Saturday, June 25, 2016

Federal Aviation Administration Drone Rules Break New Ground: Agency changes its economic calculus in taking a more flexible regulatory approach to commercial drones

The Wall Street Journal
By Andy Pasztor
June 24, 2016 6:32 p.m. ET

New federal rules permitting routine commercial-drone flights also establish legal precedents that could affect an array of future air-safety regulations, according to industry officials.

They say the Federal Aviation Administration rules released earlier this week break new ground by relying on a different and much broader definition of economic benefit than is typical for the agency.

Rather than using traditional safety measures such as fewer anticipated accidents or incidents, the FAA focused this time on “social benefits” stemming from promoting growth of the fledgling unmanned aircraft industry while reducing compliance costs for companies and designated pilots.

By easing compliance, the FAA “essentially established one of the most flexible regulatory regimes” imaginable, according to Jim Williams, the agency’s former top drone official, who now works for the global law firm Dentons.

When the goal is removing or reshaping highly prescriptive requirements as it was in this instance, “you can’t really do it the same old way,” he said in an interview. “You’re going to see more of these types of cost-benefit analyses.”

The FAA projects spending at least $150 million in taxpayer funds through 2020 to hire additional employees and implement the new rules.

But depending on how fast the industry takes off and on the proportion of business users versus hobbyists, the FAA estimates net “social benefits” will range between $733 million and about $9 billion over the same period.

If the FAA and White House regulatory watchdogs adopt a similarly inclusive approach to defining benefits in other aviation contexts, the agency could find it easier to justify proposing new safety mandates during an era of record low airline accidents.

The long-awaited drone rules permit low-altitude, daylight flights of unmanned vehicles weighing less than 55 pounds, and open the door for industry to seek a wide range of waivers.

Until now, virtually all major FAA rulemaking initiatives had to demonstrate that total benefits derived from safety enhancements—typically measured by projections of fewer accidents—would exceed total industry compliance costs.

In an initial 2015 proposal, the FAA adhered to that general concept by noting that drones could replace manned aircraft performing tasks “under potentially hazardous conditions.” The proposal pinpointed “laborers inspecting high towers” and manned aircraft engaged in aerial photography. By avoiding accidents and saving just “one human life,” it said, the benefits would outweigh costs.

But in making the case for drone oversight, the FAA’s final cost-benefit breakdown discards such arguments and instead features some novel language. It doesn’t quantify accidents prevented; rather the analysis notes, among other things, that private-sector benefits will exceed anticipated costs because each entity will determine for itself whether it is financially worthwhile to operate drones under the rules.

Instead of sticking with the usual principle of balancing compliance costs against projections of lives saved or crashes prevented, the rule assumes companies and individuals will be motivated to make compliance investments under the new regulatory framework in order to benefit from the burgeoning market.

Until the rule goes into effect in August, commercial drone operations will be allowed to continue operating only under specific exemption requests.

An FAA spokeswoman declined comment, though senior agency officials for years have chafed under the constraints of traditional cost-benefit analyses. Commercial aircraft accident and serious-incident rates are so low in the U.S. that agency leaders have been increasingly challenged to quantify the value of mandating further safety investments.

The FAA used principles similar to the drone rules, referred to as “performance-based regulations,” when it announced streamlined rules earlier this year for certifying new private-plane  models and retrofitting new safety equipment on current general aviation aircraft.

The latest language covering unmanned aircraft was welcomed by drone proponents. The rules “take more of an industry approach” making the safety case “by highlighting broader benefits,” according to Gretchen West, a former trade association leader who now works for the law firm Hogan Lovells.

FAA leaders “are showing a lot more flexibility” than under traditional safety rules, said Jack Schenendorf, a lawyer based in Washington for Covington & Burling LLP. But he added the FAA now “could be flooded with requests” for waivers, and how it handles them will help determine the agency’s success in defining safety issues.

FAA officials, among other things, are considering regulations dealing with minimum experience levels for co-pilots and mentoring of young aviators when they are hired by an airline.

The cost-benefit numbers are included in a few pages and tables in a 624–page regulatory package.

According to industry estimates, the ripple effect from the rule could generate more than 100,000 new jobs and $82 billion in economic activity over the next 10 years.

But even if those projections don’t pan out, industry officials see plenty of opportunities to show ancillary safety benefits. They could include avoiding dozens of fatalities annually across the U.S. by substituting unmanned aircraft for conventional helicopters or individual inspectors now performing dangerous jobs of checking the condition of cellphone towers, power lines, bridges and other infrastructure, sometimes stretching hundreds of feet into the air.

If drones are used to inspect railroad tracks for cracks, for instance, industry consultant Michael Gallagher thinks the FAA should consider the broader safety benefit of preventing fatalities by avoiding derailments.

"It’s not just about safety in the air,” he told a recent conference. Drone operators looking to spot minute cracks in the tracks will “need to get credit for the fact that [they are] actually going to be saving lives” on the ground.

Original article can be found here:

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