FURTHER CLARIFICATION OF PROPOSAL ON LANDSAT COMMERCIALIZATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92B00181R001000010015-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 23, 2016
• Document Release Date: April 7, 2014
• Sequence Number: 15
• Publication Date: December 2, 1987
• Content Type: MEMO

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DCl/ICS 87-4450
2 December 1987
MEMORANDUM FOR: Commercial Space Policy Working Group
FROM:
Member SI-AT
Commercial space Policy Working Group
SUBJECT: Further Clarification of Proposal on LANDSAT Commercialization
1. The current structure of the LANDSAT program is clearly not what was
envisioned when the administration decided in 1984 to transfer LANDSAT to the
private sector. EOSAT won the competition for the transfer with the stipulation
that the government would transfer LANDSATs 4 and 5, and that construction of
LANDSATs 6 and 7 would be heavily subsidized by the US government. LANDSATs 4 and
5 have indeed been transferred but the government funding of LANDSATs 6 and 7 has
not been implemented as originally scheduled. In November 1987, federal funding
for the construction and launch of the LANDSAT 6 satellite was settled. The
government's role in the next phase, LANDSAT 7, is yet to be determined. Before
making a decision on LANDSAT 7, the US government should conduct a zero-based
review of alternative approaches for maintaining continuity of the US civil remote
sensing program. If possible, an approach that reduces (or eliminates) the
government subsidy for satellite construction should be selected.
2. The selection of an approach must be based on the best available projection
of the size of the market as a function of the price of the product. The market
for LANDSAT products has not grown appreciably in the last few years. Furthermore,
because most of the revenue is from US government agencies, there is a concern that
the current tight budget environment and the emergence of new subsidized foreign
competitors will constrain any future growth in this market.
3. One approach that should be reevaluated is the elimination of all
procurement subsidies in favor of some kind of government minimum purchase level.
For example, the government might accomplish this goal by announcing that it will
take bids from private groups for the provision of its remote sensing demands. The
lowest bidder offering to satisfy these requirements would receive the contract
which might include minimum demand levels and a penalty clause if the government
does not reach the minimum. The satellite company would compete with other sources
to supply data to the private sector. If successful, this approach might assure
the continuity of data as well as commercialize remote sensing.
4. We offer the following language for our proposal:
The government should conduct a zero-based review of approaches for
maintaining continuity in the US civil land remote sensing program after
LANDSAT 6. This review should first examine the market, foreign
competition, available technology and costs, and the existing and
projected user structure and their needs. The review should also examine
a full-range of approaches for more fully engaging the private sector in
this activity by means such as purchase guarantees.
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30Nov87
COMMENTS ON DRAFT COMMERCIAL SPACE INITIATIVE PAPER
(19 November 1987 Draft)
Section IV. Deregulation: Actions Necessary to Encourage a Vigorous
Commercial Presence in Space
Proposal 8:
The Administration will accelerate phase out of support for
LANDSAT and make a clear commitment to purchase the bulk of
its remote sensing data from the private sector.
General Comments
Adopting and implementing the present language of Proposal 8 would not
contribute to the Section IV indicated objective of encouraging a vigorous
commercial presence in space. Furthermore, it would impede rather than
promote the national space policy objective of maintaining -- or more
correctly -- attempting to regain US competitiveness in civil remote sensing
programs from space.
In deciding upon the merits and feasibility of Proposal 8, a fuller range
of factors pertinent to current civil remote sensing from space than is
available in the current supporting discussion must be addressed. The
following specific points must also be considered.
o Since the 1985 transfer of the US civil Earth remote sensing program,
including operation of existing LANDSATs 4 and 5, and construction of
follow-on LANDSATs to V)SAT, the Government has not provided its
originally scheduled level of subsidy to construction of LANDSAT 6.
This failure has nearly caused the demise of the entire US civil
Earth remote sensing program. Even at the present time, the future
of the program is still uncertain. Therefore, the interest and entry
of other remote sensing system operators would be welcome.
o Without continuing support to EOSAT, current LANDSAT operations would
soon cease. Curtailment of the subsidy to EOSAT to construct LANDSAT
6 would further extend the probable gap in the US civil remote
sensing program when LANDSATs 4 and 5 come to the end of their
operational life. Any cessation of LANDSAT operations, either now or
relative to the construction of LANDSAT 6, will further divert the
remote sensing market to foreign sources, thereby making US re-entry
into the market more difficult.
o Furthermore, it must be recognized that the criterion of achieving a
financially self-sufficient US civil remote sensing system is not
realistic -- with or without a federal purchasing commitment. The
magnitude of any federal purchasing commitment is not likely to be a
sufficient foundation upon which to base the private sector operation
of a remote sensing collection svstem.
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o The worldwide market for sales of remote sensing data is limited and
is not likely to increase rapidly. The previous market on which
LANDSAT had a monopoly for years is now being divided with foreign
remote sensing operators, notably the French SPOT and the Soviet
Soyuzkarta efforts. In addition, there are a number of other
foreign-operated remote sensing systems either operational or planned
for the near future. The French SPOT system, the principal
competitor of the US LANDSAT program, is reportedly finding its sales
are considerably below its market projections. All of these systems
are government subsidized, usually for collateral benefits of
intelligence and military applications, economic advantages relative
to the value-added arena, or national prestige. Thus, the share of
the worldwide market that could be captured by a US private sector
operator would probably decrease rather than increase in the future.
SPECIFIC COMMENT 1
The discussion supporting Proposal 8 advocates action to end the present
federal subsidy to EOSAT to permit opening the US civil remote sensing field
to other commercial sector operators.
o There may be merit to have an operator other than EOSAT for a future
US system. In fact, current Government actions have already provided
for such an action. EOSAT originally wanted, and Congress initially
insisted upon, construction of two additional LANDSATS, namely
LANDSATS 6 and 7. At the present time the proposed subsidy to EOSAT
provides for the construction of only one more LANDSAT satellite
(LANDSAT 6), which is urgently required to close the projected gap in
the continuity of the US civil remote sensing program -- since the
two LANDSAT satellites currently in orbit are both past their design
lives. A decision on designating the specific builder/operator of
LANDSAT 7, or a follow-on advanced technology satellite, still needs
to be made. A $2 million study has been authorized to determine what
its capabilities should be to be competitive on a worldwide basis,
with the actual design and construction of the satellite apparently
open to all potential bidders.
SPECIFIC COMMENT 2
The present form of Proposal 8 calls for a Government commitment to
purchase its remote sensing data from the private sector. This commitment
would then constitute the foundation for private sector development of a
privately funded remote sensing system. The discusion accompanying the
Proposal alludes to three consortia of firms expressing interest in such an
arrangement.
o While there may be some growth in the US Government and US market
demand for remote sensing data, there is little evidence to
characterize the market as "large" and "increasing." In fact, the
magnitude of future Government purchases of LANDSAT-type data may
well decrease, rather than increase, because of the large number of
different sources of civil remote sensing data that are planned for
the 1990's.
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o Neither the Department of Commerce, nor any other Government
organization, has been able to identify sufficiently firm
requirements that would have justified committing their organization
to a firm level of future purchases -- given the data prices required
to sustain remote sensing collection operations. OMB explored this
approach when there was only one satellite source of civil remote
sensing data. OMB re-examined this approach as recently as early
1986, again with no success. Obtaining purchase commitments from
federal organizations is now less likely than before, since the
volume of purchases will be dependent upon the specific remote
sensing capabilities that will be provided in the future (which to a
large degree are still uncertain), and by the available funding,
which is unlikely to increase dramatically in a budget-deficit
situation.
o Finally, any commitment by Federal agencies to purchase data (e.g.,
"guaranteed purchase") is currently specifically precluded by the
existing Land Remote-Sensing Commercialization Act of 1984. Adoption
of the Proposal 8 approach would require an amendment to the Act.
o While we do not have any direct knowledge of the three consortia
referred to in the Proposal 8 discussion, comment from a
knowledgeable Commerce Department individual indicates that the three
possible consortia appear to lack sufficient financial resources and
proven management expertise to carry out any such venture -- with
only a minimum or no federal purchasing commitment.
The present Proposal 8 discussion contains the statement that "The
commercial sector is also concerned about the potential for the Government to
become a competitor in this area." Such a concern would have some merit if
EOSAT does not accept the present Government position for subsidizing current
LANDSAT operations and for constructing LANDSAT 6, and decides to drop out of
LANDSAT operations. One possible scenario in such a situation would be for
the Govenment to assume responsibility for current LANDSAT operations and
whatever future LANDSAT activities are decided upon, if any.
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CONCLUSIONS
o The following unclassified Section IV of the current draft of
National Space Policy already incorporates the valid aspects of
Proposal 8.
"IV. COMMERCIAL SPACE POLICY
United States government shall facilitate the continuing development
of a separate, non-governmental Commercial Space Sector. Expanding
private sector investment in space by the market-driven Commercial
Sector generates economic benefits for the Nation and supports
governmental Space Sectors with an increasing range of space goods
and services. Governmental Space Sectors shall purchase commercially
available space goods and services to the fullest extent feasible.
Governmental Space Sectors shall not conduct activities with
potential commercial applications so as to preclude or deter
Commercial Sector space actvities except for national security or
public safety reasons. Commercial Sector space activities shall be
supervised or regulated only to the extent required by law, national
security, international obligations, and public safety.
o Proposal 8 should be dropped or its present language modified to be
consistent with the realities of encouraging development of a viable
private sector remote sensing program.
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Proposal 9:
The Administration will eliminate the perception of
regulations inhibiting the US remote sensing industry by
stating that there are no specific limitations on spatial
.resolution, spectral ranges, geographic coverage, nor
timeliness of data delivery.
Comments
A blanket statement that there are absolutely no limitations would run
counter to existing national security concerns during times of tension,
crisis, and hostilities. To the degree that is feasible, the encouragement
required to counter the erroneous perception of inhibiting regulations on US
private sector remote sensing collection systems has already been developed in
the following provisions of unclassified paragraph d(1) of Inter-Sector
Policies Section VII of the current draft of the National Space Policy.
"(1) The United States Government will: (a) encourage the
development of commercial Earth-imaging systems from space competitive
with or superior to foreign-operated civil or commercial systems; (b)
continue to encourage commercial Earth remote sensing and the continuity
of data;
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cog,IIMIAL
Proposal 9
riT44el A in c.).)
PROPOSAL: The Administration wirg eliminate the 4=fedf
regulation, Iftltibl-tittif the US remote sensing Industry
by stating that there are ncryspeetge limitations on Prwe'em'ned
spatial resolution, spectral ranges, geographic
coverage, nor timeliness of date delluery
There is a strong and widely held belief within the US
Remote Sensing community, including industry, academialthe nrethefeemirv,6
news media and civil agencies, that there is N'US Government r
limitation on the spatial resolution, spectral bends, geographic
Coverage and timeliness allowed of US remote sensing data
producers and users. This perception Is felt to apply only to US
companies, and therefore such a limitation would put them at a
***owl disadvantage in competition with data sources from
foreign countries, such as France, Germany and Japan. There has
in fact never been any limitation placed on any US civil remote
sensing data producer or user, but many believe such
restrictions will arise from the licensing provisions of PL 98-365,
The Land Remote Sensing Comml li
merciaaetiirbAnct a 1984. This
belief, however unfounded, industry
and investor reluctance to participate in private sector remote
sensing ventures. Any reluctance Is counterproductive to
Administration and Congressional initiatives to develop, promote
and expand the US remote sensing industry, and thereby to
maintain our diminishing technical leadership In this area,
pied ete \Ern k (led
Therefore, in order toliminate this perception, this
Administration must make strong public statement to the
effect that no such specifi imitations exist, and that US
cl-
>the devel of
Industry is free to pursuel44itteiwes,in-t-bi Ea t opmenth-imaging systems
r.044161.41eniw Such a statement will be consistent with PL 98- from space
365, and the Department of Commerce regulations implementing competitive
that law. The statement should reiterate that the Defense and with or .
sr eu pi ge nri oo pr e tr oa ted
State reviews contained in PL 98-365 will be performed on the f 0
merits of each license request, without any predetermined civil or commercial
restrictions. systems.
rnklEiriENITIAI
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EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
November 24, 1987
MEMORANDUM FOR THE COMMERCIAL SPACE POLICY WORKING GROUP
FROM: THOMAS G. MOORE, MEMBER
SUBJECT: Clarification of Proposal on LANDSAT
Commercialization
The current structure of the LANDSAT program is an obstacle
to private commercial entry into the remote sensing field.
Federal funding for the construction and launch of the LANDSAT 6
satellite has been settled. The government's role in the next
phase, LANDSAT 71 is yet to be determined. A large and growing
market for remote sensing data exists to support a private
venture in this area. We believe that the government should not
purchase the next satellite or subsidize a firm to operate it.
The government can accomplish its goal by announcing that it
will take bids from private groups for the provision of its
remote sensing demands. The lowest bidder offering to satisfy
these requirements will receive the contract which might include
minimum demand levels and a penalty clause if the government does
not reach the minima. The satellite company would compete with
other sources to supply data to the private sector. This
approach would assure the continuity of data as well as
commercialize remote sensing.
We offer the following language for our proposal:
The government should make a clear committment to purchase
its remote sensing data, subiect to any national security
constraints, from the private sector. The government should
also make clear that it will not purchase the next LANDSAT
satellite or in any way act as a competitor to a private
remote sensing system.
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11/24/87
DOT -- INSERT FOR PROPOSALS 1 AND 2 (PAGES 3-4)
Space Launch Insurance Requirements And Liability Standards For
Initial Phase of U.S. Private Commercial Launch Operations
THIRD PARTY LIABILITY
Proposal la; The Administration will propose a statutory cap on
liability for damages to third parties at the level
of "probable maximum loss" (PML) and will _require
launch licensees to obtain insurance in this amount
naming the Government as an insured. Total damages
that could be awarded to all plaintiffs in
connection with a single launch accident could not
exceed this amount. The cap could vary according
to launch vehicle and payload class and the site
from which a vehicle is to be launched. DOT would
make these determinations in consultation with
other appropriate agencies.
A cap on liability would be established through statutory
limitation on the ability of Federal and State courts to award
damages in excess of a specified amount. It would compel
consolidation of claims in a single judicial forum to ensure
damages to all parties did not exceed the established limit.
Precedent for this approach exists in Admiralty (maritime) law,
which utilizes fixed statutory limitations on damages.
A necessary corollary to a cap on "domestic" liability is a
similar limitation on the amount of damages that could be awarded
under international or foreign law as a result of launch-related
accidents. (While the primary concern of the U.S. launch and
satellite industries is to limit the "openendedness" of damage
awards in U.S. courts, the absence of a similar cap
internationally would effectively place U.S. citizens bringing
suit in U.S. courts at a disadvantage vis-a-vis foreign nationals
presenting claims in international or foreign forums.)
Despite the clarity and certainty afforded by this approach, it
should be noted that Administration tort reform policy generally
has not sought limitations on recovery for economic injury (i.e.
actual damages). The preferred approach is to seek limitations on
awards for "non-economic" injury (i.e. punitive damages or damages
for pain and suffering), as set for in the following proposal.
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Proposal lb: The Administration will propose a statutory cap on
the amount of damages that may be awarded to third
party plaintiffs, either punitively or for pain and
suffering, with no cap on claims for actual
damages.
This approach would ensure sufficient compensation for injury or
economic damage actually sustained by third parties while limiting
the uncontrollable aspects of court awarded damages that are the
primary sources of concern over unlimited liability. (Limitations
on non-economic damages are in the range of $100,000 to $300,000
for each plaintiff). As there would be no cap on the total amount
of actual damages courts could award, however, DOT would not set
variable liability limits (based on vehicle type, etc.) as in
Proposal la.
The problem with proposals to cap liability is that the general
approach, while favored by the Administration, has little
Congressional support. Indications are that it is unlikely to be
given serious consideration. On the other hand, Congress is aware
of Administration opposition to indemnification for unlimited
liability. One approach under consideration by Congressional
staff attempts to fuse the two proposals into a compromise
solution that, conceivably, could be presented to the
Administration in the near future. This approach is set forth in
the following proposal.
Proposal lc: The Administration will propose a statutory
arrangement whereby the Government would indemnify
for third party claims that exceed the amount of
insurance required (set at the level of PML) up to
a limit of $ million. Above this "second layer"
of coverage, damages would be capped as in Proposal
lb (or la).
This arrangement is similar to the original Price Anderson scheme
for nuclear accident liability. In essence, the Government would
insure for unanticipated liability (catastrophic loss) up to a
fixed amount, above which all damages would be capped (as in
Proposal la). The level of PML would vary according to vehicle
type, payload class and launch site, but the $ million
indemnity would apply in all cases.
This approach represents a blending of both liability caps and
indemnification. It places reasonable limits on the amount of
liability of commercial launch vehicle and payload owners while
ensuring that funds are available to compensate third parties in
the event of a catastrophic loss. At the same time, the
Government would not be assuming a private firm's unlimited
liability; rather, third party liability above the amount of the
indemnity would be capped.
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Proposal ld: The Administration will require that NASA
discontinue its practice of indemnifying customers
jt launches on Shuttle.
This is an alternative to a cap that would ensure a more level
playing field for domestic space launch services.
DAMAGE TO GOVERNMENT PROPERTY AND PERSONNEL (DIRECT LIABILITY)
Proposal 2a: The Administration will adopt a "shared risk"
approach to limiting liability for damage to
government property: Users of government _ranges
will be required to obtain property insurance ("all
risk" coverage) covering probable maximum loss
(PML); the Government will waive its right to sue
for damages that exceed this amount.
This approach could be instituted through a DOT rule (coordinated
with Air Force, NASA and Justice) that sets a variable limitation
(according to estimated PML) on a range user's liability for
damage to Government property resulting from launch activities.
The user would have to insure only property that is used to
support a launch activity or that is exposed to foreseeable damage
resulting from that activity (e.g., within a predefined geographic
zone).
The proposal represents a departure from the approach the
Administration generally favors in the context of commercial
liability issues. Where there is no statutory cap on liability,
the Administration favors adoption of a negligence standard
wherein each side bears full responsibility (and is thus induced
or required to insure) for damages it causes to another party. A
major problem with applying this approach to commercial launch
operations, however, is that it necessitates in every case an
adjudication of causation before insurance proceeds would be
available to repair or rebuild government launch facilities. The
potential impact on civil and military programs could be
significant.
Another problem is that the space launch, payload, and insurance
industries are accustomed to a no-fault liability standard for
commercial launches. Arianespace and Shuttle launch agreements
require every commercial party (and even NASA) to waive its right
to sue any other party involved in the launch for damage to its
property. Typically, each payload owner will itself insure
against damage to its satellite. In fashioning an immediate
solution to space liability problems, reliance on familiar
approaches (to the extent possible) may have some utility.
The valuation standard to be used in determining actual property
loss to the government is an important element of this approach.
The rule would propose a standard of "actual cash value" rather
than replacement cost, in recognition of the fact that the
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Government is unlikely to replicate an existing facility and the
User should not be required to insure for upgrades. In addition,
the cost and available capacity of this new insurance line is as
yet unknown and, therefore, insurance requirements must be
realistic.
The Government would self-insure above the level of PML; that is,
it would waive its right to recover damages in excess of insurance
coverage.
Proposal 2b:
The Administration would propose establishment of a
revolving fund to satisfy any unanticipated
shortfall between the level of required property
insurance coverage and the amount of catastrophic
damage to range property, so that the Air Force or
any other Government range operator will not have
to bear sole responsibility for funding such a
shortfall from its own appropriations.
This approach is similar in concept to the contract termination
fund maintained to satisfy liquidated damage claims for government
contract termination. Liability for uninsured (and unforeseeable)
property loss should not have to be borne exclusively by the
government agency operating the range. Creation and maintenance
of such a fund ensures that this damage would be a loss to the
Government as whole. Although any immediate loss would be
compensated, the fund would have to be replenished as part of the
Administration's budget. Private contributory mechanisms for such
a fund can also be explored.
Proposal 2c: Adoption of Proposals 2a and 2b would be on a
Provisional basis subject to renewal following the
initial period of U.S. private commercial space
launch operations (e.g., 1992), and any legislative
enactments in support of a "no fault" standard for
determining liability for damage to Government
property or personnel would contain sunset
Provisions. DOJ and DOT would be directed to
consider the long-term desirability of this
approach.
The objectives of U.S. space policy over the long term
(particularly when private commercial ranges are licensed) may be
better served by moving the commercial launch industry to a
negligence based liability standard. The implications of such a
move need a great deal more consideration, and Justice and DOT
should be directed to begin that effort now.
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