FAA

Legacy ID

8081

The FAA's FY 2008 Budget Request for Research and Development

STATEMENT OF

VICTORIA COX,
VICE-PRESIDENT FOR OPERATIONS PLANNING SERVICES,
AIR TRAFFIC ORGANIZATION,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

HOUSE COMMITTEE ON SCIENCE,
SUBCOMMITTEE ON SPACE AND AERONAUTICS,

ON THE

FAA’S FY 2008 BUDGET REQUEST FOR RESEARCH AND DEVELOPMENT,

MARCH 22, 2007

Good morning, Chairman Udall, Congressman Calvert and Members of the Subcommittee. I am Victoria Cox, Vice-President for Operations Planning Services in the Air Traffic Organization of the Federal Aviation Administration. I am honored to be here this morning to testify on the FAA’s FY08 budget request for Research and Development (R&D) activities.

Aviation is a vital national resource for the United States. It provides support for business, jobs, economic development, law enforcement, emergency response, and personal travel and leisure. It attracts investment to local communities, and opens up new domestic and international markets and supply chains. As a result, the United States must have an aviation system that is second to none – a system that can respond quickly to its changing and expanding transportation needs. This can only be achieved through the introduction of new technologies and procedures, innovative policies, and advanced management practices.

Our nation’s air transportation system has become a victim of its own success. We created the most effective, efficient and safest system in the world. But we now face a serious and impending problem: today’s system is at capacity and demand for air services is growing rapidly.

The FAA is committed to reducing congestion in our nation’s air transportation system and thereby maintaining and facilitating increases in the economic benefits afforded by the system. Future congestion can only be alleviated by transforming the system we have today -- our current system is not capable of being “scaled up” to meet future demand. We must transform the current system to the system envisioned by the Joint Planning and Development Office (JPDO) - the Next Generation Air Transportation System or NextGen. NextGen includes performance targets for the year 2025 that, if achieved, will reduce congestion by providing far greater capacity than our current system with higher efficiency levels than we have today, while maintaining safety.

The FAA is integrating NextGen into its planning activities, including its five-year strategic Flight Plan. In addition, the FAA is using the Operational Evolution Partnership, the new OEP, to guide our transformation to NextGen. In the past the Operational Evolution Plan successfully provided a mid-term strategic roadmap for the FAA that extended ten years into the future. The new OEP will include strategic milestones through 2025, and its participants will include representatives from JPDO.

OEP is the FAA’s way to plan, execute and implement NextGen in partnership with private industry. Through OEP we are seeking stakeholder input, evaluating available technologies, defining and prioritizing research and development requirements, establishing milestones and commitments, and providing status, context and guidance for initiatives related to NextGen.

OEP will provide a single entry point for new NextGen initiatives to enter the FAA capital budget portfolio. It ties these initiatives directly to our budget process, and it is the way that the FAA will implement the JPDO’s vision of the future system. It will provide an integrated view of the programs, systems and procedures that are critical to transforming the system; and it will let us see them in the framework of the steps that must be taken by all FAA lines of business in order to achieve timely implementation. It also allows us to understand the near-term steps and mid-term goals that we must accomplish to sustain and improve the National Airspace System (NAS) on our way to the NextGen system of 2025.

Research is absolutely critical to FAA operations today and for NextGen. FAA has recognized this fact by proposing funding increases in R&D totaling $280 million over the next five years. These funding increases are enabled by the financing reforms contained in the Administration’s proposal to reauthorize the FAA. Among other reforms, H.R. 1356, the NextGen Financing Reform Act of 2007, adopts cost-based user fees (or offsetting collections) for the costs of air traffic control services for commercial aviation users. FAA’s annual spending of these user fees would be fully offset by the user fee collections. Therefore, FAA’s spending would rise or fall based on FAA’s costs and would not compete with any other discretionary budget priorities (as spending Trust Fund revenues do today).

The FAA uses R&D to achieve its near- and long-term goals and objectives. In the past, the R&D program was driven by the near-term operational needs of the aviation system, and a large share of the agency’s R&D was focused on specific near-term safety and capacity issues. The FAA’s R&D program is being adapted to be more flexible, balanced, and dynamic so we can respond simultaneously to the critical near-term needs of the system while providing for the NextGen system. The OEP is the mechanism by which the FAA will assess R&D requirements for supporting NextGen, and new initiatives will be reviewed and prioritized before inclusion in Agency budget planning.

Research and Development will help FAA achieve NextGen by identifying challenges, understanding barriers, and developing solutions across the parameters of safety, environment, air traffic management, human factors, systems integration and self-separation. To better manage our R&D program, we have developed the National Aviation Research Plan(NARP), which describes the FAA R&D programs that support both the day-to-day operations of the National Airspace System and the vision for NextGen. The projects identified in the NARP enable the FAA to address the current challenges of operating the safest, most efficient air transportation system in the world while building a foundation for NextGen. Research makes known the unknown. It identifies constraints and barriers, separates solutions that are effective from those that are not, and will help transform our nation’s air transportation system.

Even before NextGen and the new OEP, we have not been developing our R&D goals and portfolio in a vacuum. We continually assess our research program in conjunction with our stakeholders and customers to ensure we keep our R&D resources focused on the most critical tasks. The R&D program receives expert advice and guidance from the Research, Engineering and Development Advisory Committee (REDAC). Established by Congress in 1989, the REDAC reports to the FAA Administrator on research and development issues, and provides a liaison between our R&D program and industry, academia, and other government agencies. The R&D program benefits significantly from the recommendations provided by the REDAC. The committee, its subcommittees and working groups work hand-in-hand with us to develop our R&D program. As our advisory committee members will probably tell you, one of our greatest challenges is our ability to define what the future system will look like. Of what technologies will it be comprised? JPDO has just within the last few weeks released the NextGen Concept of Operations, and in the next few months will publish the NextGen Enterprise Architecture. The significance of these documents should not be understated. They are essential to understanding the transformed operational environment; will allow us to more precisely develop a plan for achieving it; and will provide the basis for architecture-based, quantitative resource planning.

In fiscal year 2008, the FAA plans to invest a total of approximately $259 million in Research and Development. $140 million of this total is for Research, Engineering and Development (RED), which breaks down as $123 million from the Airport and Airways Trust Fund, and $17 million from the General Fund.

The RED budget request includes $91.3 million in RED for continued research on aviation safety issues. This request supports critical safety research in the areas of: continued airworthiness of aging aircraft, fire safety, advanced aircraft materials and structural safety, catastrophic failure prevention, atmospheric hazards, propulsion and fuel systems, and weather. Aviation safety research is essential to meeting FAA Flight Plan safety objectives and NextGen performance targets. The potential of the NextGen system to handle tremendous growth in air traffic compels us to maintain our vigilance in safety research. We must continue to invest in aircraft safety to reduce accident rates to insure that an increase in accidents does not accompany the increase in traffic.

An investment in safety R&D has and will continue to result in critical safety improvements for the flying public. Our scientists and engineers, for example, are developing a fire proof airline cabin, improving aviation maintenance programs, developing better weather forecasts, ensuring the safety of composite aircraft components, reducing runway incursions, and creating new, more effective ways to train pilots, controllers, dispatchers, and crews.

In addition to safety programs, RED funding includes environmental issues, wake turbulence projects, unmanned aircraft systems, and human factors studies.

As we look at the NextGen system we are working hard to ensure that we meet the increasing demand for flying in an environmentally sound manner. The focus of the environment and energy research program is making aviation quieter, cleaner, and more energy efficient – which has the added benefit of reducing climate impact. We are investing in research and development, and demonstration projects that will help us better understand aviation’s environmental health and welfare impacts and bring new technologies, operational innovations, and other capabilities on line to address and reduce these impacts. In FY08 we are requesting $15.5 million in environment and energy research as well as $3 million for environment projects under the Airports Cooperative Research Program, funded under the Airport Improvement Program.

The FAA is also requesting funds to support wake turbulence research, the results of which will help us increase capacity while maintaining safety. This program provides a better understanding of the swirling air masses, or wakes, trailing downstream from aircraft wingtips. It will help us to safely reduce separation distances between aircraft, support the efficient use of closely spaced parallel runways, and allow airports to operate closer to their design capacity. FAA is requesting an increase in funding for wake turbulence research from $4 million in fiscal year 2007 to $13.7 million in fiscal year 2008, including $3 million in the ATO Capital request.

In addition, FAA is requesting funds to further research on unmanned aircraft systems. The program ensures the safe integration of unmanned aircraft systems into the National Airspace System. This research provides information to support certification procedures, airworthiness standards, operational requirements, maintenance procedures, and safety oversight activities of unmanned aircraft system civil applications and operations. FAA is requesting an increase in funds for unmanned aircraft systems research to $3.3 million for fiscal year 2008.

Human Factors projects will develop procedures, training and decision support approaches that mitigate human error while exploiting the innovation and problem-solving capacity that is the hallmark of human behavior. We will also develop system performance metrics that include people as critical elements of system performance while evaluating the impact of new technologies and procedures on human decision-making through integrated demonstrations. In fiscal year 2008, FAA is requesting $19.9M for human factors research and engineering efforts.

The R&D request includes $18 million to continue supporting the JPDO ($14.3M in RED and $3.5M in ATO Capital). As the unit that spearheads NextGen for the federal government, JPDO will continue defining the future operating environment, identifying demonstration opportunities, and working with the relevant agencies who will implement the JPDO vision.

$90 million in the ATO Capital account request is intended for research and development work. This includes $23 million for the R&D work at the MITRE Center for Advanced Aviation System Development (CAASD). Other requests for Capital funding include the NextGen demonstration projects. We are requesting $20 million to stage NextGen Demonstration projects that will be used to lower risk; identify early implementation opportunities; refine longer-term objectives; demonstrate compatibility with other JPDO agencies; and, if results dictate, eliminate certain concepts from further consideration.

We are requesting $28 million for research and development under the Airport Improvement Program. The two key elements of the AIP program are increasing the capacity of our nation’s airports and improving the safety of aircraft operating from these airports. As the tempo of operations at our airports continues to rise, AIP research projects include the development of technologies that insure safe transit of aircraft on taxiways and runways, improved runway designs that insure the safe control of aircraft landing in ice and snow conditions, and the development of state-of-the-art crash and rescue equipment to minimize the loss of life and injury in the event of an accident. In addition to our in-house airport research, the Airport Cooperative Research Program, funded through AIP, helps us leverage outside R&D expertise by providing grants to research institutions to help us solve real-world airport safety and capacity issues.

Given expected demand growth, it is important to improve operations well in advance of 2025 so we can avoid gridlock, especially since we expect one billion passengers per year traveling in the system by 2015. With that in mind, we are conducting research to support mid-term capabilities that must be in place to address demand forecasted for that time frame. The OEP is helping us to define projects that deliver mid-term results and also provide the stepping stones to NextGen.

We believe that a timely and efficient transition to NextGen requires us to participate in concept development and validation, prototyping and field demonstrations. Such involvement will give us in-depth understanding of required NextGen operational improvements and hasten our ability to implement NextGen systems in the National Airspace System. The President’s budget request for FY08 includes an estimated $4.6 billion for NextGen investments over the next five years. That number includes increases in funding for SWIM from $21 million to approximately $52 million, while funding for NAS-wide implementation of ADS-B goes from $86 million in FY08 to an estimated $156 million in FY12.

We have been working closely with the JPDO on defining mid and long-term R&D activities that support seven solution sets that are key to NextGen: initiation of trajectory-based operations; increased arrivals/departures at high density airports; increased flexibility in the terminal environment; improved collaborative air traffic management; reduced weather impact; increased safety, security and environmental performance; and transformed/networked facilities.

Trajectory-based operations, or management by trajectory, will allow aircraft to fly trajectories negotiated with air traffic control as opposed to today’s practice of managing aircraft sector by sector and requiring them to fly routes specified by air traffic control. NextGen demonstrations in fiscal year 2008 will test various aspects of trajectory-based management in the oceanic environment and demonstrate how oceanic flights using tailored routes can avoid congestion and take advantage of shorter routes.

High density airports are those where demand for runway capacity is high, there are multiple runways with airspace and taxiing interactions, or there are other airports in close proximity that create the potential for airspace interference. Airspace redesign coupled with new concept validation work will support this solution set.

Flexible terminals and airports will apply technologies that enhance both pilot and controller situation awareness and improve service on the ground. Wake turbulence research will support reduced separation standards that will contribute to this theme.

Collaborative air traffic management will consist of strategic and tactical interactions between air traffic controllers and customers. It will include flow programs as well as collaboration on procedures to shift demand to other routings, altitudes, times, etc.

Enhanced weather forecasts as well as improved use of forecasts will contribute to a reduction in weather impacts. Weather plays a critical role in air traffic congestion and delays in today’s system. As much as sixty percent of today’s delays and cancellations for weather stem from potentially avoidable weather situations. For fiscal year 2008 and beyond, FAA is focusing on capabilities to help stakeholders at all levels make better decisions and better react to avoidable weather situations thus minimizing their impact.

Safety, security and environment enhancements will result from deployment of new procedures and systems that support NextGen objectives. The Runway Status Lights program, for example, under our Runway Incursion Reduction funding supports this safety theme. R&D funded environment and energy programs also contribute significantly here. The estimated $4.6 billion in NextGen investments over the next 5 years also includes several initiatives to deal with aviation environmental issues. Historically, new technology accounts for 90 percent of environmental footprint reduction. Our prototype Continuous Descent Approach (CDA) has the double benefit of reducing noise and emissions. We are seeking to expand on this work in fiscal year 2008 and beyond to develop and prototype air traffic and ground procedures to reduce aircraft noise and fuel burn and emissions. And we are seeking to advance Environmental Management Systems by developing noise, local air quality and climate impacts metrics and decision support tools that will allow us to dynamically manage the environmental impacts of the NextGen system.

Human Factors considerations overlie all of these themes. NextGen systems will dramatically alter the roles and responsibilities of key players in the National Airspace System: pilots will take on more separation responsibilities; automation will enable air traffic controllers to manage larger numbers of aircraft while improving safety; network-enabled operations will provide broader situation awareness to stakeholders throughout the system and enable a new level of air-ground cooperation. Human factors research is needed to define the changing responsibilities of humans in the system, to allocate function to people or automation and to design automation so it serves the information needs of the people who are accountable for system performance. We are requesting funding increases in fiscal years 2008-2012 for human factors R&D in both the RE&D and ATO capital programs.

Proposed Research and Development in support of the seven NextGen solution sets will be outlined in the publication of OEP Version One in June 2007. The OEP will lay out the path from concept development to implementation in the National Airspace System, ensuring that our R&D is indeed focused on achieving NextGen capabilities.

Our planning is also in line with the Administration’s National Aeronautics Research and Development Policy published in December 2006. As outlined earlier in this testimony, we propose to conduct research in areas that support safety, the environment and air traffic management; we plan to conduct research to support certification of safety and environmental performance of aircraft systems; we are working and plan to continue to work to bring our requirements in line with NextGen; and through the OEP, we are aligning our efforts with NextGen.

To succeed in maintaining safety and ensuring sufficient capacity in the future, we do need a stable funding stream that will enable the FAA to launch the NextGen system. This is critical, as Secretary Peters stated "if we are to deploy the state-of-the-art technology that can safely handle the dramatic increases in the number and type of aircraft using our skies.” As outlined in the H.R. 1356, the NextGen Financing Reform Act of 2007, research will be funded to allow critical safety and capacity R&D to continue at a pace necessary to field NextGen technologies by 2025. These increases in research funding are linked to and dependent on this proposal. We are enthusiastic about and focused on the opportunity to direct our R&D efforts toward the realization of the Next Generation Air Transportation System, and look forward to working with this committee to make the NextGen vision a reality.

This concludes my testimony, and I thank you for the opportunity to appear before the committee. I would be happy to answer any questions the committee may have.

NextGen: The Automatic Dependent Surveillance-Broadcast Contract

STATEMENT OF

VINCENT CAPEZZUTO,
DIRECTOR OF SURVEILLANCE AND BROADCAST SERVICES PROGRAM OFFICE,
EN ROUTE AND OCEANIC SERVICES,
AIR TRAFFIC ORGANIZATION,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,
SUBCOMMITTEE ON AVIATION

NEXTGEN: THE AUTOMATIC DEPENDENT SURVEILLANCE-BROADCAST CONTRACT,

OCTOBER 17, 2007.

Chairman Costello, Congressman Petri, Members of the Subcommittee:

Thank you for holding today’s hearing on the Federal Aviation Administration’s (FAA) contract for the Automatic Dependent Surveillance-Broadcast (ADS-B) system. My name is Vincent Capezzuto, and as the Director of Surveillance and Broadcast Services in the Air Traffic Organization at the FAA, I have responsibility for oversight of this performance based contract. ADS-B is a new service for the FAA and this vehicle will allow the FAA to deploy the equipment and service far more quickly and easily than traditional methods, which in turn will increase efficiency and capacity in the National Airspace System (NAS), and most important, enhance aviation safety.

As you know, this system is vital to building the Next Generation Air Transportation System (NextGen). In order to ensure the success of ADS-B while maintaining the safest aviation system in the world, the FAA has crafted an innovative and closely monitored contract with the ITT Corporation for the development of ADS-B. We appreciate the role that Congress has already played in developing this contract. In fact, our confidence in the contract is directly due to Congress’ oversight and input, as well as contributions from other government entities, which have been invaluable to this process. We welcome the Members’ continued oversight to help us manage the contract moving forward.

ADS-B: Description and Benefits

While some of the Members have been able to see ADS-B in action, I wanted to give some brief background as to ADS-B’s capabilities and how it fits into the FAA’s longer-term NextGen goals. ADS-B uses signals from the international Global Navigation Satellite System to provide air traffic controllers and pilots with much more accurate information that will help keep aircraft safely separated in the sky and on runways. Aircraft avionics receive satellite signals and transmit the aircraft’s precise locations to air traffic controllers and pilots. The avionics convert that position into a digital code and combine it with other unique data from the aircraft’s flight monitoring system — such as the type of aircraft, its speed, its flight number, and whether it is turning, climbing, or descending. The code containing all of this data is automatically broadcast from the aircraft’s avionics once a second or more, as compared to the current five to twelve second refresh from today’s radar. While a time savings of four to eleven seconds may seem brief to some, this savings actually allows for far greater accuracy in determining aircraft position.

ADS-B equipped aircraft as well as ADS-B ground stations up to 200 miles away from the originating ADS-B aircraft will receive these broadcasts. Air traffic controllers will see the ADS-B surveillance information on displays they are already using, so little additional training will be needed for the controller workforce. The ADS-B ground stations also transmit data to aircraft. These stations send radar-based targets for non-ADS-B-equipped aircraft up to ADS-B equipped aircraft — this function is called Traffic Information Service-Broadcast (TIS-B). ADS-B ground stations also send out textual and graphical information and forecasts from the National Weather Service and flight information, such as Notice to Airmen or temporary flight restrictions — this is called Flight Information Service-Broadcast (FIS-B). Pilots can see the ADS-B, TIS-B and FIS-B information on their certified cockpit traffic display screens.

When properly equipped with ADS-B, both pilots and controllers will, for the first time, see similar real-time displays of air traffic. Pilots will have much better situational awareness because they will know with greater accuracy where their own aircraft are, and their displays will show them all the aircraft in the air and on the ground around them. Pilots will be able to have better situational awareness of other aircraft with fewer instructions or advisories from ground-based controllers. At night and in poor visual conditions, pilots will also be able to see where they are in relation to the ground using on-board avionics and terrain maps. In addition to improved safety in the sky, ADS-B can help reduce the risk of runway incursions. Both pilots and controllers will see the precise location on runway maps of each aircraft and equipped ground vehicles, along with data that shows where they are in relation to each other. These displays are clear and accurate, even at night or during heavy rainfall.

ADS-B also has the potential to increase capacity significantly, because more accurate tracking using satellite based positioning means aircraft will be able to fly safely with less distance between them. Because the better accuracy available with ADS-B also means greater predictability of aircraft movement, air traffic controllers will be able to manage the air traffic arriving and departing from congested airports with greater precision, resulting in even more gains in efficiency. Eventually, with ADS-B, we envision that pilots can play a more active role in keeping safe distances between aircraft, if they have the certified displays on the aircraft pinpointing all the air traffic around them, along with local weather displays.

Although radar technology has advanced, it is essentially a product of World War II technology. Radar occasionally has problems discriminating airplanes from migratory birds and rain “clutter.” Secondary surveillance radar systems can determine the identity of the aircraft because they interrogate transponders on-board the aircraft; however, both primary and secondary radars are very large structures that are expensive to deploy, need continuous maintenance, and require the agency to lease large plots of land on which to situate them. ADS-B, on the other hand, does not have problems with clutter because it receives data directly from aircraft transmitters rather than passively scanning for input like radars do. Also, ADS-B provides superior accuracy and timeliness of information in comparison to secondary radars. ADS-B ground stations are inexpensive compared to radar, and are the size of mini-refrigerators that can go essentially anywhere, so they minimize the required real estate. In addition, ADS-B also provides greater coverage, since ADS-B ground stations are much easier to place than radar. Remote areas where there is currently no radar, such as the Gulf of Mexico and parts of Alaska, will have precise surveillance coverage with ADS-B.

The ADS-B Contractor: ITT Corporation

As you know, in August 2007, the FAA selected ITT Corporation as the prime contractor for the development and deployment of ADS-B. The contract requires ITT to have the system ready for use by 2010 and expand coverage nationwide by 2013. The first stage of the contract is worth $207 million, with options worth an additional $1.6 billion. With a system as important as ADS-B, and the price tag that comes with it, we want to make sure that we are working responsibly with the taxpayers’ dollars.

The FAA believes that we have a strong contract in place and that ITT, as a proven systems architect and integrator, has the experience and expertise to fulfill that contract. The ITT team has deployed ADS-B equipment for use in aircraft separation in Australia and has worked with the FAA previously on the Telecommunications Engineering Operations and Management contract. Additionally, the contract accounts for risk mitigation, which requires ITT to work with the FAA to identify any risks within the program along with applicable mitigation plans to execute together in partnership.

To help achieve the goals of the contract, ITT has a team of subcontractors that includes:

AT&T – to create, manage and secure our telecommunications networks and infrastructure;
Thales North America (formerly Wilcox Electronics, which provided most of FAA’s instrument landing systems) – to provide expertise as a leading provider of ADS-B ground stations;
WSI – to continue as a trusted weather provider to the FAA;
SAIC – to provide scientific, engineering, systems integration, and technical services and solutions;
PriceWaterhouseCoopers – to validate and support the business aspects of the contract;
Aerospace Engineering – to provide prototyping and metrics of the benefits of ADS-B-enabled systems, operational procedures, and air traffic control (ATC) concepts;
Sunhillo – to help integrate ADS-B information seamlessly into the NAS with existing and future automation systems;
Comsearch – to perform radio frequency interference and coverage analysis for ADS-B;
Mission Critical Solutions of Tampa – to assemble ADS-B equipment racks and perform critical field installations; and
Pragmatics, Washington Consulting Group, Aviation Communications and Surveillance Systems (ACSS), and NCR Corporation.

These corporations provide additional and complementary expertise and capabilities to ITT’s core abilities in aviation, avionics, and service maintenance. In addition, ITT has partnered with L-3 Avionics Systems and Sandia Aerospace to develop low cost avionics for ADS-B and secondary radar transponders. We believe that these strategic partnerships will result in a better product that is seamlessly and reliably integrated into the NAS while providing increased capacity, enhanced services, and maximum benefits for aviation safety.

The ADS-B Contract: Milestones and Safeguards

As mentioned above, ADS-B is a serious investment. In order to protect that investment, we have designed the contract to include several required milestone events that will help us track progress and test the system as each piece is completed. Further, we have created additional incentives and disincentives throughout the contract to maximize the contractor’s commitment to success. Finally, we have a building block plan for the contract; first we build, then we test, while we create the appropriate procedures for use, and only after the groundwork has been laid do we deploy the technology nationwide.

We are keenly aware of the risks inherent to new technology and new procedures, and we are safeguarding against them as best we can. ADS-B’s potential is enormous; it is integral to our ability to achieve NextGen and to handle the doubling of today’s air traffic predicted by 2025. But, we do not want to oversell these capabilities, and the only way we can present a realistic picture of our goals is to double-check our accomplishments along the way.

Just this month, we achieved a major goal for our ADS-B program, by publishing a Notice of Proposed Rulemaking that allow only aircraft equipped with ADS-B avionics to access certain controlled-airspace. Equipage of aircraft is obviously essential to the FAA’s future ability to perform applications such as self separation of aircraft as well as encourages ITT to develop cost-effective hardware to maximize its investment. We anticipate a Final Rule will be issued in late 2009.

Currently, we are targeting the following goals:

Testing ground infrastructure and continuing voluntary avionics equipage by April 2008;
Rolling out initial operating capability by October 2009;
Deploying NAS-wide ground infrastructure between 2010-2013;
Completing avionics equipage between 2010-2020.

We have set “default” milestones for key accomplishments in the contract; if the contractor is unable to achieve the milestones, the FAA may consider it in default of the contract, and may cancel the remainder of the contract. With the first milestone set for May 2008, when the contractor is to test the up-linking of traffic and weather information to pilots (Key Site Initial Operating Capability). With this aggressive timeline, it is clear we are not wasting any time in requiring our contractor to deliver. Additional milestones are set for March, April, June, August, and October of 2009. These milestones give us concrete measures of the contractor’s progress and, if needed, allow the FAA to adjust the program early on or redirect resources as needed. Our goal is not only to test technical performance, but also to test business performance.

Other oversight measures include preliminary design reviews and critical design reviews, which enable us to track the contractor’s progress and success. As previously mentioned, we also have risk mitigation built into the contract, which requires ITT’s full participation. By no means is the FAA a passive entity in this contract.

As noted above, some of the major incentives for our contractor are embedded in the additional $1.6 billion options that the FAA can choose to exercise or not. Depending on proven contractor performance or if FAA does not receive the benefits anticipated in a particular area, these options would allow the FAA to unilaterally stop the contract in whole or in part. Additionally, the contractor is allowed, subject to FAA approval, to develop the data for other aeronautical uses, which would result in a reduction of the cost of the contract to the FAA while allowing the contractor to recoup its investment.

We are confident that this system of “carrots and sticks” will afford the FAA considerable oversight of the contract, encourage the contractor to excel in performance, and allow seamless integration of this important new technology. The contract is structured to place responsibility and ownership of hardware with the contractor or other third parties, thus ensuring long-term buy-in by the contractor and the industry, while the FAA retains control over system performance and data transmitted. The FAA also retains ownership and control of the “paper design” of the system as reflected in the final design review and any subsequent activities that might impact the design or the safety and security of the system. Finally, all data will be certified by the FAA, to guarantee its integrity prior to use for air traffic control purposes. FAA is a safety oversight agency first and foremost, and the certification of the data is critical to our mission to ensure safety is maintained and enhanced for the flying public.

The ADS-B User Community

A necessary component of all our planning and efforts has been the input of the ADS-B user community – the pilots, the controllers, the airlines, the engineers, the manufacturers – all the interested stakeholders have a place at the ADS-B table.

The FAA has formed the Air Traffic Management Advisory Management Committee (ATMAC) ADS-B Work Group, which includes representation from government and industry, including the Air Transport Association, the Air Line Pilots Association, and Helicopter Association International, to name a few. The objective of the Work Group is to collaboratively plan and expedite NAS-wide implementation of ADS-B and to offer solutions to implementation issues.

Further, we have formed an Aviation Rulemaking Committee (ARC) to assist the agency in coordinating responses to the previously mentioned NPRM. In addition, the ARC was formed to help us encourage avionics equipage even before the rule’s compliance date to speed the safety and efficiency gains possible with ADS-B. ARC participants include many of the same participants from the ADS-B Work Group, as well as the General Aviation Manufacturers Association, the Department of Defense, the National Air Traffic Controllers Association, as well as many others. Now that the NPRM has been published, the ARC will make specific recommendations to the FAA concerning the proposed requirements, based upon comments received in response to the NPRM.

Stakeholder participation is vital to the success of the ADS-B contract and overall program. We are committed to continuing to receive input from the aviation community in order to create a better service product and optimize the ways that service is applied. In that vein, we welcome Congress’ continued interest in and oversight of this program; we have already made good use of your input in framing our issues and addressing our shared concerns.

Mr. Chairman, this concludes our prepared statement. We would be happy to answer any questions that you or the other Members of the Committee may have.

Financing the Next Generation Air Transportation System

STATEMENT OF

MARION C. BLAKEY,
ADMINISTRATOR,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

HOUSE OF REPRESENTATIVES COMMITTEE ON WAYS AND MEANS,
SUBCOMMITTEE ON SELECT REVENUE MEASURES,

FINANCING THE NEXT GENERATION AIR TRANSPORTATION SYSTEM,

AUGUST 1, 2007

Good afternoon, Chairman Neal, Representative English, and Members of the Subcommittee.

It is a pleasure to be here today and I thank you for the opportunity to address an issue of great national significance. Indeed, it is a scenario that affects every man, woman and child in this great nation. It impacts every business, from blue chips to the corner store. And, it is a situation that requires prompt action by this Committee and the Congress. September 30th—and the expiration of the aviation taxes that currently fund over 80% of the Federal Aviation Administration’s (FAA) budget—is only 60 days away, and only 27 that the House will be in session. Mr. Chairman, you have recognized the significance of that date and the urgent need for timely action by holding this hearing today prior to the August recess, and I thank you for that.

Need for change

As you are well aware, the volume of traffic in the national airspace system is rapidly approaching critical mass. For years, the word “gridlock” has been bandied about. For years, experts have pointed to a system that is stretched too thin, a system that simply will not be able to accommodate all those looking to use it. We had a glimpse of this problem with the delays in the summer of 2000, and then the pressure eased with the drop in demand after 9/11. But, thanks to the hard work of the industry, aviation has bounced back and we are now at a critical decision point.

John F. Kennedy once said: “The time to repair the roof is when the sun is shining.” For our air transportation system the storm clouds aren't just on the horizon, the raindrops are starting to fall.

As passengers, we know, and not just from headlines, that 2006 was the worst in history for air transportation delays—even worse than 2000. Based on the first six months of this year, it is clear 2007 will be even worse.

Notably, these record-setting delays are occurring simultaneously with the safest period in American aviation history. This is no surprise, because the FAA’s top priority is safety. We will never sacrifice safety, even in the face of rising congestion.

However, the system is in trouble and everyone who flies knows it. We are doing everything in our power to squeeze out extra capacity from the existing model. We are building runways, redesigning airspace, and working with our stakeholders to get the most out of what we have. But the fundamental problem is we are working within the constraint of air traffic control technology that is half a century old. The amount of traffic the system can handle is limited by radars, a 1950’s technology, that update too slowly, and by the speed of voice communication between pilots and air traffic controllers. That system is simply not going to accommodate future aviation demand.

What lie ahead, according to our forecasts, are over a billion commercial passengers annually by 2015, 36% more than in 2006. At the same time, the aviation system will have to contend with an ever-increasing number of business jets, including the new very light jet models. In fact, our forecasts report the number of general aviation (GA) and air taxi jets will grow twice as fast as commercial aircraft over the next fourteen years. This results in three and a half times as many GA and air taxi jet flight hours by 2020 as there were in 2006. This growth is fantastic for the future of aviation, but we can’t get there with our current air traffic control system.

NextGen

Fortunately, there is the potential for good news on the horizon. We know the answer to the challenge that brings us here today. America needs the Next Generation Air Transportation System (NextGen). Without it, we will cease to set the pace for global aviation. We will be the country others use as a “lessons-learned” example—the country that identified its problem but couldn’t fix it.

We have a clear vision for NextGen and a plan to execute it, including $4.6 billion of NextGen-related investments over the next five years. These plans were developed in partnership with stakeholders from across the spectrum of aviation, from pilots and airlines to mechanics to Wall Street and beyond. In fact, every segment of aviation agrees we need NextGen—and we need to begin implementing it now. The capacity, safety, and environmental benefits are enormous. The tough issue is how to pay for it, and how do we put a financing system in place that sends the right price signals to aviation users.

Cost-based funding

I firmly believe a cost-based funding structure is our best chance of transforming the aviation system into NextGen quickly and efficiently. This is not a new idea. Numerous bipartisan commissions have recommended cost-based funding for the FAA over the last two decades, and air traffic control providers in every other developed country have cost-based funding. We do not. That is economically inefficient, unfair to those who fly in the system, and will hinder the implementation of NextGen.

Presently, there is little connection between what users pay into the system and the costs they generate, and this detachment leads to chronic over-consumption of air traffic services relative to available supply—in other words, congestion. We know the system is not cost-based from the results of the FAA’s most recent study. Using comprehensive cost accounting and activity data, we put together the most detailed and transparent cost allocation ever done by the FAA or, we believe, by any other air traffic control provider.

Costs in our study were classified by type of air traffic service. This includes dividing airports into large, medium, and low activity categories. We evaluated over 600 cost accounting projects and divided the costs between two main user groups—high performance turbine aircraft and piston aircraft. The study considers piston users to be “marginal” and assigns them virtually none of the system’s fixed costs, except at the low activity towers. Our allocation recognizes that a jet in the middle of Montana does not drive the same costs as a jet going into O’Hare. But a business jet using exactly the same air traffic services as a commercial jet does drive the same costs.

However, under the current tax system, business jets contribute very little tax revenue despite often using virtually the same airspace and services as a commercial airliner. For example, a typical commercial airliner flying from New York to Miami would pay approximately $2,015 in taxes. In contrast, a large private jet, flying the same distance, through the same airspace, using the same air traffic services, would pay roughly $236 in fuel taxes. On a flight from Washington to Hartford/Springfield, a commercial airline flight would pay nearly $900, while a large business jet pays less than $90. On a flight from Shreveport to Atlanta, an airline regional jet would pay almost $400, while a small business jet pays about $70. This boils down to the passengers flying on commercial airlines subsidizing the flights of corporate executives and others who fly private jets.

On a system-wide basis, our cost allocation found that general aviation drives about 16% of the costs of the air traffic control system, while only paying about 3% of the taxes, a situation that is unsustainable, given the growth in GA flight time that we expect. I recognize there has been a lot of rhetoric about fairness over the last few months. However, the sheer numbers are hard to refute. It’s important to note that in the Administration’s proposal, we only proposed that GA users pay 11% of the total tax burden, with 10% coming from turbine users and 1% from piston users. That’s a particular break for piston users, who would pay less than one-quarter of the air traffic costs allocated to them.

Some have argued that the FAA’s cost allocation study departed from international standards. However, these criticisms confuse cost allocation with cost recovery. In fact, every other country with an air traffic control system that we studied uses accounting principles similar to the FAA’s for cost allocation. However, our methodology does differ from other service providers in that it is much more detailed and transparent. DOT’s Inspector General (IG) has said the FAA cost allocation is reasonable and that it makes tradeoffs that “result in fewer costs being allocated to general aviation and some air carriers than other possible methods.” The General Accountability Office (GAO) has not finished its review of the FAA’s cost allocation, but has stated the general conclusion that general aviation is underpaying is likely to hold. The International Civil Aviation Organization (ICAO) specifically calls on member countries to ensure that no users are burdened with air navigation services costs that are not properly allocable to them according to sound accounting principles. FAA’s proposal does this.

Thus, there is a basic fairness issue in terms of how much users pay for the services provided. Also, in the case of commercial operators, there is another disconnect with how taxes are determined. The primary source of the commercial tax revenue comes from the 7.5% excise tax that we all pay on the price of commercial airline tickets. Back when the Airport and Airway Trust Fund was established in 1970, the Civil Aeronautics Board regulated the operations of the commercial airlines, including prices and routes. Under that system, the passenger ticket tax was a fair proxy for a cost-based funding system. Whereas today, ticket prices and airline routes are deregulated making a tax based on the price of a passenger ticket completely divorced from the cost of providing air traffic services to users of the system. This results in different passengers on the same airplane paying different amounts into the Airport and Airway Trust Fund. The same flight on two different days would generate two different amounts of revenue, depending on how many passengers are on the plane and what they paid for their tickets.

In short, tying the aviation system’s revenue to the price of a ticket may have made some sense before airline deregulation, but it now has nothing to do with the cost to provide service and is an unfair way to fund the operation of our national airspace and the transformation to NextGen. Similarly, it may have made sense back in 1970 for GA to pay little into the system. However, the number of high performance non-airline aircraft has significantly increased in the system over the last 37 years to the point today where such operators are 18% of all flights in the en route system. And, their use of this system is forecasted to grow at twice the rate of airline growth.

I know there are some who argue that the current tax system can support the FAA, even if it is not cost-based. While it may be possible to finance pieces of NextGen through the existing taxes, the existing system is inflexible and will not enable the implementation of NextGen as quickly or as rationally as a cost-based funding structure. For instance, some users have said that they would pay additional fees to achieve the efficiencies of NextGen sooner; under the current tax system, this type of flexibility is not possible. We do project revenue to grow under the current system, but the fact that revenue is projected to grow over the long term really misses the point. The basic baseline analysis that some stakeholders are using to conclude that the status quo is fine has a number of caveats, assumptions and uncertainties associated with it. GAO, the Congressional Budget Office (CBO) and the DOT IG have at various times noted this. These variables that can impact both spending levels and revenue include the level of the general fund contribution, the future cost of NextGen investments, the volume of air traffic, the future costs of operating the national airspace system, future appropriation levels for AIP, and changes in the aviation industry. Furthermore, even with CBO’s baseline assumptions, there is minimal room for additional spending until after 2010, which is problematic because we need to start making significant investments in NextGen now. In addition, seven independent commissions over the last two decades have recommended reform of the current funding system.

Keep in mind that not only are we facing the implementation costs of NextGen--which is a two-decade long project--but we also have to operate and manage traffic growth within the current system immediately. Without a cost-based revenue structure that encourages the most efficient use of the airspace, we are vulnerable to short-term increases in delays throughout the system and to long-term funding volatility for NextGen as ticket prices fluctuate.

With cost-based financing, the factors that drive our costs—such as how many flights users make and how far they fly—would also drive our revenues. Under the current taxes, there are limited incentives to use resources efficiently, since system users do not pay based on costs. With a cost-based structure, users would understand the impact of their actions and also see a direct relationship between investments we make and the costs they pay. Finally, without cost-based financing, as noted above, commercial airline passengers will continue to subsidize business jets, and the disparity will only get worse since private jet activity will grow significantly faster than commercial flights.

In short, cost-based financing will improve the efficiency and fairness of the system, and set us on a predictable path towards a NextGen system of technology that allows us to use a lot more of the sky.

This year is a once-in-a-generation opportunity, presenting a rare chance to leave an extraordinary legacy for our children. But, to develop the NextGen system successfully, we need a revenue stream that is tied to the actual cost of our operations. We need a revenue stream that’s equitable and rational. Our financing system should be balanced, fair, and provide predictability, reliability, and stakeholder involvement. It must also take into account the valuable and unique role that aviation plays in small communities across the country.

Consistent with these principles, we proposed a hybrid system of cost-based user fees, cost-based taxes and a general fund contribution to pay for the cost of specific public good services. The key to such a financing system is to have a clear link between costs and revenues. And, of course, if it is to be truly cost-based, the amount of money coming in must be adjustable as costs change—both upwards as we invest in NextGen and downwards as we reap the benefits of a more efficient system in future years. That sort of adjustability is more challenging to do with taxes than with user fees.

Building flexibility into our revenue stream is also important to allow us to spend the revenue we generate where and when we need it. Without the ability to spend what comes in, we will not be able to support the NextGen transformation. One of the ways our bill would achieve this is by directly counting the incoming user fees against the spending of those fees in annual appropriations.

I commend Chairman Oberstar, Chairman Costello, and Ranking Members Mica and Petri for their swift action in moving forward on the Committee’s aviation reauthorization bill, H.R. 2881. The Science Committee should also be recognized for their timely action on reporting their reauthorization measure, H.R. 2698. We are heartened by the recognition that the American public would not be well-served if the aviation programs were allowed to expire. We appreciate the support for transforming our air traffic control system to NextGen as well as the fact that many of the program reforms and environmental provisions from the Administration’s bill have been incorporated in H.R. 2881, including updating fees for the services provided by the FAA’s Aircraft Registry in Oklahoma City.

At the same time, we are disappointed that H.R. 2881 does not include cost-based financing reform. Instead, we understand that Chairman Oberstar and Chairman Costello have recommended to this Committee that you should keep the status quo by simply extending current taxes, with modest adjustments to two of the taxes (aviation jet fuel and aviation gasoline). This does not address or remedy the fundamental problems with the current aviation tax system that I have outlined above: that the current tax system is not fair to all users; it is not cost-based and therefore does not provide the right incentives for efficient use of the system; and the system’s revenues are not stable or predictable. The Transportation and Infrastructure Committee has generally acknowledged that the current tax system is inequitable, but this proposal does not seriously address that issue. Unfortunately, without real funding reform, the past will be prologue and progress toward NextGen will be shortchanged.

Price of inaction

As I mentioned at the outset, there is an urgent need for action. The expiration of the current taxes is less than two months away. Ten years ago, the last funding debate resulted in a series of lapses in aviation taxes during two years of short term fixes. During that time the Airport and Airway Trust Fund lost 10 months of tax revenues. At that time, the uncommitted balance of the Trust Fund was sufficient to sustain the FAA, but the start-stop nature of the short-term fixes caused serious problems for programs such as AIP. Today, the Trust Fund’s uncommitted balance is equivalent to less than two months of appropriations. Thus, a lapse in tax authority would have real and significant consequences. The aviation system cannot afford a lapse that puts air transportation – the lifeblood of our economy - at risk.

Short-term extensions without a long-term solution are not a good option either. Extensions would not address the need for reform or congestion relief, would postpone the hard decisions, and would make it difficult to implement the airport grant program in particular. Additionally, immediate legislative action is necessary to advance NextGen initiatives. If funding reform is not approved with sufficient lead time to implement the new system at the start of FY 2009, $450 million in new FY 2009 NextGen investments are particularly at risk. Critical investments in automation, advanced communications systems, facilities, and system integration could be significantly delayed.

Outyear Costs

Finally, we note that section 601 of H.R. 2881 would not only impose binding arbitration on the FAA in the event of a labor negotiation impasse, but also roll-back the current controller contract to the one that was negotiated nearly ten years ago. This would significantly threaten the FAA’s ability to control its costs in the outyears. The Administration strongly opposes legislative efforts that would limit the FAA’s ability to manage its workforce and that would threaten investment in NextGen and critical aviation safety programs.

Also, the authorization levels in H.R. 2881 are significantly higher than those proposed in the Administration’s bill for the airport grants program. Authorization levels consistent with the Administration’s proposal would adequately support the capital program and reduce the need for higher taxes to support the authorization levels.

Conclusion

This Subcommittee will make some serious decisions over the coming weeks affecting the future of the aviation system. Before you make these determinations, I ask that you take a step back and look at the big picture. In it, you will see passengers crowded into terminals, delays piling up—from large hubs to small communities, but you will also see an opportunity to make real progress, in a balanced, fair way for the aviation community as a whole, not just for a select few.

So far, in the House’s action on the aviation reauthorization, I have been impressed by the recognition of two undeniable facts. First, NextGen technology and programs are necessary to carry U.S. aviation into the first quarter of this century and lay the foundation for what lies beyond. Second, there is a great deal of inequity built into the current tax structure and this is an opportunity to correct it.

It is clear that we share many of the same goals for the future of aviation. A more efficient, safer, higher-capacity and more environmentally-friendly aviation system is essential to the continued vitality of America’s economy. NextGen is that system, and we must seize the opportunity this year to deliver it with a cost-based and fair financing structure. I look forward to working with you to achieve that goal by September 30^th.

Mr. Chairman, that concludes my prepared statement. I would be happy to answer your and the other Members’ questions at this time.

Financing the Next Generation Air Transportation System

STATEMENT OF

MARION C. BLAKEY,
ADMINISTRATOR,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

SENATE COMMITTEE ON FINANCE,

FINANCING THE NEXT GENERATION AIR TRANSPORTATION SYSTEM,

JULY 12, 2007

Good morning, Chairman Baucus, Senator Grassley, and Members of the Committee.

It is a pleasure to be here today and I thank you for the opportunity to address an issue of great national significance. Indeed, it is a scenario that affects every man, woman and child in this great nation. It impacts every business, from blue chips to the corner store. And, it is a situation that requires prompt action by this Committee and the Congress. September 30th—and the expiration of the aviation taxes that currently fund over 80% of the FAA’s budget—is only 80 days away, and only 51 that Congress will be in session. Mr. Chairman, you have recognized the significance of that date and the urgent need for timely action by holding this hearing today, and I thank you for that.

Need for change

As you are well aware, the volume of traffic in the national airspace system is rapidly approaching critical mass. For years, the word “gridlock” has been bandied about. For years, experts have pointed to a system that is stretched too thin, a system that simply won’t be able to accommodate all those looking to use it. We had a glimpse of this problem with the delays in the summer of 2000, and then the pressure eased with the drop in demand after 9/11. But, thanks to the hard work of the industry, aviation has bounced back and we are now at a critical decision point.

John F. Kennedy once said: “The time to repair the roof is when the sun is shining.” Well, for our air transportation system the storm clouds aren't just on the horizon, the raindrops are starting to fall.

However, the system is in trouble and everyone who flies knows it. The problem is we have already squeezed out virtually every ounce of capacity that’s available to us. We are building runways, redesigning airspace, and working with our stakeholders to get the most out of what we have. But the fundamental problem is we are working within the constraint of air traffic control technology that is half a century old. The amount of traffic the system can handle is limited by radars, a 1950’s technology, that update too slowly, and by the speed of voice communication between pilots and air traffic controllers. That system is simply not going to accommodate future aviation demand.

What lie ahead, according to our forecasts, are over a billion commercial passengers annually by 2015, 36% more than in 2006. At the same time, the aviation system will have to contend with an ever-increasing number of business jets, including the new very light jet models. In fact, our forecasts report the number of GA and air taxi jets will grow twice as fast as commercial aircraft over the next fourteen years. This results in three and a half times as many GA and air taxi jet flight hours by 2020 as there were in 2006. This growth is fantastic for the future of aviation, but we can’t get there with our current air traffic control system.

NextGen

Fortunately, there is good news on the horizon. We know the answer to the challenge that brings us here today. America needs the Next Generation Air Transportation System (NextGen). Without it, we will cease to set the pace for global aviation. We will be the country others use as a “lessons-learned” example—the country that identified its problem but couldn’t fix it.

Cost-based funding

I firmly believe a cost-based funding structure is our best chance of transforming the aviation system into NextGen quickly and efficiently. This is not a new idea. Numerous bipartisan commissions have recommended cost-based funding for the FAA over the last two decades, and air traffic control providers in every other developed country have cost-based funding. We do not. That is unfair to those who fly in the system and will hinder the implementation of NextGen.

Presently, there is little connection between what users pay into the system and the costs they generate, and this detachment leads to over-consumption of air traffic services, and ultimately congestion. We know the system is not cost-based from the results of the FAA’s most recent study. Using comprehensive cost accounting and activity data, we put together the most detailed and transparent cost allocation ever done by FAA or, we believe, by any other air traffic control provider.

Costs in our study were classified by type of air traffic service. This includes dividing airports into large, medium and low activity categories. We evaluated over 600 cost accounting projects and divided the costs between two main user groups—high performance turbine aircraft and piston aircraft. The study considers piston users to be “marginal” and assigns them virtually none of the system’s fixed costs, except at the low activity towers. And our allocation recognizes that a jet in the middle of Montana does not drive the same costs as a jet going into O’Hare. But a corporate jet using exactly the same air traffic services as a commercial jet does drive the same costs.

However, under the current tax system, corporate jets contribute very little tax revenue despite often using virtually the same airspace and services as a commercial airliner. For example, a typical commercial airliner flying from LaGuardia to Miami would pay approximately $2,015 in taxes. In contrast, a large private jet, flying the same distance, through the same airspace, using the same air traffic services, would pay roughly $236 in fuel taxes. This boils down to the passengers flying on commercial airlines subsidizing the flights of corporate executives and others who fly private jets, and a system that incentivizes incredible growth in general aviation traffic. On a system-wide basis, our cost allocation found that general aviation drives about 16% of the costs of the air traffic control system, while only paying about 3% of the taxes, a situation that is unsustainable given the growth in GA flight time that we expect. I recognize there has been a lot of rhetoric about fairness over the last few months. However, the sheer numbers are hard to refute. And it’s important to note that in the Administration’s proposal, we only proposed that GA users pay 11% of the total tax burden, with 10% coming from turbine users and 1% from piston users. That’s a particular break for piston users, who would pay less than one-quarter of the air traffic costs allocated to them.

The commercial taxes are currently not cost-based either. The primary source of the commercial tax revenue comes from the 7.5% excise tax that we all pay on the price of commercial airline tickets. This results in different passengers on the same airplane paying different amounts into the Airport and Airway Trust Fund. The same flight on two different days would generate two different amounts of revenue depending on how many passengers are on the plane and what they paid for their tickets. In short, tying the aviation system’s revenue to the price of a ticket may have made some sense before airline deregulation, but it now has nothing to do with the cost to provide service and is an unfair way to fund the operation of our national airspace and the transformation to NextGen.

I know there are some who argue that the current tax system can support the FAA, even if it is not cost-based. While it may be possible to finance pieces of NextGen through the existing taxes, the existing system is inflexible and will not enable the implementation of NextGen as quickly or as rationally as a cost-based funding structure. For instance, some users have said that they would pay additional fees to achieve the efficiencies of NextGen sooner; under the current tax system, this type of flexibility is not possible. We do project revenue to grow under the current system, but the fact that revenue is projected to grow over the long term really misses the point. Keep in mind that not only are we facing the implementation costs of NextGen—which is a two-decade long project--but we also have to operate and manage traffic growth within the current system immediately. Without a cost-based revenue structure that encourages the most efficient use of the airspace, we are vulnerable to short-term increases in delays throughout the system and to long-term funding volatility for NextGen as ticket prices fluctuate. With cost-based financing, the factors that drive our costs—such as how many flights users make and how far they fly—would also drive our revenues. Under the current taxes, there are limited incentives to use resources efficiently, since system users do not pay based on costs. With a cost-based structure, users would understand the impact of their actions and also see a direct relationship between investments we make and the costs they pay. Finally, without cost-based financing, commercial airline passengers will continue to subsidize corporate jets, and the disparity will only get worse since private jet activity will grow significantly faster than commercial flights.

This year is a once-in-a-generation opportunity, presenting a rare chance to leave an extraordinary legacy for our children. But to develop the NextGen system successfully, we need a revenue stream that is tied to the actual cost of our operations. We need a revenue stream that’s equitable and rational. Our financing system should be balanced, fair, and provide predictability, reliability, and stakeholder involvement. It must also take into account the valuable and unique role that aviation plays in small communities across the country.

We are pleased S. 1300 supports the need to transform the aviation system by providing funding through a modernization surcharge that supports NextGen-related capital projects. I hope the Finance Committee will use this building block in the construction of a fair and cost-based financing system for the FAA. We know that the Administration’s bill has led to a spirited debate over financing the air transportation system. Regardless of what type of financing mechanism is ultimately adopted, we believe it is imperative that such a system mirror actual costs and charge those responsible for the services provided to them.

Price of inaction

As I mentioned at the outset, there is an urgent need for action. The expiration of the current taxes is less than three months away. Ten years ago, the last funding debate resulted in a series of lapses in aviation taxes during two years of short term fixes. During that time the Airport and Airway Trust Fund lost 10 months of tax revenues. At that time, the uncommitted balance of the Trust Fund was sufficient to sustain the FAA, but the start-stop nature of the short-term fixes caused serious problems for programs such as AIP. Today, the Trust Fund’s uncommitted balance is equivalent to less than two months of appropriations. Thus, a lapse in tax authority would have real and significant consequences. The aviation system cannot afford a lapse that puts air transportation – the lifeblood of our economy - at risk.

Outyear Costs

Finally, we note that section 313 of S. 1300 threatens the FAA’s ability to control its costs in the outyears. Under this provision, in the event of a negotiation impasse, the matter would go to binding arbitration. The Administration opposes legislative efforts that would limit the FAA’s ability to manage its workforce and that would threaten investment in critical aviation safety programs.

Also, the authorization levels in the Senate Commerce bill are significantly higher than those proposed in the Administration’s bill for the airport grants program. Authorization levels consistent with the Administration’s proposal would adequately support the capital program and reduce the need for higher taxes to support the authorization levels.

Conclusion

This committee will make some serious decisions over the coming weeks affecting the future of the aviation system. Before you make these determinations, I ask that you take a step back and look at the big picture. In it you will see passengers crowded into terminals, delays piling up—from large hubs to small communities, but you will also see an opportunity to make real progress, in a balanced, fair way for the aviation community as a whole, not just for a select few.

So far, in the Senate’s action on the aviation reauthorization, I have been impressed by the recognition of two undeniable facts. First, NextGen technology and programs are necessary to carry U.S. aviation into the first quarter of this century and lay the foundation for what lies beyond. Second, there is a great deal of inequity built into the current tax structure and this is an opportunity to correct it.

Mr. Chairman, that concludes my prepared statement. I would be happy to answer your and the other Senators’ questions at this time.

The Next Generation Air Transportation System Financing Reform Act of 2007

STATEMENT OF

MARION C. BLAKEY,
ADMINISTRATOR,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

HOUSE TRANSPORTATION AND INFRASTRUCTURE COMMITTEE,
SUBCOMMITTEE ON AVIATION,

THE FAA’S REAUTHORIZATION PROPOSAL,

THE “NEXT GENERATION AIR TRANSPORTATION SYSTEM FINANCING REFORM ACT OF 2007,”

ON MARCH 14, 2007.

Chairman Costello, Representative Petri, Members of the Subcommittee:

I am happy to appear before you today to provide an overview of the Administration’s proposal to reform the funding structure for, and reauthorize the programs of the Federal Aviation Administration (FAA). Because we view this proposal as the foundation for the future, we entitled it the “Next Generation Air Transportation System Financing Reform Act of 2007.” I want to thank Chairman Oberstar, Mr. Mica, Chairman Costello, and Mr. Petri for introducing our proposal, H.R. 1356, by request, and I also want to thank the Committee for holding a series of early hearings on reauthorization. They will certainly provide us with an opportunity to fully explore the important issues facing aviation today and, hopefully, lead to the development of consensus solutions. The simultaneous expirations at the end of September of the funding authorization for the FAA’s current programs as well as the ten-year term for existing taxes that fund the Airport and Airway Trust Fund (Trust Fund) present us all with a unique opportunity to make a better system possible. Moreover, ten years ago, the last funding debate resulted in a lapse of the taxes. At that time, the uncommitted balance of the Aviation Trust Fund was sufficient to sustain continued funding of the aviation accounts without disruption to the system. Today, the Trust Fund balance cannot support such a lapse, and thus such a lapse would have potentially significant consequences. We all understand the importance of this industry, just as we are all committed to its success. It is because of our shared values and goals for aviation that I am confident that hard work and dedication will result in a new and better system for funding the FAA by September 30th.

When I was here last month to testify on our fiscal 2008 budget, Secretary Peters had sent our proposal to Congress that day. Even though during that hearing we touched on some of the major elements of the bill, I am grateful for the opportunity to return and discuss our proposal in greater depth. While our proposal has generated some spirited debate already, I think we can all agree that we share two fundamental goals for reauthorization: first, that we continue to keep our air transportation as safe as we possibly can, and, second, that we have the ability to grow the system to meet our nation’s future air transportation needs. The Administration’s proposal leads us towards these goals by supporting the transformation of our air transportation system, responding to a changing aviation industry, and creating a rational funding system that ties revenues to costs.

The Administration’s proposal supports the transformation to the Next Generation Air Transportation System (NextGen). Without this transformation, the current system is simply incapable of accommodating future demand. As we look out into the future, we see a system that will need to grow to accommodate the demands of our stakeholders and the flying public. These issues will be front and center at our annual Aviation Forecast Conference, which begins tomorrow. Passenger demand has returned to pre-9/11 levels and we project that the system must be ready to serve over 1 billion passengers annually by 2015, and continuing growth through 2025. It will be difficult to meet this challenge under the current system, where the needs of NextGen must compete with other funding priorities in the appropriations process. The Administration’s proposal meets this challenge by largely funding NextGen investments through user-supported offsetting collections.

The current financing mechanisms, both in terms of taxes and spending, are not tied to FAA’s cost to deliver services, and therefore are not scalable to meet these growing demands. This can be illustrated by example. Consider two identical aircraft, flying the same route from Boston to Miami, one full of passengers, and the other only half–full. Although both planes impose the same air traffic control costs on the system, the full plane will contribute far more to the funding of the air traffic control system. As another example, consider an airline that is replacing a large aircraft flying between two cities, with two smaller aircraft flying the same number of people between those cities. This change in service will impose twice as much cost on the air traffic control system, but under the current system, there is no incentive for the airline to consider those additional costs in its decision. Finally, the greatest flaw in the current system becomes apparent when one considers that while a corporate jet consumes the same air traffic control services as a commercial airline, because the corporate jet has no passengers, under the current financing system, it contributes far less to the funding of air traffic control services than ticketed passengers flying on the commercial airline. The following table highlights this issue for a number of illustrative flights from the Los Angeles area to the San Francisco area:

Operator Type	Aircraft Type	# of Passengers	Estimated Current Taxes
Airline	Boeing 777	203	$2,000
Airline	Boeing 757	138	$1,334
Airline	Airbus 319	86	$837
Airline	Bombardier CRJ-200	33	$331
Air Taxi	Learjet 35	5	$116
Corporate Jet	Citation II	N/A	$58
GA Piston	Bonanza 36	N/A	$7

Under the current tax structure, it is clear that taxes paid by different user categories do not generally reflect the costs those users impose on the system. Commercial airline passengers currently pay over 95 percent of the Trust Fund taxes, but our cost allocation shows that the aircraft carrying them account for approximately 73 percent of air traffic costs. In many cases, “high end” turbine (jet and turboprop) general aviation (GA) flights are consuming similar FAA and airspace resources as the commercial operators, but paying only a fraction of what commercial operators pay through the passenger taxes. For example, as the table above shows, a corporate jet flying from Los Angeles to San Francisco today pays only 17% of what a 50-seat regional jet pays, and less than 5% of what a Boeing 757 pays. In other words, commercial operators and everyday passengers are subsidizing use of the system by corporate jets. I do not believe this is equitable.

Because of the fundamental disconnect between the existing tax structure and the FAA’s workload, we strongly believe that the FAA needs to move to a different, more rational funding mechanism. The Administration’s proposal creates a transparent financing system where aviation users pay for FAA services through user fees and fuel taxes, so that all users pay their fair share of air traffic control services. Most commercial aviation operators would pay for their fair share of the costs of air traffic control services through user fees, while general aviation users and some commercial users would pay for these services through a cost-calibrated fuel tax. This linkage between what users pay and what FAA invests in will be critical to facilitate our transition to the NextGen modernization the air traffic control system.

I want to be clear that the primary purpose of this proposal is not about collecting more money for the FAA, it is about creating a more rational, equitable, and stable system that provides appropriate incentives to airspace users to efficiently use increasingly congested airspace, to the FAA to control costs. However, by adopting new discretionary user fees and authorizing borrowing, the Administration’s proposal does allow the FAA the flexibility to meet the financing challenges of NextGen and facilitates modernization of the aviation system on an assured and predictable basis.

The new system will facilitate more reliable, more predictable, and less congested air travel for the traveling public. The FAA will continue to have strong congressional and public oversight, and our proposal adds additional oversight through a newly created Air Transportation System Advisory Board to play a role in key agency financial decisions and provide strong incentives for the FAA to control costs and meet the demand for services efficiently. The financing proposal is the product of both significant consultation with the public, including our aviation stakeholders, as well as a detailed analysis of the current financing system and various alternatives. We have attempted to balance the diverse views that our stakeholders have expressed with the need for a stable, equitable, and cost-based funding structure. Our recommended solution builds on the work of numerous bi-partisan commissions from the past two decades, including the National Civil Aviation Review Commission that Congress created and that former Secretary Mineta chaired approximately ten years ago.

Let me describe in greater detail how our proposal would fund the different parts of the FAA.

Proposed Funding for the Air Traffic Organization (ATO)

The cost of ATO’s services will primarily be funded by those operating in the system. The manner of contribution will vary depending on the type of operation. Turbine commercial flights would primarily pay user fees; general aviation and all piston-powered flights would primarily pay fuel taxes; and the General Fund would finance the costs of services provided to public users and other programs that are in the general public interest.

User fees would apply to turbine commercial flights, including those by U.S. and foreign airlines, passenger and freight carriers, domestic and international flights, charter operators, and regional airlines. They would cover all flights by jet aircraft that are considered commercial under the current tax code, including air taxis and flights operated under fractional ownership. Collecting user fees for air traffic services is an internationally accepted practice in widespread use around the world, and would be consistent with the recommendations of at least seven bi-partisan commissions that have studied this issue over the last two decades. These fees would be based on data derived from the agency’s cost accounting and cost allocation systems—including the operations, maintenance, and overhead expenses for the services provided, the facilities and equipment used in such services, and the projected costs for the period during which the services are provided. Existing U.S. overflight fees would be integrated into these new user fees. While the proposal gives the FAA and its users latitude in how the fees would be structured, these fees would clearly tie FAA revenues much more closely to the actual cost of the services provided. We anticipate that approximately three-fourths of the Air Traffic Organization’s budget would come from these user fees.

The fees would be dedicated to air traffic control and related services and would be subject to oversight through the annual budget and appropriations process and treated as discretionary offsetting collections for budget purposes. Congressional appropriators would receive credit for these collections and would make them available for expenditure through annual appropriations action. The user fee spending would be fully offset by the user fee collections. It would rise or fall based on FAA’s costs and would not compete with any other discretionary budget priorities (as spending Trust Fund revenues do today).

The general aviation (GA) community and piston commercial operations would contribute their allocated share of air traffic control costs primarily via a fuel tax. We have considered stakeholder feedback from this community and accept the argument that the efficiency and simplicity of the fuel tax mechanism merit its continued use as the primary mechanism for GA’s contribution to FAA funding. We identified the costs associated with these users and then set the fuel tax rates to recover those costs. We anticipate that just over 10 percent of the ATO’s budget would come from these taxes, which would continue to be deposited in the Trust Fund and be subject to appropriation. The bill proposes periodically recalibrating the portion of the GA fuel tax dedicated to funding ATO based on updates to FAA’s cost allocation study.

In addition to the fuel tax, GA and piston commercial flights may be subject to a terminal user fee when they arrive or depart at one of a limited number of large hub airports. In general, these airports are the most congested terminal facilities in the aviation system, and all users at congested facilities contribute to congestion for other users. Given that large hub airports are in metropolitan areas that have alternative airports, which would not be subject to this fee, we believe it is appropriate to apply fees to all users of the most congested airports.

The costs associated with air traffic control service for military and other public users, as well as other functions and services deemed to be in the general public interest would be funded from the General Fund appropriation, as discussed below.

Proposed Funding for Aviation Safety

The funding proposal includes modest user fees to pay for the costs of 25 activities in the areas of certification and registration. These include issuance of certain certificates, appointment and training of designees, registration of aircraft and airmen, airmen medical certificates, and training provided to other aviation authorities. All of these activities are specific services that FAA provides for individual businesses; other federal, state and local government agencies charge for similar services, as do many international aviation authorities. They are FAA products and services that have value to those who receive them, and that are initiated by customer action. In fact, FAA currently charges fees for many of these services; however, the current fees are set significantly below the cost of providing the service—and below the price of other comparable services. For example, the $5 it currently costs to register an airplane would not go very far toward registering a car in most states. The legislation specifies the amount to be charged for 12 specific services. Thirteen other activities are identified for which fees will be collected, but do not have the unit charge specified as FAA’s cost accounting system is still being implemented with respect to regulation and certification activities. As with the ATO fees, the charges for these activities will be determined based on the available data derived from the agency’s cost accounting and cost allocation systems and revenue from the fees would be treated as offsetting collections. Based on the historical cost of these activities, DOT anticipates that approximately 10 percent of FAA’s Aviation Safety budget will come from user fees.

Regardless of the type of product or amount of fee determined for that product, FAA will always make fee decisions considering safety first. We are also mindful of the significant international leadership role of both the FAA and the U.S. industry, and the fact that benefits from many aviation safety functions (such as ongoing surveillance) are widely dispersed to the traveling and non-traveling public. No fee structure will compromise the FAA’s statutory safety responsibilities or the U.S. aviation community’s ability to remain the world’s principal system innovator. As a result, we are proposing that the vast majority of FAA’s aviation safety responsibilities remain funded from the General Fund.

General Fund Proposal

The Administration derived its General Fund proposal by evaluating specific activities to determine whether they are in the general public interest and have a compelling case for a General Fund appropriation. The dollar figures in the reauthorization proposal are based on the following activities and services:

Air traffic costs allocated to public users (military, other government aircraft, and air ambulances), because providing air traffic control services to these flights as serving the public good;
Flight service stations, because charging user fees for these services would encourage general aviation pilots to fly “outside the system,” which would have a negative safety impact;
Low activity towers, because they help provide safe access to the aviation system to numerous small communities and are a critical part of the national aviation infrastructure; the primary users of these terminals (piston aircraft) likely cannot bear the cost of funding them, even though many of these towers are contract towers, which are the FAA’s most cost-efficient facilities;
Safety regulation and oversight that are not recovered by user fees, because these regulatory functions benefit the general public by contributing to a safe and reliable air transportation system;
Commercial Space Transportation, because, given the early and volatile state of the industry, it would be virtually impossible to develop a schedule of fees that would generate significant revenue without unduly burdening the industry and placing U.S. companies at a competitive disadvantage compared to heavily subsidized firms from other countries; and
The portion of Research, Engineering and Development (RE&D), sponsored by FAA’s Aviation Safety organization, related to aging aircraft and aircraft catastrophic failure prevention (approximately $17 million of the RE&D budget[1]), because this research supports FAA’s “public good” regulatory functions.

Transition and Elimination of Other Aviation Excise Taxes

The Administration proposes that the changes to the aviation financing system take effect at the start of fiscal year 2009, in order to provide the FAA with sufficient time to establish user fees and implement a billing and collection system. Our proposal therefore extends the current excise taxes for one year to ensure that the FAA has sufficient funding in FY 2008.

As of FY 2009, the existing domestic ticket tax (including the tax on mileage awards), domestic segment tax, cargo waybill tax, and Alaska/Hawaii departure tax would expire under our proposal. The proposed user fees, adjusted fuel taxes, and the adjusted international arrival and departure tax would replace these taxes. This represents a significant simplification of the aviation excise tax system.

FAA Governance

A review of air traffic service providers around the world shows that one of the common changes accompanying the introduction of user fees is adoption of a “user pays, user says” policy – according users a significant role in decisions relating to the setting of fees and the use of moneys collected.

Therefore, our proposal creates an Air Transportation System Advisory Board, comprised of user representatives and public interest members appointed by the Secretary, which would have a significant role in the decisions of the agency. Although the FAA Administrator and the Secretary retain ultimate responsibility for the safety and operation of the National Airspace System and thus have the final decision authority, the Board would provide advice and recommendations on the creation and adoption of user fees, and would propose modifications to them on a periodic basis. Under our proposal, if the Board does not approve the establishment or modification of a fee, the Administrator can only implement it after publishing a written determination in the Federal Register. This Board would also review and make recommendations with respect to major capital infrastructure decisions and modernization projects, the agency’s strategic plan, and the development and adoption of ATO’s operational performance metrics. Finally, the Board would review and provide advice on FAA’s safety programs, budget, and cost accounting system. Of course, as the FAA is a government agency, Congress will always have the ultimate oversight authority.

The FAA Administrator and a representative from the Department of Defense would be Board members, along with members representing airports, air carriers, general aviation, business aviation, aviation manufacturing, and the public interest. The Management Advisory Council and Air Traffic Services Committee would be discontinued with the creation of this new Board.

Proposed Funding for AIP, RE&D and EAS

The Subcommittee has scheduled a separate hearing on the airport-related portion of reauthorization for later this month, at which time we will provide detailed testimony on those aspects of our proposal. For the moment, we would briefly note the funding aspects of our proposal. Airports are a key part of the system, and that includes small primary and general aviation airports that rely on AIP funding to help meet their capital needs. We have proposed changes to Federal funding programs that will stabilize and enhance these funding sources for airports. Our proposal ensures that smaller airports that cannot generate sufficient funding on their own can rely on their entitlement funds to complete strategic projects. These airports play an important role in the national aviation system.

We propose to continue financing the AIP program through taxes. The proposed taxes are administratively simple and build on existing collection mechanisms. Specifically, our bill would fund the AIP program via a set of simplified excise taxes, consisting of a flat, universal fuel tax for domestic commercial and all GA flights and an international passenger head tax for international commercial passenger flights. This universal fuel tax would be in addition to the proposed GA ATO fuel taxes for GA users and piston commercial users. Like the ATO taxes, these taxes would be deposited into the Airport and Airway Trust Fund and be subject to Congressional appropriation. The proposed taxes are expected to generate receipts sufficient to cover the proposed authorization levels for AIP, the Essential Air Service (EAS) program, and the Trust Fund’s portion of RE&D. If the enacted authorization levels are different from the proposed levels, the tax rates proposed could be adjusted accordingly. The bill also proposes indexing both the AIP portion of the fuel tax and the international passenger tax to keep pace with inflation.

The universal fuel tax and international passenger tax would also be the funding sources for all of EAS and most of RE&D. As in the case of AIP, it is appropriate for users to fund most research and development because it ultimately benefits them, but it is challenging to allocate research costs to specific users. Similarly, EAS has a long history of being funded by users through overflight fees; however, it is not part of air traffic control costs, and similar to AIP, is largely a grant program to assist small communities that cannot support service on their own. Therefore, the Administration has included EAS and RE&D funding requirements in the proposed universal fuel tax and international passenger tax rates. However, AIP is the primary driver of the tax rates.

NextGen – Funding of Major Capital Projects

Examples of FAA projects that may be appropriate for debt financing include safety-critical and mission-essential software and systems that controllers and traffic flow managers will use to support trajectory based operations in the NextGen system, enhancements to the global positioning system (GPS) technology related to civil aviation, surveillance technology for homeland security and defense, and potential facility consolidation. This authority would be targeted, as noted, for a limited time period (FY 2013 to FY2017) and would be capped at $5 billion. We think this innovative authority will give us what we need when we need it.

Congestion Charges at Certain Capacity-Constrained Airports

While our bill will provide us the tools to be prepared for the future, we must also manage our current system safely and efficiently. To that end, I wish to briefly note two provisions in our bill that would authorize the use of market-based mechanisms (e.g., auctions or congestion pricing) to control congestion and delay at capacity-constrained airports. While FAA’s policy is to expand capacity to meet demand, physical expansion is not feasible at certain airports, most notably at New York’s LaGuardia Airport. Therefore, specifically with regard to LaGuardia, our bill would give the Secretary and the FAA statutory authority to authorize the Port Authority of New York and New Jersey (Port Authority) to use market-based mechanisms at the airport. The language generally complements rulemaking FAA is currently undertaking with respect to LaGuardia to replace the expired High Density Rule (HDR). If the Port Authority implements a market-based mechanism and such mechanism produces annual revenue in excess of associated administrative costs, the Port Authority would have to deposit the excess revenue in an escrow account. It could then use those funds on otherwise eligible airport related projects or any other project that the Secretary finds is in the public interest. If the Port Authority fails to implement a market-based mechanism at LaGuardia within one year of the Secretary’s determination, the Secretary would have authority to implement such a mechanism at the airport.

Similarly, the second provision establishes a pilot program allowing for broader evaluation of market-based mechanisms. The Secretary could approve the participation of up to 15 airports in the program. For airports experiencing congestion that results in delays affecting the regional airspace, participating airports could implement a market-based mechanism, for domestic flights, to the extent necessary to achieve a target reduction in congestion and operating delays. The amount of the fee would be set by the airport operator. Any surplus revenue that results would be placed in an escrow account to be used only for airport related projects or any other project the Secretary finds is in the public interest with priority given to projects at the airport where the fees were collected. The program would also provide for participation of airports experiencing congestion that results in more widespread delays.

Environmental Stewardship and Streamlining

Part of our NextGen vision is to provide environmental protection that allows for sustained growth in our aviation system. Our proposal includes provisions to enhance the FAA’s ability to work cooperatively with our partners to preserve the environment by developing technologies, operational procedures, and best practices to minimize the impact of aviation. Our goal is an aviation future that is quieter, cleaner, and more energy efficient. Key environmental stewardship provisions include:

A research consortium for the development, maturing, and certification of lower energy, emissions, and noise engine and airframe technology over the next ten years;
A permanent Airport Cooperative Research Program for research and development specifically related to the airport environment; and\
n environmental mitigation demonstration pilot program to demonstrate the noise, air quality, or water quality benefits of promising research concepts at airports.

We have also proposed environmental streamlining provisions that are intended to improve the administration of current programs without affecting environmental quality in such areas as the state block grant program and the air tour management program.

Realignment and Consolidation of Aviation Facilities and Services

As we plan to transform our air transportation system, we must also transform ourselves as an agency—a provider of services to the aviation community. Our bill includes a proposal that would create a specific process for the comprehensive study and analysis of how we could realign and consolidate our services and facilities to help us reduce capital, operating, maintenance, and administrative costs on an agency-wide basis with no adverse effect on safety. In addition to our current authority, this provision would provide a critical tool that the FAA could use to operate in a more business-like fashion. Any realignments or consolidations recommended by the Administrator under to this section would only be implemented after a thorough review by a newly created Commission of experts, and the opportunity for the public, and ultimately, Congress, to examine the recommendations.

Extension of Aviation InsuranceProgram

Finally, I wish to mention our proposal for the FAA’s aviation insurance program. This is a program that has been very important in recent years to the continued operations of the industry, but which, we feel needs some adjustments. Our bill would extend the Secretary’s overall authority to provide aviation insurance, now set to expire on March 30, 2008, to March 30, 2013. It also removes current requirements for the program to provide first dollar coverage, thus permitting deductibles and the opportunity for commercial coverage of those deductibles. Current law allows the Secretary to limit an airline’s third-party liability to $100 million and also prohibits punitive damages against an airline, aircraft or engine manufacturer, as well as the Government for any cause resulting from a terrorist event. This authority to limit liability is also extended by this section.

Conclusion

Mr. Chairman, I want to conclude by emphasizing that I know we all share the same basic goals for an industry that we all care about deeply. We want a safe system that can meet future demand - one that is cost effective and efficient and that meet the needs of the flying public. We all appreciate the importance of this industry, not only to those of us lucky enough to be a part of it, but to every American. While I anticipate and look forward to a frank and wide-ranging discussion of this proposal and others that I am sure will be put on the table, I cannot overstate my personal commitment to the need for a funding system that better ties FAA’s costs to its revenues and its revenues to its spending. Changing how we fund and operate our system will be hard, but maintaining the status quo will not get us what we all want: a more efficient, modern aviation system.

This concludes my prepared statement. I will be happy to answer your questions at this time.

[1] The remainder of RE&D would be funded from the Airport and Airway Trust Fund, and is included in the universal fuel tax rate discussed below under “Proposed Funding for AIP, RE&D and EAS”.

Financing Reform Proposal

STATEMENT OF

MARION C. BLAKEY,
ADMINISTRATOR,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE
SENATE COMMERCE COMMITTEE,
SUBCOMMITTEE ON AVIATION

FINANCING REFORM PROPOSAL,

ON FEBRURARY 15, 2007.

Chairman Rockefeller, Senator Lott, members of the Subcommittee, I am happy to appear before you today to discuss the Administration’s proposal to reauthorize the programs of the Federal Aviation Administration (FAA). I have mentioned in my previous appearances before you that we have been working very hard on this proposal for quite some time. With both our programs and our funding set to expire at the end of the fiscal year, we are presented with an important opportunity to make needed changes.

The essential question is: why should we change the current financing mechanisms? The answer, simply put, is that the current mechanisms are not well suited to support the transformation to the Next Generation Air Transportation System (NextGen). This transformation is essential. As we look out into the future, we see a system that will need to grow to accommodate the demands of our stakeholders and the flying public. The current financing mechanisms – both in terms of taxes and spending – are not tied to FAA’s cost to deliver services, and therefore are not scalable to meet these growing demands. To deliver the benefits of NextGen, it is essential that a reliable funding stream that better ties our income and our outgo are better tied to the services we provide. NextGen is a reachable goal only if its development and integration is not left to the characteristics of a funding system that does not cover the costs of the system and the services provided. A reliable funding foundation is essential and failure to provide one may well result in tangible programmatic problems in the near term.

Ten years ago, the last funding debate resulted in a lapse of the taxes. At that time, the uncommitted balance of the Aviation Trust Fund was sufficient to sustain continued funding of the aviation accounts without disruption to the system. Today, the Trust Fund balance cannot support such a lapse, and thus such a lapse would have potentially significant consequences. We must approach our work this year as being crucial to the future of aviation. I am sure the debate will be robust and I am anxious to take part in it. We all understand the importance of this industry, just as we are all committed to its success. It is because of our shared values and goals for aviation that I am confident that hard work and dedication will result in a new and better system for funding the FAA.

The Administration’s proposal creates a financing system where what users pay into the system – whether user fees or taxes – and the benefits they get out of the system will be more stable and transparent. The proposal adopts a cost-based financing system for the FAA through new user fees and fuel taxes. Most commerical aviation operators would pay for the costs of air traffic control services through user fees and general aviation would pay for these services through a cost-based fuel tax. The new user fees will allow aviation users to pay directly for the services that FAA provides in managing the use of the national airspace. This linkage between what users pay and what FAA invests in will be critical to facilitate our transition to the NextGen modernization the air traffic control system.

The new system will facilitate more reliable, more predictable, and less congested air travel for the traveling public. A newly created Board will give our stakeholders a significant role in key agency financial decisions and will provide strong incentives for the FAA to control costs and meet the demand for services efficiently. The financing proposal is the product of both significant consultation with the public, including our aviation stakeholders, as well as a detailed analysis of the current financing system and various alternatives. We have attempted to balance the diverse views that our stakeholders have expressed with the need for a stable, equitable, and cost-based funding structure. Our recommended solution builds on the work of numerous bi-partisan commissions from the past two decades, including the National Civil Aviation Review Commission that Congress created and that former Secretary Mineta chaired approximately ten years ago.

Today’s funding system is largely based on taxes that are, for the most part unrelated to the costs of the services provided by the FAA. While this system has worked well in the past, changes in the industry require that we replace it with something that better reflects the cost of providing service. The success of low cost carriers has been a tremendous benefit to the flying public, but in many instances it results in two identical operations, imposing identical costs to the FAA, paying very differently into the system because so much of the current revenue stream is based on the cost of the ticket. Similarly, as airlines work to control costs per enplanement, they are using increasing numbers of small aircraft. This trend adds to the workload of our air traffic system without increasing tax revenue commensurately. If an airline carries the same number of passengers (at the same fares) on two smaller jets instead of one larger jet, the tax revenues do not change, but the controller workload doubles. Our latest forecasts indicate that the trend to use smaller aircraft by airlines will continue, especially as the current system provides no incentives to the airlines to respond to the costs that a switch from large jets to regional jets imposes on air transportation system.

The results of these trends are best captured in the two charts that I have included with this statement. The first depicts the uncommitted balance in the Trust Fund in FY 2006. This information clearly supports the need for immediate action to prevent any lapse in funding. The second chart compares the Trust Fund revenue to the activity levels in the system. There is clearly no connection between the two. The recent industry changes I discussed have resulted in this disconnect being even more apparent. It is extremely important that a connection be established to ensure an uninterrupted, stable, reliable funding stream to transition us to NextGen.

Under the current tax structure, it is clear that taxes paid by different user categories do not generally reflect the costs those users impose on the system. Commercial airlines and their passengers currently pay over 95 percent of the Trust Fund taxes, but our cost allocation shows that they account for approximately 73 percent of air traffic costs. In many cases, “high end” turbine (jet and turboprop) general aviation (GA) flights are consuming similar FAA and airspace resources as the commercial operators, but paying only a fraction of what commercial operators pay.

Because of the fundamental disconnect between the existing tax structure and the FAA’s workload, we strongly believe that the FAA needs to move to a different, more rational funding mechanism. I want to be clear that this proposal is not about collecting more money for the FAA, it is about creating a more rational, equitable, and stable system that provides appropriate incentives to airspace users to efficiently use increasingly congested airspace, to the FAA to control costs. Moreover, by adopting new discretionary user fees, the Administration’s proposal gives FAA the flexibility to meet the financing challenges of NextGen and facilitates modernization of the aviation system on an assured and predictable basis.

Let me describe in greater detail how our proposal would fund the different parts of the FAA.

Proposed Funding for the Air Traffic Organization (ATO)

User fees would apply to turbine commercial flights, including those by U.S. and foreign airlines, passenger and freight carriers, domestic and international flights, charter operators, and regional airlines. They would cover all flights by jet aircraft that are considered commercial under current tax code, including air taxis and flights operated under fractional ownership. Collecting user fees for air traffic services is an internationally accepted practice in widespread use around the world, and would be consistent with the recommendations of at least seven bi-partisan commissions that have studied this issue over the last two decades. These fees would be based on data derived from the agency’s cost accounting and cost allocation systems—including the operations, maintenance, and overhead expenses for the services provided, the facilities and equipment used in such services, and the projected costs for the period during which the services are provided. Existing U.S. overflight fees would be integrated into these new user fees. While the proposal gives the FAA and its users latitude in how the fees would be structured, these fees would clearly tie FAA revenues much more closely to the actual cost of the services provided. We anticipate that approximately three-fourths of the Air Traffic Organization’s budget would come from these user fees. The fees would be dedicated to air traffic control and related services and would be treated as discretionary offsetting collections for budget purposes. The proposal also authorizes a reserve, funded by user fees, which FAA would use to minimize the need for increases in fee rates that might otherwise be required to avoid funding shortfalls attributable to unanticipated reductions in aviation activity, or to emergency requirements.

The general aviation (GA) community and piston commercial operations would contribute their allocated share of air traffic control costs primarily via a fuel tax. DOT has considered stakeholder feedback from this community and accepts the argument that the efficiency and simplicity of the fuel tax mechanism merit its continued use as the primary mechanism for GA’s contribution to FAA funding. Our goal is to identify the costs associated with these users and then to set the fuel tax rates to recover those costs.

We anticipate that just over 10 percent of the ATO’s budget would come from these taxes, which would continue to be deposited in the Airport and Airway Trust Fund and be subject to appropriation. The bill proposes periodically recalibrating the portion of the GA fuel tax dedicated to funding ATO based on updates to FAA’s cost allocation study.

Proposed Funding for Aviation Safety

The funding proposal includes modest user fees to pay for the costs of 25 activities in the areas of certification and registration. These include issuance of certain certificates, appointment and training of designees, registration of aircraft and airmen, airmen medical certificates, and training provided to other aviation authorities. All of these activities are specific services that FAA provides for individual businesses; other federal, state and local government agencies charge for similar services, as do many international aviation authorities. In fact, FAA currently charges fees for many of these services; however, the current fees are set significantly below the cost of providing the service. The legislation specifies the amount to be charged for 12 specific services. Thirteen other activities are identified for which fees will be collected, but do not have the unit charge specified as FAA’s cost accounting system is still being implemented with respect to regulation and certification activities. As with the ATO fees, the charges for these activities will be determined based on the available data derived from the agency’s cost accounting and cost allocation systems and revenue from the fees would be treated as offsetting collections. Based on the historical cost of these activities, DOT anticipates that approximately 10 percent of FAA’s Aviation Safety budget will come from user fees.

General Fund Proposal

Air traffic costs allocated to public users (military, other government aircraft, and air ambulances), because DOT views providing air traffic control services to these flights as serving the public good;
Flight service stations, because charging user fees for these services would encourage general aviation pilots to fly “outside the system,” which would have a negative safety impact;
Low activity towers, because they help provide safe access to the aviation system to numerous small communities and are a critical part of the national aviation infrastructure; the primary users of these terminals (piston aircraft) likely cannot bear the cost of funding them, even though many of these towers are contract towers, which are the FAA’s most cost-efficient facilities;
Safety regulation and oversight that are not recovered by user fees, because these regulatory functions benefit the general public by contributing to a safe and reliable air transportation system;
Commercial Space Transportation, because, given the early and volatile state of the industry, it would be virtually impossible to develop a schedule of fees that would generate significant revenue without unduly burdening the industry and placing U.S. companies at a competitive disadvantage compared to heavily subsidized firms from other countries; and
The safety portion of Research, Engineering and Development (RE&D) related to aging aircraft and aircraft catastrophic failure prevention (approximately $17 million of the RE&D budget[1]), because this research supports FAA’s “public good” regulatory functions.

Transition and Elimination of Other Aviation Excise Taxes

FAA Governance

Therefore, a new Governance Board (the “Air Transportation System Advisory Board”) comprised of user representatives and public interest members appointed by the Secretary would have a significant role in the decisions of the agency. Although the FAA Administrator and the Secretary retain ultimate responsibility for the safety and operation of the National Airspace System and thus have the final decision authority, the Board would provide advice and recommendations on the creation and adoption of user fees, and would propose modifications to them on a periodic basis. Under our proposal, if the Board does not approve the establishment or modification of a fee, the Administrator can only implement it after publishing a written determination in the Federal Register. This Board would also review and make recommendations with respect to major capital infrastructure decisions and modernization projects, the agency’s strategic plan, and the development and adoption of ATO’s operational performance metrics. Finally, the Board would review and provide advice on FAA’s safety programs, budget, and cost accounting system. However, the FAA Administrator would retain the safety and policy responsibilities and decision-making authority of the FAA with user input for these areas in a solely advisory capacity. Of course, as the FAA is a government agency, Congress will always have the ultimate oversight authority.

Proposed Funding and Programmatic Reforms for AIP, RE&D and EAS

The FAA is committed to a healthy national air transportation system. Airports are a key part of the system, and that includes small primary and general aviation airports that rely on AIP funding to help meet their capital needs. We have proposed changes to Federal funding programs that will stabilize and enhance these funding sources for airports.

This proposal ensures that smaller airports that cannot generate sufficient funding on their own can rely on their entitlement funds to complete strategic projects. These airports play an important role in the national aviation system. Therefore, we propose financing the program through taxes.

I am certain our proposed changes to these important programs will be the subject of future hearings before this subcommittee and look forward to sharing the details of that proposal with you. However, today I will focus my comments on how our new structure will fund AIP and our other important programs.

The proposed taxes are administratively simple and build on existing collection mechanisms. Specifically, DOT proposes funding the AIP program via a set of simplified excise taxes, consisting of a flat, universal fuel tax for domestic commercial and all GA flights and an international passenger head tax for international commercial passenger flights. This universal fuel tax would be in addition to the proposed GA ATO fuel taxes for GA users. Like the ATO taxes, these taxes would be deposited into the Airport and Airway Trust Fund and be subject to Congressional appropriation. The proposed taxes are expected to generate receipts sufficient to cover the proposed authorization levels for AIP, the Essential Air Service (EAS) program, and the Trust Fund’s portion of RE&D. The bill also proposes indexing both the AIP portion of the fuel tax and the international passenger tax to inflation to keep pace with inflation.

NextGen – Funding of Major Capital Projects

As I stated at the outset, one of the drivers of our proposed changes to how the FAA is funded is to the challenge of funding NextGen. Implementing NextGen will be a unique transition from the technology of 50 years ago to the technologies of tomorrow and it will require a substantial investment of capital. Financing this investment is something I have very strong views about. Business as usual is not an option. The new discretionary user fees will enable us to fund several important NextGen investments. However, to avoid spikes in the user fee levels the Administration’s proposal also would authorize us to borrow through the Secretary of the Treasury beginning in FY 2013 with debt service recovered from users of the system by FY 2017. This authority would contribute to a more business like funding structure, leverage limited resources, and further accelerate the transition to NextGen by better aligning payment for a project with the benefits that project generates and providing greater flexibility to take advantage of capital investment opportunities as technology changes. Examples of FAA projects that may be appropriate for debt financing include safety-critical and mission-essential software and systems that controllers and traffic flow managers will use to support trajectory based operations in the NextGen system, enhancements to the global positioning system (GPS) technology related to civil aviation, surveillance technology for homeland security and defense, and potential facility consolidation. This authority would be targeted, as noted, for a limited time period (FY 2013 to FY2017) and would be capped at $5 billion. We think this innovative authority will give us what we need when we need it.

I want to end by saying that I know we all share the same basic goals for an industry that we all care about deeply. We want a safe system that can meet future demand - one that is cost effective and efficient and that meet the needs of the flying public. We all appreciate the importance of this industry, not only to those of us lucky enough to be a part of it, but to every American. While I anticipate and look forward to a frank and wide-ranging discussion of this proposal and others that I’m sure will be put on the table, I cannot overstate my personal commitment to the need for a funding system that better ties FAA’s costs to its revenues and its revenues to its spending. It is the fundamental component that supports all of our important initiatives. So, let the debate begin.

This concludes my prepared statement. I will be happy to answer your questions at this time.

[1] The remainder of RE&D would be funded from the Airport and Airway Trust Fund, and is included in the universal fuel tax rate discussed below under “Proposed Funding for AIP, RE&D and EAS”.

The FAA’S FY 2008 Budget

STATEMENT OF

MARION C. BLAKEY,
ADMINISTRATOR,
FEDERAL AVIATION ADMINISTRATION

BEFORE THE

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,
SUBCOMMITTEE ON AVIATION

THE FAA’S FY 2008 BUDGET,

FEBRUARY 14, 2007.

Good afternoon, Chairman Costello, Congressman Petri and members of the subcommittee. As this is my first appearance before the 110^th Congress, I would like to take this opportunity to acknowledge the new Chairman and Ranking Member of the subcommittee and say that I look forward to working with you on what I’m sure will be a broad range of issues. It is a pleasure to appear before you on behalf of the 44,000 men and women of the Federal Aviation Administration (FAA) to discuss our FY 2008 budget request. But before discussing next year’s budget, I would like to touch briefly on the Administration’s reauthorization proposal. I cannot overstate how important enacting the reauthorization proposal is to FAA’s ability to meet the safety and capacity needs of our Nation’s aviation system -- both in the short and long term.

Reauthorization Proposal

As most everyone knows, we have been working on this reauthorization proposal for over two years. FAA’s aviation taxes and programmatic authorization under Vision 100 both expire on September 30^th of this year. Given where we are as an agency and taking into account the significant challenges before us, we consider this a rare opportunity to make the critical programmatic and financing changes needed for FAA - and the aviation community as a whole - to move forward and meet those challenges while maintaining the safest, and most efficient aviation system in the world

FAA did not develop this proposal in a vacuum. We conducted extensive outreach to our stakeholders, and analyzed best practices from industry, other government agencies, and other countries.

Our legacy aviation system has served the country well, but it is in dire need of a major transformation. There is no way that the current system can handle future traffic increases without major delays. The Federal Government’s commitment to being ready for the future is embodied in the Next Generation Air Transportation System (NextGen) initiative. This is a multi-agency, multi-year endeavor that is of the highest importance. A successful transformation to NextGen will require bold action and central planning over the next 20 years.

Unfortunately, the current financing mechanisms are not well suited to support the transformation to the Next Generation Air Transportation System (NextGen). This transformation is essential. As we look out into the future, we see a system that will need to grow to accommodate the demands of our stakeholders and the flying public. The current financing mechanisms – both in terms of taxes and spending – are not tied to FAA’s cost to deliver services, and therefore are not scalable to meet these growing demands. To deliver the benefits of NextGen efficiently and on schedule, the financing system should be reformed so that both our income and our outgo are better tied to the services we provide.

I know you plan to have a series of hearings on reauthorization and I look forward to participating in what I know will be a robust discussion of the best way to proceed. Let me just emphasize how important I believe it is to move toward a stable, cost-based funding structure to ensure that FAA’s costs and revenues are better aligned and that our stakeholders are treated equitably and reap the benefits of their investments in the system. That is what our proposal provides. It is a simple, transparent, and repeatable methodology to divide FAA’s costs among users and services. It also contains other needed programmatic reforms that provide airports with greater financing flexibilities, address environmental and congestion challenges. All in all, I expect it will be a very interesting, and hopefully productive year.

FY 2008 Budget

I will now turn to the issue at hand. The FY 2008 budget requests a total of $14.1 billion to improve safety, reduce congestion, and improve global connectivity. The request supports our financing and programmatic reforms and focuses on accountability and performance. For several years, we have pushed to manage more effectively, rein in costs, and better respond to our customers’ needs.

As always, safety is FAA’s primary concern. Our collaboration with industry speaks for itself: efforts to improve operations have contributed to the safest period in aviation history. At the same time, the demand for FAA services has never been greater. We oversee about 50,000 flights per day. In 1995, the system supported about 545 million passengers. In 2005, it was 739 million. Forecasts estimate one billion passengers annually by 2015.

Given the anticipated growth—both in terms of passengers, and, critically, in the number of aircraft operations—we know that our services must adapt to meet the demand. We also know that the complexity of the future operating environment—with evolving fleet mixes, new aircraft, technology, and environmental constraints—must be approached in partnership with our customers. This budget demonstrates a long-term commitment to NextGen, not as a pie-in-the-sky vision, but as embodied by tangible systems, processes, and capital projects that will lead us to the future.

For FY 2008, FAA has prepared the budget in a new account structure that aligns with the financing reform proposal and the services that we provide. While the Grants-in-Aid for Airports (AIP); and Research, Engineering, and Development (R,E,&D) accounts remain, the Operations and Facilities and Equipment accounts have been replaced with two new accounts. There is a Safety and Operations account and an Air Traffic Organization (ATO) account that more closely align the accounts with our lines of business. Under our reauthorization proposal, beginning in FY 2009 these accounts would be funded by a combination of fees, taxes and general fund contribution. We consider this structure to be more consistent with and supportive of our business-like approach by expanding our comprehensive pay-for-performance programs, consolidating operations, improving internal financial management, and delivering benefits to our customers.

Safety and Operations

The FY 2008 budget provides $2 billion for Safety and Operations. Most of the funds requested for Safety and Operations in FY 2008 support maintaining and increasing aviation safety and efficiency, reflecting the President’s commitment in this area. Other significant amounts support reducing congestion and enhancing safety. Of this request, $1.1 billion is for the agency’s Aviation Safety (AVS) office. This level supports increasing the AVS safety workforce by 177 inspectors and 173 other safety staff.

The FY 2008 budget requests $12.8 million for Commercial Space Transportation to continue its commitment to timely and responsive licensing and regulatory processes designed to enable a safe, secure, efficient, and internationally competitive U.S. space transportation industry. Commercial space transportation is an exciting area, and we are commited to supporting its continued growth. $758 million is requested for Staff Offices to fund administrative and managerial costs for FAA’s regulatory, international, medical, engineering and development programs, as well as policy oversight and management functions.

Air Traffic Organization

As a Performance Based Organization (PBO), the Air Traffic Organization (ATO) continues to provide safe, secure, and cost effective air traffic services. The budget provides $7 billion for ATO operating expenses. In FY 2008, this will fund 1,420 new air traffic controllers to address the projected 1,276 controller retirements next year, resulting in a net increase of 144 controllers. In October 2005, ATO completed the largest non-military A-76 competition in history. That action will save the agency $51.7 million in FY 2008, with a 10 year projected savings and cost avoidance totaling almost $2.2 billion. The contract not only saves money, it also commits the vendor to modernize and improve the flight services we provide to general aviation pilots. In addition, the employees who left Federal service as a result of this transition were given offers to work for Lockheed Martin, the successful bidder of the contract.

In FY 2006, ATO consolidated its administrative and staff support functions from nine service areas to three. This will allow us to provide better service to customers while saving an estimated $360 to $460 million over the next ten years. In FY 2008, we anticipate savings of $29 million from Service Area Consolidation.

NextGen and Capital Needs

The ATO FY 2008 capital program budget requests $2.3 billion to support the ultimate NextGen vision – with $174 million requested for key NextGen activities detailed below – and continues to support the investments needed to keep the current National Airspace System (NAS) functioning. We know that it will take not only funding, but new management approaches, to transform today’s aviation system to meet tomorrow’s needs. We have done much in recent years to break down stovepipes and plan in a more integrated manner, but NextGen requires us to go further. The new OEP—formerly the Operational Evolution Plan, and now the Operational Evolution Partnership—is a big step in the right direction. OEP has gone from a 10 year rolling plan to a more comprehensive roadmap for how we get to NextGen. The emphasis is on “partnership”—within and between major FAA organizations, with the JPDO and its other partner agencies, the private sector, and, of course Congress.

One of our greatest challenges is our ability to define what the future system will look like. What technologies will it be comprised of? In the coming months, the JPDO will publish the first official NextGen Enterprise Architecture and Concept of Operations. The significance of these foundational documents should not be understated. They are essential to understanding the transformed operational environment, will allow us to more precisely develop a plan for achieving it, and will provide the basis for architecture-based, quantitative resource planning. Our reauthorization proposal is designed to strengthen the key linkages needed to implement NextGen, and to deliver those resources when they are needed.

Given demand growth, we know it is important to improve operations well in advance of 2025. To do so, we are requesting funding to stage demonstrations and develop critical infrastructure that will better define how we can move to trajectory based operations and identify implementation opportunities. Ultimately, trajectory-based operations will allow pilots to select the most cost-effective, fuel-efficient routes, achieving substantial cost and time savings for our customers, while maintaining the highest levels of safety. Our capital request funds a growing list of NextGen transformational technologies. Most significantly, these include Automatic Dependent Surveillance-Broadcast, the next generation surveillance technology; System-Wide Information Management, which will provide a broad range of real-time information to users of the National Airspace System; and NextGen Network Enabled Weather, which will improve forecasting and information sharing and enhance safety. NextGen Demonstration and Infrastructure Development projects will be used to identify early implementation opportunities, refine longer-term objectives, and if results dictate, eliminate certain concepts from further consideration.

We are also requesting research funds to continue supporting the JPDO. As the unit that spearheads NextGen for the federal government, JPDO will continue defining the future operating environment, identifying demonstration opportunities, and working with the relevant agencies to implement them. We are also requesting funds to support wake turbulence research, the results of which will help us increase capacity while maintaining safety. In addition, research funds would be directed to environmental research, especially noise and emission control, critical to the design of the future system. And finally, we would fund further research on unmanned aircraft systems, a likely addition to the future fleet mix.

Grants in Aid for Airports (AIP)

The FAA is committed to a healthy national air transportation system. Airports are a key part of the system, and that includes small and medium-sized airports that rely on AIP funding to help meet their capital needs.

We have proposed changes to the Federal funding programs which will stabilize and enhance these funding sources for airports. With our proposed programmatic changes, the $2.75 billion proposed in our budget will be more than enough to finance airports’ capital needs and meet national system safety and capacity objectives.

Research, Engineering, and Development (R,E,&D)

The FY 2008 request for RE&D is $140 million. The request includes $91.3 million for continued research on aviation safety issues. The remaining research funding is for reduced congestion and environmental issues, including $14.3 million for the Joint Planning and Development Office to continue defining and facilitating the transition to NextGen. An additional $3.5 million in support for JPDO is contained in the ATO capital request, related specifically to the work on the demonstration projects.

Flight Plan 2007 - 2011

The Flight Plan is FAA’s rolling five-year strategic plan that we first undertook in 2004. As scheduled, we updated it last fall, with input from our internal and external stakeholders. The Flight Plan is organized around the agency’s primary goals: increased safety; greater capacity; international leadership, and organizational excellence.

The Flight Plan is our blueprint for managing the agency. It has made the FAA more business-like, performance-based, and customer-focused.

As part of our Flight Plan, each FAA organization now has its own individual business plan. Each of these plans is linked to the Flight Plan, budgeted and tied to what the customers need. The agency’s business plan goals have been built into a performance-based tracking system that is posted to the FAA website each quarter. It lists each of the agency’s goals, performance targets, who is responsible, and the status of each. Using this data, the senior management team conducts a monthly review of our performance. When used with other cost and performance data, the Flight Plan information clearly and precisely identifies the effectiveness of a program across the entire agency. With this perspective, the agency is able to capitalize on successful strategies. Let me address our performance and requests under each of our goals.

Increased Safety

At FAA, safety is our top priority, and approximately 66 percent of our budget request, $9.4 billion, supports this goal. Over the last three years, the accident trends in both commercial and general aviation have been at all-time lows. Commercial space transportation continues its remarkable safety record, without a fatality, injury, or any significant property damage to the public. The Flight Plan continues our commitment to reduce commercial and general aviation fatal accidents. We continue to strive toward a three-year rolling average for our commercial airline fatal accident rate of 0.010 fatal accidents per 100,000 departures or below.

We have achieved the highest safety standards in the history of aviation. Even so, our goal is—as always—to continue to improve safety. We address our operational vulnerabilities to reduce risk. We work to improve airport infrastructure, safety management systems awareness, runway safety training, and new procedures. One major key to our successful safety efforts is cooperation among our stakeholders. We constantly work with our stakeholder groups to meet our safety goal. Each group helps us with technology, communications, and its own unique expertise. In our responsibility for safety oversight, we work with them to establish their own safety management systems that meet the highest standards of quality.

To help reduce runway incursions, we deployed the Airport Surface Detection Equipment-Model X (ASDE-X) warning system at five major airports in FY 2006. We also strengthened the airfield paint markings standard for taxiway centerlines at 72 large airports to alert pilots when they are approaching hold short lines so they won’t inadvertently enter a runway without a clearance. Our efforts also are helping controllers do their jobs more safely, especially when it comes to tracking and eliminating operational errors. In response to a long-standing recommendation by the Department of

Transportation Inspector General and the National Transportation Safety Board to improve reports of operational errors, we’ve added a new initiative to automate data collection. The Traffic Analysis and Review Program—known as “TARP”—is a state-of-the-art traffic analysis and playback system that will improve operational error identification and quality assurance. We’re putting the software in place for use next year, with all installations complete by 2011. The high-fidelity, near-real time playback feature of TARP will also support more effective and efficient air traffic controller training.

At airports, over 48 percent of our AIP grants go to safety-related projects, such as upgrades to runway safety areas, runway safety action team recommendations, purchase of airport rescue and fire fighting vehicles, and airfield signing, marking and lighting. AIP also supports projects that reduce runway incursions. For example, end-around perimeter taxiways at Atlanta and Dallas-Fort Worth will not only increase capacity, but will also reduce the risk of runway incursions by substantially reducing the number of runway crossings.

Three operating capabilities are key to handling the traffic demand forecast for 2025 and beyond: Navigation, Communications, and Surveillance. We have already developed design criteria as well as aircraft and operator requirements for Required Navigation Performance (RNP) approaches – a key element of NextGen’s near term operational environment. We published 6 special RNP approaches in 2005, 28 in 2006, and set a goal of 25 each for FY 2007 and FY 2008. We will continue to develop and implement RNP procedures to reduce our already low airline fatal accident rate. In addition to its safety benefits, we expect RNP to help keep airports open in challenging environments and that could mean fewer canceled or diverted flights, thereby saving time and money.

The work of the Commercial Aviation Safety Team (CAST), which includes representatives from government, industry, and employee groups, has been instrumental in using data to drive decisions. The team’s disciplined and focused approach to analyzing accidents and incidents, identifying precursors, and developing targeted implementation strategies helped to reduce the airline fatal accident rate over 60 percent in the last 10 years. We are also working with this team to develop new targets to more effectively measure performance in commercial aviation safety.

Finally, we continue our work to expand the growing field of commercial space transportation. In 2006, there were seven commercial launches. We are issuing experimental permits and are now ready to grant safety approvals of commercial space launch and reentry vehicles, safety systems, processes, services and personnel. We met our commercial space launch target and continued improvement of internal processes and partnerships with the Air Force, other government agencies, and the commercial space transportation industry.

Increasing Capacity

While safety is always our primary concern, our mission includes expanding capacity throughout the aviation system – both in the air and on the ground. The FY 2008 budget requests $3.6 billion to support expansion of capacity on the ground, in the form of new runways, and the continued deployment of new technologies that allow more efficient use of the system.

The FAA Flight Plan identifies over 50 percent of AIP funding being used to increase capacity and decrease delays at the most congested airports in the country. These projects include new runways and runway extensions, new airports, and perimeter taxiways which not only improve capacity, but eliminate runway crossings which improves airfield safety.

Every day, our capacity accomplishments, such as Domestic Reduced Vertical Separation Minimum (DRVSM), help provide more economical and efficient aircraft operations. DRVSM created an additional six layers of cruise levels at higher altitudes enabling aircraft to operate at more fuel-efficient cruising altitudes while also increasing system capacity. Implemented in FY 2005, DRVSM was estimated to yield over $5.3 billion in savings from FY 2005 through FY 2016, but with the rise in jet fuel prices, the savings will exceed $13.4 billion, a 152 percent increase.

Advanced Technologies and Oceanic Procedures (ATOPs) are now available in 24 million square miles of airspace. Using ATOPS, the Atlantic routes will save airlines 6.5 million pounds of fuel and $8 million per year.

International Leadership

The United States established world leadership in aviation with a consistent commitment to make safety our most important export. Today, FAA has operational responsibility for about half of the world’s air traffic, certifies more than two-thirds of the world’s large jet aircraft, and provides technical assistance to more than 100 countries to improve their aviation systems. In FY 2006 alone, FAA provided technical guidance and training to 66 countries and 5 international organizations. The FY 2008 budget requests $78 million for global connectivity so FAA can be even more globally focused, helping to ensure that U.S. citizens can travel as safely and efficiently around the world as they do at home, and strengthen America’s aviation leadership role in both safety and air traffic control.

We cooperate with bilateral and multilateral partners in Europe and Asia to negotiate executive agreements and implementation procedures supporting the transfer of aviation products to help lower accident rates in areas that are experiencing substantial growth in operations. We have also developed initiatives to collaborate with key international partners to implement NextGen technologies globally as they become available to improve aviation safety and capacity. Last June, the FAA entered into a cooperative agreement with European aviation organizations to participate in each other’s air traffic management modernization programs to harmonize operations. These efforts are essential to seamless operation of aircraft.

We are also leading the world in the development of both private human spaceflight and commercial spaceports.

Environmental Stewardship

The FAA is committed to managing aviation’s growth in an environmentally sound manner. Indeed, NextGen recognizes the need to develop and insert technology to reduce levels of aviation noise and emissions, thereby reducing environment as a constraint on capacity. The FY 2008 budget requests $354 million to support environmental stewardship for noise mitigation, fuel efficiency, and a comprehensive approach to both noise and emissions. We are on track to reduce the impacts of airport noise to more than 100,000 people over the next five years through AIP grants in our FY 2008 budget.

In April 2006, the Office of Airports issued its revised environmental guidance handbook. This handbook is the most recent product in our continuing efforts to meet the streamlining goals of Vision 100 and the President’s Executive Order (13274) on environmental stewardship and streamlining of transportation infrastructure projects. Recent environmental review for capacity enhancing projects at O’Hare, Dulles, and Philadelphia Airports demonstrated this integration process produces meaningful results.

We are also working with our Center of Excellence for Aircraft Noise and Aviation Emissions Mitigation to foster breakthrough scientific, operations, and program advances. We call the Center “PARTNER”, and it truly is an excellent partnership of government, academic, and industry participants. – led by MIT. Our work this year includes Continuous Descent Approaches to airports that can reduce noise, emissions, and fuel use; the feasibility of alternative fuels for aircraft; and assessing fuel burn reduction through enroute optimization. In FY 2008, with our reauthorization and budget request, we plan to expand PARTNER’s work to develop and certify lower energy, emissions, and noise engine and airframe technology over the next ten years.

Security

While the U.S. Department of Homeland Security’s TSA now has primary responsibility for transportation security, FAA still retains responsibility for the security of its personnel, facilities, equipment and data. The agency also works closely with TSA and other federal agencies to support aviation security, transportation security, and other national security matters.

FAA ensures the operability of the national airspace, which is essential to the rapid recovery of transportation services in the event of a national crisis. The budget request includes $246 million to continue upgrading and accrediting facilities, procure and implement additional security systems, enhance IT security, and upgrade Command and Control Communications equipment to meet the increased national security demands that have resulted since the September 11 attacks.

Organizational Excellence

The budget requests $384 million to support our organizational excellence initiatives.

FAA’s progress over the past four years has been steady, as we’ve embraced the vision of the President’s Management Agenda (PMA) and its strategy to improve management throughout the federal government. Through the Flight Plan and PMA, we’ve made significant gains in human capital, competitive sourcing and consolidations, financial performance -- including controlling costs; and, in terms of accountability to Congress, the taxpayers, and our customers.

Controlling Labor Costs/Pay-for-Performance – Human Capital Reform

We know that labor costs drive a significant share of our budget, and we have been working to slow the rate of growth of these costs, as was evidenced by our efforts in the recent controller negotiations, and our focus on back-filling positions with new employees at lower pay grades when possible. We’re also increasing workforce productivity in several ways and we are on track to achieve cost efficiencies of 10 percent by FY 2010 in controller staff costs. We achieved the first five percent of this goal in FYs 2005-2006 by reducing staffing standards where appropriate and imposing greater scrutiny of the use of controllers on duties that take them away from controlling traffic. Our budget request assumes we will achieve controller productivity improvements of two percent in both FYs 2007 and 2008.

Through improved oversight and proactive management of our worker’s compensation caseload we’ve slowed the growth of this program, which has resulted in $5.5 million in avoided costs in FY 2005 and $7 million in FY 2006. In FY 2007, this effort is expected to yield an additional $7 million in avoided costs.

I have mentioned in past the ATO’s efforts to streamline its organization. Over the last several years, ATO reduced its overhead expenses by cutting multiple levels of senior management, reducing its executive ranks by 20 percent. In addition to the Service Area Consolidation noted above, ATO has used Activity Value Analysis to help streamline its operations, and eliminate and consolidate administrative staffs and support functions. Since FY 2003, the ATO non-safety workforce was reduced by 16 percent.

Much of the efficiencies I’ve noted are the result of the personnel reform that was granted to the agency in 1996. It has enabled FAA to transition from the traditional General-Schedule pay system to pay for performance. Accountability for results is systemic throughout our organization, with 80 percent of our employees on a pay-for-performance system, including our executives. Flight Plan performance targets must be achieved before annual pay raises are calculated. The system provides discretion to reward high-performing employees, and incentives are available to ensure that quality work and innovation are rewarded.

In December 2003, we strengthened the approval process for negotiated agreements by requiring, among other things, an analysis of the budget impact of all proposed agreements.

Smarter Capital Investment Choices and Improved Performance

A capital investment team was created in 2004 to review financial and performance data. The team completes an evaluation of baseline performance and includes associated variances, obligations, schedule milestones and earned value management (EVM) data. EVM will provide an early warning for potential and actual variances as well as help the program manager develop corrective actions. The members of this team apply a business case approach to each project as the program is assessed. Since April 2004, over 100 projects have been reviewed. Seven major projects (a total of $60 million) have been significantly restructured and segmented. Three projects were terminated. These changes alone resulted in $460 million in lifecycle savings to FAA. In the fiscal year 2006 Flight Plan, all of our major capital programs were on schedule and we missed only a single program milestone. As we move to the NextGen environment, it will be critical to maintain rigorous oversight of our capital investments.

SAVES

The Strategic Sourcing for the Acquisition of Various Equipment and Supplies (SAVES) initiative is an ambitious effort begun in FY 2006 to implement best practices from the private sector in the procurement of administrative supplies, equipment, and IT hardware. It is expected to achieve $5 million in savings in FY 2007 and annualized savings of $6 million thereafter.

Improved Financial Management Performance

We’re making significant strides in improving our financial management. The Government Accountability Office (GAO) removed us from its high-risk list in 2006, a particular accomplishment since FAA Financial Management had been a high-risk item since 1999. We also received, for the third year in a row, the Association of Government Accountants’ prestigious Certificate of Excellence in Accountability Reporting (CEAR) for our 2005 Performance and Accountability Report.

Closing

I’ll end where I began. At FAA, our top priority is safety. Because of the growth forecasted in air traffic, however, we must also focus significant energy on training and transitioning to a NextGen air transportation system. Even with new efficiencies, the current system cannot meet future demand. America’s ability to launch NextGen depends on the enactment of FAA financing and programmatic reform proposals and our FY 2008 budget request which supports them. I thank you for your time and look forward to discussing both these proposals and our budget request in greater detail today and in the coming weeks.

The FAA Reauthorization Act of 2009

STATEMENT OF

LYNNE OSMUS,
ACTING ADMINISTRATOR,
FEDERAL AVIATION ADMINISTRATION,

THE FAA REAUTHORIZATION ACT OF 2009,

BEFORE THE

HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,
SUBCOMMITTEE ON AVIATION,

FEBRUARY 11, 2009.

Chairman Costello, Congressman Petri, and Members of the Subcommittee:

Thank you for inviting me here today to be a part of your discussion about the reauthorization of the Federal Aviation Administration (FAA). We at the FAA, and the U.S. Department of Transportation (DOT) as a whole, look forward to working with this Committee and the new Congress on achieving a robust, multiyear bill that will help ensure the safety of the flying public and efficiency of the National Airspace System (NAS). This is an exciting time in our Nation’s history, as a new Administration takes the reins and establishes its policies. With new Members in Congress as well, fresh ideas and innovative approaches to challenging problems are sure to come. As Acting Administrator, I look forward to facilitating that as much as possible.

FAA reauthorization is a priority for the Department. As the new Administration settles in and continues to get its policy team in place, we will have the opportunity to analyze the Committee’s proposal and develop an Administration position on FAA reauthorization. There is a challenging legislative agenda this session and circumstances have dictated that during this first month of the Administration, the legislative focus be on the economic stimulus package. I can assure you, though, that the Secretary views the aviation reauthorization as one of his top legislative priorities. In the meantime, please accept my gratitude on behalf of the Administration for your efforts in moving the FAA’s reauthorization forward. There is a consensus in the aviation community, and certainly in the FAA, that multiple, short-term extensions as we have had in the last 18 months are burdensome and disruptive, and do not permit the careful planning and efficient execution that is necessary for successful infrastructure and technology programs.

Secretary LaHood has demonstrated that the FAA is at the top of his list of priorities. He visited FAA headquarters twice in his first week as Secretary, meeting first with the executive management team, and then holding a town hall meeting where all employees were invited to attend. In addition to the overflow crowd in the FAA auditorium, the town hall was shown via video broadcast to other FAA offices.

The Secretary has indicated several times in his confirmation hearing and to FAA employees that one of his immediate goals is to fill the position of FAA Administrator, in order to move forward as quickly and seamlessly as possible. He has expressed that the new Administrator will be one who can advance the Next Generation Air Transportation System (NextGen) and refine benchmarks for the program for the next five to eight years. The Secretary has also noted that one criterion for a successful FAA Administrator is someone with the people skills to resolve outstanding labor issues, something to which many Members of this Committee are also committed. I am also confident that any new Administrator will work closely with the Committee to ensure these goals are part of any future aviation legislation.

Secretary LaHood has also established four primary areas of focus for the DOT and FAA: safety, economy, sustainability, and livability. At the FAA, our highest priority is always safety. It is our mandate and it is our passion. We are currently in the safest period in commercial aviation history, and every day, every hour, we are doing everything we can to make sure that continues. Secretary LaHood intends to continue that legacy.

Even with the strong safety record aviation is currently enjoying, we are continuing our efforts to make the system even safer. For example, the FAA is making it a priority to reduce the number of runway incursions—and we are seeing strong results. There were no serious runway incursions in the first quarter of fiscal year 2009 — not a single Category A or B event during 12.8 million aircraft operations. Category A and B runway incursions are the most serious, in which a collision was narrowly avoided or where there is a significant potential for a collision. Category C and D incidents present no immediate safety consequences to the public.

This phenomenal achievement is the direct result of a focused commitment at all levels of the aviation industry – from management at airports, airlines, and the FAA to pilots, mechanics, vehicle operators, and air traffic controllers. Between fiscal year 2000 and the close of fiscal year 2008 on Sept. 30, 2008, serious runway incursions have decreased by 63 percent. All categories of runway incursions were down slightly for the first quarter of fiscal 2009 versus the same period a year earlier – 224 in 2009 compared to 226 in 2008.

Runway safety initiatives include enhancements to airport markings, signage and lighting; implementation of new technology such as runway status lights and cockpit moving map displays; and increased runway safety training and awareness among pilots, air traffic controllers and airport vehicle drivers. We have accelerated our runway status lights program, and the systems are scheduled to be installed at 22 of the nation’s busiest airports by FY 2011.

In these challenging economic times, we must also consider our aviation infrastructure. As the Secretary has noted, transportation infrastructure is a substantial part of the Administration’s economic recovery plan, and he is making the successful implementation of that initiative one of his top priorities. New infrastructure investment pays enormous short- and long-term dividends, creating economic and social benefits for generations. The Secretary has also committed to supporting investments that will help bring the country’s transportation assets up to a state of good repair.

We have only to look as far back as last November for a prime example. That was when we commissioned three new runways in a single day – at Washington Dulles, Chicago O’Hare, and Seattle-Tacoma (Sea-Tac) International Airports. Spanning a total of more than 25,000 feet, these three runways are expected to increase capacity at these major airports, as well as significantly reduce delays. The new runways at Dulles and O'Hare have the potential to accommodate more than 150,000 additional annual operations in the NAS (100,000 at Dulles and 52,000 at O’Hare), while we expect delays to decrease at both airports.

The Sea-Tac runway is expected to significantly reduce weather-related delays that have plagued the airport. Because of low clouds — which occur about 44 percent of the time — the airport is often confined to using one arrival stream instead of two. The introduction of a third runway will allow Sea-Tac to handle two simultaneous staggered arrival streams in poor weather. This translates into as many as eight additional on-time arrivals per hour.

While we are looking to improve economic development, we must also give priority attention to environmental stewardship – the Secretary’s sustainability priority. Increases in air transportation demand will place significant environmental pressures on the national airspace system. Environmental protection that allows sustainable aviation growth is a key goal, and we have placed addressing environmental issues at the heart of NextGen. We have a plan that offers a systematic approach that builds on better science and improved decision support tools, advanced air traffic procedures, enhanced aircraft technology, sustainable alternative fuels, and policies to address environmental challenges. Advances in aircraft technology and renewable fuels are essential if we are to provide solutions for the energy and climate challenges for the U.S. aviation system. The close partner to this sustainable development is livability, the fourth area of this Administration’s priorities. In aviation, this entails a commitment to the flying public to continue to focus on the safety, convenience, and confidence of the traveling public, with minimal environmental impacts on our communities.

With these priorities on the table, the DOT and FAA are poised to move forward. But while we have new leadership still to come, we are not content simply to sit back.

Just two weeks ago, the Government Accountability Office (GAO) removed the FAA's air traffic control modernization program from its High Risk List (HRL) for the first time in 14 years. The HRL identifies Federal programs and operations that the GAO deems as high risk due to their greater vulnerabilities to fraud, waste, abuse, and mismanagement. The FAA was initially placed on the HRL in 1995 due to our poor track record of program deployment and cost over-runs. The GAO noted that management focus and willingness to attack and rectify our shortcomings were the reasons that it felt comfortable removing FAA modernization from the High Risk List. The GAO also noted our plan to continue improvements into 2009.

Also this January, testing for NextGen is accelerating with an agreement to equip US Airways aircraft with GPS-based Automatic Dependent Surveillance-Broadcast. The FAA partnership with US Airways and Aviation Communication and Surveillance Systems will equip 20 US Airways Airbus A330s with ADS-B avionics for tests at Philadelphia International Airport. ADS-B allows aircraft to be tracked by satellite rather than radar, allowing more precise information to boost safety and ease congestion. ADS-B uses GPS to broadcast the position and intent of an aircraft to air traffic controllers and other pilots.

Under the agreement, the A330s will use both ADS-B “In” and ADS-B “Out” signals. ADS-B “In” is information sent into the cockpit, and will be used to evaluate potential safety improvements on the airport surface; ADS-B “Out” involves an aircraft broadcasting information, such as its location, out to ground stations and other aircraft, allowing controllers to separate traffic. In 2007, FAA issued a proposed regulation that, if finalized, would require ADS-B “Out” equipment on all aircraft operating in certain classes of airspace within the NAS by 2020. FAA has yet not issued a regulation proposing a timeframe for the adoption of ADS-B “In”.

On January 30, we published an updated NextGen Implementation Plan that details our strategies for accelerating NextGen operational capabilities in the 2012-2018 mid-term timeframe. Implementing NextGen over the next 10 years will enable significant safety, environmental, and operational improvements. This is clearly seen through our initial NextGen demonstrations, operational trials and deployments. This early work has also provided invaluable data and insights to allow FAA to use the power of modeling and simulation to assess the integrated NextGen benefits across a range of future scenarios.

Our preliminary modeling of a series of NextGen capabilities shows that by 2018 total flight delays may be reduced by 35-40 percent, saving almost a billion gallons of fuel. This is compared to the “do nothing” case, which shows what would happen if we operate in 2018 the same way as today. The current model includes one-third of the NextGen changes. It is important to note that our modeling and simulation results are preliminary, and as the model matures the FAA expects these benefits values will increase.

As NextGen planning evolves, we may reduce uncertainty in our assumptions and we may develop and validate additional modeling capability for currently un-modeled NextGen capabilities, such as improved traffic flow around adverse weather. Because NextGen benefits are integrally linked to equipage rates, it is imperative that the FAA works closely with all aspects of the aviation community on NextGen deployment.

Finally, no organization is successful without its most valuable asset – its workforce. Controller hiring is up and we have a record number of applicants. While our historical hiring goal was a “one-for-one” model (one new hire for every one retirement), beginning in 2004, we increased our hiring targets to prepare for the anticipated retirements in the next decade. We've hired 5000 new controllers over the past three years. We exceeded our hiring goals for FY 2008, and we are on track to meet our end of year hiring goal in FY 2009. New controllers are completing their training faster – in fact, we anticipate that 1000 new hires will complete training to reach full certification this year, compared to 762 last year. Controller retirements have also leveled out and are trending below what we had projected for this year.

For the past several years we have also enjoyed increased hiring in the Aviation Safety organization. Through those hires, we have been able to support certification of new products and new operators – while assuring the continued operational safety of all those who hold FAA certificates. But we will never have enough people to be present at the operation of every aircraft or the turning of every wrench. That’s why we need to rely on voluntary reporting systems – where pilots, mechanics, flight attendants and operators can tell us what they’re seeing in the system that may introduce risk. I know this Committee identified some concerns over our management of voluntary reporting systems. We have improved those processes and will continue to do so. You have our commitment that they will be used to enhance safety – and not abused by anyone in the system.

As you can see, we are still actively moving forward on all key areas. The FAA is a growing, learning organization, dedicated to the safety of the traveling public and the efficient operation of the NAS. We look forward to supporting the new President’s agenda for aviation, a new FAA Administrator, and to working with this Committee and the rest of the Congress on FAA reauthorization legislation. In the meantime, we remain focused on our duties to ensure aviation safety and efficiency.

Mr. Chairman, Congressman Petri, Members of the Subcommittee, this concludes my prepared remarks. I would be happy to answer any questions that you may have.

Commercial Space Transportation

STATEMENT OF

DR. GEORGE C. NIELD,
ASSOCIATE ADMINISTRATOR FOR THE OFFICE OF COMMERCIAL SPACE TRANSPORTATION,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

HOUSE OF REPRESENTATIVES,
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,
SUBCOMMITTEE ON AVIATION,

COMMERCIAL SPACE TRANSPORTATION,

DECEMBER 2, 2009.

Chairman Costello, Ranking Member Petri, and Members of the Subcommittee:

Good morning. Thank you for inviting me to participate in this hearing to update the subcommittee on the activities of the Federal Aviation Administration (FAA) related to commercial space transportation. Today I will briefly summarize the history, mission, and range of responsibilities assigned to the organization I oversee, the FAA’s Office of Commercial Space Transportation (AST). I will then review some of our major accomplishments since the enactment of the Commercial Space Launch Amendments Act of 2004, which established a framework for the future of commercial spaceflight as it continues to evolve in this country. It is important to point out that the work the FAA does today is clearly the direct result of the forward-looking action of Congress, and the leadership and support of senior management at both the Department of Transportation and the FAA, under the current direction of Administrator Randy Babbitt. Finally, I will mention two key challenges that we expect to face in the years ahead.

Spaceflight is changing. Once the exclusive province of two nations and managed by their governments, other nations are now active in space at the same time that new, entrepreneurial efforts are complementing the work of existing commercial launch operators. Suborbital flights and low-Earth orbit operations have attracted the interest of new space entrants with designs on both payload services and access to space for private citizens. Collectively, the commercial space industry represents a diverse, dedicated, and innovative group of men and women who make the science of launching rockets their daily work, with safety the rule that guides them.

While all this amounts to a new day in spaceflight, it follows on the heels of more than two decades of commercial space transportation development and activity. AST was established by Executive Order in 1984 and was originally located in the Office of the Secretary of Transportation. In November of 1995, AST was transferred to the FAA, where today it is one of four lines of business, along with Aviation Safety, Airports, and the Air Traffic Organization.

Our most critical mission is carrying out our statutory charge of ensuring public safety during commercial launch and reentry activities. We do this in a number of ways. First, we issue launch licenses, experimental permits, and safety approvals. Since March of 1989, there have been 200 licensed launches, with the most recent being the launch of an Atlas V from Cape Canaveral on November 23, 2009. During all of those launches, there have been no accidents that have resulted in fatalities or significant property damage to the public. However, in the event of a serious accident, we are prepared. There is a memorandum of understanding (MOU) among the FAA, the United States Air Force, and the National Transportation Safety Board regarding commercial space accidents and incidents. This MOU outlines agreed-upon matters between the agencies, including notification procedures, accident/incident definitions, investigation primacy, and shared training opportunities.

AST also issues licenses for the operation of launch sites, or “spaceports.” Since 1996, AST has issued site operator licenses for seven spaceports: California Spaceport at Vandenberg Air Force Base; Spaceport Florida at Cape Canaveral Air Force Station; the Mid-Atlantic Regional Spaceport at Wallops Flight Facility in Virginia; Mojave Air and Space Port in California; Kodiak Launch Complex on Kodiak Island, Alaska; the Oklahoma Spaceport, in Burns Flat, Oklahoma; and Spaceport America, near Las Cruces, New Mexico.

Second, we develop and issue regulations that are designed to ensure that commercial launch and reentry activities are conducted safely. Finally, we perform safety inspections in conjunction with all licensed and permitted launches, to ensure that operations are conducted in accordance with those regulations.

As a result of the Commercial Space Launch Amendments Act of 2004, the FAA has acquired additional responsibilities for regulating commercial human spaceflight. There were two main rulemaking efforts to implement that Act. The first involved setting standards for testing new space vehicles. As Congress directed, the FAA on April 6, 2007 issued a Final Rule on Experimental Permits for Reusable Suborbital Rockets. The regulations establish an experimental permit regime modeled on the experimental airworthiness certificates that are issued for aircraft. Experimental permits may be used for reusable suborbital rockets involved in testing, training, and data gathering missions. The aim is to streamline the approval process for research and development activities. A vehicle operating under a permit may not carry people or property for compensation or hire.

The second rulemaking involved standards for rocket launches carrying people. On February 13, 2007, the FAA Final Rule on Human Space Flight Requirements for Crew and Space Flight Participants became effective. It treats the crew as part of the flight safety system, which means that operators are required to protect the crew in order to protect the general public. It identifies performance requirements for environmental control and life support systems, smoke detection and fire suppression, and human factors, as well as the need for a verification program. In accordance with the statute, the regulations also use the term “space flight participant” rather than “passenger,” to underscore the fact that private citizens making suborbital flights will encounter an elevated level of risk and, therefore, will fly under a policy of informed consent. Participants must be briefed verbally and in writing about the risks involved; be required to sign a document indicating that the risks have been communicated and understood; and then, and only then, board the craft.

These regulations were cornerstone results of the 2004 legislation, but not the only important outcomes. Congress also mandated an independent study on Human Space Flight Safety. The final report for that effort was issued on November 11, 2008. Among other conclusions reached in that report, it said: “Initial regulation must strike a balance between establishing a regulatory regime that allows and encourages private risk taking and investment, while still protecting the uninvolved public …” It is challenging work, but we give it everything we have every day.

Over the last 25 years, the FAA has developed a strong and supportive partnership with the United States Air Force, which is responsible for leading our nation’s national security space activities. In August 2006, after the completion of a multi-year process involving telecons, working group sessions, and public meetings, the FAA issued a final rule establishing common launch safety standards with the Air Force. The rule was designed to make sure that whether a rocket is carrying a telecommunications satellite or a payload for the Department of Defense, the same basic requirements for public safety will still apply.

More recently, in August of 2009, Administrator Babbitt approved the creation of a Commercial Space Transportation Center of Excellence to conduct research in the areas of Space Traffic Management and Operations; Launch Vehicle Systems; Human Space Flight; and Space Commerce. We hope that the Center will allow students and faculty members from all over the country to become involved in space-related research that will benefit both industry and the government.

In the five years since adoption of the Commercial Space Launch Amendments Act, the commercial space industry has come a long way. But we know the way ahead is filled with challenges and unknowns. For example, the National Aeronautics and Space Administration (NASA) is currently in the process of retiring the Space Shuttle, with just five more launches on the schedule. After the Shuttle’s retirement, commercial launches licensed by the FAA will be a key part of the plan for delivery of equipment and supplies to the International Space Station. In fact, we are currently working very closely with both Orbital Sciences Corporation and Space X, the companies that have been selected to perform these resupply activities, on their planned operations.

A second key challenge is based on the fact that we are currently on the threshold of a new era in space transportation: commercial human space flight, and specifically, suborbital space tourism. The X-Prize winning flight of SpaceShipOne in 2004 awakened the nation to the potential for both a new space-related market and a new way of doing space business. Today, our office is working with a number of different companies, each of which is in the process of designing, building, and testing rocket-powered vehicles capable of carrying people to the edge of space, where they will be able to look out at the black sky above, see the curvature of the Earth below, and experience the magic of weightlessness. We know that not all of the companies engaged in this effort will be successful. Some will encounter technical difficulties. Others will have financial challenges. But I am quite confident that we will soon be seeing both test flights and operations involving a variety of reusable launch vehicle concepts.

America’s spaceflight effort is not a monolith. It involves NASA, the Air Force, the FAA and the commercial space transportation industry. Likewise, the industry itself is not a monolith. It is a blend of established operators and entrepreneurial newcomers. Its aims involve both payloads and people, both suborbital flights and missions to low-Earth orbit. And it is important to note that interest in space transportation is not just limited to the United States. Although only a handful of countries have demonstrated the ability to successfully launch rockets into space, many others have begun voicing their aspirations to reap the very same national security benefits, technological spin-offs, economic rewards, and public inspiration that we have enjoyed in the U.S. since the beginning of the space age more than 50 years ago.

With the potential for vigorous competition emerging among commercial space transportation providers around the world, the FAA appreciates the recent action taken by the House in passing H.R. 3819, a three-year extension to what is often referred to as “indemnification authority.” We would strongly support similar action in the Senate before the December 31^st expiration of the current regime. While a three-year extension is needed now to prevent a lapse in the program, we believe that a longer-term extension in the future would be extremely beneficial. It would facilitate long-term planning and investment by the industry during what is expected to be a significant growth period, without interfering with Congress’ ability to revisit this issue at a later time to determine whether the current policy is still appropriate.

The Office of Commercial Space Transportation has a two-fold mission consistent with both enabling the industry and keeping it operating safely. In addition to our safety role, as our governing statute directs, our office is charged with the responsibility to encourage, facilitate, and promote the commercial space industry. We do that in a variety of ways. For example, we develop market forecasts, launch reports, and economic impact assessments. Additionally, we conduct pre-application consultations, host workshops, and publish guides and advisory circulars to assist launch operators in understanding our regulations and how to comply with them. We also work with other government agencies to identify policies which may have an unintended adverse impact on commercialization efforts.

At the FAA, safety -- helping to safeguard the public during launch operations -- is the core of our mission that shapes our days and guides our work. As the Commercial Space Launch Amendments Act of 2004 directs, the Secretary of Transportation “shall encourage, facilitate, and promote the continuous improvement of the safety of launch vehicles designed to carry humans….” With that in mind, I want to conclude today by briefly sharing our perspective on safety in commercial human spaceflight.

First, much as I wish it were, safety is not an absolute. Climbing aboard a rocket carries with it the potential for unfavorable results. So safety must override assumptions, shortcuts and the potentially false and dangerous sense that “what has always worked before is bound to work again.” Safety is a mindset, a professional tension where all the people involved in providing a rocket trip are constantly on alert, determined to get it right this time, next time, all the time.

Second, even at that high order of readiness, safety does not, nor can it ever, immunize anyone against unforeseen harm. Misfortune will always be an uninvited possibility whenever a rocket launches. At the FAA, we never forget that. It is a compelling fact that reinforces our commitment to safety, and leads us to check and recheck, and if necessary, even re-think what we do and how we do it.

Third, and finally, I want to assure you that the people of the FAA are passionate about safety and are always aware of the hazards associated with the serious work for which we are responsible. It is a thrill to be part of safely expanding the frontiers of spaceflight, a challenge to excel at it, and an honor to have the chance.

Chairman Costello, Ranking Member Petri, Members of the Subcommittee, this concludes my prepared remarks. At the appropriate time, I would be pleased to answer any questions you might have.

Aviation and the Emerging Use of Biofuels

STATEMENT OF

DR. LOURDES MAURICE,
CHIEF SCIENTIFIC AND TECHNICAL ADVISOR,
OFFICE OF ENVIRONMENT AND ENERGY,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

HOUSE SCIENCE AND TECHNOLOGY COMMITTEE,
SUBCOMMITTEE ON SPACE AND AERONAUTICS, ON

AVIATION AND THE EMERGING USE OF BIOFUELS,

MARCH 26, 2009

Madam Chair, Congressman Olson, and Members of the Subcommittee:

Thank you for the invitation to testify on “Aviation and the Emerging Use of Biofuels.” I am the Federal Aviation Administration’s (FAA) Chief Scientific and Technical Advisor for Environment and Energy. In that role I also serve as the environmental team leader for the Commercial Aviation Alternative Fuels Initiative (CAAFI). I am pleased to be able to speak to the Subcommittee today about biofuel (hereinafter referred to as “renewable jet fuel”) activities of CAAFI.

Today’s hearing is well timed. Aviation has made enormous progress in the last three years identifying and testing technologies for renewable jet fuels, and progressing toward broad airworthiness certification for the most mature of these technologies. As you may know, the FAA has the responsibility to make sure that any aircraft, aircraft engine or part, or fuel that is used in aviation is safe and performs to set standards. We have identified a number of alternative jet fuels (including renewable jet fuels) that can replace petroleum jet fuel without the need to modify aircraft, engines and fueling infrastructure (often referred to as “drop in” fuels). Compared to the other transportation sectors, aviation is, in fact, well positioned to adopt renewable jet fuels. Moreover, this effort is critical to achieving the environmental goals of the Next Generation Air Transportation System (NextGen).

In order to spur deployment of fuels with clear environmental benefits we are aggressively pursuing robust and reliable environmental life cycle analysis to quantify environmental impacts of renewable jet fuels, including air quality and greenhouse (GHG) impacts from direct and indirect land use change, feedstock production, fuel processing, transport and use in aircraft. We are coordinating this aviation effort with the Environmental Protection Agency’s (EPA) life cycle analysis through an interagency working group. Airlines and multiple fuel suppliers are developing a range of opportunities to deploy renewable jet fuels and are pursuing deployment options via incentives available from U.S. Department of Energy (DOE) and U.S. Department of Agriculture (USDA) programs on, for the first time, an equal basis with ground transportation users. And because safety is crucial to this effort, FAA is taking the certification process step-by-step to ensure that any fuels developed will meet or exceed the safety performance of today’s jet fuels. FAA will also ensure, in collaboration with EPA, that any new fuels will meet or exceed emissions standards for aircraft engines.

While the aviation community has made significant strides, we have learned as we have worked on this effort, as is the case with most new technical initiatives. There are ongoing efforts now that we did not imagine at the outset. One example is the rapid pace of development and flight testing of hydroprocessed renewable jet fuels. However, it is clear there is no one “silver bullet” global process or feedstock solution. Rather there are multiple solutions, which we can pursue in an environmentally and economically viable and safe manner via regional development and deployment.

Founded in 2006, CAAFI[1] is a coalition of airlines, airports, aircraft and engine manufacturers, energy producers, researchers and U.S. government agencies (including FAA, EPA, USAF, NASA, DOE and USDA) that are leading efforts to develop and deploy alternative jet fuels for commercial aviation. Jointly sponsored by the FAA, the Air Transport Association of America, the Aerospace Industries Association and Airports Council International-North America, CAAFI has taken a comprehensive approach to the development, evaluation and deployment of alternative jet fuels. CAAFI focuses its stakeholder efforts in four key areas: fuel certification, research and development (R&D) needs, environmental impacts and costs and benefits, and the business and economics of commercialization. The goal is to promote the development of renewable jet fuels for use with today’s aircraft fleet that offer equivalent or better cost compared to petroleum based jet fuel, with equivalent safety. Further, the goals are also to provide environmental improvement, energy supply security and economic development. Promising renewable jet fuel feedstocks options may include biomass, corn-stover, and inedible crops such as jatropha and camellina, and algal oils.

In your invitation to testify, the Subcommittee asked me to specifically address the following five questions regarding emerging aviation renewable jet fuels:

1. What research is CAAFI sponsoring or coordinating to validate the projected benefits of using biofuel in civil aviation in terms of their ability to reduce engine emissions?

First I should clarify that CAAFI does not sponsor research per se. Rather we are a coalition of stakeholders that individually and collectively sponsor and coordinate research to meet CAAFI’s goals. This ensures we strengthen each other’s efforts and avoid duplication. One of the goals of CAAFI’s environmental team is quantifying the potential for renewable jet fuels and renewable jet fuel blends to improve air quality and reduce life cycle GHG emissions. An improved environmental footprint is a critical objective of alternative jet fuels (including renewable jet fuels) for both the FAA and other CAAFI sponsors. Largely funded by FAA, the CAAFI environmental team’s efforts in air quality include both the measurement of engine exhaust emissions such as particulate matter and sulfur oxides and calculating the cost and benefits of reducing these emissions with alternative fuels. The FAA funded efforts totaling $1 million in fiscal[2] year 2008 through the Partnership for AiR Transportation Noise and Emission Reduction (PARTNER) Center of Excellence focused on assessing select air quality emissions for alternative fuels including renewable jet fuels: Emissions Characteristics of Alternative Aviation Fuels and Ultra Low Sulfur (ULS) Jet Fuel Environmental Cost Benefit Analysis.[3]

The U.S. has National Ambient Air Quality Standards for particulate matter emissions and 44% of our 50 largest airports in terms of enplanements are in areas of non-attainment status for these emissions. Common to all alternative fuels under consideration is their potential to reduce particulate matter emissions. We have obtained direct measurements in in-service aircraft engines that clearly validate these benefits[4] . Additionally, with CAAFI’s support, the FAA-sponsored Transportation Research Board’s Airport Cooperative Research Program (ACRP) will complete in May 2009 a handbook enabling possible investors, airlines and airports to quantify environmental and/or financial gains for alternative jet fuel (including renewable jet fuel) use at their specific airports.[5]

The consideration of the life cycle emissions from alternative fuel production and transportation must be considered when calculating environmental impacts and the CAAFI environmental team has also focused on measuring the potential to reduce aviation GHG emissions by using renewable jet fuels. For example, the FAA and the U.S. Air Force are jointly funding the development of a GHG life cycle analysis (LCA) framework through the FAA’s PARTNER Center of Excellence.[6] We refer to the approach as “well-to-wake”. The CAAFI environmental team endorsed the intent to develop a consistent framework in October 2008. The Intergovernmental Panel on Climate Change (IPCC)-endorsed global aviation emissions modeling tools anchor the framework on the aircraft exhaust end. To measure GHG emissions from the production end, CAAFI researchers are part of a working group (including FAA, U.S. Air Force, DOE, EPA, and university experts) that is developing best practice tools to capture the many variables associated with GHG life cycle calculation. At the present time a half dozen domestic and international alternative jet fuel producers are participating with CAAFI and can evaluate the outcomes of their specific projects using this framework.

Once completed, we will rigorously peer review the LCA framework to ensure it is based on the best science and accurately captures GHG life cycle emissions to inform the aviation industry and potential fuel producers.

2. What is the status of CAAFI’s roadmap? How does CAAFI ensure that federal and private sector biofuel research is aligned?

CAAFI uses R&D roadmaps to align and communicate research needs that will define both process and feedstock maturity up to certification and subsequently through deployment. On January 27 CAAFI’s R&D team, hosted by the U.S. Air Force in Dayton, OH, updated the R&D roadmaps. Participants contributing to this process included government technology investors such as the National Aeronautics and Space Administration (NASA), DOE’s National Renewable Energy Labs and Energy Efficiency and Renewable Energy office, and USDA, as well as private sector investors. The resulting roadmaps define the work done to date, and what’s planned or needed to support deployment of alternative aviation fuels. These updated roadmaps include milestones for maturing feedstock and production processes for renewable jet fuels. The roadmaps are currently available in draft form; stakeholders as well as government, and any other entities concerned about aviation alternative fuels, can use the roadmaps in their final form to guide investment decisions. CAAFI welcomes the Subcommittee’s participation in both using and contributing to these roadmaps (see Appendix A).

3. Can the development readiness of various biofuels be commonly characterized and measured?

As a complement to communicating research needs, we also need a common definition of alternative fuels among all fuel investors and aviation consumers to determine the maturity of the variety of alternative options that are under considerations. Such a system helps to differentiate candidates in the research phase (such as those being pursued by NASA and the Defense Advanced Research Projects Agency (DARPA)), candidates ready for certification, and candidates in the deployment phase and worthy of support by private investors and public funding such as that by the USDA Rural Development program. On January 27, 2009, CAAFI introduced a risk management measuring system for alternative fuels named Fuel Readiness Level (FRL). The basis of FRL is the Technology Readiness Level (TRL) used by the U.S. Air Force, NASA and CAAFI’s manufacturing sector to classify systems development maturity. FRL combines TRL with critical manufacturing readiness level (MRL) steps to characterize the readiness of alternative fuel candidates. As is the case with CAAFI’s roadmaps, FRL protocols are available to the Subcommittee (see Appendix B).

4. What research is CAAFI sponsoring or coordinating to determine the impact that long-term and widespread biofuel use may have on aircraft safety, and engine performance/ maintainability/reliability? Is more research needed? In what areas?

The FAA (through CAAFI) collaborates with ASTM International, the industrial standards-setting organization, to perform the technical evaluation of potential alternative jet fuels leading to FAA airworthiness certification. The process adheres to strict rules and standards to ensure safety. The CAAFI certification team comprises core members of that body representing equipment manufacturer, fuel producer, and fuel consumer sectors. My colleague Mark Rumizen of the FAA’s Airworthiness division chairs the CAAFI certification team. The certification team’s goal is to facilitate fuel certification for alternative jet fuels by coordinating the fuel evaluation and specification development process with airworthiness authorities and industry stakeholders. The team is initially focused on, as noted above, “drop in” fuels. These fuels are essentially identical to conventional Jet A and transparent to the aircraft system and aviation fuel infrastructure. Equivalent operating performance and maintenance characteristics are inherent in the definition of “drop in” fuel.

Simply meeting top-level specification requirements for airworthiness (for example freeze point, flash point and energy content) is not sufficient for fuel approval. ASTM uses testing protocols developed by a special ASTM task force to ensure no changes in operating and maintenance characteristics. For example the “fit for purpose” testing puts bounds on lubricity requirements that will influence fuel system wear. Testing identifies a minimum aromatic content to ensure elastomer seals perform properly. Limits on electrical conductivity of the fuel ensure that there is no interference with cockpit instrumentation.[7]

Presently CAAFI’s certification team and ASTM are completing a framework specification for synthetic alternatives to complement the petroleum-based specification. ASTM members are currently reviewing this new specification approach for approval. With the new specification, we expect a generic approval of the full range of fuels from Fischer Tropsch (FT) processes[8] – including biomass to liquid fuels -- for use at a 50% blend level.[9] Similarly, we forecast approval for use by as early as the end of 2010 of hydroprocessed renewable jet (HRJ) fuel – from non-food biomass feedstocks such as corn stover, jatropha, camelina, halophytes and algae. This probable approval relies on recent data but may also require additional investment in research. The FAA’s Continuous Low Emissions, Noise and Energy (CLEEN) program is one source for this investment. Flight tests sponsored by industry will also support the certification efforts.

5. In CAAFI’s view, what are the main challenges facing widespread use of biofuels in civil aviation? What issues need to be resolved before CAAFI can project when widespread aviation use of biofuels may occur?

Speaking as a member of CAAFI, we view three areas as hurdles, as well as opportunities for future focus:

First and foremost is certification. We believe we have a path for achieving biofuel approvals at a 50% blend level over the next two years. However, approval of the blend and eventual approval of 100% renewable jet fuels may require full combustor rig and or engine tests under approval protocols. We can leverage U.S. Air Force investment in biofuel testing to cover the performance of in-use commercial engines such as on the C-17 aircraft. However, we will likely need additional testing to cover advanced low emissions combustors such as those on new commercial engines or advanced cycles such as those NASA is exploring. Full combustor rig and engine tests require as much as 250,000 gallons of fuel, which may be a significant challenge for some candidate alternative fuel producers, as well as requiring substantial research investment.

The next hurdle is accurately quantifying environmental impacts. Assessments of both air quality and GHG life cycle emissions impacts must continue to be timely and thorough as new fuel options emerge. For example, we, in collaboration with EPA, need to populate emissions prediction models with measured emissions data for emerging renewable jet fuels. Acquiring such data is empirical in nature and requires significant testing and investment. Reducing the uncertainties associated with land use changes, fertilizer use, and impacts on the quality and quantity of water resources, GHG inherent in-life cycle analyses from harvest to processing to transport and use of the renewable jet fuels, will also require significant effort and investment, and the collaboration of all stakeholders involved to ensure an agreeable and accurate framework.

The FAA’s CLEEN program, noted above, as well as its NextGen investments in environment and energy research, are vehicles available to CAAFI sponsors and other stakeholders to address the certification and environmental issues. We appreciate the Subcommittee’s support for these efforts.

The final hurdles are infrastructure and deployment. Aviation’s dependence on high-density liquid hydrocarbon fuels for the foreseeable future is perhaps unique, unlike surface transportation modes which have other options such as electric power and lower-density ethanol fuel. Another unique characteristic of U.S. commercial aviation is that the fueling infrastructure can serve over 80% of all jet fuel used in about 35 locations, i.e. at our busiest airports. These realities of dependence and concentrated infrastructure should lead to aviation becoming a “first mover” in the deployment of alternative fuels. Aviation’s circumstances are critical to its attractiveness to biofuel producers despite aviation’s small market for transportation fuels relative to cars and trucks.

The recent economic slowdown has somewhat diminished the ability of conventional investment sources to quickly respond to the opportunities that aviation uniquely provides. However, FAA believes there is a need for investments in biofuel production infrastructure specific to aviation. With relatively modest investment at locations near airports which combine feedstock availability, existing biofuel infrastructure, need for air quality gains, and U.S. airlines eager to use renewable jet fuels, we believe successful production facilities can be built. Focusing sufficient investment on developing a number of success models, rather than a target percentage of fuel supply from renewable jet fuels, is likely the key to producers deploying these fuels for both the aviation industry and perhaps the nation as a whole.

The nation has often counted upon the skills of the aerospace industry to lead the way in technical innovation. Renewable jet fuels offer the opportunity to team the aerospace science and technology efforts with those of agriculture, energy, and sustainability to address the three challenges I outlined above.

Madam Chair and Members of the Subcommittee, thank you again for the opportunity to testify on how the aviation community is leading the way to develop and realize the potential of emerging aviation renewable jet fuels. That completes my prepared remarks and I welcome any questions that you may have.

[1] The CAAFI coalition includes 300 domestic and international stakeholder representatives: U.S. government agencies, aircraft and engine manufacturers, over 40 energy producers, many of the world’s airlines, and numerous Universities.

[2] In fiscal year 2009, we expect to invest approximately $2 million in alternative jet fuels (including renewable jet fuels).

[3] More information about PARTNER is available at http://web.mit.edu/aeroastro/partner/projects/index.html

[4] Hileman, J, Ortiz, D., Brown, N., Maurice, L., and Rumizen, R., “The Feasibility and Potential Environmental Benefits of Alternative Fuels for Commercial Aviation,” International Congress of Aeronautical Sciences, Anchorage, Alaska, September 2008.

[5] See ACRP Project 02-07: Handbook for Analyzing the Costs and Benefits of Alternative Turbine Engine Fuels at Airports. See http://www.trb.org/TRBNet/ProjectDisplay.asp?ProjectID=1585

[6] For work to develop alternative jet fuel life cycle analyses, see PARTNER Center of Excellence Project 17: Alternative Jet Fuels and Project 28: Alternative Jet Fuel Environmental Cost Benefit Analysis at http://web.mit.edu/aeroastro/partner/projects/index.html

[7] Much of the fit for purpose testing is being done by the U.S. Air Force and then shared with CAAFI.

[8] The Fischer Tropsch or F-T synthetic fuel production process is a catalyzed chemical reaction in which synthesis gas, a mixture of carbon monoxide and hydrogen, is converted into liquid hydrocarbons of various forms. This output produces synthetic petroleum replacements such as diesel and jet fuel from coal, natural gas or biomass.

[9] One FT fuel made by SASOL of South Africa is already approved for global aviation use at a 50% and 100% blend. However this approval is for one specific manufacturer, with one specific feedstock and one specific facility. CAAFI is targeting a generic specification that will enable approval of many different manufacturers, feedstocks and facilities that use this process.

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Need for change

Price of inaction

Outyear Costs

Conclusion

Need for change

Outyear Costs

Conclusion

We have also proposed environmental streamlining provisions that are intended to improve the administration of current programs without affecting environmental quality in such areas as the state block grant program and the air tour management program.

Realignment and Consolidation of Aviation Facilities and Services

Extension of Aviation InsuranceProgram

Conclusion

This concludes my prepared statement. I will be happy to answer your questions at this time.[1] The remainder of RE&D would be funded from the Airport and Airway Trust Fund, and is included in the universal fuel tax rate discussed below under “Proposed Funding for AIP, RE&D and EAS”.

Improved Financial Management Performance

STATEMENT OF

DR. LOURDES MAURICE,CHIEF SCIENTIFIC AND TECHNICAL ADVISOR,OFFICE OF ENVIRONMENT AND ENERGY,FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

HOUSE SCIENCE AND TECHNOLOGY COMMITTEE,SUBCOMMITTEE ON SPACE AND AERONAUTICS, ON

AVIATION AND THE EMERGING USE OF BIOFUELS,

MARCH 26, 2009

U.S. Department of Transportation

Want to know more?

This concludes my prepared statement. I will be happy to answer your questions at this time.

[1] The remainder of RE&D would be funded from the Airport and Airway Trust Fund, and is included in the universal fuel tax rate discussed below under “Proposed Funding for AIP, RE&D and EAS”.

DR. LOURDES MAURICE,
CHIEF SCIENTIFIC AND TECHNICAL ADVISOR,
OFFICE OF ENVIRONMENT AND ENERGY,
FEDERAL AVIATION ADMINISTRATION,

HOUSE SCIENCE AND TECHNOLOGY COMMITTEE,
SUBCOMMITTEE ON SPACE AND AERONAUTICS, ON