1

U.S. Department of Transportation
**FEDERAL AVIATION ADMINISTRATION**  

## NOTICE OF PROPOSED RULEMAKING

**REGULATORY EVALUATION Tr**  **ansport Airplane Fuel**  **Ta nk and System Lightning Pr** **otection**

**14 CFR Part 25 OFFICE OF AVIATION POLICY AND PLANS**  **ECONOMIC ANALYSIS DIVISION**  **Martin K.**  **Zhu , Ph.D.**  **June 23 , 2014** 2



### Executive	Summary This rule is a retrospective regulatory review rulemaking under Executive Order 13563. The current regulations contain certain airworthiness provisions that are not always practical for transport category airplanes regarding lightning protection of fuel tanks and systems. The FAA proposes to amend fuel tank structure and s ys tem lightning protection related regulations by removing previsions containing impracticality and redundancy

while adding and clarifying new requirements to meet current knowledge about lightning and state
- of
- the
- art airplane design. Inaddition, the FAA proposes to simplify regulations considered to be burdensome and unrealistic through this proposed rule. As a result , this rule would be relieving for both government and industries with the estimated net benefits. We assess regulatory benefits based on resources saved for reducing regulatory burden on industry and the FAA. The total combined regulatory savings would be $624 million or $451 million present value at a 7% discount rate. The lower and the higher estimates of the total combined regulatory savings would be between $384 million and $863 million ($283 million and $618 million present value at a 7% discount rate, respectively). The proposed rule would maintain achieved safety levels related to fuel tank structure and s ys tem lightning protection commensurate with the current requirements.3



### Regulatory	Evaluation **I. Introduction/**  **Background** Consistent with Ex ecutive Order 13563, the FAA proposes to simplify these regulations considered to be burdensome through this rule. Inp articular, § 25.981(a) (3) contains three levels of redundancy

in lightning protection features, based on assumptions that all fuel tanks are flammable at all times and all lightning strikes are critical, which are unrealistic . This impracticality

has led applicants to petition for exemptions and for the FAA to impose special conditions to achieve the intended level of safety . The current lightening protection regulation has created a regulatory

burden on industries and the FAA. The FAA proposes to amend fuel tank structure and system lightning protection related regulations by

removing previsions containing impracticality and redundanc y while adding and clarifying new requirements to meet current knowledge about lightning and state
- of
- the
- art airplane design . Specifically , this NPRM would amend §25.981 , by eliminating ambiguity as to the necessary

methods of compliance with the previou sly established requirements of §§ 25.901 and 25
- 130 1 . Further, this NPRM would eliminate the regulatory redundancy

resulted from two separate requirements § 25.954 and §25.981 by consolidating lightning protection regulations for fu el tanks and s ys tems into § 25.954. The proposed rule revises the previously established requirements based on recommendations made by Aviation Rulemaking Committee Report, “Large Airplane Fuel System Lightning Protection Rulemaking Recommendations”, dated May , 2011.


### II. **Assumption s	and	Data	Sources** 

 Data related to industry savings mainl y come from airplane manufacturers4

 D ata related to requests for exemptions and special condition s come from FAA internal data source and the agency ’s experts judgments

 The FAA would process 4 special conditions and 7 exemptions in the next 10 ye ars in the absence of this rule 1

 Domestic airplane manufacturers would petition for 2 special conditions and 3 exemptions before reaching their cost -benefit steady
- state 2

 Approximately 184 airplanes would be produced per year for 10
- years based on airplane models being approved for exemptions and special conditions for lightening protection 3

 Computation al weight s of composite wing airplane would change from current 15%~25% level linearl y increasing to 50% level for a 1 0
- ye ars production cycle 4

 A irplanes have service life
- span for 30 ye ars 5

 Projected impacts on manufacturers and the government are for a 10
- ye ar period from 201 5 to 202 4

 All monetary

values are expressed in 201 4 dollars 

### III. **Costs** M anufacturers would not need to do anything new to be in compliance. The FAA expects this rule would reduce cos ts against the current practice
.

1 FAA internal data source and the agency’s experts judgments 2 Ibid 3 “Fleet Discovery” 2000
- 2004 Penton, provided by Aviation Week Intelligence Network, data through the end of April 2014Ibid 4 Ibid 5 Ibid 1 and 25



### IV. **Benefits** This proposed rule would benefit both the FAA and industry . O ne of the benefits would relieve manufacturers from working alternate structural lightning protection requirements to 14CFR 25.981(a)(3) via petitions for exemption or special conditions . As a result both the FAA and industry would not have to expend resources to process exemption s and special condition requests . The FAA estimates cost - savings/benefits of processing exemptions and special conditions herein b ased on the FAA’s internal records of petitions and requests submitted by manufacturers to the FAA
. Estimating the regulatory impact on the administration and assuming no growth of such activities , the FAA uses the historical data to determine the numbers of requests for exemptions and special conditions from domestic and foreign manufacturers
. The FAA anticipates processing and issuing about an additional 7 exemptions and 4 special condition s that would be necessary based on the current regulations in the absence of this proposed rule. With this rule finalized as propo sed, the FAA expects that petitions for exemptions and special conditions would not be needed
. The elimination of administering exemptions and special conditions would result in a cost - saving
. Further, the FAA expects such benefits would be dissipating as such impact w ould reach its steady- state in 10 ye ars. The FAA believes the projected numbers of exemptions and special conditions in the coming ye ars may be low as the estimates assum e no growth from the past
. Estimated numbers of the agency hours come from the actual hours spent by FAA engineers, administrative managers and legal experts on evaluating petitions, technical writings and legal reviewing related to process ing exemptions and issue special conditions. The FAA spends between 60 and 128 hours depending on the complexity of issued exemption s on a6

petition for exemption
. We estimate the average time spent on exemptions to be 74.3 1 hours. The FAA time to administer special conditions range s from 114 hours for a small jet to 288 hours for a large airplane. We estimate the average time spent on special conditions to be 155.5 hours. The hourl y labor cost 6 including benefit s of federal employees is between $66.53 and $92.49, with an average hourly cost of $79.21. Multiplying the average wage cost by the hours expended , we estimate the average agency ’s cost
- savings to be $5,886 for processing exemption and $12,31 8 for processing special condition. Further, multiplying average cost - savings by the numbers of exemptions and special conditions, the total 10
- ye ar FAA saving would range from $ 69,391 ($ 48,737 present value at a 7% discount rate) to $ 162 ,229 ($ 1 13,943 present value at a 7% discount rate)
. The average saving to the FAA would be $ 90,47 4 ( $ 87 ,000 present value at a 7% discount rate )
. 7 Currently , the ind

ustry allocates resources to petition for exemptions and special conditions for single and latent assessment of fuel tank systems for lightning protection
. Eliminating this certificati on work would result in nonrecurring and recurring cost savings. The FAA has requested and received airplane manufacturers inputs on impact s associated with this proposed rule. In response, the airplane manufacturers identified nonrecurring and recurring cost reductions varying with airplane structure s by composite wing or metal wing in the following
areas :

• Simplified analysis and d ocumentation related to certification or petition for

special conditions and exemptions

• Production cost savings resulting from reducing labor and materials

6 Based on pay
- rate between Federal GS
- 13
- 5 and Federal GS
- 15
- 5, OPM 2014 Federal wage table of DC area, http://www.opm.gov/policy
- data
- oversight/pay
- leave/salaries
- wa ges/salary
- tables/pdf/2014/DCB_h.pdf 7 For this calculation , the average savings = $5,886 x 7 for exemptions + $12 ,318 x 4 for special conditio ns.7

• Operation al cost savings resulting from fuel efficiencies and technical improvements Based on discussions with manufacturers, the FAA estimates the cost savings in the above three categories b y factoring in computational weights of composite wing airplane from current 15% linearl y increasing to 50% level within the next 1 0 years. The FAA observes not all airplane production programs would need to petition for exemptions or special conditions because some popular production runs have been around for decades and will continue without expecting to amend type of certifications or to petition for exemptions or special condition papers. While foreign manufacturers may benefit also from this proposed rule, the FAA has no direct regulatory

authority over these entities and therefore po ssible compliance cost and benefit to foreign companies are not estimated. Of the all past exemptions and special conditions related to fuel systems and structures, five were issued to domestic manufacturers. The estimated domestic industrial cost savings in designs, documentations and anal ys es equal the number of petitions for special conditions or exemptions multiplied by an average hourly wage rate. 8 The FAA estimates the number of processing special conditions and exemptions related to fuel tank and system lightning protection to be 2 (40 %) and 3 ( 60 %) , 9 respectivel y, for the next 10
- ye ar period. The FAA applies the above estimates to calculate one
- time cost
- savings due to eliminating petitions for each request of exemption and special condition . Domestic manufacturers spent 95 thousand to 246 thousand labor hours to petition for 2 special conditions in a 10
- ye ar period varying with ty pes of airplanes
. 10 The proposed rule

8 An average salary derived from aviation and avionic engineers wage rates is approximately $71 per hour including other employee hourly benefits, see http://www.bls.gov/oes/current/naics4_481200.htm#11
- 0000 9 FAA’s internal records 10 Based on information that the FAA collected from airplane manufacturers through informal inquiries8

would result in nonrecurring cost savings to manufacturers by eliminating formal special condition request s ranging from approximately $ 7 million to $ 17 million , multiplying the average wage rate b y labor hour savings
. 11 Similarly we estimate industrial cost reduction as sociated with removing the basis of exemption requests . Domestic manufacturers spent 142 thousand to 369 thousand labor hours to petition for 3 exemp tions in a 10
- ye ar period varying with manufacturers’ production programs. 12 The cost
- savings contributed b y eliminating exemption request s range from about $ 1 0 million to $ 26 million
. Combined onetime savings related to petitions for exemptions and special conditions with an estimated mid
-point would be approximately $ 30 million ($ 21 million present value at a 7% discount rate). The lower and the higher estimates would be approximately $ 17 million and $ 44 million ($ 12 million and $ 30 million pres ent value at a 7% discount rate, respectivel y)
. Secondly , there would be recurring cost s avings associated with the production of each airplane that would be impacted b y this proposed rule. The p roduction process would benefit from a simpler process with fewer parts required to meet the current regulations. The proposed requirements would red

uce recurring cost by

reducing labor and material expenses spent on each airplane
. According to aviation industry sources , the combined 5 historical petitions for exemptions and special conditions impacted production lines of 1,837 airplanes over a 10
- ye ar period , of which 22% were delivered to the domestic market
. 13 The FAA assumes the future numbers of petitions and productions would be similar to the past and thus estimates impacted domestic production would be annuall y 184 airplane s. In addition, the FAA assumes that each

11 See computational tables in Appendix 12 Ibid 9 13 “F leet Discovery” 2000
- 2004 Penton, provided by Aviat ion Week Intelligence Network, data through the end of April 20149

ty pe certification or amended ty pe certification has an average production cycle of 10 years . 14 The FAA applies the above assumptions and estimates to calculate recurring cost
- savings due to labor and material reductions for each airp lane production. Airplane manufacturers have a long history of constantly

improving their productivities. As a result, their unit production costs are trending down for repetitively manufacturing each part of an airplane. Because of the repetitiveness o f each production line, direct labor man
- hours necessary to complete a unit of production will decrease. Learning curve theory 15 captures this decreasing
- cost process. For a simplistic application of this model, we use an 80 per cent learning curve until the learning rate reach es its steady state of 20%
. The FAA estimates the recurring production cost savings for the 1 0
- ye ar period by multiplying the recurring cost saving 16 per unit by the expected number of the domestic airplane production associated with changes in lightening protections regulations times the learning curve . The estimated mid
-point of production cost savings would be approximately $ 570 million ($ 423 million present value at a 7% discount rate) . The lower and the higher estimates of prod uction cost
- savings would be between $ 361 million and $ 779 million ( $ 267 million and $ 579 million pres ent value at a 7% discount rate , respectively)
. Finally , the FAA uses an average airplane size with about 145 seats representing a manufactured “typical” airplane that would benefit from this proposed rule. Based on the domestic delivery rate around 22% , the FAA estimates the domestic delivery is roughl y 41

14 An average derived from FAA internal studies, based on multiple airplane manufacturers’ publications , data through April 30, 2014
. 15 A learning curve i s geometric with the general form Y = aXb , where Y = cumulative average time per unit or batch; a = time taken to produce initial quantity; X = the cumulative units of production, b = the learning index or coefficient. 16 Information on recurring cost savi ngs per airplane was provided by airplane manufacturers. See computational tables in the appendix.10

airplanes (184 airplanes per year times 22%)
. 17 Since some potions of airplanes fleet are imported, the U.S. airline carriers would also benefit from those imported airplane s by this proposed rule on the operational basis
. Based on FAA records, foreign manufacturers petitioned for 6 exemptions and special conditions , which would result in lowering the op erating cost for 24 imported new airplanes per year . 18 Combined domestic and foreign manufactured airplanes, the total deliveries would be 65 (41 domestic + 24 foreign) “typical” airplanes 19 per year to the domestic market. The FAA assumes a “ty pical” airplane has an average service life
- span of 30 ye ars. 20 The FAA considers those are best available data to calculate an operational fuel savings on the basis that not all delivered airplanes to the domestic market would benefit from the propo sed rule but onl y those airplanes reducing their structural weight attributable to this proposed rule. Airplane m anufacturers identified service operation cost savings that would be contributed by

reducing fuel burn from weight savings attributable to the simplification of design elements under proposed requirements relative to current practice
. The FAA received weight saving per airplane information from manufacturers. The weight savings would be likely between 100 pounds and 200 pounds for a composite wing airplane and between 50 pounds and 100 pounds for a metal wing airplane. The operational cost saving would apply to 65 airplanes delivered b y both foreign and domestic manufacturers. The FAA expect s the operational cost saving woul d be generate d by every flight hour during an average 30
- year airplane service s . The FAA derives the fuel consumptions by using the following model. 21

17 Ibid 9 and 13 , data through April 2014 18 Ibid 19 Ibid 20 Ibid 21 GRA, Incorporated , E conomic V alues for FAA Investment and Regulatory D ecisions , A Guide , revised 2007 , pp 6
- 6.11

Fuel consumption22 = weight saving x fuel burn x flight hour per year x delivered airplanes to domestic market The FAA estimates weight savings by multiplying the jet fuel prices per gallon23 by fuel consumptions in each ye ar from 2015 to 20 44
. The estimated mid
-point of operation cost
sav ings would be approximately $ 10 million ($ 6 million present value at a 7% discount rate). The lower and the higher estimates of production co st - savings would be between $ 6 million and $ 13 million ($ 4 million and $ 9 million present value at a 7% discount rate, respectivel y).


### Benefit **- Cost	Summary**  The governmental would receive savings of $90,47 4 , or $87,000 present value at a 7% discount rate
. The estimated compliance benefits attributable to the industry cost reductions would be $30 million in petitions for special conditions and exemptions, $570 million in production line s and $10 million in fuel
-burn . The average present values benefiting to industries at a 7% discount rate would be about $21 million, $423 million and $6 million, respectivel y. This rule would be relieving f or both government and industries with the estimated net benefits
. The total combined regulatory savings would be about $ 610 million as the mid
-point estimate or $ 45 0 million present value at a 7% discount rate
. The lower and the higher estimates of the total combined regulatory savings would be between $ 384 million and $ 8 36 million ($ 283 million and $ 618 million present value at a 7% discount rate, respectivel y)
. Additional detailed categorical benefits are presented in the following summary table and other computing tables are presented in appendix
. 22 Ibid, Ta

ble 6
- 1 on pp 6
- 7, the FAA uses two
- engine narrow
- body (B737
- 300) as the forecasted average airplane size with seats between 141.3 and 148.7 to calculate the operational fuel savings or weight savings. 23 FAA Aerospace Forecast Fiscal Years 2014
- 2034 , Table 18, pp 10912

Benefits ( 1 x million dollar) Value in 2014 dollar Present value at 7% Average Low er

bound Upper

bound Average Low er

bound Upper

bound Government benefits (sub
-total) $0.1 $0.1 $0.2 $0.1 $0.1 $0.1 Industries benefits (sub
-total) $610 $384 $836 $450 $283 $618 Exemptions and special conditions $30 $17 $44 $21 $12 $30 Productions $570 $361 $779 $423 $267 $579 Operations $10 $6 $13 $6 $4 $9 Total Societal Benefits $610 $384 $836 $451 $283 $618
The proposed rule would maintain achieved safety levels related to fuel tank structure and system lightning protection commensurate with the current requirements and provide cost
savings/benefits
.13



### Appendix Table 1 Government Savings (2014 constant d ollar) sub
- total 5
- year period average savings Lo w bound High bound exemptions $5,886 7 $41,204 $33,270 $70,975 Special conditions $12,318 4 $49,27 0 $36,121 $91,254 Total $90,47 4 $69,391 $162,229 Table 2 Industry Exemption and Special Condition Savings ( in million s )
Year Weights

for Com posite wing Weights

for metal wing Lo w

Range Com posite Wing High

Range Com posite Wing Lo w

Range Metal Wing High

Range Metal Wing Sub
total low range Sub
- total

high range 2015 19% 82% 0.56 1.30 0.82 2.45 $1.4 $3.7 2016 22% 78% 0.66 1.54 0.78 2.34 $1.4 $3.9 2017 26% 75% 0.77 1.79 0.75 2.24 $1.5 $4.0 2018 29% 71% 0.87 2.03 0.71 2.13 $1.6 $4.2 2019 33% 68% 0.98 2.28 0.68 2.03 $1.7 $4.3 2020 36% 64% 1.08 2.52 0.64 1.92 $1.7 $4.4 2021 40% 61% 1.19 2.77 0.61 1.82 $1.8 $4.6 2022 43% 57% 1.29 3.01 0.57 1.71 $1.9 $4.7 2023 47% 54% 1.40 3.26 0.54 1.61 $1.9 $4.9 2024 50% 50% 1.50 3.50 0.50 1.50 $2.0 $5.0 Total $16.9 $43.7 Note: TC and ATC = 5 for a 10
- year period, or 45% of all 11 exemptions and special conditions related to lightening protection. Table 3 Industry Production Savings (in million s )

Year Weights for

Composite wing Weights

for metal wing Learning

Rate (Cost Reduction Rate) Low Range

Composite Wing High

Range Composite Wing Low

Range Metal Wing High

Range Metal Wing Sub
total low range Sub
total high range 2015 19% 82% 85% 29 58 25 64 $54.4 $121.6 2016 22% 78% 71% 29 57 20 51 $49.1 $108.4 2017 26% 75% 58% 27 54 16 40 $43.1 $94.2 2018 29% 71% 50% 27 53 13 33 $39.7 $86.0 2019 33% 68% 43% 26 51 11 27 $36.4 $78.1 2020 36% 64% 37% 25 49 9 22 $33.2 $70.8 2021 40% 61% 32% 23 47 7 18 $30.4 $64.3 2022 43% 57% 27% 22 43 6 14 $27.4 $57.6 2023 47% 54% 23% 20 40 5 11 $24.6 $51.4 2024 50% 50% 20% 19 37 4 9 $22.4 $46.8 Total $360.8 $779.3 'Num ber of production = 184 per year or 1837 for 10
- years period14

Table 4 Services Operational Savings ( in million s ) Data Source: Boeing Weights

for Com posite wing Weights

for metal wing Projected

fuel Price Lo w

Range Com posite Wing High

Range Com posite Wing Lo w

Range Metal Wing High Range Metal Wing Sub
total low range Sub
total high range 2015 19% 82% 2.74 0.04 0.08 0.09 0.17 0.13 0.25 2016 22% 78% 2.71 0.05 0.09 0.08 0.17 0.13 0.26 2017 26% 75% 2.78 0.06 0.11 0.08 0.16 0.14 0.27 2018 29% 71% 2.87 0.06 0.13 0.08 0.16 0.14 0.29 2019 33% 68% 2.97 0.08 0.15 0.08 0.16 0.15 0.31 2020 36% 64% 3.07 0.09 0.17 0.08 0.15 0.16 0.33 2021 40% 61% 3.15 0.10 0.19 0.07 0.15 0.17 0.34 2022 43% 57% 3.22 0.11 0.22 0.07 0.14 0.18 0.36 2023 47% 54% 3.29 0.12 0.24 0.07 0.14 0.19 0.38 2024 50% 50% 3.36 0.13 0.26 0.07 0.13 0.20 0.39 2025 50% 50% 3.42 0.13 0.27 0.07 0.13 0.20 0.40 2026 50% 50% 3.49 0.14 0.27 0.07 0.14 0.20 0.41 2027 50% 50% 3.57 0.14 0.28 0.07 0.14 0.21 0.42 2028 50% 50% 3.64 0.14 0.28 0.07 0.14 0.21 0.43 2029 50% 50% 3.71 0.14 0.29 0.07 0.14 0.22 0.43 2030 50% 50% 3.79 0.15 0.30 0.07 0.15 0.22 0.44 2031 50% 50% 3.87 0.15 0.30 0.08 0.15 0.23 0.45 2032 50% 50% 3.95 0.15 0.31 0.08 0.15 0.23 0.46 2033 50% 50% 4.03 0.16 0.31 0.08 0.16 0.24 0.47 2034 50% 50% 4.11 0.16 0.32 0.08 0.16 0.24 0.48 2035 50% 50% 4.2 0.16 0.33 0.08 0.16 0.25 0.49 2036 50% 50% 4.28 0.17 0.33 0.08 0.17 0.25 0.50 2037 50% 50% 4.37 0.17 0.34 0.09 0.17 0.26 0.51 2038 50% 50% 4.46 0.17 0.35 0.09 0.17 0.26 0.52 2039 50% 50% 4.55 0.18 0.36 0.09 0.18 0.27 0.53 2040 50% 50% 4.65 0.18 0.36 0.09 0.18 0.27 0.54 2041 50% 50% 4.74 0.18 0.37 0.09 0.18 0.28 0.55 2042 50% 50% 4.84 0.19 0.38 0.09 0.19 0.28 0.57 2043 50% 50% 4.94 0.19 0.39 0.10 0.19 0.29 0.58 2044 50% 50% 5.04 0.20 0.39 0.10 0.20 0.29 0.59 Total $ 6.48 $ 12.96