2. Summary ofComments

One commenter asked for clarification ofhow the 200,000urbanized area population criteria would be applied. Specifically, the commenter asked whether the population criteria applied
to urbanized areas within each Metropolitan Statistical Area (MSA) or urbanized areas within the entire attainment or non-attainment area.
3. Response to Comments

Within the OTR, enhanced I/M programs are required in MSA's with populations of 100,000 or more. However, the OTR, like the rest ofthe country, is also subject to the basic I/M requirements that an urbanized area with apopulation of200,000 or more that is classified as moderate ozone nonattainment must implement a basic I/Mprogram. Thus, moderate ozone
areas in the OTR with an MSA population ofgreater than 100,000 but

an urbanized area population ofless than 200,000 are eligible for the OTR low enhanced performance standard. In contrast, moderate ozone areas with MSA populations ofgreater than 100,000 and urbanized area populations ofgreater than 200,000 must meet the basic performance standard. Ifa state within the OTRfalls into this later category which has to implement abasic I/M program in the urbanized area (with

apopulation of200,000 or more) it can still implement an OTRlow enhanced program in any portion ofthe MSA which falls into an urbanized area with

apopulation ofless than 200,000.

C.DuplicateRequirements
1. Summary ofProposal

The proposal did not exempt states that implement an OTRlow enhanced performance program from most ofthe general requirements for enhanced I/M programs in the original I/M rule.

2. Summary ofComments

Two commenters addressed this issue. The first felt that the inclusion of on-road testing and OBD testing in the OTR low enhanced performance standard is duplicative ofthe on-road and OBD testing requirements in the original rule,40 CFR 51.351 (b) and (c). The second commenter felt that several sections oftheI/M rule dealing with data collection and data analysis and reporting, 40 CFR 51.365 and 51.366, should not be applicable to OTR low enhanced programs.
3. Response to Comments

The Clean Air Act requires OBD as part ofany basic or enhanced performance standard. Additionally, RSD is required as part ofany enhanced I/M performance standard. Section 51.351(b) requires that on-road testing of either 0.5% ofthe subject vehicle population or 20,000 vehicles (whicheveris less) be included in any enhanced I/Mperformance standard. The OBD requirements were reserved by EPA in the original I/Mrule and are expected to be published in 1996. EPA cautions commenters to remember that performance standards merely establish the minimum target a certain program must meet. They do not conclusively establish the elements ofthe program. Thus, the §51.351(h)(6) establishment ofRSD and OBD asthe exhaust emission test types under the OTRlow enhanced performance standard is not a duplication of§§ 51.351 (b) and (c) because these are separate standards which OTRlow areas do not otherwise have to meet.

EPA agrees with the comment that certain portions ofsections 51.365 and 51.366 regarding data collection, analysis and reporting are inapplicable
to OTRlow enhanced performance
states. Certain "high" enhanced program elements, such as evaporative system checks, will not apply in an OTR low enhanced program. However, the Clean Air Act and the I/Mrule require each state to report emissions reductions achieved, based on data collected during the inspection and repair ofvehicles. Furthermore, depending on the program design which these areas elect to implement, varying types ofdata and reporting might or might not apply. Obviously a state cannot collect, analyze and report data which its program does not generate. Therefore, while the data collection and reporting requirements ofsections 51.365 and 51.366 must still apply to OTRlow enhanced areas, states need only submitprogram-applicable data and reports.
D.EmissionReduction Credits

1. Summary ofProposal

The preamble for theproposal acknowledged that EPAhad not finalized emission reduction credits for the OTR low enhanced performance standard because EPA is still in the process offinalizing the credits for RSD. However, the preamble did note that EPA expected thesebenefits to be less than those achieved by the basic performance standard.
2. Summary ofComments

Several commenters noted that itis difficult for a state to finalize an OTR low enhanced program untilEPA issues emission reduction credits for the program.
3. Response to Comments

EPA is preparing to issue a draft guidance on RSD credits in the Summer of 1996. After the draft guidance is issued, EPA will take public comments before issuing final guidance. While EPA cannot give a specific date by which final guidance willbe issued, stakeholders can be assured that EPA realizes the importance ofissuing RSD credits and is working to issue them as
soon aspossible.

E. ComparabilityofBasicPrograms
1. In the proposal, EPA stated that the emission reductions from the new OTR low enhanced performance standard will actually be less than the emission reductions obtained from abasic I/M program. EPA noted that the Act in no way prohibits the creation ofmultiple enhanced performance standards to meet a wide variety ofstate and local needs and conditions. In fact, the Clean AirAct does not require emission reductions targets for enhanced I/M programs to be greater than those for basic programs. Furthermore, allthe

areas eligible to use the OTR low enhanced performance standard were

### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Rules and Regulations

not required and did not implement I/ M programs before 1990. Thus, the OTR low enhanced performance standard is

an enhancement for these areas compared to what was required and present before the 1990 amendments to the Act.

2. Summary ofComments

One commenterbelieves that any existing basic program in an attainment

or marginal non-attainment area should
meet the OTR low enhanced performance standard. This commenter did not believe that existing programs should have to be supplemented to meet the new performance standard.

3. Response to Comments

From an emission reduction point of view, any existingbasic program that meets the basic performance standard will also meet the emission reduction targets established by the OTRlow enhanced performance standard. The only changes existing programs will have to make is to include any element which is required for an enhanced program which itcurrently does not include; for instance, OBD checks and 0.5% on-road testing.

F. Effectiveness ofRSD

1. Summary ofRule

The performance standard created by today's action requires RSD testing of 1968 to 1995 vehicles beginning in 1999.

2. Summary ofComments

One commenter was very concerned that RSDtesting will actually increase

consumer inconvenience if RSDhas a high false failure rate. Ifthis is the case and the state requires retests for vehicles that fail the RSD test, many consumers may be needlessly required to go to a test station to get another emission test.
3. Response to Comments

The goal ofthis action is to increase flexibility to the states so that they can design an I/M program which they feel is most effective for their area and convenient for their citizens. This performance standard merely establishes the target level ofemission reductions that an OTRlow enhanced program must achieve and in no way mandates the type oftest a state must implement. Thus, states concerned about false failures need not relyheavily

on RSD testing. States may implement any type oftest they choose so longas it meets the emission reduction target of the OTRlow enhanced performance standard. The requirement to perform on-road testing on at least 0.5% ofthe fleet remains, although RSDis not required for this purpose. G.Retests forRSD Failures

1. Summary ofProposal

The OTRlow enhanced performance standard requires RSDtesting of 1968- 1995 vehicles with a carbon monoxide standard of7.5%. A vehicle must have
two separate readings above 7.5% to establish afailure thereby requiring a retest.
2. Summary ofComments

One commenter noted their opinion that RSDis useful at targeting vehicles with excess emissions but that RSD
cannot substitute for a traditional tailpipe exhaust test. Therefore, the
commenter believed that RSD must be used in conjunction with a traditional exhaust emissions re-test.
3. Response to Comments

EPA agrees with this comment but again points out that this rule only establishes a performance standard and is not guidance or a mandate for RSD usage. EPA believes that it would be unwise for states to require emission related repairs based solely on an RSD reading. Indeed, EPAbelieves that states

are aware ofthis and will perform confirmatory emission re-tests using proven methods on vehicles that fail RSD in order to avoid useless repairs.

H. OBDtests
1. Summary ofRule

Among other requirements, the OTR low enhanced performance standard requires a start date ofJanuary 1, 1999 and OBD tests on all 1996 and newer vehicles.

2. Summary ofComments

One state commented that itwas reluctant to require repairs based solely

on OBD test failure in 1999 because of the relative newness ofOBD technology. The state commented that itpreferred to wait and notrequire repairs based on OBD test failure untilthere is more data available on OBD's effectiveness at correctly identifying emission component failures.

3. Response to Comments

EPA proposed an OBDrule in the Federal Register on August 18, 1995 (60 FR43092). Currently, EPA is finalizing the OBD rule which is expected to be published in the Summer of 1996. In the OBD rule, EPA will address the

concerns ofthis and several other
comments about the novelty ofOBD and the need for aphase-in period prior to requiring repairs. L Other Comments
EPA received several other comments which dealt with I/Missues that were not specific to thisrulemaking. EPA responded to these unrelated comments in aresponse document which itplaced in the docket.

V. Economic Costs and Benefits

Today's revisions provide states additional flexibility that lessens rather than increases the potential burden on states. Furthermore, states are under no obligation, legal or otherwise, to modify existingplans meeting thepreviously applicable requirements as a result of today's action. 

### VI. Administrative Requirements

A. AdministrativeDesignation

It has been determined that this amendment to the I/M rule is not a significant regulatory action under the terms ofExecutive Order 12866 and has been waived from OMB review. Any impacts associated with these revisions do notconstitute additional burdens when compared to the existing I/M requirements published in the Federal Register on November 5, 1992 (57 FR 52950) as amended. Nor do today's amendments create an annual effect on the economy of$100 million or more or otherwise adversely affect the economy

or the environment. It is not inconsistent with, nor does it interfere with, actions by other agencies. Itdoes
not alterbudgetary impacts of entitlements orother programs, and it does not raise any new or unusual legal

orpolicy issues.

B. ReportingandRecordkeeping Requirement

There are no information requirements in this supplemental final rule which require the approval ofthe Office ofManagement and Budget under the Paperwork Reduction Act, 44 U.S.C. 3501 etseq. C. Regulatory FlexibilityAct

Pursuant to section 605(b) ofthe Regulatory Flexibility Act, 5 U.S.C. 605(b), the Administrator certifies that this action will not have a significant economic impact on a substantial number of small entities and, therefore, is not subject to the requirement ofa Regulatory Impact Analysis. A small entity may include a small government entity orjurisdiction. A small governmentjurisdiction is defined as "governments ofcities, counties, towns, townships, villages, school districts, or special districts, with a population of less than 50,000." This certification is based on the fact that theI/M areas 

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## 39036 Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Rules and Regulations

impacted by thisrulemaking do not meet the definition ofa small government jurisdiction, that is, "governments ofcities, counties, towns, townships, villages, school districts, or special districts, with a population of less than 50,000." Furthermore, the impact created by this action does not increase the pre-existing burden which this proposal seeks to amend.

D. UnfundedMandatesAct

Under Section 202 ofthe Unfunded Mandates Reform Act of 1995 ("Unfunded Mandates Act"), signed into law on March 22, 1995, EPA must prepare a budgetary impact statement to accompany any proposed or final rule where the estimated costs to State, local,

or tribal governments, or to theprivate sector, will be $100 million or more. Under Section 205, EPA must select the
most cost-effective and least burdensome alternative that achieves the objective oftherule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly impacted by therule.

To the extent that therules in this action would impose any mandate at all

as defined in Section 101 ofthe Unfunded Mandates Act upon the state, local, or tribal governments, or the private sector, as explained above, this rule is not estimated to impose costs in

excess of$100 million. Therefore, EPA has not prepared a statement with respect to budgetary impacts. As noted above, this rule offers opportunities to states that would enable them to lower economic burdens from those resulting from the currently existing I/Mrule.

E. SmallBusinessRegulatory EnforcementFairness Act

Under section 801(a)(1)(A) ofthe Administrative Procedures Act (APA) as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, EPA submitted areport containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives and the Comptroller General ofthe General Accounting Office prior to publication oftherule in today's Federal Register. Thisrule is
not a "major rule" as defined by section 804(2) ofthe APA as amended.

List ofSubjects in 40 CFR Part51

Environmental protection, Administrative practice and procedure, Air pollution control, Carbon monoxide, Transportation. Dated: July 16, 1960. Fred Hansen,
ActingAdministrato r. For the reasons set out in the preamble, part 51 oftitle 40ofthe Code ofFederal Regulations is amended to read as follows:

PART 51-[AMENDED]

1. The authority citation for part 51 continues to read as follows:

Authority: 42 U.S.C. 7401 7671q.
2. Section 51.350 is amended by revising paragraph (b)(1) and by adding paragraph (b)(5) to read as follows:
§51.350 Applicability.

(b)* * * (1) In an ozone transport region, the program shall cover all counties within subject MSAs or subject portions ofMSAs, as defined by OMB in 1990, except largely rural counties having a population density ofless than 200 persons per square mile based on the 1990Census and counties with less than 1% ofthe population in the MSA may be excluded provided that atleast 50% ofthe MSA population is included in the program. This provision does not preclude the voluntary inclusion of portions ofan excluded county. Nonurbanized islands not connected to the mainland by roads, bridges, or tunnels may be excluded without regard to population.

* * * * *

(5) Notwithstanding the limitation in paragraph (b)(3) ofthis section, in an
ozone transport region, states which opt for aprogram which meets the performance standard described in §51.351(h) and claim in their SIP less emission reduction credit than the basic performance standard for one or more pollutants, may apply ageographic bubble covering areas in the state not otherwise subject to an I/Mrequirement to achieve emission reductions from other measures equal to or greater than what would have been achieved ifthe low enhanced performance standard

were met in the subject I/Mareas. Emissions reductions from non-I/M

measures shall not be counted towards the OTRlow enhanced performance standard.

* * * * *

3. Section 51.351 is amended by addingparagraph (h) to read as follows:
§51.351 Enhanced I/M performance standards.

* * * * *

(h) Ozone Transport RegionLowEnhancedPerformanceStandard.An attainment area, marginal ozone area, or moderate ozone area with a 1980 Census population ofless than 200,000 in the urbanized area, in an ozone transport region, that is required to implement enhanced I/Munder section 184(b)(1)(A) ofthe Clean Air Act, but

was not previously required to or did
notin fact implement basic IM under the Clean Air Act as enacted prior to 1990 and is not subject to the requirements for basic I/Mprograms in this subpart, may select the performance standard described below in lieu ofthe standard described in paragraph (f)or (g) ofthis section as long as the difference in emission reductions between the program described in paragraph (g) and this paragraph are madeup with other measures, as provided in §51.350(b)(5). Offsetting

measures shall not include those otherwise required bythe Clean Air Act in the areas from which credit is bubbled. The program elements for this alternate OTR enhanced IM performance standard are: (1) Network type. Centralized testing. (2) Startdate.January 1, 1999. (3) Test frequency. Annual testing. (4)Modelyearcoverage.Testing of 1968 and newer vehicles.

(5) Vehicle type coverage.Light duty vehicles, and light duty trucks, rated up to 8,500 pounds GVWR.

(6) Exhaustemissiontesttype. Remote sensing measurements on 1968- 1995 vehicles; on-board diagnostic system checks on 1996 and newer vehicles.

(7) Emissionstandards.Forremote sensing measurements, acarbon monoxide standard of7.5% (with at least two separate readings above this level to establish a failure).

(8) Emissioncontroldevice inspections.Visual inspection ofthe catalytic converter on 1975 and newer vehicles and visual inspection ofthe positive crankcase ventilation valve on 1968-1974 vehicles.

(9) Waiverrate.A 3% waiver rate, as

apercentage offailed vehicles.

(10) Compliance rate.A 96% compliance rate.

(11) Evaluationdates.Enhanced I/M program areas subject to the provisions ofthis paragraph shall be shown to obtain the same or lower VOC and NOx emission levels as the model program described in this paragraph byJanuary 1, 2000, 2003, 2006, and 2007. Equality ofsubstituted emission reductions to the benefits ofthe low enhanced performance standard must be demonstrated for the same evaluation dates.

4. Section 51.353 is amended by addingparagraph (c)(5) to read as follows:

### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Rules and Regulations



### §51.353 Networktypeand program evaluation.

(c) * * * (5) Areas that qualify for and choose
to implement an OTRlow enhanced I/ M program, as established in §51.351(h), and that claim in their SIP less emission reduction credit than the basic performance standard for one or

more pollutants, are exempt from the requirements ofparagraphs (c)(1) through (c)(4) ofthis section. The reports required under §51.366 ofthis part shallbe sufficient in these areas to satisfy the requirements ofClean Air Act for program reporting.

*< < *< *< * 

### 5. Section 51.364 is amended by addingparagraphs (e) and (f)toread as follows: §51.364 Enforcement againstcontractors, stationsand inspectors.

(e)Alternative quality assurance procedures orfrequencies that achieve equivalent orbetterresults may be approved bythe Administrator. Statistical process control shall beused whenever possible to demonstrate the efficacy ofalternatives. (f)Areas thatqualify forand choose to implement an OTRlow enhanced I/ M program, as established in §51.351(h), and thatclaim in their SIP less emission reduction credit than the basic performance standard for oneor more pollutants, are not required to meet the oversight specifications ofthis section.

6. Section 51.373 is amended by addingparagraph (f)to read as follows: 

### §51.373 Implementation deadlines.

(f)Areas that choose to implement an enhanced I/Mprogram onlymeeting the requirements of §51.351(h) shall fully implement the program no later than July 1, 1999. The availability and use of this late start datedoes not relieve the

area ofthe obligation to meet the requirements of §51.351(h)(11) by the end of 1999. [FR Doc. 96 18922 Filed 7 24 96; 8:45 am]

BILLING CODE 6560-50-P 

## 39037

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### CFR PARTS AFFECTED DURING JULY

At the end ofeach month, the Office ofthe Federal Register publishes separately a List ofCFR Sections Affected (LSA),which lists parts and sections affected by documents published since therevision date ofeach title.

523-6641 3CFR 523-5227 Proclamations: 6907

................................. 35083 6908

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................................. 38049 523-5227 Executive Orders: 13010

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................... 38561 puimc Presidential Determinations: public No. 96-34 ofJune 26, -275-0920 1996

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1996

............................. 36495 rlong No. 96-36 ofJune 28, o n 1996
............................. 35075 of r No.96-37 ofJune 29, Wgister's 1996

............................. 36989 cument No. 96-38 ofJune 29, of 1996

............................. 36991 No.96-39 ofJune 6,

1996

............................. 38053

INTS ON No. 96-40 ofJune 8,

son 1996

............................. 38055

ce located n-Demand 4CFR -713-6905 28

..................................... 36809 29
..................................... 36809

Y 5CFR 530

................................... 34713 531

................................... 34713 532

................................... 36609 534

................................... 34713 550

................................... 34713 575

................................... 34713 581

................................... 34713 582

................................... 34713 630

................................... 34713 734

................................... 35088 890

................................... 37807 1001

................................. 36993 1660

................................. 36610 2634

................................. 35589 3201

................................. 35915 Ch. XXIII

.......................... 35085 Ch.XXXV

........................ 36993 Ch.LXV

........................... 36246 Proposed Rules: 890

................................... 35973
7CFR
2
....................................... 37544 16

..................................... 37199 29

......................... 37316,37351 52

..................................... 37663 58

..................................... 35589 210

................................... 37670 225

................................... 37670 301

......... 35102,35107,36811, 36812,38353 400
....................... 34367,38057 718
................................... 37544 719
................................... 37544 720
................................... 37544 723
................................... 37672 729
................................... 36997 790
................................... 37544 791
................................... 37544 793
................................... 37544 796
................................... 37544 868
................................... 34714 905
................................... 38354 906
................................... 37810 916
................................... 37812 917
................................... 37812 946
................................... 35109 948
................................... 36813 958
................................... 35592 989
................................... 36814 997
................................... 35594 998
................................... 35594 1106
................................. 35596 1230
................................. 35597 1240
................................. 38355 1400
................................. 37544 1401
................................. 37544 1402
................................. 37544 1405
................................. 37544 1412
................................. 37544 1413
................................. 37544 1421
................................. 37544 1425
................................. 37544 1427
................................. 37544 1430
................................. 37544 1434
................................. 37544 1435
................................. 37544 1446
................................. 37544 1464
................................. 37672 1468
................................. 37544 1470
................................. 37544 1477
................................. 37544 1478
................................. 37544 1479
................................. 37544 1479
................................. 37544 1497
................................. 37544 1498
................................. 37544 1493
................................. 33825 1703
................................. 37813 1910
................................. 35916 1924
................................. 35916 1941
................................. 35916 1943
................................. 35916 1945
................................. 35916 1951
................................. 35916 1955
................................. 35916 1962
................................. 35916 1965
................................. 35916 1980
................................. 35916 Proposed Rules: 1
....................................... 38567

### ii Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Reader Aids

20

..................................... 38107 210

................................... 35152 220

................................... 35152 225

................................... 35152 226

................................... 35152 300

................................... 34379 301

................................... 38017 318

................................... 38108 319

................................... 34379 868

................................... 35687 956

................................... 36827 1005

................................. 37628 1007

................................. 37628 1011

................................. 37628 1046

................................. 37628 1240

..................... 34385,38407 1280
................................. 35982 1962
................................. 37405
8 CFR
103
................................... 35597 212
................................... 36610 214
................................... 35934 217
................................... 35598 264
................................... 37673 301
................................... 35111 Proposed Rules: 207
................................... 35984 208
................................... 35984
9 CFR 92

..................................... 36816 112
................................... 33840 113
................................... 33840 201
....................... 36277,36279 304
................................... 38806 308
................................... 38806 310
................................... 38806 318
................................... 37675 320
................................... 38806 327
................................... 38806 381
....................... 37675,38806 416
................................... 38806 417
................................... 38806 Proposed Rules: 1
....................................... 34386 3
........................... 34386,34389 11

..................................... 34747 92

..................................... 36520 93

..................................... 36520 94

......................... 35987,36520 95

..................................... 36520 96

..................................... 36520 98

..................................... 36520 301
................................... 35990 304
................................... 35990 308
................................... 35990 318
................................... 35992 319
................................... 35157 320
................................... 35990 381
....................... 35157,35990 391
................................... 34747
10 CFR 51

..................................... 37351 53

..................................... 35935 110
................................... 35600 205
..................................... 3511 420
................................... 35890 430
................................... 36974 450
................................... 35890 463
................................... 35114 784
................................... 36611 1003
................................. 35112 1010
................................. 35085 1021
................................. 36222 Proposed Rules: 34

..................................... 37019 1021

................................. 35990
12 CFR 311

................................... 38356 324

................................... 33842 367

................................... 35115 1750

................................. 35607 Proposed Rules: 32

..................................... 37227 205

................................... 37229 207

................................... 33874 218

................................... 34749 220

................................... 33874 221

................................... 33874 250

................................... 34749 327

................................... 34751 502

................................... 38114 516

................................... 38114 562

................................... 38114 563

................................... 38114 565

................................... 38114 574

................................... 38114 614

................................... 37230 704

................................... 3811 7 745

................................... 36663
14 CFR
1
....................................... 34508 Ch

. III

............................... 37814 25

..................................... 34716 29

......................... 33963,36965 39

........... 33874,34368,34718, 35122,35126,35127,35936, 35938,35940,35942,35944, 35946,36620,36622,36817, 37199,37202,37675,37814 61

..................................... 34

508 71

............ 33843 33844, 33845, 34720,34721,34722,34723, 35307,36283,36284,36285, 36286,36820,37001,37113, 37204,37205,37352,37677 73

..................................... 35623 91

......................... 34508,36286 95

..................................... 37

206 97
........... 35623,35624,35626, 37352,37354,37356,37677 1 19
................................... 35628 121
......... 34508,34927,35628, 37222 125
................................... 34

508 135
.......... 34508,34927,35628 141
................................... 34

508 142
................................... 34

508 211
................................... 34

724 213
................................... 34

724 1260
................................. 38058 Proposed Rules: 25

........... 35056,37844,38374, 38552 39

........... 34767,35691,35693, 35695,36307,36308,36310, 36664,36667,36669,37019, 38407 71

........... 34391,34393,34394, 34395,34396,34397,34398, 34769,35991,36311,36312, 36313,36314,36315,36316, 36317,36520,37113,37230, 37231,37407,37408 91

..................................... 381 19 121
.......... 37144,38119,38552 125
................................... 37144 127
................................... 381 19 129

................................... 37144 135

....................... 37144,38119 440

................................... 38992
15 CFR 902

......... 34570,34930,34966, 35145,35548,38358 923
................................... 36965 Proposed Rules: 30

..................................... 36318 303
................................... 37845 922
................................... 33876
16 CFR Proposed Rules: 303
................................... 35992
17 CFR
249
................................... 37357 Proposed Rules: 15

..................................... 37409 16

..................................... 37409 17

..................................... 37409 18

..................................... 37409 19

..................................... 37409 240
....................... 36521, 37701 249
................................... 37701
18 CFR
154
................................... 38565 346
................................... 38567 Proposed Rules: 35

..................................... 38663
19 CFR 10

..................................... 33845 12

..................................... 33845 102
....................... 33845,37817 134
....................... 33845,37678 201
................................... 37818 207
................................... 37818 Proposed Rules: 134
................................... 38119
20 CFR
404
....................... 38361, 38363
21 CFR
14

..................................... 36624 175
................................... 37208 176
................................... 37209 177
....................... 34370,37210 178
................................... 33846 184
................................... 36287 201
................................... 38046 210
................................... 37679 211
................................... 37679 331
................................... 38046 452
................................... 34726 500
................................... 37680 505
................................... 37680 507
................................... 37680 508
................................... 37680 510
....................... 35949,37680 520
................................... 34727 522
......... 34727,35129,36290, 37682 529
................................... 34727 558
.......... 34727,35949,36291 570
................................... 37680 801
................................... 37682 803
................................... 38346 804
................................... 38346 807
................................... 38346 Proposed Rules: 106
................................... 36154 107

................................... 36154 201

................................... 38047 331

................................... 38047 803

................................... 38348 804

................................... 38348

22CFR
41

..................................... 35628 126

................................... 36625 514

................................... 37002 608

................................... 36820

23CFR 630

................................... 35629

24CFR
0
....................................... 36246 60

..................................... 36462 200

................................... 36260 201

................................... 36260 202

....................... 36260,36452 203
......... 35024,36260,36452, 37798 206
....................... 35014,36260 221
.......... 36260,36452,37798 233
................................... 36260 234
....................... 36260,36452 280
................................... 36260 291
................................... 36260 570
................................... 36456 901
................................... 35633 941
....................... 35958,38014
25CFR
10
..................................... 34371 211
.................................. 35634 212
................................... 35634 700
................................... 35666 Proposed Rules: 5
....................................... 36671 11

..................................... 35158 12

..................................... 35163 21

..................................... 33876 45

..................................... 34399 152
................................... 34400 169
................................... 37417 171
................................... 35167 256
................................... 36829 290
................................... 37022
26CFR
301
................................... 37683 Proposed Rules: 1
........................... 35696,36320 31

..................................... 36320
27CFR 18

..................................... 37002 30

..................................... 37002 53

..................................... 37005 55

..................................... 38084 275
................................... 37005 Proposed Rules: 53

..................................... 37022
28CFR
2
....................................... 38569 42

..................................... 34729 82

..................................... 38085 552
................................... 38042 571
................................... 38042 Proposed Rules: 16

..................................... 37425 17

..................................... 36679 31

..................................... 34770

### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Reader Aids iii

38

......................... 37964,37976 58

..................................... 37426
29 CFR
102
................................... 38368 1952
................................. 36824 2509
................................. 33847 2520
................................. 33847 2550
................................. 33847 Ch.XXVI

............. 34002,36626, 37316,37795 Ch.XL

.... 34002,36626,37316, 37795 4044
................................. 36968 Proposed Rules: 101
................................... 35172 102
................................... 35172 1910
................................. 37849 1926
................................. 37849 4001
................................. 38409 4043
................................. 38409 4065
................................. 38409 Ch.XIV

............................ 34405
30 CFR 56

..................................... 36790 57

..................................... 36790 256
................................... 34730 901
................................... 37382 913
................................... 37383 925
................................... 38374 931
................................... 38376 936
................................... 38381 948
................................... 38382 Proposed Rules: 206
................................... 37865 943
................................... 38420 946
................................... 38420 948
................................... 37023
31 CFR
321
................................... 37196 356
................................... 37007 515
................................... 37385 575
................................... 36627 Proposed Rules: 356
................................... 38127
32 CFR 66

..................................... 38386 706
.......... 35958,36291,36497 Proposed Rules: 651
................................... 37865
33 CFR
100
................................... 36292 110
................................... 36786 116
................................... 36786 117
....................... 36786,37211 120
................................... 37648 127
................................... 36629 128
................................... 37648 157
................................... 36786 158
................................... 36629 164
................................... 35064 165
......... 35130,35132,37211, 37684 179
................................... 36629 181
................................... 36786 183
................................... 36629 334
................................... 34732 Proposed Rules: 117
................................... 35702 154
................................... 34775 155
................................... 34775 165

................................... 37714 167

................................... 35703

34 CFR 646

................................... 38534 Proposed Rules: 75

..................................... 37184 206

................................... 37184 231

................................... 37184 235

................................... 27184 369

................................... 27184 371

................................... 27184 373

................................... 27184 375

................................... 27184 376

................................... 27184 378

................................... 27184 380

................................... 27184 381

................................... 27184 385

................................... 27184 386

................................... 27184 387

................................... 27184 388

................................... 27184 389

................................... 27184 390

................................... 27184 396

................................... 27184 610

................................... 27184 612

................................... 27184 630

................................... 27184 637

................................... 27184 658

................................... 27184 660

................................... 27184 661

................................... 27184 669

................................... 27184
35 CFR
61

..................................... 36497 123

................................... 36497
36 CFR
1
....................................... 35133 13

..................................... 35133 222

................................... 35959 223

................................... 35960 Proposed Rules: 1190

................................. 36688 1191

..................... 36688,37964
37 CFR
2
....................................... 36825 251
................................... 37213
38 CFR
1
........................... 33850,38570 21

..................................... 36629 Proposed Rules: 1
....................................... 33878 17

..................................... 37024
39 CFR
5
....................................... 36498 7
....................................... 36498 10

..................................... 36498 20

..................................... 36500 3001
................................. 37316
40 CFR
9
........................... 33851,34202 51

..................................... 39032 52

........... 36292,36501,36502, 37216,37387,37390,37393, 37833,38086,38388,38391, 38571,38574,38577,38582, 38590,38591,38594,38597 55

..................................... 34202 63

......................... 34140,36295 70

..................................... 34733 71

..................................... 34202 79
..................................... 36506 80

............ 35310,35673,35960 81

..................................... 37833 180
......... 34739,34741,36298, 36299, 37218, 37,395 257
................................... 34253 261
....................... 34252,37397 271
....................... 34252,38392 300
....................... 35137,35962 372
................................... 38600 425
................................... 35680 799
................................... 37685 Proposed Rules: 50

..................................... 37427 51

............ 35994,36112,38250 52

........... 35998,36004,36320, 36534,37030,37232,37428, 37429,37875,38129,38250, 38423,38664,38682,38683 55

..................................... 36012 61

..................................... 36326 63

......................... 36326,36835 79
..................................... 36535 80

..................................... 34775 81

............ 33879,36004,37875 82

..................................... 37430 86

..................................... 37715 90

..................................... 34778 93

......................... 35994,36112 136
................................... 36328 148
................................... 38684 180
......... 36329,36331,36689, 37233,37433,38423,38426, 38428 185
................................... 37233 186
................................... 37233 260
................................... 33881 261
....................... 33881, 38684 262
................................... 33881 264
................................... 33881 268
....................... 33881, 38684 269
................................... 33881 271
....................... 33881, 38684 300
......... 36858,37435,37875, 37877 425
................................... 35705 430
................................... 36835

41 CFR
201
................................... 35685

42 CFR
405
................................... 35307 413
................................... 37011 417
....................... 35307,38395 431
....................... 35307,38395 433
................................... 38395 440
................................... 38395 441
................................... 38395 447
................................... 38395 456
................................... 38395 473
................................... 35307 498
................................... 35307 Proposed Rules: 410
................................... 34614 415
................................... 34614

43 CFR
1820
................................. 37686 3710
................................. 37116 Proposed Rules: 11

..................................... 37031 4700
................................. 36333 44CFR 62

......................... 36513,37687 64

..................................... 36514 65

........... 33852,33854,38091, 38092 67

......................... 33856,38094 Proposed Rules: 67

......................... 33882,38129
45CFR Proposed Rules: 232
................................... 37236 235
................................... 37236
46CFR
42

..................................... 35963 76

..................................... 35138 108
................................... 36786 110
................................... 36786 111
.......... 35927,36608,36786 112
................................... 36786 113
................................... 36786 161
................................... 36786 167
................................... 35138 514
................................... 35685 Proposed Rules: 10

......................... 36543,36608 15

......................... 36543,36608
47CFR
Ch.I
................................. 35964 1
....................................... 3

6 62

9 20

............ 33859,38399,38605 22

......................... 34375,38399 24

..................................... 33850 36

..................................... 34375 52

..................................... 38605 61

......................... 36515,36653 64

......................... 36629,36653 66

..................................... 36654 73

........... 34368,34743,34744, 35139,36302,37840 90

......................... 34375,38403 Proposed Rules: Ch.I
................................. 34405 1
....................................... 3 7 241 20

..................................... 38687 24

..................................... 38693 52

..................................... 38687 73

........... 34406,34407,34784, 34785,35705,37241,37715, 37716,37717 76

......................... 34408,34409
48CFR
225
................................... 37841 231
................................... 36305 252
................................... 37841 Proposed Rules: 219
................................... 37878 252
................................... 37878 401
................................... 37032 453
................................... 37032 917
................................... 38701 950
................................... 38701 952
................................... 38701 970
................................... 38701
49CFR
1
....................................... 3 47

4 5 40

............ 37015,37222,37693 172
................................... 38642 190
................................... 38403 192
.......... 35139,36825,38403 193
................................... 36825

### iv Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Reader Aids

195

................................... 36825 173

................................... 38702 625

.............................. 34966 663

................................... 34570 198

................................... 38403 180

................................... 38702 630

.......... 34746,35971,37842 669

............................ . 34930 199

................................... 37222 192
....................... 34410,34413 638
................................... 34930 670
................................... 34930 209
................................... 38644 195
....................... 34410,34413 641
................................... 34930 679
......... 34377,36306,37225, 219

................................... 37222 383
................................... 38133 642
................................... 34785 37226,37403,37404,37700, 225
................................... 37842 391
................................... 38133 645
................................... 34930 37843,38099,38358,38656 233

................................... 33871 393
................................... 36691 646

.............................. 34930 680

................................... 34570 235
................................... 33871 397
................................... 36016 647................................... 34930 681
....................... 34570,35145 236
................................... 33871 571
......... 36334,36698,38135, 648
......... 34966,35142,38403, 683
................................... 34570 382
................................... 37222 38404 685
................................... 34570 571
.......... 33891,36516,36655 50 CFR 650
................................... 34966 695
................................... 35548 575

................................... 36655 Ch.III

............................... 35548 651

............................. 34966 697
................................... 34746 653
................................... 37222 246
................................... 35548 652
................................... 34966 Proposed Rules: 654

................................... 37222 280
................................... 35548 653
................................... 34930 17
........... 36020,36021,36346, 1150
................................. 36965 281
................................... 35548 655
................................... 34966 37034,38702 1300

................................. 35139 282
................................... 35548 657

.............................. 34966 20

..................................... 37994 1305

................................. 35141 285
................................... 38656 658

.............................. 34930 229

................................... 37035 Proposed Rules: 298
................................... 35548 659
................................... 34930 300
................................... 38703 1
....................................... 33886 299
................................... 35548 660
......... 34570,35143,35144, 642

........................... 34785 8
....................................... 33886 600
................................... 37225 36662,37843 648
.......... 37241, 37436,38430 171

................................... 38702 622
................................... 34930 661
................................... 34570 679
.......... 35174, 36702, 37041

### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Reader Aids v

REMINDERS The items in this list were editorially compiled as an aid to Federal Register users. Inclusion or exclusion from this list has no legal significance.

RULES GOING INTO EFFECT TODAY

COMMERCE DEPARTMENT National Oceanic and Atmospheric Administration Tuna, Atlantic bluefin fisheries;

published 7-25-96 ENERGY DEPARTMENT Energy Efficiency and Renewable Energy Office Energy conservation:

Federal energy management

and planning programs-- Life cycle cost analyses;

methodology and procedures; published 6-25-96 ENVIRONMENTAL PROTECTION AGENCY Clean Air Act:

State operating permits

programs-- Texas; published 6-25-96 Superfund program:

Toxic chemical release

reporting; community-rightto-know-- Hydrochloric acid; status

modification on list of toxic chemicals subject to reporting requirements; published 7-25-96

FEDERAL COMMUNICATIONS COMMISSION Radio services, special:

Interactive video and data

service licensees-- Mobile service provided

on ancillary basis; published 6-25-96 Television broadcasting:

Cable television systems--

Equipment costs on

franchise, system, regional, or company level; aggregation; published 6-25-96 GOVERNMENT ETHICS OFFICE Public financial disclosure,

conflicts of interest, and certificates of divestiture for executive branch officials; published 6-25-96 Public financial disclosure,

conflicts of interest, and certificates of divesture for executive branch officials Correction; published 7-8-96 TRANSPORTATION DEPARTMENT Federal Aviation Administration Airworthiness directives:

Fairchild; published 7-15-96 Airworthiness standards:

Normal, utility, acrobatic,

and commuter category airplanes-- Powerplant instruments;

fuel pressure indication; published 3-27-96 TRANSPORTATION DEPARTMENT Federal Railroad Administration Railroad safety enforcement

procedures: Hazardous materials

regulations, violations thereof; penalty guidelines; published 7- 25-96 VETERANS AFFAIRS DEPARTMENT Career employment; part-time;

published 7-25-96

COMMENTS DUE NEXT WEEK

AGRICULTURE DEPARTMENT Agricultural Marketing Service Onions (sweet) grown in

Washington and Oregon; comments due by 7-30-96; published 7-15-96 AGRICULTURE DEPARTMENT Animal and Plant Health Inspection Service Exportation and importation of

animals and animal products: African swine fever; disease

status change-- Spain; comments due by

7-29-96; published 5-29- 96 Plant-related quarantine,

foreign: Fruits and vegetables;

importation; comments due by 8-1-96; published 7-2-96 AGRICULTURE DEPARTMENT Federal Crop Insurance Corporation Crop insurance regulations:

Sugar beets; comments due

by 7-30-96; published 5- 31-96 AGRICULTURE DEPARTMENT Farm Service Agency Program regulations: Personal property-- Post bankruptcy loan

servicing notices; comments due by 8-2- 96; published 7-18-96 AGRICULTURE DEPARTMENT Food Safety and Inspection Service Meat and poultry inspection:

Fee increases; comments

due by 8-2-96; published 7-3-96 AGRICULTURE DEPARTMENT Rural Business-Cooperative Service Program regulations:

Personal property--

Post bankruptcy loan

servicing notices; comments due by 8-2- 96; published 7-18-96 AGRICULTURE DEPARTMENT Rural Housing Service Program regulations:

Personal property--

Post bankruptcy loan

servicing notices; comments due by 8-2- 96; published 7-18-96 AGRICULTURE DEPARTMENT Rural Utilities Service Program regulations:

Personal property--

Post bankruptcy loan

servicing notices; comments due by 8-2- 96; published 7-18-96 COMMERCE DEPARTMENT National Oceanic and Atmospheric Administration Fishery conservation and

management: Caribbean, Gulf of Mexico,

and South Atlantic fisheries; comments due by 8-2-96; published 7-3- 96 DEFENSE DEPARTMENT Army Department Military traffic management:

Motor common carriers of

perishable subsistence and bulk fuel; cargo insurance requirements; comments due by 7-29- 96; published 6-27-96 DEFENSE DEPARTMENT Federal Acquisition Regulation

(FAR): Final indirect cost rates;

comments due by 7-29- 96; published 5-28-96 EDUCATION DEPARTMENT Educational research and

improvement: Exemplary and promising programs designation; conduct standards and activities evaluation; comments due by 8-2-96; published 6-3-96 ENERGY DEPARTMENT Federal Energy Regulatory Commission Electric utilities (Federal Power

Act): Capacity reservation open

access transmission tariffs; comments due by 8-1-96; published 5-10-96 ENVIRONMENTAL PROTECTION AGENCY Air pollutants, hazardous;

national emission standards: Nonhandheld new nonroad

phase I small sparkignition engines, class I and II; carbon monoxide standard; comments due by 8-2-96; published 7-3- 96 Air programs; fuels and fuel

additives: Reformulated gasoline

program; alternative analytical test methods use; comments due by 8- 2-96; published 7-3-96 Air quality implementation

plans; approval and promulgation; various States: Alaska; comments due by

7-29-96; published 6-28- 96 Georgia; comments due by

7-29-96; published 6-27- 96 Kentucky; comments due by

7-29-96; published 6-28- 96 Pennsylvania; comments

due by 8-2-96; published 7-16-96 Air quality planning purposes;

designation of areas: Washington; comments due

by 7-31-96; published 7-1- 96 Hazardous waste:

Hazardous waste

management system-- Contaminated media;

management requirements; comments due by 7-29-96; published 4-29-96 Management facilities; solid

waste management units (SWMUs), corrective action; comments due by 7-30-96; published 5-1-96 Pesticides; tolerances in food,

animal feeds, and raw agricultural commodities: Dicofol, etc.; comments due

by 7-30-96; published 5- 29-96

### vi Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Reader Aids

Pesticide chemicals; various

tolerance actions; comments due by 7-29- 96; published 5-29-96

FEDERAL COMMUNICATIONS COMMISSION Radio stations; table of

assignments: California; comments due by

7-29-96; published 6-17- 96 Hawaii; comments due by

7-29-96; published 6-19- 96 New York; comments due

by 7-29-96; published 6- 19-96 South Carolina; comments

due by 7-29-96; published 6-20-96 South Dakota; comments

due by 7-29-96; published 6-20-96 Wisconsin; comments due

by 7-29-96; published 6- 17-96 FEDERAL RESERVE SYSTEM Availability of funds and

collection of checks (Regulation CC): Miscellaneous amendments;

comments due by 8-2-96; published 6-3-96 Electronic fund transfers

(Regulation E): Home banking services

disclosure, new accounts error resolution and stored-value cards, etc.; comments due by 8-1-96; published 5-2-96 Loan guarantees for defense

production (Regulation V); comments due by 7-29-96; published 5-28-96 Securities credit transactions

(Regulations G, T, and U); comments due by 8-2-96; published 5-6-96 Securities:

Relations with dealers in

securities under section 32, 1933 Banking Act (Regulation R); and miscellaneous interpretations; comments due by 8-2-96; published 7-3-96 HEALTH AND HUMAN SERVICES DEPARTMENT Food and Drug Administration Animal drugs, feeds, and

related products: Extralabel drug use in

animals; comments due by 7-31-96; published 5- 17-96 Chlorofluorocarbons and other ozone-depleting substances, products containing or manufactured with; warning statements; comments due by 8-1-96; published 5-3-96 Human drugs:

Antibiotic drugs--

Clarithromycin granules

for oral suspension; comments due by 8-2- 96; published 7-3-96 Current good manufacturing

practice-- Finished pharmaceuticals;

manufacturing, quality control, and documentation requirements; comments due by 8-1-96; published 5-3-96 HEALTH AND HUMAN SERVICES DEPARTMENT Health Care Financing Administration Medicare:

Hospital inpatient

prospective payment systems and FY 1997 rates; comments due by 7-30-96; published 5-31- 96 INTERIOR DEPARTMENT Indian Affairs Bureau BIA rules applicability;

comments due by 8-2-96; published 6-3-96 Energy and minerals:

Ute Indian Tribe's undivided

tribal assets on Uintah and Ouray Reservation, UT; management by Tribe and Ute Distribution Corporation; comments due by 8-2-96; published 6-3-96 Indian Self-Determination and

Education Assistance Act program: Contracts, grants, school

construction contracts, etc.; comments due by 8- 2-96; published 6-3-96 Land and water:

Land records and title

documents; comments due by 8-2-96; published 6-3-96 INTERIOR DEPARTMENT Fish and Wildlife Service Migratory bird hunting:

Early-season regulations

(1996-1997); proposed frameworks; comments due by 8-1-96; published 7-22-96 INTERIOR DEPARTMENT Minerals Management Service Royalty management: Royalty relief for producing leases and existing leases in deep water; comments due by 7-30-96; published 5-31-96 INTERIOR DEPARTMENT Surface Mining Reclamation and Enforcement Office Federal regulatory review:

Permanent program and

abandoned mine land reclamation plan submissions; comments due by 7-29-96; published 5-28-96 Permanent program and

abandoned mine land reclamation plan submissions: West Virginia; comments

due by 7-31-96; published 7-16-96 NATIONAL LABOR RELATIONS BOARD Procedural rules:

Attorneys or party

representatives; misconduct before agency; comments due by 8-2-96; published 6-17-96 SECURITIES AND EXCHANGE COMMISSION Securities:

Executive and director

compensation disclosure; streamlining and consolidation; comments due by 7-29-96; published 6-14-96 TRANSPORTATION DEPARTMENT Coast Guard Federal regulatory review:

Lifesaving equipment;

comments due by 7-31- 96; published 5-20-96 TRANSPORTATION DEPARTMENT Omnibus Transportation

Employee Testing Act of 1991: Workplace drug and alcohol

testing programs-- Drug and alcohol

procedural rules; update; comments due by 7-29-96; published 4-29-96 TRANSPORTATION DEPARTMENT Federal Aviation Administration Airworthiness directives:

de Havilland; comments due

by 7-29-96; published 7-3- 96 Boeing; comments due by

7-29-96; published 6-19- 96 Don Luscombe Aviation History Foundation; comments due by 7-31- 96; published 5-29-96 Gulfstream; comments due

by 8-2-96; published 6-24- 96 Israel Aircraft Industries,

Ltd.; comments due by 7- 29-96; published 5-29-96 McDonnell Douglas;

comments due by 7-29- 96; published 6-19-96 SAAB; comments due by 7-

30-96; published 5-31-96
Twin Commander Aircraft

Corp.; comments due by 7-29-96; published 6-6-96 Airworthiness standards:

Special conditions--

Cessna 500, 550, and

S550 airplanes; comments due by 8-2- 96; published 7-3-96 Class Eairspace; comments

due by 7-29-96; published 6-27-96 VOR Federal airways;

comments due by 7-29-96; published 6-17-96
TRANSPORTATION DEPARTMENT Federal Highway Administration
Motor carrier safety standards:

Practice rules for

proceedings, investigations, and disqualifications and penalties; comments due by 7-29-96; published 4- 29-96
TRANSPORTATION DEPARTMENT Research and Special Programs Administration
Hazardous materials:

Performance-oriented

packaging standards; final transitional provisions; comments due by 8-2-96; published 6-26-96 TREASURY DEPARTMENT
Bank Secrecy Act:

Currency and foreign

transactions; financial reporting and recordkeeping requirements-- Exemptions from currency

transaction reporting; comments due by 8-1- 96; published 4-24-96

### Federal Register / Vol. 61, No. 144 / Thursday, July 25, 1996 / Reader Aids vii

LIST OF PUBLIC LAWS

Note: No public bills which have become law were received by the Office ofthe Federal Register for inclusion in today's List of Public 

### Laws. Last List July 24, 1996