Last month, Congress passed HR 5245 which extended the U.S. government indemnification for certain losses over and above “maximum probable loss” up to the limit of $1.5 billion (in 1988 dollars) in the event of a catastrophic launch failure from a U.S.-based launch service provider, essentially capping the amount a third party can recover from a launcher. It is the fourth time this indemnification has been extended since it was first passed in 1988.

“The general spirit of the bill, which is a bi-partisan consensus between industry and government, is that there has to be some risk-sharing between the partners so that commercial launches can be possible at all in face of very stiff competition from, if not commercial launch providers, at least from commercial launch capabilities development in places such as India and Russia and even in places like Argentina and Brazil which have expressed interest as well,” Pat McCartan, director of legislative affairs at the Aerospace Industries Association told Satellite News.

And while the bill caps recoverable losses, McCartan was quick to note that there has not been a catastrophic commercial launch failure in the history of U.S. commercial launches. And while advances in propulsion and safety technologies have put the launcher industry “in a much better position now than we were in 1988” when indemnification was first enacted, “the bill is actually a business proposition and the commercial space launcher industry would probably wither without the knowledge and the security of some form of risk-sharing or indemnification between the public and private sectors,” McCartan said.

Industry Applauds Extension

The extension of indemnification was greeted with praise from U.S.-based launchers Sea Launch LLC and International Launch Services (ILS).

“Sea Launch fully endorses the extension of the commercial launch indemnification bill,” Sea Launch President Jim Maser told Satellite News. “It ensures that the U.S. commercial industry remains on equal footing with competing systems worldwide.”

Added ILS Spokeswoman Fran Slimmer: “ILS is very pleased with the long-term renewal of government indemnification for launches. We believe it provides the optimal means for meeting the needs of both the U.S. government and the U.S. commercial space transportation industry.”

An End To Indemnification?

While the recently enacted bill extends the indemnification for another five years, it could also be laying the foundation for the end of federal indemnification of commercial launches, as the bill has required a study on the alternatives to the current indemnification regime but done so in a way that would maintain U.S. competitiveness in the tight launcher market. McCartan said the study language was driven primarily by members of Congress with input from industry.

“Congress in a tight budgetary environment wanted to consider several options for supporting the commercial space launch industry, but also comparing and contrasting what might be able to be done in absence of indemnification as the market expands and technologies advance,” McCartan said. He added that the study would be complete in about two years.

However, both Sea Launch and ILS did not see any alternatives lingering on the horizon that could sufficiently substitute for government indemnification.

“There is really no alternative,” Maser said. “Buying insurance in the open market would cause U.S. launch services to be less attractive and unable to compete with foreign launch providers.”

“We don’t believe there is a need for alternatives to the approach,” Slimmer said.

(Matt Grimison, AIA, 703/358-1076; Fran Slimmer, ILS, 571/633-7462; Paula Korn, Sea Launch, 562/499-4729)