Federal Aviation Administration: Commercial Space Launch Industry Developments Present Multiple Challenges
Published: 2015-08-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The U.S. commercial space launch industry has changed considerably since the enactment of the Commercial Space Launch Amendments Act of 2004. FAA is required to license or permit commercial space launches, but to allow the space tourism industry to develop, the act prohibited FAA from regulating crew and spaceflight participant safety before 2012—a moratorium that was later extended but will now expire on September 30, 2015. Since October 2014, there have been three mishaps involving FAA licensed or permitted launches.
GAO was asked to examine the changes in the commercial space launch industry and FAA's oversight of the industry. This report addresses, among other things, (1) changes in the industry over the last decade, (2) FAA challenges in addressing industry developments, and (3) FAA's launch licensing workload and budget. GAO reviewed FAA's guidance and documentation on its launch permit, licensing, and safety oversight activities; interviewed FAA officials, industry stakeholders, and experts who were selected on the basis of their knowledge of FAA's oversight of the commercial space launch industry; and visited the spaceports where the two 2014 launch mishaps occurred.
section_title: What GAO Found
paragraphs: During the last decade, U.S. companies conducted fewer orbital launches in total than companies in Russia or Europe, which are among their main foreign competitors. However, the U.S. commercial space launch industry has expanded recently. In 2014, U.S. companies conducted 11 orbital launches, compared with none in 2011. In addition, in 2014, U.S. companies conducted more orbital launches than companies in Russia, which conducted four, or Europe, which conducted six.
The Federal Aviation Administration (FAA)—which is responsible for protecting the public with respect to commercial space launches, including licensing and permitting launches—faces multiple challenges in addressing industry developments. If Congress does not extend the regulatory moratorium beyond September 2015, FAA will need to determine whether and when to regulate the safety of crew and spaceflight participants. Most commercial space launch company representatives told GAO that they favor extending the regulatory moratorium beyond September 2015 to allow the industry more time to develop. Current bills propose extending it as well. In addition, according to FAA officials and industry stakeholders, FAA faces an increasing workload related to licensing and permitting launches such as NASA's commercial cargo and crew programs that involve transporting cargo and crew to the International Space Station; space tourism; and the launching of small satellites.
FAA's budget requests for its commercial space launch activities generally have been based on the number of projected launches. However, in recent years, the actual number of launches has been much lower than the projections. For fiscal year 2016, FAA requested a 16 percent increase in staff for its commercial space launch activities to keep pace with industry growth. Office of Management and Budget guidance indicates that if an agency is requesting significant changes in full-time positions, it should provide a detailed justification of the changes and discuss alternative implementation strategies. However, FAA's fiscal year 2016 budget submission does not provide a detailed justification of the staffing changes and does not consider alternatives to hiring additional staff. Because FAA has not done this, Congress lacks information that would be helpful in making decisions about the resources needed for the agency's commercial space launch activities. FAA officials said that the agency lacked additional workload metrics, which officials are now developing to include in future budget submissions for its commercial space launch oversight activities.
section_title: What GAO Recommends
paragraphs: GAO recommends that FAA, in its budget submissions, provide more detailed information about the Office of Commercial Space Transportation's workload. FAA agreed with the recommendation but thought the report did not convey the extent of industry growth. GAO added information on challenges related to industry growth.

section_title: Letter
paragraphs: The U.S. commercial space launch industry, which the Federal Aviation  Administration (FAA) reports had estimated revenues of $1.1 billion in  2014, has experienced considerable change since the enactment of the  Commercial Space Launch Amendments Act of 2004 (“the act”). The act  promoted the development of the emerging commercial human  spaceflight industry and made the Department of Transportation (DOT)  responsible for overseeing the safety of the new industry—a responsibility  that DOT delegated to FAA. To allow the space tourism industry to  develop, the act prohibited FAA from regulating the safety of crew and  spaceflight participants before 2012, except in limited circumstances.  This regulatory moratorium, also called a “learning period,” was later  extended to September 30, 2015. The space tourism industry has not  started as quickly as some companies had expected; however, it  continues to develop despite some setbacks. For example, in October  2014, Scaled Composites’ reusable launch vehicle, SpaceShipTwo,  crashed in the Mojave Desert during a test flight, resulting in the death of  the copilot. The customer for that vehicle, Virgin Galactic, is building  another SpaceShipTwo and will fly its first paid spaceflight participants  when the vehicle is ready for commercial operations. Other companies  continue developing their own vehicles for space tourism with various  designs and business plans.
FAA has been licensing an increasing number of commercial space  launches in recent years, including those for the National Aeronautics and  Space Administration’s (NASA) commercial cargo program, which  contracts with commercial launch companies to transport cargo to the  International Space Station (ISS). However, in October 2014, one of  those launches—Orbital Sciences’ cargo rocket bound for the ISS— exploded shortly after liftoff from the Mid-Atlantic Regional Spaceport  located at the NASA Wallops Flight Facility in Virginia, causing   In  approximately $13 million to $15 million in damage to the launch pad.addition, in June 2015, a SpaceX rocket also bound for the ISS exploded  during flight about 2 minutes after launching from the Cape Canaveral Air  Force Station, FL.
FAA also will be responsible for licensing launches for NASA’s  commercial crew program after NASA certifies provider vehicles (post  certification missions). first time will purchase services from commercial space launch  companies to transport astronauts to and from the ISS and low-earth  orbit. According to FAA, out of 284 launches and re-entries (returning to  earth) that the agency has licensed or permitted from 1989 through May  2015, the SpaceShipTwo accident is the only one that involved a fatality.
By contrast to FAA, which is a regulatory agency, NASA is a civil research and  development agency that does not regulate the commercial space launch industry.
GAO, Commercial Space Launches: FAA Needs Continued Planning and Monitoring to  Oversee the Safety of the Emerging Space Tourism Industry, GAO-07-16 (Washington,  D.C.: Oct. 20, 2006). occurred in the commercial space launch industry over the last decade  and potential changes in the future. This report examines (1) how the  competitive landscape has changed for the U.S. commercial space  launch industry over the last decade, (2) challenges that FAA faces in  licensing and regulating commercial space launches, (3) the status of  developing industry standards for human spaceflight, (4) how FAA has  projected its commercial space launch licensing workload for future fiscal  years when submitting budget requests to Congress and how changes in  the number and types of launches might affect its budget needs in future  years, and (5) how changes in the number and types of commercial  space launches could affect the government’s overall exposure and  indemnification for commercial launches. You also asked us to provide an  update on FAA’s actions to address our previous recommendations on its  methodology regarding launch insurance calculations. See appendix I for  this information.
To evaluate these issues, we reviewed FAA’s program guidance, legal  requirements and restrictions, and data on FAA’s licensing, permitting,  and inspection workload during the last decade. We visited launch  facilities in Mojave, CA, and Wallops Island, VA, to review how FAA  carries out its launch safety activities. We chose to visit the Mojave Air  and Space Port because it is an FAA-licensed launch site where a  number of companies are conducting space launch and development  activities for both suborbital and orbital operations and because it was  the site of the SpaceShipTwo test flight accident in October 2014. In  addition, we visited the Mid-Atlantic Regional Spaceport at NASA Wallops  Flight Facility in Wallops Island, VA, because it is an FAA-licensed launch   and was the site of Orbital Sciences’  site located on a federal rangelaunch mishap in October 2014. At those facilities and elsewhere, we  interviewed FAA officials, nine commercial launch companies, an industry  association, an industry advisory group, and three experts about (1)  industry international competition, (2) the challenges that FAA faces in  space launch safety oversight given developments in the industry, and (3)  the development of industry standards. We also interviewed  representatives from the two launch sites that we visited regarding  industry competition and FAA challenges. We chose these companies  and industry organizations by reviewing FAA reports on the commercial  space launch industry and other literature. We interviewed  representatives from the majority of U.S. commercial space launch  companies identified in FAA’s 2014 annual report on commercial space  transportation. Of the nine companies we interviewed, three conducted  licensed launches in 2014. The experts whom we interviewed were  selected from academia and private industry based on their knowledge of  FAA’s oversight of the commercial space launch industry. Two of the  experts are professors who conduct research on commercial space  launch activities at universities, and the third expert is the former  associate administrator for FAA’s Office of Commercial Space  Transportation. Their views are not generalizable.
To study the competitive landscape regarding the commercial space  launch industry, we reviewed FAA trend data, such as the number of  launches conducted by U.S. and foreign companies during the last 10  years, and interviewed the representatives from the commercial space  launch companies and the experts. To review how FAA projects its  launch licensing workload, we examined metrics for the last 10 fiscal  years such as the number of launch licenses and permits that the agency  processed and the number of safety inspections conducted, and reviewed  budget formulation guidance from the Office of Management and Budget  (OMB). We also reviewed FAA’s commercial space launch budget  submissions for those years. In particular, we compared the number of  launches that FAA projected during the last 10 fiscal years, which it  generally used as the basis for its budget requests, with the actual  number of launches that occurred. FAA provided information about the  steps that it took to ensure the completeness and reliability of the data on  the number of launches that the agency licensed and permitted and  inspections that it conducted, as well as the data on overtime and  compensatory expenditures. Based on our review of this information, we  determined the data were sufficiently reliable for our purposes. To  determine how changes in the number and types of commercial space  launches could affect the government’s overall exposure and  indemnification for commercial launches, we discussed the factors  affecting the government’s overall exposure and indemnification for  commercial launches with FAA officials, industry representatives, and an  insurance company representative. Appendix II provides more details  about our scope and methodology.
We conducted this performance audit from January 2015 to August 2015  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Space transportation is the movement of, or means of moving objects,  such as satellites and vehicles carrying cargo, scientific payloads, or  passengers, to, from, or in space. Space activity in the United States is  conducted by the civil, military, and commercial sectors. Commercial  space transportation is carried out using orbital and suborbital vehicles  owned and operated by private companies or other nonfederal  organizations. Space tourism is a segment of the commercial space  launch industry that would make space travel available to the public. The  commercial sector officially began in 1984 with Executive Order 12465,  which designated DOT as the lead federal agency for enabling private-  Also in 1984, the Commercial Space Launch  sector launch capability.Act gave DOT the authority, among other things, to license and monitor  the safety of commercial space launches and to promote the industry.  Regulatory oversight for the commercial sector was given to the Office of  Commercial Space Transportation, which was originally within the Office  of the Secretary of Transportation but according to an FAA official was  transferred to FAA in 1995.
In the past, the U.S. government was the sole entity launching civil and  commercial payloads into orbit from the United States. However, as a  result of the Space Shuttle Challenger accident in 1986, the U.S.  government transferred responsibilities for commercial payload launches  to the private sector. In the NASA Reauthorization Act of 2005, Congress  directed NASA to foster the commercial spaceflight industry, as the end of  the Space Shuttle program would leave the United States without a  domestic capability to transport crew and cargo to and from the ISS.  This led NASA to establish the commercial cargo and crew programs to  facilitate safe, reliable, and cost-effective transportation services to low- earth orbit instead of purchasing seats on the Russian Soyuz and  developing new government launch vehicles. Two U.S. companies  currently have a commercial resupply services (CRS) contract with NASA  to carry cargo to the ISS—Space Exploration Technologies Corporation  (SpaceX) and Orbital ATK. In September 2014, NASA released a  request for proposal for the follow-on CRS contract—CRS2—and expects  to award the contract in the third quarter of fiscal year 2015. NASA  expects new competitors for the CRS2 contract to drive lower prices and  provide increase capacity per flight. Several companies have been  involved in developing vehicles that will carry astronauts to the ISS,  including Blue Origin, Boeing, Paragon Space Development Corporation,  Sierra Nevada Corporation, SpaceX, and United Launch Alliance.  Boeing and SpaceX are the only companies currently under contract and  are working on obtaining vehicle certification from NASA. Combined, the  companies have received awards under the program that could total  nearly $8 billion. These include a minimum of two and a maximum of six  post certification missions per provider for crew transportation to the ISS  under the recently awarded contracts with NASA for the latest phase of  the program.
subsections: section_title: Types of Vehicles
paragraphs: Historically, commercial space launches carried payloads, generally  satellites, into orbit using expendable launch vehicles that did not return  to earth. An expendable launch vehicle is a single-use vehicle that is used  to launch a payload into space. Launch companies such as SpaceX and  United Launch Alliance are also testing reusable elements of expendable  launch vehicles. Figure 1 shows examples of expendable launch  vehicles—Orbital ATK’s Antares, SpaceX’s Falcon, and United Launch Alliance’s Atlas and Delta.
The commercial space launch industry is changing with the emergence of  suborbital reusable launch vehicles that are capable of being launched  into space more than once and enable space tourism from state- sponsored or private launch sites, also known as spaceports. According  to FAA, suborbital reusable launch vehicles are those that do not attain  enough velocity to enter into a sustainable orbit around the earth. These  vehicles are being designed to reach or surpass an altitude of 100  kilometers (62.5 miles) and enter space for a brief time. As shown in fig.  2, some of the reusable launch vehicles under development include:
Virgin Galactic’s SpaceShipTwo, a space tourism vehicle with  seats for two pilots and six spaceflight participants. According to  the company, about 700 people have already placed refundable  deposits on the $250,000 ticket price per flight that is to last for  about 2 hours, including 5 minutes of microgravity.
XCOR Aerospace’s Lynx, another space tourism vehicle with  seats for one pilot and one spaceflight participant. The ticket price  is $100,000.
Blue Origin’s New Shepard vehicle, a vertical takeoff and landing  vehicle designed to carry three or more crew. The crew capsule is  designed to land with the assistance of parachutes.
Stratolaunch System’s Stratolaunch aircraft, which is being  designed with a wingspan greater than 380 feet to be powered by  six Boeing 747 engines, and a multi-stage booster to carry  unmanned payloads and manned spacecraft to orbit. According to  the company, the aircraft will be the largest ever constructed.
section_title: Federal Roles and FAA’s Budget
paragraphs: In 2004, the Commercial Space Launch Amendments Act gave DOT,  among other things, the specific responsibility of overseeing the public  safety aspects of space tourism, but the act prohibited DOT from  regulating the safety of crew and spaceflight participants before 2012,  except in response to high-risk events, serious injuries, or fatalities—a  provision that in 2012 was extended to September 30, 2015. Under the  act, in response to such events during the moratorium, the Secretary of  Transportation may issue regulations governing the design or operation of  a launch vehicle to protect the health and safety of crew and spaceflight  participants that would: describe how such regulations would be applied in determining  whether to issue a launch license, apply only to launches in which a vehicle will be carrying a human  being for compensation or hire, and be limited to restricting or prohibiting design features or operating  practices that have (1) resulted in a serious or fatal injury to crew  or spaceflight participants during a licensed or permitted  commercial human spaceflight or (2) contributed to an unplanned  event or series of events during a licensed or permitted  commercial human spaceflight that posed a high risk of causing a  serious or fatal injury to crew or spaceflight participants.
At the same time, the act maintains FAA’s authority over protecting the  public with regard to commercial space launches, and FAA has issued  regulations regarding that. If Congress decides not to extend the  moratorium, FAA will have the discretion to propose regulations regarding  the safety of crew and spaceflight participants without restriction after  September 30, 2015.
FAA’s primary means of authorizing space launch activities is through its  licensing process. Among other things, FAA’s Office of Commercial  Space Transportation is responsible for:  licensing launch and reentry vehicle operations and launch and  reentry site operations (spaceports) carried out by U.S. citizens or  within the United States, except for those operations that are  carried out exclusively by and for the government.  reviewing applications for experimental permits, which allow  suborbital reusable rocket operations while conducting research  and development showing compliance with licensing requirements  or crew training;  reviewing safety approvals, which are determinations that safety  elements such as launch or reentry vehicles or safety systems will  not jeopardize the safety of public health or property when used or  employed within defined parameters or situations; conducting safety inspections and oversight regarding the  licensed and permitted activities; engaging in rulemaking activities; and promoting the commercial space launch industry.
FAA’s overall budget request for fiscal year 2016 is $15.8 billion and  44,333 full-time equivalent positions—a decrease of $11.5 million and an  increase of 120 full-time equivalent positions over fiscal year 2015  appropriations. For its Office of Commercial Space Transportation, FAA is  requesting $18.1 million and 92 full-time equivalent positions—an  increase of $1.5 million and 13 full-time equivalent positions over fiscal  year 2015 appropriations. In its budget submission, FAA indicated  additional staff for the Office of Commercial Space Transportation are  needed to conduct license and permit determinations within the legally  mandated time periods, among other responsibilities. The Commercial  Space Launch Amendments Act requires FAA to make its determinations  within 180 days of accepting licensing applications and within 120 days of  accepting experimental permit applications. From 1989 through May  2015, FAA licensed 237 launches, 39 launches under experimental  permits, and 9 licensed reentries. As of July 2015, 6 companies held 17  active launch licenses, and FAA had licensed 10 launch sites, 3 of which  are located at federal ranges (see fig. 3). To date, no space tourism  companies have received a launch license. In addition, as of May 2015,  FAA had received portions of applications for an additional four launch  sites.
Because some launch vehicles also may be operated as aircraft, another  FAA office is involved in providing safety oversight—the Office of Aviation  Safety, which regulates aircraft. The Office of Aviation Safety regulates  nonlaunch flights of hybrid vehicles under airworthiness certificates  authorizing the vehicles to fly.operated as an aircraft for research and development purposes, the  Office of Aviation Safety issued an experimental airworthiness certificate  for Scaled Composites to fly SpaceShipTwo as an unpowered glider for  flights not conducted under the company's experimental permit. In  addition to FAA, other federal agencies are involved in commercial space  launch activities. The Department of Defense (DOD), primarily through  the Air Force, and NASA provide infrastructure, operations support, and  range safety oversight for government and commercial launches at their  launch sites. The Department of Commerce is also responsible for  promoting the commercial space launch industry. In addition, the National  Transportation Safety Board (NTSB) has asserted its authority to  investigate commercial space launch accidents.
section_title: Launch Mishaps and Indemnification
paragraphs: Since October 2014, there have been three mishaps involving FAA  licensed or permitted launches. On October 28, 2014, Orbital Sciences’  cargo rocket bound for the ISS exploded shortly after liftoff from the Mid- Atlantic Regional Spaceport located at the NASA Wallops Flight Facility.  FAA authorized Orbital ATK to conduct the investigation under the  agency’s oversight. Under a 2004 agreement between the NTSB and  FAA, lead investigative authority is determined based on the classification  of the mishap, the phase of flight when the mishap occurred, impact  location, and its consequences. This mishap was classified as an  “incident” because it did not involve a fatality or serious injury or cause  enough third-party property damage to trigger the provisions of the  memorandum of agreement between NTSB and FAA. That agreement  indicates that NTSB will investigate all commercial space launch mishaps  involving (1) an impact outside of the impact limit lines designated by the  launch range facility, or (2) a fatality or serious injury, or (3) more than  $25,000 in property damage outside of the range facility. FAA expects the  results of the investigation will be publicly released in August 2015.
On October 31, 2014, Scaled Composites’ reusable launch vehicle,  SpaceShipTwo, crashed in the Mojave Desert during a test flight,  resulting in the death of the copilot. Because that mishap involved a  fatality, it was classified under the memorandum of agreement as an  “accident” and NTSB was designated as the lead investigative authority.  The results of NTSB’s accident investigation, released in July 2015,  indicated that the probable cause of the accident was Scaled Composites’  failure to consider and protect against potential human error that could  result in a catastrophic hazard. According to NTSB, this set the stage for  the copilot’s premature unlocking of the feather system designed to slow  the vehicle during reentry and subsequent in-flight breakup of the vehicle.  NTSB made 10 recommendations, including 8 to FAA, about developing  guidance on human factors, improving FAA’s experimental permit  application review and safety inspection processes, and implementing a  database of lessons learned from commercial space mishap  investigations.
In addition, on June 28, 2015, a SpaceX rocket bound for the ISS  exploded during flight about 2 minutes after launching from the Cape  Canaveral Air Force Station, FL. An FAA official indicated that SpaceX  will lead the investigation of this mishap with FAA oversight.
The federal government provides for a conditional payment of claims in  excess of the required insurance mandated by license. This conditional  payment is popularly referred to as indemnification—catastrophic loss  protection in the event of a launch accident—for all FAA-licensed  commercial launches through the Commercial Space Launch  Amendments Act. Thus, subject to congressional appropriations, the U.S.  government may pay third-party liability claims for injury, damage, or loss  that result from a commercial launch-related accident in excess of the  required “maximum probable loss,” which is calculated by FAA and is  capped at $500 million per launch or amount available at reasonable  cost. The federal government, subject to the availability of  appropriations, is then liable for claims over the maximum probable loss  up to $1.5 billion adjusted for post-1988 inflation which is about $3.06  billion. Launch companies are responsible for third-party liability claims  up to the maximum probable loss and over $3.06 billion.
The indemnification coverage will expire in December 2016 if Congress  decides not to extend this date. A bill that the Senate passed in August  2015 would extend the indemnification coverage through 2020, while a  bill passed by the House of Representatives in May 2015 would extend  the indemnification coverage until 2025.
Launch licensees and experimental permit holders that launch from  federal facilities are also required to insure up to $100 million against any  potential damage to government property. provides indemnification only for third-party claims and does not  indemnify those involved in a launch including crew and spaceflight  participants onboard a vehicle against third-party claims. The federal  government also does not provide indemnification for experimental permit  holders.
51 U.S.C. § 50914((a)(3)(A)(ii).
section_title: The U.S. Commercial Space Launch Industry Has Expanded in Recent Years
paragraphs: During the last decade, U.S. companies conducted fewer orbital launches  in total than companies in Russia or Europe, which are among their  main foreign competitors. However, in recent years U.S. companies have  conducted an increasing number of orbital launches. As shown in figure 4  below, the number of orbital launches conducted by U.S. companies  increased from zero in 2011 to 11 in 2014. Moreover, in 2014, U.S.  companies conducted more orbital launches than companies in Russia,  which conducted four, or Europe, which conducted six.
Similarly, as shown in figure 5, during most years over the last decade,  FAA data indicated that U.S. companies generated less orbital launch  revenue than companies in Russia or Europe but in 2014, U.S.  companies generated more orbital launch revenue than companies in  Russia or Europe. According to FAA data, over the last 3 years, orbital  launch revenue generated by U.S. companies increased from none in  2011 to $1.1 billion in 2014.
A number of factors are responsible for the recent expansion of the U.S.  commercial space launch industry. First, federal government contracts,  such as NASA’s commercial cargo program, have supported the industry  and have resulted in an increase in the number of U.S. commercial  launches and revenues. For example, in 2014, SpaceX launched two  cargo resupply missions for NASA, and NASA ordered three additional  missions to SpaceX’s CRS contract. NASA also procured eight launches  from Orbital Sciences in 2008 that were scheduled to occur between  2014 and 2016. In addition to fulfilling government contracts, these  companies also conducted launches for other customers. For example, in  2014, SpaceX conducted four commercial launches, three of which were  for international customers, and Orbital ATK conducted two, both of which  were for international customers.
Second, according to representatives from two commercial space launch  companies, including SpaceX, and an advisory group and an expert who  we interviewed, the growth in the U.S. commercial space launch industry  is largely being led by SpaceX being more price competitive compared  with foreign launch providers. The Chairman of the Commercial Space  Transportation Advisory Committee said that SpaceX’s prices are  significantly lower than foreign providers. Moreover, some companies are  seeking ways to further reduce costs. For example, Blue Origin is  developing new main engine elements for United Launch Alliance’s future  expendable launch vehicles. Representatives from one company and an  industry association and an expert told us that reusable stages will lower  launch prices. In previous work, we reported that according to industry  stakeholders, launch prices, along with launch vehicle reliability, were the major factors that customers focus on when selecting launch providers.One expert noted, however, that although reusable stages will lower  launch costs and prices may decrease, those decreases may not be  enough to significantly affect demand because prices will be affected by  many other parameters such as other nations’ launch pricing schemes  and possible shifts in consumer demand.
Third, the emerging space tourism industry and small satellite industry in  the United States also may help the U.S. commercial space launch  industry expand. As noted earlier, some U.S. companies are developing  reusable launch vehicles to carry spaceflight participants on suborbital  flights and to place small satellites into orbit. According to FAA,  companies are also developing small expendable launch vehicles to  deploy small satellites in space.
Finally, the federal government’s current indemnification of FAA licensed  launches helps keep launch costs low. As we found in 2012, countries  such as China, France, and Russia have indemnification regimes with no  limits on the amount of government indemnification. Representatives  from five commercial space launch companies, three experts, an industry  advisory group, an industry association, and a spaceport told us that  government indemnification is critical to the U.S. launch industry. One  expert, for example, said that indemnification is critical mainly because all  other space-faring nations also have insurance or indemnification subsidy  programs. He added that if in the future, the number of launches and  companies expands greatly in the United States, a formal government  indemnification program possibly could be replaced with an industry- funded insurance system. The federal government currently indemnifies  launch operators by providing catastrophic loss protection covering third- party liability claims in excess of required launch insurance in the event of  a commercial launch incident, subject to the availability of appropriations.  Representatives from four companies said that the lack of indemnification  in the United States could lead to higher insurance prices, which, if  passed on, could lead to higher launch prices.
section_title: FAA Faces Multiple Challenges Regarding Developments in the Commercial Space Launch Industry
paragraphs: We asked FAA officials, representatives from nine commercial space  launch companies, and three experts to identify the challenges that FAA  faces—and is likely to face in the near future—to address significant  developments in the commercial space launch industry over the last  decade. The challenges for FAA that they identified included the  following: (1) determining whether and when to regulate the safety of  crew and spaceflight participants, (2) increased workload relating to  licensing and permitting launches and launch sites, (3) creating a safety  reporting system, and (4) responding to emerging business plans.
Determining whether and when to regulate the safety of crew  and spaceflight participants: In 2014, FAA released a set of  recommended practicesthat the agency indicated could be a starting point for the industry  to develop standards, or if needed, for FAA to develop regulations.   on human spaceflight occupants’ safety  FAA officials said that if the moratorium is not extended beyond  September 30, 2015, the agency has no plans to issue regulations  regarding the safety of crew and spaceflight participants. The  officials said rather than issuing regulations, FAA is looking to  industry to develop industry consensus standards detailing  validation and verification criteria that are needed to implement  the agency’s recommended practices. The officials also noted that  if the moratorium remains in place, industry may not have an  incentive to devote much time or energy to developing industry  standards (discussed later in this report).
In 2006, we recommended that to be proactive about safety, FAA  should identify and continually monitor space tourism industry  safety indicators that might trigger the need to regulate the safety  of crew and spaceflight participants before the moratorium expires  (rather than responding only after a fatality or serious incident  occurs) and issue guidance on the circumstances under which it  would regulate the safety of crew and spaceflight participants.  FAA disagreed with our recommendation, stating that in light of its  observation of safety risk management, safety assurance and a  general safety culture in the commercial space launch industry  and other factors, it found no compelling reason to issue  guidelines on the circumstances under which it would regulate the  safety of crew and spaceflight participants. During this review, an  FAA official also said that in theory, the agency could promulgate  regulations after an accident, but under the moratorium, it would  be limited to the design feature that caused the accident. For  example, he said that any regulatory action taken in response to  the SpaceShipTwo accident would depend on the results of the  NTSB’s accident investigation. This official also said that the  development of standards by industry may take less time than the  years it would take for FAA to promulgate regulations.
Representatives from six of the nine commercial space launch  companies that we interviewed, the three experts, the Chairman of  the Commercial Space Transportation Advisory Committee, and  the President of the Commercial Spaceflight Federation, all  recommended that the regulatory moratorium be extended beyond  September 30, 2015. Among the reasons provided were allowing  the space tourism industry and industry standards more time to  develop and because of changing technologies. However, they  had different opinions regarding about how long to extend the  moratorium, ranging from 1 to 15 years. Representatives from two  companies suggested that the moratorium be extended  indefinitely. However, one of the experts said that the moratorium  should not be extended for an unreasonably long time or  indefinitely because there will a point in the future when start-up  companies either become successful or fail. Rather, he suggested  that the moratorium be reevaluated periodically to allow  companies to conduct adequate business planning and for the  government to collect information for future decision making on  regulatory and budgetary issues. Another expert we interviewed  said that although he supported extending the moratorium on  regulating crew and spaceflight participant safety, he suggested  that FAA and industry start discussions regarding what a  regulatory framework would look like. In response, an FAA official  said that the agency is concerned about how an extension of the  moratorium would impact the practicality of such discussions, but  that the moratorium would not prohibit FAA from engaging in such  a dialogue with industry These representatives and the experts we interviewed also  provided various reasons why the space tourism industry has not  already begun commercial operations, such as technological  challenges, the amount of time needed for testing and  engineering, and financing. By contrast, representatives from two  of the nine companies that we contacted—both are companies  that are focused on orbital operations—favored allowing the  moratorium to expire. A representative from one company said, for  example, that regulation is needed to provide protection against  companies that may not be safe. He also said that the lack of FAA  regulations defining what is considered “safe” for spaceflight  participants will increase the vulnerability of the commercial  human spaceflight industry to public outcry if loss of life occurs  due to a mishap. However, he added that if there is a clear and  justifiable safety regulatory framework, then a mishap will appear  as a regrettable but inevitable part of any transportation industry’s  growth.
An FAA official indicated that the agency’s position is that the  moratorium should be allowed to expire. FAA officials explained  that although the agency has no plans to regulate the safety of  crew and spaceflight participants, if at some point FAA were to  identify a systemic issue with existing vehicle designs or  operations, the officials would like to be able to quickly initiate the  development of appropriate regulations to address that issue. The  bill approved by the Senate in August 2015 would extend the  regulatory moratorium by 5 years through 2020, while the bill that  the House of Representatives passed in May 2015 would extend  the regulatory moratorium by 10 years through 2025.
Increased workload relating to licensing and permitting  launches and launch sites:
Licensing more launches: In fiscal year 2014, FAA licensed  and permitted 20 launches and re-entries, up from 6 in fiscal  year 2005 and compared with an average of about 11  launches and re-entries during each fiscal year from 2005 to  2014. (Fig. 6 shows changes in the number of licensed and  permitted launches and re-entries from 2005 through May  2015.) A large part of this increase is due to launches for  NASA’s commercial cargo program, which involves  transporting cargo to and from the ISS. One of the experts we  interviewed said the impact of the June 2015 SpaceX launch  mishap on NASA’s commercial cargo program and FAA’s  launch licensing workload depends on several variables such  as the cause of the mishap, future program funding, and the  availability of other international vehicles to supply the ISS. In  the future, FAA also will need to license launches for NASA’s  commercial crew program, which involves transporting  astronauts to and from the ISS and is expected to begin in late  2017, following certification of the provider vehicles. Some  launch companies are also preparing to launch small satellites.  According to FAA, 20 percent of the projects in “pre- application coordination” for possible FAA authorization  involved nonconventional satellite deployment, including small  satellites and the use of hybrid launch vehicles.
Conducting more inspections: In fiscal year 2014, FAA  conducted 223 commercial launch inspections, up from 15 in  fiscal year 2005 and compared with an average of 70  inspections during each fiscal year from 2005 to 2014.
According to FAA officials, an average of 20 to 30 inspections  is required for each launch and inspections can take from 4  hours to 3 12-hour shifts to complete. Officials said that FAA  has conducted more safety inspections, especially those  associated with pre-launch and reentry activities, to allow the  agency to identify safety issues early for correction and to  avoid noncompliance with regulations and the conditions set  forth in the launch license. FAA conducts different types of  inspections such as launch and reentry operations and launch  site operations, and FAA inspectors are present at launches.
Licensing new types of vehicles and technologies:
Companies are developing a variety of new vehicles and  technologies. For example, the space tourism industry is  developing hybrid launch systems such as SpaceShipTwo,  which have elements of both aircraft and rocket-powered  components. FAA officials said that hybrid vehicles are  evaluated on a case-by-case basis to determine which  regulations apply. As discussed earlier, some companies  are testing the re-use of elements of launch vehicles, such  as first and second stages of the vehicles, which FAA will  need to review for licensing.
Some companies are also testing autonomous flight safety  systems, which would allow a launch vehicle that is off  course to be terminated without humans taking action.  Most licensed launches to date have involved flight  termination systems that were human-operated. FAA  officials said that approving such autonomous systems will  involve complicated software analyses.
An FAA official said that reentries from orbit carrying  humans, including NASA crew from the ISS, will be  significantly more complex and resource intensive for the  agency to regulate and license compared with current  launch and reentry regulation and operations. According to  FAA, operators plan to maximize their flexibility to conduct  successful reentries, using multiple reentry sites and  dynamic decision making that could postpone the selection  of a site and the vehicle’s corresponding trajectory until just  hours before the planned landing. An FAA official said that  to adequately prepare for these sites to be used, the  agency must evaluate all of them during its licensing  process, develop and implement plans to manage the  airspace around each site, and remain prepared to  compute real-time aircraft hazard areas throughout a  reentry operation.
Licensing more and complex launch sites: Although launch  sites traditionally have been located in coastal areas at federal  launch facilities, last year FAA licensed an inland launch site  that is collocated with a commercial airport in Midland, TX.  FAA officials said that operating commercial launch sites  located inland will require the Office of Commercial Space  Transportation to work with other FAA offices to safely and  effectively integrate launch vehicles into the National Airspace  System to avoid interference with other air traffic. Furthermore,  although commercial space launches have traditionally  occurred at Air Force ranges, FAA is licensing more  nonfederal launch sites. As of July 2015, there were 10 FAA- licensed commercial launch sites, compared with six in 2006.  In addition, as of May 2015, FAA had received partial  applications for four additional launch sites. (See fig. 3 for  launch site locations.)
Responding to industry requests for changes in licensing  and permitting: Representatives from five of the nine  commercial launch companies that we interviewed, the  Chairman of the Commercial Space Transportation Advisory  Committee, and the President of the Commercial Spaceflight  Federation said they would like FAA to allow companies to  hold experimental permits and licenses for the same vehicle  design, which is currently prohibited. One company  representative, for example, said this would allow continued  testing and development of a vehicle while it is in commercial  operation. FAA officials said they would like to be able to  approve experimental permits and licenses for the same type  of vehicle, but that it is not permitted under the Commercial  Space Launch Amendments Act of 2004, so the act would  need to be amended for this to be authorized. Bills passed  by the Senate in August 2015 and the House of  Representatives in May 2015 would allow a launch license and  experimental permit to be issued for the same type of vehicle  design.
Creating a safety reporting system: Although FAA created a  Commercial Space Transportation Lessons Learned System for  industry to share safety data, as of May 2015, it contained only  three submissions. An FAA official said that it is difficult to create a  lessons learned database that is anonymous for those making  submissions and that companies may be concerned about sharing  proprietary information. However, FAA has established a voluntary  safety reporting system for the airline industry called the Aviation  Safety Action Program. This program encourages the voluntary  reporting of safety issues and events by employees of companies  that are FAA certificate holders. FAA created the program to  encourage aviation employees to voluntarily report safety issues  even though they may involve alleged regulatory violations. Those  reports are protected from disclosure, with certain exceptions.  The Office of Commercial Space Transportation’s 2015 business  plan contains a plan to determine the feasibility of a voluntary  safety reporting system. According to FAA, legislative protections  for voluntarily submitted safety data are likely to be needed. As  discussed earlier, NTSB recommended as part of its investigation  of the SpaceShipTwo accident that FAA implement a database of  lessons learned from commercial space mishaps investigations.
Uncertain regulatory framework and authority for regulating  emerging business plans: Some companies are developing  business plans that could present regulatory challenges for FAA.  In December 2014, FAA informed Bigelow Aerospace that in  principle, the agency supports the company’s plans to develop a  lunar habitat. Some companies are also considering mining  resources on the moon and asteroids. Although FAA plans to  leverage its existing launch licensing authority to encourage such  private sector investments, it is also concerned that the current  regulatory framework may not fulfill the federal government’s  obligations under the Outer Space Treaty of 1967. That treaty  established principles governing the activities of nations in the  exploration and use of outer space, including the moon and other  celestial bodies. FAA officials cited an April 2014 letter from the  State Department to FAA indicating that the Department is  concerned that the “national regulatory framework for  nongovernmental space activities, in its present form, does not  appear adequate to enable the United States Government to fulfill  its obligations under  with respect to the  activities proposed by Bigelow.” However, the Chairman of the  Commercial Space Transportation Advisory Committee stated that  FAA does not have regulatory authority over activities in space or  on the moon. Representatives from two commercial space launch  companies said that FAA should regulate activities in space, while  a representative from another company thought that FAA should  not have such authority. FAA officials told us that federal authority  regarding activities in space should be clarified to prevent  companies from going to other countries to operate their  businesses. The bill that the House of Representatives passed in  May 2015 states that “ny asteroid resources obtained in outer  space are the property of the entity that obtained such resources,  which shall be entitled to all property rights thereto, consistent with  applicable provisions of Federal law and existing international  obligations.”
section_title: Commercial Space Launch Industry Is Starting to Develop Standards for Human Spaceflight but Faces Challenges
paragraphs: The commercial launch industry has begun developing human spaceflight  standards and, as of June 2015, had developed two voluntary  standards—one on the storage, use, and handling of liquid propellants  and the other on hazardous materials notification. This effort is being led  by the Commercial Spaceflight Federation, an industry association  established to promote the development of commercial human  spaceflight, among other objectives. A representative from the  Commercial Spaceflight Federation said the association is developing  these standards to promote safety. An association representative also  said that, unlike NASA’s human spaceflight standards for its commercial  crew program that are focused on orbital operations using vehicles that  are similar to those used in the past, the industry standards are intended  for use in both orbital and suborbital flight using vehicles with a variety of  designs. However, representatives from the association and three  companies leading the development of the standards said the process of  developing standards for human spaceflight is difficult for several  reasons, including (1) that multiple types of technologies are being  developed simultaneously, (2) that resources to devote to this effort are  lacking, and (3) that FAA is not providing enough direction about its  priorities. The association representative said two or three standards  would be developed per year, but did not know how many would be  prepared in total.
The Commercial Space Launch Amendments Act provides that the  Secretary of Transportation “shall encourage, facilitate, and promote the  continuous improvement of the safety of launch vehicles designed to  carry humans.” FAA officials said they interact with stakeholders  through the Commercial Space Transportation Advisory Committee,  FAA’s annual Commercial Space Transportation Conference, FAA’s  Commercial Space Transportation Center of Excellence, industry  workshops, and meetings with license and permit holders and applicants  regarding industry-led efforts to develop industry standards. As stated  earlier, FAA also developed a set of recommended practices in 2014 on  human spaceflight occupants’ safety. This document, which FAA  prepared based on NASA’s requirements and guidance for its commercial  crew program, provides 89 recommended practices regarding human  spaceflight on suborbital and orbital launch and reentry vehicles in the  categories of design, manufacturing, and operations that are primarily  performance-based. Specific topics include medical limits for spaceflight  participants, human protection, and flightworthiness. However,  Commercial Spaceflight Federation representatives said they would like  FAA to provide more information about which practices within the  document are agency priorities. When we asked FAA officials about this  topic, they said that industry is in the best position to identify its priorities.  Agency officials also said that an industry standards committee has not  yet been formed on which FAA could participate. The bills passed by the  Senate in August 2015 and the House of Representatives in May 2015  would require the Secretary of Transportation, in consultation with the  commercial space launch industry, to report to Congress every 2 years on  the progress of developing voluntary consensus standards starting in  2016.
The Chairman of the Commercial Space Transportation Advisory  Committee cited the development of industry consensus standards for the  regulation of the light sport aircraft industry as a possible approach that  the commercial space launch industry could follow. According to an FAA  official who participated in developing standards for the light sport aircraft  industry, FAA worked with the industry to develop standards within a year  and shared its views about which standards the agency favored. FAA  later incorporated these standards by reference into their regulations  which made them enforceable. However, the FAA official acknowledged  that FAA found through its airworthiness certification process that many  manufacturers were not in compliance with the standards. This official  also said that the light sport aircraft industry knew the direction it wanted  to go with the standards, which facilitated the process. Another FAA  official noted that the effort was conducted under a FAA rulemaking  process, and that once the standards were developed, the agency had to  accept them. The official said that this process differed from the situation  that the Office of Commercial Space Transportation faces because it  cannot proceed with rulemaking regarding commercial spaceflight.  Furthermore, another FAA official said that a disadvantage of industry  consensus standards is the possibility that one entity could attempt to  dominate the process to favor a particular design. A representative from  one commercial launch company said that it may be impossible to  develop consensus standards because of the number of different vehicles  that are being developed and that his company withdrew from the  process because there were too many diverse opinions. Commercial  Spaceflight Federation representatives said the standards must be  approved by three-fourths of the members who vote. Representatives  from two companies that are involved in developing the standards said  that the standards could become enforceable if insurance companies  required adherence to them.
section_title: FAA Has Not Provided Detailed Information in its Budget Submissions Justifying its Requests
paragraphs: During 6 of the 10 years from fiscal years 2005 to 2014, FAA generally  based its budget submissions for the Office of Commercial Space  Transportation on the number of launches that it was projecting for the  following year.launches during those years was much lower than what FAA projected.  (The table shows the actual number of launches in both fiscal and  calendar years because the projections in the budget submissions were  not always clear regarding whether they pertained to fiscal or calendar  years.) Furthermore, while the capability of transporting crew to the ISS is  expected in fiscal year 2018, continued budget uncertainty for the  commercial crew program could put that date in jeopardy and it is unclear  whether those vehicles currently in development under the commercial  crew program will be ready in time. This is because NASA has received  $1.13 billion less than it requested for the commercial crew program in  fiscal years 2011 through 2015.
section_title: Some Industry Changes Could Increase the Government’s Exposure but Could Be Mitigated
paragraphs: While the federal government provides a process for the conditional  payment of third-party claims i.e., indemnification, to cover claims for  damage to people or property as a result of a launch accident, the  government has not had any claims as of June 2015. As noted earlier,  FAA calculates the maximum probable loss to estimate the losses likely  to occur from a potential launch mishap to determine the amount of third- party losses against which launch companies must insure. Launch  companies purchase third-party liability insurance up to the maximum  probable loss, which is capped at a maximum of $500 million or the  maximum liability insurance available on the world market at reasonable  cost, if less. The federal government, subject to the availability of  appropriations, then provides indemnification for losses over the  maximum probable loss up to $1.5 billion adjusted for post-1988 inflation,  which is about $3.06 billion in 2015. Figure 7 illustrates the three tiers of  coverage.
The federal government has not paid any third-party liability claims as  none of the 246 FAA licensed launches and reentries from 1989, when  launches were first indemnified, through May 2015 have resulted in  losses which would invoke indemnification. This includes the recent two  launch mishaps involving Scaled Composites’ SpaceShipTwo and Orbital  Sciences’ Antares, both of which occurred in October 2014. The  SpaceShipTwo accident occurred under a FAA experimental permit that  was issued to Scaled Composites; the federal government does not  indemnify permitted activities. The Antares mishap, a FAA licensed  launch, did not result in third-party losses over the maximum probable  loss which FAA calculated as $56 million.
As we have previously reported, industry changes could increase the  government’s exposure to third-party liability, but the amount of increase  could be mitigated as long as the maximum probable loss methodology is  reasonable and maximum probable loss calculation is accurate.  Increases in the number of prospective launches and reentries would  increase the number of times the government is exposed to potential  claims. In addition, changes in the types of launches and reentries could  increase the government’s exposure but the increase could be mitigated if  the maximum probable loss calculation accurately takes them into  account.
First, the number of launches and reentries covered by federal  indemnification is forecasted to increase, and the federal government’s  potential exposure to third-party liability claims would increase with the  added volume. NASA expects to procure 42 launches from launch  companies to carry cargo and crew to the ISS from fiscal years 2015  through 2020. The space tourism industry may also increase the number  of launches and reentries covered by federal indemnification, although  the timing of these launches and reentries is uncertain. In general, by  increasing the volume of launches and reentries, the probability of a  catastrophe occurring is also increased. A catastrophic accident could  result in third-party losses over the maximum probable loss, which would  invoke federal indemnification.
Second, forecasted types of launches and reentries include newly  developed launch vehicles that have a shorter launch history than more  “legacy” launch vehicles. For example, Virgin Galactic’s SpaceShipTwo,  XCOR’s Aerospace’s Lynx, and Blue Origin’s New Shepard vehicle are  new vehicles. However, increased flights of a launch vehicle could make  a vehicle more reliable. For a vehicle to be certified to fly NASA’s  highest priority science missions, NASA requires at least three successful  flights (two of which must be consecutive) of the same vehicle  configuration, among other factors. However, an insurance company  representative with whom we spoke stated that even launch vehicles with  a proven launch history can have accidents particularly if the vehicle has  been modified. To license launches of launch vehicles and determine the  maximum probable loss, FAA reviews the launch vehicle, flight path, and  the potential casualties and fatalities that could result from varying types  of launch failures at different points along the path. In addition, although  many forecasted launches are anticipated to take place at federal ranges,  including Cape Canaveral Air Force Station and Kennedy Space Center  where range safety oversight is provided in addition to that of FAA, some  forecasted launches and reentries may occur from licensed launch sites  that are not located on a federal range and one launch site is collocated  at a commercial airport. Thus, according to FAA, the maximum probable  loss could be higher for such launches.
According to FAA, industry changes that include space tourism flights  may not increase the federal government’s potential exposure because  the government provides indemnification only for property damage, and  injury and death of the public and does not indemnify those involved in a    launch, including crew and spaceflight participants onboard a vehicle. Instead, these individuals are required to sign cross waivers stating that  they will not bring claims against the federal government in the event of a  mishap.crew or spaceflight participants when determining the maximum probable  loss.
Thus, FAA does not consider whether the launch is carrying  As we have previously reported, although some industry changes may  alter the government’s exposure, an accurate maximum probable loss  calculation will mitigate the effects to some extent. If the maximum  probable loss calculation is accurate, the estimated losses will adjust for  the risk profile of each license, such that the likelihood the government  would indemnify a third-party remains the same regardless of the industry  change. Thus, whether the launch vehicle is newly developed or manned,  an accurate maximum probable loss calculation would adjust for the  increased (or decreased) potential damage associated with that vehicle.  For example, if the maximum probable loss for an unmanned launch over  an unpopulated area is $35 million, it could be $45 million for the same  launch over a populated area and the government would indemnify from  the maximum probable loss up to an additional $3.06 billion in 2015 for  losses. In this example, the higher maximum probable loss accounts for  the higher expected damages over a populated area, and the estimated  likelihood that the launch company’s gross liability would exceed the  maximum probable loss (triggering government indemnity) would remain  the same. However, the amount the government would pay if the launch  company’s gross liability does exceed the maximum probable loss may  change with these industry changes—and could be higher or lower— depending on the circumstances. For example, a launch from a licensed  launch site with a flight path over a populated area could affect the  severity of a potential accident and thus the amount by which third-party  claims exceed the maximum probable loss. These effects  notwithstanding, if the industry changes would result in losses that  exceed $500 million or the amount of the insurance that launch  companies could purchase at a reasonable cost, the federal  government’s exposure may increase by the amount of the shortfall.  However, according to FAA data on commercial launches and reentries,  the average maximum probable loss for launches—most of which are  from federal, coastal launch sites—was about $99 million and ranged  from $23 million to $267 million as of January 2012.
In July 2012, we recommended that FAA review whether its risk  methodology should be updated due to advances in risk modeling of  potential catastrophic events since the maximum probable loss  methodology was first established in the 1980s.
FAA uses an “overlay  method” that estimates a debris field and potential impacts on nearby  populated areas. On the other hand, insurance companies use  “catastrophe modeling” that generates a distribution of potential losses  and simulated probability of different losses using computer simulations.  We recommended that FAA review its maximum probable loss  methodology and FAA is addressing this open recommendation. For  further information, see Appendix I.
section_title: Conclusions
paragraphs: The commercial space launch industry has experienced considerable  change over the last decade. Several developments, such as NASA’s  commercial cargo and crew programs, continuing efforts to begin space  tourism operations, and the launching of small satellites, may increase  FAA’s workload for licensing and permitting launches. However, currently  there is not enough information to know the level of resources that FAA  needs for its commercial space launch oversight activities. Over the last  decade, FAA has generally based its budget submissions on the  projected number of launches, but launches are not the only indicators of  its commercial space launch activity workload. FAA is hindered by the  lack of data on how much time its staff spend on related responsibilities  such as consulting with companies before they submit their license or  permit applications. Because FAA has not provided this type of detailed  information in its budget submissions, Congress lacks information that  would be helpful in making decisions about the resources needed for the  agency’s commercial space launch activities.
section_title: Recommendation
paragraphs: To provide Congress with more information about the resources  requested to address developments in the commercial space launch  industry, in justifying requested changes, we recommend that the  Secretary of Transportation direct the FAA Administrator to provide more  detailed information in its budget submissions for the Office of  Commercial Space Transportation regarding its workload.
section_title: Agency Comments and Our Evaluation
paragraphs: We requested comments on a draft of this report from DOT, NASA, and  DOD. In its written comments, DOT said that upon preliminary review,  FAA agreed with the recommendation, but DOT also had concerns about  how some issues were presented. (This response is summarized below  and reprinted in app. III). DOT stated it was concerned that the report did  not adequately convey the dramatic growth in commercial space  transportation activity and innovation underway, which will affect the  workload of FAA’s Office of Commercial Space Transportation. DOT said  the report focuses on the licensing of NASA-sponsored commercial  programs and on delays in the suborbital space tourism industry. It also  said that the report does not give sufficient attention to the emerging  market for the deployment of small satellites, which the department said  is a significant activity for the industry and FAA. For example, DOT said  that FAA currently has 54 projects in “pre-application coordination” for  possible authorization, 81 percent of which is unrelated to NASA  programs or space tourism.
In the report, we focused on FAA’s increasing workload related to  licensing and permitting launches such as for NASA’s commercial and  cargo programs, in part, because the agency reported in its Annual  Compendium for Commercial Space Transportation: 2014 that launches  in the next 10 years are predominantly commercial launches to the ISS,  i.e., NASA programs. Further, according to a forecast for 2014 through  2023 in FAA’s Annual Compendium for Commercial Space  Transportation: 2014, the number of small satellites drops off toward the  end of the forecast period, but the number of launches remains relatively  steady during this time period as NASA expects to begin its commercial  crew program. In response to FAA’s comments, we added more  information to the report about the agency’s workload relating to small  satellites, including its pre-application coordination activities. However,  because the Office of Commercial Space Transportation does not record  the amount of time its staff spends on various activities, we could not  confirm the extent to which the number of commercial space launch  projects in “pre-application coordination” that is unrelated to NASA or the  space tourism industry reflects the office’s overall workload.
DOT also provided technical comments, which we incorporated as  appropriate. NASA only provided technical comments, which we  incorporated as appropriate. DOD did not have any comments.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to appropriate congressional  committees, the Administrator of the Federal Aviation Administration, the  Administrator of the National Aeronautics and Space Administration, and  the Secretary of Defense. In addition, this report will be available at no  charge at http://www.gao.gov  If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or dillinghamg@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV.
section_title: Appendix I: FAA is Taking Steps to Address GAO Recommendation on FAA’s Risk Methodology
paragraphs: In July 2012, we recommended that the Federal Aviation Administration  (FAA) review its risk methodology including (1) assessing the  reasonableness of the assumptions FAA uses to determine the maximum  probable loss and (2) considering the use of external experts to adjust the  methodology as appropriate considering the costs. FAA concurred with  the recommendation and in response, intends to reassess one of the  main assumptions that it uses to determine the maximum probable loss— the cost of casualty value—which represents the value of a lost life or  injury due to a catastrophic launch incident. Specifically, FAA would like  to contract for a study on whether the $3 million figure it currently uses  should be raised. According to FAA, the Department of Transportation  (DOT) uses $9.2 million for the value of a statistical life, a figure that is  based on people’s willingness to pay for safety. However, FAA told us  that in the case of commercial space launches, there could be data based  on liability determined through the judicial process, such as in the case of  a wrongful death suit that would provide a more appropriate figure for  required third-party liability insurance. A study would look at these factors  and assess what would be the figure that best captures the cost of  casualty as a result of a commercial space launch accident. In addition,  FAA has contracted with ACTA Inc., a company that has provided flight  risk and safety hazard analyses of space launches for the U.S. Air Force  and the National Aeronautics and Space Administration, to review FAA’s  maximum probable loss methodology. ACTA is assessing whether FAA  could use a risk profile method that looks at a variety of scenarios and  probabilities of launch mishaps using software simulations. According to  FAA, this approach would allow the agency to run multiple scenarios of  potential rocket failures, ways in which the launch vehicle could break  apart, and various impacts on the ground. ACTA plans to conclude this  review and report to FAA in December 2015.
FAA told us that the agency is also looking at catastrophic risk models  and thresholds of risk and would like to develop a risk profile method that  would then be reviewed by an external party. Most launch companies and  an insurance company that provides third-party liability insurance for  commercial launches with whom we spoke said that FAA’s maximum  probable loss methodology is reasonable and does not need  improvement. However, as the maximum probable loss establishes the  point at which the federal government is liable for third-party claims  subject to the availability of appropriations, we continue to believe that a  review of whether the methodology could be improved is warranted,  especially given changes in the types and number of forecasted  increases in commercial launches.
section_title: Appendix II: Objective, Scope, and Methodology
paragraphs: Our objective was to review the extent to which the Federal Aviation  Administration (FAA) is prepared to address changes that have occurred  in the commercial space launch industry over the last decade and  potential changes in the future. Specifically, we examined (1) how the  competitive landscape has changed for the U.S. commercial space  launch industry over the last decade, (2) challenges that FAA faces in  licensing and regulating commercial space launches, (3) the status of  developing industry standards for human spaceflight, (4) how FAA has  projected its commercial space launch licensing workload for future fiscal  years when submitting budget requests to Congress and how changes in  the number and types of launches might affect its budget needs in future  years, and (5) how changes in the number and types of commercial  space launches could affect the government’s overall exposure and  indemnification for commercial launches.
First, to study the competitive landscape regarding the commercial space  launch industry, we reviewed FAA trend data, such as the number of  orbital launches conducted by U.S. and foreign companies and orbital  launch revenues generated during the last 10 years. We also interviewed  FAA officials, industry stakeholders, and experts about the factors that  have affected the U.S. commercial space launch industry during the last  decade. We chose these companies and industry organizations by  reviewing FAA reports on the commercial space launch industry and  other literature. We interviewed representatives from the majority of U.S.  commercial space launch companies identified in FAA’s 2014 annual  report on commercial space transportation. Of the nine companies we  interviewed, three conducted licensed launches in 2014. The experts that  we interviewed were selected from academia and private industry based  on their knowledge of FAA’s oversight of the commercial space launch  industry. Their views are not generalizable. Table 2 lists the organizations  and experts that we interviewed.
To identify the challenges that FAA faces in licensing and regulating  commercial space launches and how it is addressing them, we asked  FAA officials, industry stakeholders, and experts for their views on how  developments in the industry affect FAA’s oversight responsibilities. We  also reviewed data on FAA’s licensing, permitting, and safety inspection  workload during the last decade; program guidance; legal requirements  and restrictions; business plans; and related documentation.
Regarding the status of developing industry standards for human  spaceflight, we interviewed representatives from three companies who  are involved in developing the standards as well as the Commercial  Spaceflight Foundation, which is leading the effort. We also reviewed  FAA’s legal responsibilities to promote human spaceflight safety. In  addition, to compare how standards were developed for another  emerging aviation industry, we interviewed an FAA official who  participated in developing standards for the light sport aircraft industry.
To evaluate how FAA estimates its commercial space launch licensing  workload for future fiscal years when submitting budget requests to  Congress and how the changing market might affect its budget needs in  future years, we discussed with FAA officials how the agency prepares its  launch projections and its commercial space launch oversight workload.  In addition, we examined FAA’s budget submissions for its Office of  Commercial Space Transportation from fiscal year 2005 through fiscal  2016 to determine the extent to which FAA’s launch projections were  used as the bases for its budget submissions. We also compared (1)  FAA’s fiscal year 2016 budget submission for the Office of Commercial  Space Transportation against the Office of Management and Budget’s  guidance on budget formulation and (2) the number of launches that FAA  projected during the last 10 fiscal years with the actual number of  launches that occurred. In addition, we discussed the workload metrics  that the Office of Commercial Space Transportation collects and analyzed  the office’s overtime and compensatory expenditures during the last 5  years. FAA provided information about the steps that it took to ensure the  completeness and reliability of the data on the number of launches that  the agency licensed and permitted and inspections that it conducted, as  well as the data on overtime and compensatory expenditures. Based on  our review of this information, we determined the data were sufficiently  reliable for our purposes.
To study how changes in the number and types of commercial space  launches could affect the government’s overall liability and  indemnification for commercial launches, we reviewed prior GAO reports  and testimonies and discussed the factors affecting the government’s  overall potential liability and indemnification for commercial launches with  FAA officials, industry representatives, and an insurance company  representative. We also discussed with FAA officials the status of our  2012 recommendation that the agency review its risk methodology  regarding maximum probable loss.
Moreover, we visited launch facilities in Mojave, CA, and Wallops Island,  VA, to review how FAA carries out its launch safety activities. We chose  to visit the Mojave Air and Space Port because it is an FAA-licensed  launch site where a number of companies are conducting space launch  and development activities for both suborbital and orbital operations and  because it was the site of the SpaceShipTwo test flight accident in  October 2014. In addition, we visited the Mid-Atlantic Regional Spaceport  at NASA Wallops Flight Facility in Wallops Island, VA, because it is an  FAA-licensed launch site located on a federal range and was the site of  Orbital Sciences’ launch mishap in October 2014.
We also interviewed officials from the National Aeronautics and Space  Administration regarding its commercial crew and cargo programs and  related issues, the National Transportation Safety Board about the status  of its investigation of the SpaceShipTwo accident, and the U.S. Air Force  regarding its launch safety oversight at federal ranges and interaction with  FAA.
We conducted this performance audit from January 2015 to August 2015  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objective. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objective.
section_title: Appendix III: Comments from the Department of Transportation
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Catherine Colwell (Assistant  Director), Namita Bhatia Sabharwal, Melissa Bodeau, Kevin Egan, Bob  Homan, David Hooper, Maureen Luna-Long, SaraAnn Moessbauer,  Shelby Oakley, Jack Sheehan, Joe Silvestri, and Kristin Van Wychen  made key contributions to this report.