This New Ocean

This isn’t space law, but it feels like space law.  Or, to put it more pedantically, this application to the National Oceanic and Atmospheric Administration from Lockheed Martin Corporation to extend its deep seabed mineral exploration licenses contains interesting parallels to the mining of celestial bodies.  The mining would take place outside of anyone’s sovereign territory.  As a review of Lockheed Martin’s application shows, it’s technically very difficult.  Also, there’s a treaty that Lockheed is waiting on the United States to ratify, somewhat like some space miners are waiting for Congress set up a regulatory structure for them before they will start mining.   There is an International Seabed Authority, much as some, including the signatories of the Moon Treaty, would have there be an international authority for extraterrestrial activity.  Unlike for space miners, Congress did pass a law, the 1980 Deep Seabed Hard Mineral Resources Act, to regulate and administer seabed mining.

NOAA’s Federal Register notice links to the application itself.  In its application, Lockheed Martin states that it:

requests an extension of the seabed exploration licenses for the two Lockheed Martin claims, USA-1 and USA-4. NOAA renewed these licenses in 2012 enabling us to continue our investigation into the viability of exploration and development of the USA-1 and USA-4 licensed areas. Since the most recent 5 year license extension was granted, the Corporation has made significant progress against Phase I of its Exploration Plan.1 However, during the same period, progress on the Exploration Plan has been delayed due to the prolonged, severely depressed state of the metals markets and continued delay in resolving the security of tenure issues given the lack of ratification of the U.N. Convention on the Law of the Sea.

It would be very interesting to know why Lockheed sees the lack of ratification of the UN Convention as an impediment to going forward, but I found no additional detail or explanation in the Lockheed application for this tantalizing tidbit.

A quick internet search unearthed this comprehensive review of the 1982 UNCLOS.  Writing in 2012, Steven Groves of the Heritage Foundation explains how U.S. companies can engage in seabed mining without joining UNCLOS.  For one thing, the United States has entered into a series of agreements with other nations to, among other things, resolve conflicting claims and to notify each other when approving applications for exploration. A number of nations

have made a commitment to the United States that they will not interfere with or infringe on the claims by the United States or its companies in the CCZ. None of the nations has denounced or withdrawn from the agreements or has otherwise indicated that it does not respect its international commitments to recognize U.S. claims in the CCZ.

As a legal matter the article notes, the countries who are part of  UNCLOS “cannot prevent the United States or any other nation from mining the seabed any more than they can prevent the U.S. from exercising the freedom of navigation and overflight, the freedom of fishing, or any other high seas freedom.”

Simply because most nations have ratified UNCLOS does not mean that those nations or any international organization, such as the Authority, may deny a right to the United States that it enjoys under international law. One set of nations cannot annul the rights of another set of nations by drafting a treaty that the second set of nations chooses not to join.

(From the perspective of Article II of the Outer Space Treaty, which bars national appropriation of celestial bodies, it is interesting to note that no nations claim sovereignty over the deep seabed yet those nations may recognize claims.)

Groves’ article sums up the state of affairs for security of tenure:

In sum, acting under the authority of DSHMRA, customary international law, and multilateral agreements with foreign countries and companies, the United States has successfully claimed and maintained security of tenure over vast tracts of the deep seabed. The U.S. has done so as an independent sovereign nation exercising its inherent rights.

Groves’ discussion highlights a number of areas of concern for U.S. companies, including environmental measures, inspections, data sharing, and, most significantly for a company with fiduciary obligations to its shareholders:

Under an UNCLOS regime, a U.S. company would have limited control over the area licensed to it for exploration. Once a U.S. company identifies an area of the seabed that it wants to explore, it must divide the area into two halves of equal estimated commercial value and share its data on the area with the Authority.[51] Thereafter, the Council reserves one half of the area for exploration by developing countries or the Enterprise, the Authority’s mining arm.[52] The remaining half would be licensed to the U.S. company for exploration. The size of the U.S. company’s half is effectively limited to only 75,000 square kilometers.[53] (By comparison, the USA-1 exploration area is almost 169,000 square kilometers.[54] Finally, a U.S. company would not have exclusive access to its half because the Authority has the right to enter into contracts with third parties to explore and mine the U.S. half for resources other than polymetallic nodules.

According to NOAA’s Federal Register notice, it seeks comments from the public by May 22, 2017, on Lockheed Martin’s request for an extension.  It will be interesting to follow this docket and see if anyone objects to the extension.  Might competitors file?  Might environmental groups?  Might those who think this a fine regulatory model for outer space be deterred by the thought that others get to comment on and thus delay their business plans?

Bonus points to anyone able to identify the source of this post’s title.

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Inflating the Penalties for Commercial Space Transportation

To account for inflation, the Federal Aviation Administration issued a final rule that adjusts the fines—“civil penalties” in FAA lingo—that the agency may impose for violations of its regulations and statutes. The agency has to do this because several laws require inflation adjustments to ensure that the threatened fines of regulatory agencies continue to have a deterrent effect.   The laws include the Federal Civil Penalties Inflation Adjustment Act of 1990, the Debt Collection Improvement Act of 1996, and, most recently, the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. The 2015 Act amended the formula for and frequency of agency inflation adjustments, requiring an initial “catch-up” adjustment, followed by annual adjustments of civil penalty amounts using a statutorily mandated formula. The FAA implemented the initial adjustment in July 2016. This new rule provides the first of the annual adjustments. The FAA notes that the new law:

provides a formula for annual inflationary adjustments that increase civil penalty maximums and minimums by a cost-of- living adjustment (COLA). Under the FCPIAA, as amended by the 2015 Act, the COLA for each civil penalty is the percent change between the U.S. Department of Labor’s Consumer Price Index for all-urban consumers (CPI–U) for the month of October of the calendar year preceding the adjustment and the CPI–U for the month of October of the previous calendar year. Any resulting increase must be rounded to the nearest $1.

*          *          *

To derive the 2017 adjustment, the FAA must multiply the maximum or minimum penalty amount by the percent change between the October 2016 CPI–U and the October 2015 CPI– U. In this case, October 2016 CPI–U (241.729)/October 2015 CPI–U (237.838) = Multiplier (1.01636).5 Accordingly, the agency multiplied the civil penalty maximums and minimums provided in current 14 CFR 13.301 and 406.9 by 1.01636 to derive the updated maximums and minimums provided in this final rule.

Relying on an interpretation of the 2015 law from the Office of Management and Budget, the FAA did not issue a notice of proposed rulemaking for public comment. This final rule changes the minimum and maximum penalties effective April 10, 2017, the day the rule was published in the Federal Register.

The FAA’s space transportation regulations do not contain minimum or maximum penalties like the FAA’s aviation regulations do. Instead, the commercial space regulation, 14 C.F.R. § 406.9, implements the single penalty listed in 51 U.S.C. ch. 509 (aka the Commercial Space Launch Act). When Congress initially granted the FAA the authority to impose civil penalties, it capped the amount at $100,000.00 per violation per day. 51 U.S.C. § 50917. The United States Code still says that. With the passage of its various inflation adjustment laws, Congress mandated a global search and replace on civil penalties, including those imposed for violations of space regulations. Thus, the FAA’s own new requirement now says:

14 C.F.R. § 406.9 Civil Penalties.

(a) Civil penalty liability. Under 51 U.S.C. 50917(c), a person found by the FAA to have violated a requirement of the Act, a regulation issued under the Act, or any term or condition of a license or permit issued or transferred under the Act, is liable to the United States for a civil penalty of not more than $229,562 for each violation. A separate violation occurs for each day the violation continues.

The FAA will not necessarily claim a civil penalty as high as that, and, to my knowledge, has yet to do so.  Agencies are allowed discretion in deciding the size of a penalty, and will typically attempt to impose smaller fines for first-time violations.

 

 

 

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Demonstrating Compliance with a Performance Standard

Performance standards are the new* “in” thing in the regulatory world. Everyone wants them. Everyone notes how they offer greater flexibility, greater opportunity for innovation, and greater speed in adopting new designs. Everyone wonders why they didn’t do them sooner.  When considering them, however, rule writers should keep in mind that the regulated people need to have some certainty as to what an acceptable demonstration of compliance might be.

What are these great things? In the regulatory world, performance standards are requirements that mandate satisfaction of a goal instead of requiring a specific design as the solution to a problem. Rather than saying that your time machine must carry six ounces of dilithium crystals for every fifty pounds of weight, the performance-based regulation says “Each time machine must possess sufficient power to return all occupants to the present.” The first version of the requirement envisions only one way of getting everyone back to the positive now, only one ratio, and only one acceptable power source for achieving that goal. The second approach focuses on the underlying goal, and allows any power source, any method, and any ratio so long as it works. Returning time travelers to the present has to work, because you can’t walk into today from yesterday but one second at a time, and if the time machine dumps you 24 hours earlier than now, you’ll stay there, possibly run into yourself, and create a temporal vortex in the time/space continuum. No one wants that.

The mandatory design solution is not without its admirers.  It’s very easy to administer:  if the time machine weighs 100 pounds, it better have 12 ounces of dilithium crystals powering it.  No one need perform any additional analysis.  It provides certainty.  It’s what the guy who invented the time machine used, and he always brought everyone back, except for the time that wasn’t his fault.  Lastly, the mandatory design solution forces manufacturers to ask for waivers and exemptions, so the Time Stream Administration can look at any deviations individually.

Nonetheless, there is a growing consensus that good government requires performance based standards for purposes of transparency, encouraging innovation, and avoiding unnecessary costs.  These are all virtues.

However, when it adopts performance based requirements, an agency should not lose sight of making all its requirements transparent.  There is one last requirement at issue, and it plays an important role in the whole process, namely, the demonstration of compliance.  At one end of the spectrum, we can be pretty sure the TSA won’t be satisfied with an applicant’s bald statement that his machine has enough power to bring everyone back.  At the very least, the agency will want to know the proposed power source and how it works.  What more would the agency want?  A computer model or actual real-time testing?  How many hours of testing or how many successful journeys would qualify a time machine using chewing gum as its power source?  Should an agency mandate reliability and confidence levels?  Should it put that out as guidance rather than a regulation?  If it does, will it wind up treating similar applicants differently?

Agencies don’t always put their demonstrations in their regulations.  One of the prettier performance standards I’ve seen is for human space flight.  In 14 C.F.R. § 460.5(b), the FAA requires that “[e]ach member of a flight crew [aboard a licensed or permitted launch or reentry] must demonstrate an ability to withstand the stresses of space flight, which may include high acceleration or deceleration, microgravity, and vibration, in sufficient condition to safely carry out his or her duties so that the vehicle will not harm the public.”  “In sufficient condition” to carry out one’s duties shows that a commercial flight crew member need not be a superhuman astronaut.  One might only need to retain sufficient consciousness to work the controls .  That the flight “may” include high acceleration suggests that all flights might not include that particular stress of space flight.  If a capsule gets to space via a balloon, the operator might not need to demonstrate to the FAA that the crew member can withstand high acceleration.  The requirement, in other words, is tailorable to the technology, and an applicant need only demonstrate that the crew can withstand the stresses of his particular vehicle.

However, what the regulation does not say is what a successful demonstration of compliance looks like.  Does the flight crew have to undergo the anticipated stresses?  How many times?  To what level of reliability?  Nine times out of ten?  99 times out of 100?  The answers to these questions may reveal hidden costs of the regulation.  While each applicant gets to make his case for his vehicle, operators of similar vehicles should be treated similarly.  One crew member should not be required to undergo hours of high acceleration while another one is subjected to only minutes.

Consistency and fairness suggest that these unwritten “requirements” be made public. If the FAA finds one method of demonstrating compliance acceptable for certain circumstances, it could let everyone else know by publishing that method in an advisory circular. (The Administrative Procedure Act also requires the publication of an agency’s opinions.) Then, other operators with a similar flight profile would know that they could follow that method without long talks with the agency.  Alternatively, that same operator might have something less costly in mind and could go to the FAA and makes it case for using a different demonstration.  That demonstration could also be shared.  Publication, of course, carries concerns regarding proprietary information, but those can be worked out.

None of this is to suggest that performance standards aren’t awesome.  They are, but no one should lose sight of the question of how much advance notice is necessary regarding the demonstrations of compliance.

*”New” is a relative term.  In the regulatory world, “new” can span a couple decades.

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A Request to the Regulators

How we write things matters.  How we write regulations really matters because regulations can influence design and make people spend money.  One small but important area of regulations is the definitions.  If you are going to regulate something, you need to define and identify what you are regulating.  That’s all you need to do.  After you’ve defined the object, you can impose any design requirements or operational restrictions in a different paragraph, a different section, somewhere else, just not in the definitions.

This is a nice, clean approach that avoids legal problems, brain-breaking confusion, and just plain stalling out when it’s time to administer the regulations.  Waivers and exemptions illustrate this point nicely.  Let’s say someone asks you for a waiver from a requirement.  If you’ve loaded the requirements into what should only be a description, how do you waive a definition?  You don’t.

In order to avoid pointing fingers, I will indulge my fondness for science fiction to illustrate the concern.  Let’s say that someone has invented a time machine.  As a well-informed TSA (Time Stream Administration) regulator you know that sending people back in time more than a year wreaks havoc with the space-time continuum, creates alternate timelines in which the internet is not invented and you might have to live there, and sends vast waves of energy pulsing out from the sun to engulf your home planet in radiation.  So, that’s all bad.  You don’t want to approve a time machine that travels back more than ten months because you like margin.  How do you go about it?

The right way would be to define a time machine with enough precision and clarity that the time machine operators know you are talking about their machine, but not so much that machines that don’t fit the definition but still accomplish time travel are left out.  Thus, you can say something like “a ‘time machine’ means a machine that travels forwards or backwards in time.”  This definition may require some tweaking, but it will do for now.  Then, over in a different section of the regulations you can say something like “No person may operate a time machine to travel farther back in time more than ten months.”  (I know, I know:  what if she takes it back 8 months and then another 8 months?  This post isn’t about that.  But if you want to write a guest post…..?).  This very hygienic approach avoids all sorts of problems.

Sometimes, however, regulators focus on the ultimate approval, and if you do that, you might not want to give your  approval to a time machine that will take people back to visit London in the 18th century where they’ll win the Longitude Prize years early, and then, somehow, the internet won’t get invented.  If that is your sole focus you might be tempted to define a time machine as “a machine that travels backward in time by ten months and forward in time.”  (Traveling to the future does not bring about the heat death of our home planet.  Everyone knows that.)  Please resist this temptation.  Later when someone invents a time machine that doesn’t do all the bad things you addressed in the preamble to your notice of proposed rulemaking, you might legitimately want to waive the ten-month prohibition.  Now you can’t, because it’s not a prohibition.  It’s part of the description of what a time machine is.  Also, all those other requirements and prohibitions that you put into the right place in the regulations won’t apply to time machines not meeting your definition.  This will matter if you want to approve something that’s perfectly safe without going through a whole new rulemaking.

Thus, my plea.

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The Only Thing Worse than Ambiguity: Clarity.

I’ve worked on a lot of regulations, and it seems sometimes that the only thing people hate more than vague requirements are clear ones. And vice versa.

The world offers many opportunities to be dissatisfied. Regulations are no exception, and provide the double-hit of being difficult whether they are ambiguous and flexible performance standards or prescriptively clear. Performance standards, regulations couched as flexible, open-ended standards that accommodate a variety of technological solutions, may leave a hapless regulated entity in the dark as to what an agency requires. After all, as many have noted, the ultimate performance standard consists of the admonition “Be safe.” On the other hand, if an agency starts to issue regulations that spell out prescriptive design solutions as the answer to a safety concern, the regulations lose their flexibility even as the affected industry learns precisely what the agency requires of it. But it is not necessarily the performance standards themselves that lack sufficient specificity.

A lot of the time, it’s not the standard that’s the problem, but the demonstration. Applicants for authorizations, whether for a launch license or aircraft certification, must demonstrate how they satisfy the FAA’s regulations.   If an applicant must satisfy a performance standard, the applicant may have to show the agency a lot more than if he only needs to run through a very specific checklist. If faced with a checklist, however, the applicant will have lost flexibility in designing his vehicle.

Examples of Performance Standards

The human space flight regulations in 14 C.F.R. part 460 are very performance based. For example, section 460.5, Continue reading

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