Voluntary Licensing of Amateur Rocket Operations, Technical Paper 6/21/2012

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U.S. Department of Transportation

FEDERAL AVIATION

ADMINISTRATION

Voluntary Licensing of Amateur Rocket Operations

Technical Paper

(14 CFR Part 400)

OFFICE OF AVIATION POLICY AND PLANS

ECONOMIC ANALYSIS DIVISION

APO-300
Voluntary Licensing of Amateur Rocket Operations, Technical Paper 6/21/2012

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Table of Contents

LIST OF ABBREVIATIONS......................................................................................................... 3

Executive Summary........................................................................................................................ 4

I. Background.................................................................................................................................. 4

1. Problem the Rule is Trying to Solve ....................................................................................... 4

2. Amateur Rockets..................................................................................................................... 5

3. Summary of the Rule............................................................................................................... 5

4. Requirements of Operating under chapter III ......................................................................... 6

4.1 Launch Licenses and Permits............................................................................................ 6

4.2 Financial Responsibility .................................................................................................... 6

II. Costs........................................................................................................................................... 7

1. Overview.............................................................................................................................. 7

2. Assumptions......................................................................................................................... 8

3. Operator Costs ..................................................................................................................... 9

3.1 Licensing Costs.................................................................................................................. 9

3.2 Financial Responsibility Costs ........................................................................................ 10

3.3 Operator Costs................................................................................................................. 10

4. Government Costs.............................................................................................................. 11

4.1 Cost for FAA to Review and Process a License......................................................... 11

4.2 Financial Responsibility ............................................................................................. 12

III. Benefits................................................................................................................................... 13

IV. Summary of Costs and Benefits ............................................................................................. 14
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LIST OF ABBREVIATIONS

ELV Expendable Launch Vehicle

FAA U. S. Federal Aviation Administration

MPL Maximum Probable Loss

RLV Reusable Launch Vehicle

CFR Code of Federal Regulations
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Executive Summary

The FAA does not require licensing of amateur rocket operators, who may continue to operate as 

before without incurring the cost of obtaining a license. The FAA notes that customers, 

including other agencies such as NASA, may require a license for an amateur rocket operator 

who wishes to provide launch services or participate in programs such as NASA’s Flight 

Opportunities Program. NASA has selected seven companies for its Flight Opportunities 

Program. Some of these companies may launch amateur rockets under the program. NASA is 

requiring these operators to conduct their launches under a launch license. Therefore, the FAA is 

amending its rules to now allow amateur rocket operators to voluntarily obtain a launch license 

or permit to launch Class 3 amateur rockets. Operators of Class 3 amateur rockets that choose to 

obtain a launch license or permit will incur costs when applying for and renewing a license or 

permit, and will incur insurance costs. The FAA will incur costs to process and review the 

applications. 

Whenever a license or permit is issued the FAA will incur a cost to produce the authorization. 

The FAA costs will be $1.8 million, or in present value $1.5 million at a 7% discount rate and 

$1.7 million at a 3% discount rate. The FAA’s costs are a cost of the rule and have been 

attributed to the rule in the preamble to that document.

Operators who choose to obtain a license under this rule will also incur costs. However, because 

a license is not an FAA requirement, the FAA attributes the costs of operator compliance to the 

customer, not to this rule. Operators will incur costs of $2.0 million ($1.7 million present value 

using a 7% discount rate and $1.9 million present value using a 3% discount rate). Because this 

rule will allow amateur rocket operators to voluntarily obtain a license or permit for these 

launches, operators who choose to launch amateur rockets under a license or permit will do so 

only if they expect that the benefits will exceed the costs. Operator benefits are expected to 

equal or exceed their costs.

For ease of reading, the FAA assumes all operators further discussed in this document are 

operators who have made the business decision to apply for and obtain a license or permit, even 

though not required to do so by the FAA.

I. Background 

1. Problem the Rule is Trying to Solve 

On May 26, 2011, NASA issued Release 111-170 seeking proposals for services from 

commercial suborbital flight providers and others in support of its Flight Opportunities Program. 

 

1

http://www.nasa.gov/home/hqnews/2011/may/HQ_11-170_Commercial_SRLV_RFP.html
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On August 9, 2011, NASA issued Release 211-258 in which it selected seven companies to 

support this program through launches to near space. NASA has required these operators be 

licensed by the FAA for the financial responsibility requirements of the Commercial Space 

Launch Act (CSLA) to apply. However, chapter III does not apply to amateur rockets,

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as stated 

in § 400.2 “The regulations in this chapter do not apply to amateur rockets activities, as defined 

in 14 CFR 1.1”. In order to support NASA’s program, the FAA is amending its regulations to 

allow non- U.S. government operators of Class 3 advanced high-power rockets to submit an 

application for a license or experimental permit under chapter III. The NASA program requires 

operators to have licenses (and does not allow permits), but the FAA is amending its rules to also 

include permits to enable operators who are not part of NASA’s program to obtain permits for 

Class 3 amateur rocket launches. Experimental permits are issued for reusable suborbital rockets 

flown for: research and development; showing compliance with requirements for a license or 

crew training prior to obtaining a license. Compensation or hire is not allowed under a permit. 

This rule is enabling by allowing but not requiring, amateur rocket launches to be conducted 

under a license or permit. Amateur rocket operators who do not wish to operate under chapter III 

will not be required to apply for a license or permit, but they will not be able to participate in 

NASA’s Flight Opportunities Program or other programs that may require a launch license or 

permit.

2. Amateur Rockets 

Amateur rocket means an unmanned rocket that:(1) Is propelled by a motor or motors having a 

combined total impulse of 889,600 Newton-seconds (200,000 pound-seconds) or less; and (2) 

Cannot reach an altitude greater than 150 kilometers (93.2 statute miles) above the earth's

surface. 4

Chapter III, which regulates commercial space transportation of title 14 of the Code of Federal 

Regulations currently does not apply to amateur rocket operations. Although amateur rocket 

operators currently do not operate under an FAA license or a permit, operators generally file for 

a certificate of waiver or authorization under 14 CFR part 101 to conduct operations of Class 3 5

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amateur rockets. 

3. Summary of the Rule 

 

2

http://www.nasa.gov/centers/dryden/news/NewsReleases/2011/11-258.html. The seven companies are: Armadillo 

Aerospace, Near Space Corp., Masten Space Systems, Up Aerospace, Inc., Virgin Galactic, Whittinghill Aerospace 

LLC, XCOR.

3 Amateur rockets are regulated under Subpart C of Part 101 of the Code of Federal Regulations

4 Title 14 Aeronautics and Space Part 1 Definitions and Abbreviations § 1.1 General definitions.

5

§ 101.22 Definitions

6 The information required under a waiver or authorization are found in Title 14, § 101.29 Information requirements.

7 Requirements for Amateur Rocket Activities, 73 Fed. Reg. pg.73768, Dec. 4, 2008.
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The rule will allow launch operators conducting certain amateur rocket launches to voluntarily

apply for a commercial space transportation license or permit under 14 CFR chapter III. The 

rocket must be a Class 3 8advanced high-power rocket as defined in § 101.22 of this title in order 

for the operator to be allowed to voluntarily submit an application for a launch license. To be 

clear, the rule will not require these amateur rocket launches to operate under a license or permit, 

but will allow operators to voluntarily elect to operate under a launch license or permit.

4. Requirements of Operating under chapter III

The regulations 9of Title 14 Code of Federal Regulations (14 CFR) chapter III govern 

commercial space transportation activities conducted in the United States or by U.S. citizens.

Those operators who are subject to chapter III must apply for a license or experimental permit 

for their launch operations, which includes submitting data for a safety and an environmental 

review, 10 and demonstrating financial responsibility.

4.1 Launch Licenses and Permits 

The FAA expects that the majority of licenses that will be obtained for amateur rocket launches 

will be for reusable launch vehicles although the rule will also apply to expendable launch 

vehicles. Parts 415 and 417 apply to expendable launch vehicles. Part 431 applies to the launch 

and reentry of a reusable launch vehicle. Part 435 applies to the reentry of a non-reusable launch 

vehicle. Part 437 applies to experimental permits. Part 440 establishes financial responsibility

and allocation of risk requirements for launches and reentries authorized by a license or a permit. 

4.2 Financial Responsibility

Amateur rocket operators who launch under a launch license or permit have to demonstrate 

financial responsibility under part 440. To comply, the licensee can demonstrate the required 

amount of financial responsibility by obtaining and maintaining insurance in the amount 

determined by the FAA or by otherwise demonstrating the required amount of financial 

responsibility. 

A licensee or permittee must obtain and maintain insurance to protect against claims by a third 

party for bodily injury or property damage resulting from a licensed or permitted activity as 

prescribed in § 440.9 (or otherwise demonstrate financial responsibility). The amount of 

insurance required is based upon the FAA’s determination of maximum probable loss (MPL)

11; 

however, it will not exceed the lesser of:

 

8

Class 3—Advanced High-Power Rocket means an amateur rocket other than a model rocket or high-power rocket.

9 They currently do not apply to amateur rocket activities.

10 Otherwise known as the National Environmental Policy Act Review.

11 The applicant must submit information to the FAA so that the FAA can make the determination of maximum 

probable loss.
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(1) $500 million; or

(2) The maximum liability insurance available on the world market at a reasonable cost, 

as determined by the FAA.

Further, if damages occur above the amount of insurance required under § 440.9, the U.S. 

government has agreed to pay third party claims in excess of the amount of liability insurance 

held by the licensee but not more than $1,500,000,000 12 above that amount. Specific details are 

found in § 440.19.

In addition to protection against claims by third parties, those operating under a license or permit 

must also obtain and maintain insurance that covers claims by the U.S. and other parties 13 for 

property damage or loss from the activity. Specific details are found in § 440.9.

The amount of insurance is based upon a determination of maximum probable loss; however, it 

will not exceed the lesser of: 

(1) $100 million; or

(2) The maximum available on the world market at a reasonable cost, as determined by 

the FAA.

Amateur rocket operators who choose to obtain a license will be subject to these financial 

responsibility requirements. The required level of insurance is determined by the FAA on a 

case-by-case basis. The FAA will prescribe these amounts for each license, and requires 

information and data from the applicant for use in its MPL calculations. The amount of third 

party liability insurance that the FAA will prescribe will likely fall within the range of $1 million 

to $6 million dollars based on the type of amateur rocket vehicles that are currently available. 

Today many amateur rocket launches carry insurance. We assume that on average the FAA will 

require $3 million of third party liability insurance and that amateur rocket operators will be 

operating on non-federal launch sites so the FAA will not require U.S. government property

insurance.

II. Costs 

1. Overview

The FAA does not require licensing of amateur rocket operators, who may continue to operate as 

before without incurring the cost of obtaining a license. The FAA notes that other agencies such 

as NASA may require a license for an amateur rocket operator who wishes to provide launch 

services or participate in programs such as NASA’s Flight Opportunities Program. Under 

NASA’s Flight Opportunity Program all launches including amateur rocket launches will have to 

be licensed. Because a license is not an FAA requirement, the FAA attributes the costs of 

 

12 “As adjusted for inflation occurring after January 1, 1989,” Title 14 Aeronautics and Space, Part 440, § 440.19.

13 Including its agencies, and its contractors and subcontractors involved in a licensed or permitted activity.
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operator compliance to the customer, not to this rule. However, to be transparent, we estimate 

operator costs of obtaining a license, in the accompanying technical paper.

The U.S. government will incur costs in reviewing the additional license applications, ensuring 

financial responsibility requirements are met and reviewing the additional environmental 

analyses. The U.S. government will also assume the risk of liability coverage between the 

maximum probable loss up to an amount not more than $1,500,000,000 (as adjusted for inflation 

occurring after January 1, 1989) above the MPL. 14

2. Assumptions

Assumptions, Estimates and Ground Rules Used in Analysis:

 All monetary values are expressed in 2011 dollars.

 The time horizon for the analysis is 5 years because this time period captures all of the 

relevant costs.

 Present value costs are estimated at 7% and 3% discount rates.

 Hourly burdened government rate is $51.72.

 Ten operator licenses for launches of reusable amateur rocket vehicles would be issued 

over the first 5 years. 15

 Operator licenses for reusable launch vehicles are valid for 2 years.

 Operators will begin license renewal process for each license the second year of the 

license. 

Issuance of Amateur Rocket Launch Licenses Over Time

 There will be on average 5 to 14 launches per year per license in the first 5 years.

 Operators will renew with amendments to include additional configurations.

 Cost of these renewals will be 70 percent of the cost of the original license because 

configurations will be expanded beyond original license.

 Estimated cost to operator of initial application is $65,000 and the estimated cost of 

renewal with additional configurations is $45,500.

 Estimated cost to FAA to review and process application is $108,000 and to review and 

process renewal is $75,000.

 

14 § 440.19 United States payment of excess third-party liability claims.

15 NASA’s flight opportunities program (FOP) has awarded contracts to seven operators. We assume that in the first 

2 years after the rule publishes, three amateur rocket licenses will be granted. Two more amateur rocket operators 

not involved with the FOP have inquired into the possibility of obtaining voluntary licenses for research and 

development and demonstration launches. It is reasonable to estimate that the FAA could issue up to 10 amateur 

rocket licenses in the first five years. 
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 Maximum probable loss will be set at between $1 million and $6 million for third party 

liability and $1 million and $3 million for U.S. government property. 

 For this analysis we assume the FAA will establish an average of $3 million third party

liability insurance.

 An average MPL of $3 million for third party liability insurance will be established, 

which will cost $3,000 per flight. 16

 Flights during the first 5 years will be from launch sites for which the FAA will not 

require government property insurance.

 We assume amateur rocket operators who choose to obtain a license will decide to launch 

from a licensed launch site which will already have a completed environmental review or 

which will have a government grant for preparing an environmental review. This would

result in minimal costs.

3. Operator Costs

3.1 Licensing Costs

Although, the FAA does not attribute such costs to this rule, the FAA notes, that amateur rocket 

operators will incur costs to submit the data and analyses to the FAA for a license or 

experimental permit and for the cost of third party liability insurance. These costs are estimated 

here. The FAA has never licensed or issued a permit for an amateur rocket launch; therefore,

there is no historical record for amateur rocket licensing or permitting costs. The FAA expects 

that the cost to obtain a license for an amateur rocket launch will be significantly less than that 

for a commercial license. Amateur rockets are by definition17 suborbital and they have limited 

performance capabilities. The risk analyses for non-amateur launches are usually more expensive 

than those for amateur launches. Based on work that the FAA has done with prospective 

applicants, the FAA estimates that an applicant for a launch license for an amateur rocket will 

incur costs of $65,000 to comply with all the requirements of applying for a license and $45,500 

to comply with the requirements for a renewal. 18

License applicants will take the following general steps to apply for an amateur rocket license 

 Pre-application consultation

 Preparation of license application

 Resolution associated with the application process

 

16 This is a conservative estimate which assumes the policy covers only one flight. Where a policy covers multiple 

launches as is assumed here the premium per flight could be less.

17 Title 14 Aeronautics and Space § 1.1 General definitions. Amateur rocket means an unmanned rocket that: (1) Is 

propelled by a motor or motors having a combined total impulse of 889,600 Newton-seconds (200,000 poundseconds) or less; and (2) Cannot reach an altitude greater than 150 kilometers (93.2 statute miles) above the earth's 

surface.

18 The FAA includes permits as enabling. As the NASA requirement is for licenses only, we do not estimate the 

costs or benefits for permits.
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In general licensees must comply with licensing application and post licensing requirements in 

the following general areas to become and remain licensed. 

 Policy Review and Approval 

 Safety Review and Approval 

 Payload Review and Determination

 Post-Licensing Requirements—Environmental Review 

3.2 Financial Responsibility Costs

The amateur rocket operator who obtains a license will be required to obtain third party liability

insurance and government property insurance (or demonstrate the financial ability to cover the 

financial responsibility the FAA will require.) While the levels have not yet been determined by

the FAA, we assume for this analysis that the FAA will require $3 million of third party liability 

insurance and that no U.S. government property insurance will be required. The estimated per 

launch premium for third party liability insurance of $3 million is $3,000 although it is likely that 

given multiple flights per license the actual cost will be lower.

3.3 Operator Costs

Based on the assumptions provided above, the cost to operators of applying for the initial launch 

license, renewing that license and the cost of obtaining third party liability insurance is displayed 

in the table below. Operators will begin the process of renewing each license in the year 

following the initial issuance of the license. We assume that operators will continue to renew 

their licenses over the 5 years. The renewals are good for 2 years. 19 The number of licenses is 

cumulative, starting with one in the first year, two new licenses in the second year, for a total of 

three licenses in year two (two new licenses and one existing license), in year three there will be 

five licenses (two new licenses, two new renewals from the previous year, and the existing 

renewal from year one). Based upon these licenses, we estimate an average of five launches in 

the first year building up to fourteen launches per license by the fifth year. Estimated per launch 

cost for insurance is $3,000. In year 5 there are fourteen launches per license, and ten licenses 

for a total of 140 launches times $3,000 for a total insurance premium of $420,000. An 

estimated three new launch licenses at an estimated cost of $65,000 per license results in 

$195,000 and two renewals at an estimated cost of $45,500 each results in $91,000 in year five.

The total estimated cost to operators who obtain a voluntary license for amateur rocket launches 

is $2.0 million ($1.7 million present value using a 7% discount rate and $1.9 million present 

value using a 3% discount rate).

 

19 Based on the assumption that in the first 5 years all launches will be of RLVs. 
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Estimated Industry Cost of Obtaining a Voluntary Amateur Rocket License

4. Government Costs

4.1 Cost for FAA to Review and Process a License

FAA costs associated with reviewing and processing amateur license and permit applications are 

a cost of the rule. This is because, without the change to the existing rule, no license applications 

would be reviewed, and the FAA would not incur costs. 

The FAA Office of Commercial Space estimates the cost for the FAA to process a license for a 

Class 3

20

 amateur launch rocket as follows: It will require six people working half time to 

process the application within 120 days. Therefore, the estimated hours are: 

2,080 (hours in a year) x .33 (120 days processing time) x 6 (people) x .5 (half time) = 

2,080 or a full work year.

An average salary for the six people processing the application would be $51.72 an hour. The 

estimated cost to review and process an amateur rocket license application is $108,000 per 

launch license. The FAA estimates the cost to review and process a renewal to be $75,000 per 

application.

 

20 101.22 (c) Class 3—Advanced High-Power Rocket means an amateur rocket other than a model rocket or highpower rocket.
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The total estimated cost to the FAA to process and review the applications and renewals is $1.8 

million ($1.5 million present value using a 7% discount rate and $1.7 million present value using 

a 3% discount rate) over 5 years.

FAA Cost to Complete Review and Processing of Launch License Applications and Renewals

4.2 Financial Responsibility

The government would also bear the costs of the continued payment of excess claims should 

damages occur that exceed the liability insurance prescribed by the FAA, which is based on the 

FAA’s determination of maximum probable loss. The following paragraphs from the CFR 

define maximum probable loss. 

“Maximum probable loss (MPL) means the greatest dollar amount of loss for bodily 

injury or property damage that is reasonably expected to result from a licensed or 

permitted activity;

(1) Losses to third parties, excluding Government personnel and other launch or reentry 

participants' employees involved in licensed or permitted activities, that are reasonably 

expected to result from a licensed or permitted activity are those that have a probability

of occurrence of no less than one in ten million.

(2) Losses to Government property and Government personnel involved in licensed or 

permitted activities that are reasonably expected to result from licensed or permitted 

activities are those that have a probability of occurrence of no less than one in one 

hundred thousand. ”

21

The threshold probability represents the probability of an event resulting in losses at the greatest 

dollar amount that is reasonably expected to result from a licensed or permitted activity. The 

threshold probability is a quantitative measure selected by the FAA as representing the 

probability of occurrence associated with accidental events from licensed or permitted activities. 

The values of 10-7and 10-5are the thresholds used for third party (bodily injury) and Government 

 

21 Title 14: Aeronautics and Space, Part 440-Financial Responsibility § 440.3 Definitions.
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property damage, respectively, established in the definition of MPL quoted above. 22 The MPL

determination for third party liability damages related to an amateur rocket launch, while 

determined on a case by case basis, is assumed to range from $1 million to $6 million per launch. 

In other words there is a 10-7probability of an event resulting in claims of $1 million to $6 

million (if that is the MPL determination). The probability of an event resulting in claims of 

$1.5 billion 23 beyond the MPL (which is the maximum amount the government would be 

expected to indemnify) would be significantly less. What the threshold probability is telling us is 

that one in 10 million launches might result in third party liability damages of $1 million to $6 

million (which would range from $0.10 to $0.60 per launch.) The probability of third party

liability damages occurring at levels greater than the MPL would certainly be no more than 10-7.

 

Therefore, the cost of government indemnification of third party losses up to $1.5 billion beyond 

the MPL of $1 million - $6 million would not exceed $150 24 per launch, and will certainly be 

significantly lower than that. However, in a worst case scenario, the U.S. government could be 

liable for up to $1.5 billion (after being adjusted for inflation) of third party liability claims. This 

possibility is extremely remote, especially in light of the fact that the maximum probable loss is 

expected to be no more than $6 million.

III. Benefits

NASA has selected seven companies to support its Flight Opportunities Program. NASA has 

required companies launching under the program be licensed by the FAA. Some of these 

companies might launch Class 3 amateur rockets under the program. Under the current CFR 

amateur rocket launches may not be licensed. This rule will allow amateur rocket operators to 

voluntarily obtain a license or permit and to operate under chapter III. The amateur rocket 

operator chooses whether or not to obtain a license or permit for amateur rocket launches. 

Therefore, anyone who chooses to obtain a license under this rule will do so because they expect 

benefits in excess of their costs. Assuming 10 licenses are issued in the first 5 years, operators 

will voluntarily expend a total of $2 million ($1.7 million present value using a 7 percent 

discount rate and $1.9 million present value using a 3 percent discount rate) over 5 years for 

licenses. Any benefit to the operator associated with having a license will be realized only after 

an operator has incurred the cost of obtaining a license. This rule will result in more rocket 

launches which helps fulfill an FAA mission to encourage private sector launches. The FAA is 

not able to quantify other societal benefits of issuing these licenses.

 

22 The greatest dollar amount of losses to third parties, excluding Government personnel and other launch or reentry 

participants’ employees involved in licensed or permitted activities that are reasonably expected to result from a 

licensed or permitted activity are those that have a probability of occurrence of no less than one in ten million or 

10-7. The greatest dollar amount of losses to Government property and Government personnel involved in licensed 

or permitted activities that are reasonably expected to result from licensed or permitted activities are those that have 

a probability of occurrence of no less than one in one hundred thousand.

23 As adjusted for inflation occurring after January 1, 1989.

24 Before being adjusted for inflation.
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IV. Summary of Costs and Benefits

The estimated cost attributed to the issuance of licenses under this rule is $1.8 million ($1.5

million present value using a 7% discount rate and $1.7 million present value using a 3% 

discount rate) over 5 years for the cost to the government as indicated in the table below. As 

discussed above the rule does not require operators to incur costs, but to be transparent we 

include these $2.0 million costs to operators ($1.7 million present value present value using a 7% 

discount rate and $1.9 million present value using a 3% discount rate) as presented below.

Costs to Government

 

Costs to Operators

Because this rule will allow amateur rocket operators to voluntarily obtain a license or permit for 

these launches, operators who choose to launch amateur rockets under a license or permit will do 

so only if they expect that their benefits will exceed their costs. This rule will result in more 

rocket launches which helps fulfill an FAA mission to encourage private sector launches. The 

FAA is not able to quantify other societal benefits of this rule. To the extent the licensing 

requirements provide a societal benefit, those benefits, including any reduction in risk, may

attend this rule.