What happens if a commercial space launch vehicle explodes upon takeoff?

The FAA’s “indemnification program” allows the government to share the cost with industry against injuries or property damage in such a potential disaster. Although that kind of insurance has not been used in more than 200 launches, the current program expires at the end of the year. So during a House Science space and aeronautics subcommittee hearing on June 6, lawmakers considered whether to extend the program, by how much and for how long.

The program authorizes the government to ask Congress for $2.7 billion to cover such damages; companies have to pick up the tab for any additional costs.

China, France and Russia provide no upper limit on their coverage, according to Alicia Cackley of the Government Accountability Office (GAO). Risk-modeling experts told GAO the calculations driving FAA’s current coverage are outdated.

But there are risks in increasing the maximum possible loss, according to testimony by George Nield, FAA’s associate administrator for commercial space transportation. “Companies with fewer resources would struggle to manage risk, and investors would be discouraged from providing capital to companies with catastrophic risk exposure, further restricting access to capital and suppressing growth,” Nield writes.

Industry wants Congress to extend the U.S. insurance coverage for as long as possible.

“The indemnification provides certainty,” says Allison Alfers, a DigitalGlobe executive. Without the program, commercial space launch companies would be liable for all potential risk, and that would be passed on to consumers. But the space launch market is competitive, and if that would drive higher launch prices, foreign competitors would be more attractive.

“We encourage Congress to at a minimum extend, and to consider a significant extension, or eliminate the sunset program,” Alfers says.

Rep. Mo Brooks (R-Ala.) says he remains a believer in minimal government intervention in the market and asked why the space industry should receive government assistance, rather than other industries.

Frank Slazer of the Aerospace Industries Association contends the indemnification program is a national security imperative. The U.S. needs to keep its launch capability for military and NASA satellites, and the program helps to “spread the cost around.” Without it, the cost of launches would continue to escalate, he says.