House Passes Extension of Launch Liability Indemnification

The House passed H.R. 6586 today, extending for two years the government’s authority to indemnify launch services companies from third party claims for certain amounts of money resulting from launch vehicle accidents.

The current authority expires on December 31, 2012.   The bill was not controversial.  Only five Members — four Republicans and one Democrat — were on the House floor to speak about the bill.  All supported it.  The main theme was that the U.S. launch services industry needs a level playing field in order to successfully compete with other countries that indemnify their companies.

Under current law, launch services companies must purchase insurance to cover the Maximum Probable Loss as calculated by the Federal Aviation Administration to cover claims from the general public in case they or their property are damaged by a launch failure, up to a maximum of $500 million.   Under the 1988 law that created this authority, the government covers claims for the next $1.5 billion. The company must cover claims above that.

The $1.5 billion limit is adjusted for inflation, however, and is currently $2.7 billion.  In supporting the bill, Rep. Jerry Costello (D-IL), the only Democrat to speak on the bill, said that he hoped that the next time Congress revisits the provision it will take a look at how the taxpayer’s exposure is growing.  He also pointed out, however, that the provision has not cost taxpayers a single penny in third-party claims so far.   Costello is retiring from Congress at the end of the year.

Rep. Steve Palazzo (R-MS), chairman of the House Science, Space and Technology (HSS&T) Committee’s subcommittee on Space and Aeronautics, who introduced the bill, pointed out that the administration would have to submit a request and Congress would have to pass a separate appropriations bill in order to pay any claims under the authority.  He supported the bill, noting that the number of domestic commercial launches will be increasing in the years ahead particularly with the commercial cargo and commercial crew launches for NASA.

Rep. Ralph Hall (R-TX), chairman of the full HSS&T committee, Rep. Lamar Smith (R-TX), and Rep. Dana Rohrabacher (R-CA) also spoke in favor of the bill.   Smith and Rohrabacher are two of the three candidates vying to succeed Hall as chairman.   Smith said that it was good that the authority would be extended for two years in this bill, but that a longer extension is needed and it might be possible to consider that next year when Congress considers a new NASA authorization and new commercial space legislation — hinting at what his space priorities will be if he is chairman.  Rohrabacher, who is a strong proponent of commercial space and involved in commercial space legislation for many years, noted that in 2004 he was a key figure in legislation that created the current regulatory regime for personal human spaceflight (“space tourism”).  He said it was “tempting” to revisit that topic now as well, but congratulated Palazzo on keeping the current bill focused on “the critical question before us” — extending the current authority before it expires at the end of the year.

Editor’s Note:   This article has been modified to clarify that the inflation-adjusted figure of $2.7 billion refers to the $1.5 billion tier of claims covered by the government.  The law states that the first tier, for which companies must purchase insurance, is a maximum of $500 million, and the second tier is the government-covered $1.5 billion — a total of $2 billion.  However, the MPL calculated by the FAA for which insurance must be purchased may be less than $500 million.  Whatever that level is, the government covers the next $1.5 billion — as adjusted for inflation.