The Passive Regulator: How the FAA's Failure to Act Affects the Development of Drone Technology

Late last year, Jeff Bezos, the founder and CEO of Amazon, made national news with his announcement that Amazon was working on a drone system that could be used to deliver packages to the consumer's front door. At roughly the same time, the Federal Aviation Administration ("FAA"), the federal agency responsible for oversight of these unmanned aircraft systems ("UAS"), issued a set of documents broadly outlining its plans for integration of these systems into the U.S. national airspace system ("NAS"). Shortly before New Year's Day, the FAA announced six UAS test sites that will be instrumental in developing the necessary knowledge to facilitate this integration. In light of these recent public announcements, one could reasonably think that the advent of domestic drone technology is right around the corner. In truth, the United States is a long way from allowing routine use of UAS in domestic airspace. However, a recent decision from an administrative law judge ("ALJ") at the National Transportation Safety Board ("NTSB"), if upheld by the NTSB on appeal, could effectively remove the FAA from an oversight position in the near-term, at least for smaller UAS.[1] Whether the ALJ's decision is upheld or not, the FAA needs to rethink how it plans to exercise that oversight if it wants to remain relevant. 

The use of drone technology by public entities like Customs and Border Protection and local law enforcement agencies, while not exactly widespread, is not unusual. This is because, unlike private operators, the FAA has no jurisdiction over public aircraft, and public aircraft operations are subject only to those regulations regarding the safe interaction of public and civil aircraft in the NAS. So, for example, public aircraft operators flying in instrument conditions must be in contact with air traffic control, but the aircraft that is being flown does not need to meet safety standards and does not generally need to be operated in accordance with federal standards. Because of their status, operators of public UAS need only receive a Certificate of Authorization (or waiver) ("COA") from the FAA. These COAs detail the airspace in which the UAS may operate (which the FAA may close to other traffic), may impose time-of-day restrictions, and may require the operator to take steps to address the chance of a runaway situation. Border protection drones and other defense applications remain the most common public UAS operations, but other federal agencies, and state and local law enforcement authorities, are using drones for their purposes as well.  

Certainly there is a value to public UAS operations, both in terms of surveillance and monitoring. However, the greatest value of UAS technology is probably in the commercial sector. Proposed commercial UAS employment includes aerial agricultural spraying, inspecting oil and gas pipelines, monitoring ports and power facilities, delivering packages and transporting cargo, and alerting emergency responders to potentially dangerous fumes from an accident. For many of these applications, the technology already exists and the costs have lowered to a point that is commercially feasible. However, the FAA will not currently permit commercial UAS operations because the existing regulatory structure is insufficiently flexible to address the design and operation of UAS. New regulations are needed. 

The announcement of the six test sites and the federal government's strategic plan for facilitating integration of UAS into domestic airspace is encouraging. However, it also indicates just how far the FAA is from developing a comprehensive regulatory scheme that will facilitate the type of integration that entrepreneurs like Mr. Bezos envision.  

Current Regulation of Commercial UAS 

At the present time, a company hoping to operate a UAS is required to obtain a Special Airworthiness Certificate—Experimental Category (experimental airworthiness certificate). However, the FAA will approve an experimental airworthiness certificate for a UAS only for the purposes of research and development, market surveys, and crew training. Since the majority of anticipated commercial applications for UAS technology do not fall within one of these three categories, this certificate is of limited utility, and less than 120 certificates have been issued to date. Once one receives an experimental airworthiness certificate, one must also receive special operating authority before the UAS can actually be flown. FAA guidance materials on both the experimental certificates and special operating authority for UAS make no distinction between very small UAS and large drone technology like the Department of Defense's Predators, even though the performance capabilities (and attendant risks) are dramatically different. This approach, while adopted because of concerns over the safety of UAS technology generally, is in direct contrast to the approach the FAA has taken with respect to traditional aircraft designs and operations, where the level of risk is appropriately distinguished among different classes of aircraft and operations, with scheduled air transportation on transport category aircraft meeting the most stringent standards and model aircraft subject to essentially no regulations at all. 

Challenges to the FAA's Current Enforcement Posture 

In fairness to the FAA, it has been trying for the past several years to issue a small UAS (under 55 pounds) regulation that would permit the use of these aircraft in domestic airspace without an experimental airworthiness certificate and special operating authorization. However, the agency has yet to publish a notice of proposed rulemaking ("NPRM"), and a final rule is likely years away. The FAA is hoping to issue the NPRM by the end of this year. If successful, there would not be a final rule until 2016 at the earliest.  

Ironically, the majority of UAS that would qualify as small UAS under the contemplated rule may already qualify as model aircraft under FAA guidance. As such, it is unclear to many why the FAA believes it must regulate these UAS at all. The FAA signaled in an Advisory Circular issued in 1981[2] that it did not intend to regulate model aircraft, although the circular failed to actually define the term and the FAA has not done so elsewhere, leaving some doubt as to what qualifies as a model aircraft. The advisory circular makes no distinction between use for recreational or business purposes; however, the FAA first noted in a 2007 policy statement and then reiterated in 2013 that the use of small UAS "for business" purposes was prohibited under the existing guidance for hobby aircraft,[3] i.e., the 1981 advisory circular. The 2007 policy statement asserted that the 1981 advisory circular was issued only to accommodate the recreational use of model aircraft and therefore did not apply to the business use of the same type of aircraft as small UAS.  

Some have challenged the FAA's authority to make such a pronouncement, and the post-hoc distinction is, in some respects, philosophically at odds with both the apparent lack of safety concerns over aircraft of this size and the agency's general distinction of operations "for compensation or hire" and operations on one's own behalf, regardless of whether that operation is in support of a nontransportation-related enterprise. The distinction on commercial use historically has been whether someone else is paying the operator for a service, not whether there is any business purpose. Thus, charter operators are subject to much more stringent regulations than a corporation flying its own employees. Yet under the 2007 policy statement, a business enterprise may not use even a small UAS without specific FAA authorization, even if not receiving any compensation from others. 

The prohibition on use of small UAS for business purposes is widely flouted and misunderstood. Newscasters routinely tell the viewing public that there are no restrictions on the use of this technology after first reporting on its use to photograph real estate or to monitor crop production. The FAA has taken some enforcement action, but the enforcement activity appears to be limited and low-profile. The actual regulatory infraction cited is typically for "careless or reckless operation of an aircraft" in violation of 14 C.F.R. 91.13[4] rather than the operation of an aircraft that cannot meet all of the applicable regulations referenced in the 2007 policy statement. And, in general, it is hard to believe these devices carry much risk. They typically fly at very low altitudes and, as such, are unlikely to interfere with other aircraft unless operated close to an airport. While they could damage property or injure a person, any damage is arguably better addressed through civil litigation, just as the case would be for recreational model aircraft. 

Indeed, the FAA's enforcement policy on small UAS has recently been successfully challenged. On March 6, ALJ Patrick Geraghty set aside the FAA's penalty assessment against Raphael Pirker, who had been charged with violating 14 C.F.R. §91.13(a). Mr. Pirker had used a small, remote-controlled power glider to take pictures of the University of Virginia campus and medical center for Lewis Communications. Notably, the FAA did not allege that Mr. Pirker was operating the UAS without an airworthiness certificate or in violation of any operating rules, although it did note that he did not possess a pilot's license.  

Rather than pay the $10,000 proposed civil penalty, Mr. Pirker argued that the FAA had no authority to regulate model aircraft, regardless of whether the operation of the aircraft was for recreational or professional purposes. In short, the FAA's reliance on internal orders and its 2007 Policy Statement, rather than on any validly issued regulations, as well as its 1981 Advisory Circular apparently ceding regulatory oversight of model aircraft, prevented the FAA from asserting any regulatory jurisdiction over small UAS, because model aircraft do not qualify as "aircraft" as contemplated by statute or regulation.  

In agreeing with Mr. Pirker, Judge Geraghty found that the power glider was not an aircraft and that the FAA had no authority, in the absence of regulations specifically addressing UAS, to characterize small UAS as aircraft. Since Mr. Pirker was not operating an aircraft, he could not have violated 14 C.F.R. §91.13(a). On March 7, the FAA appealed the ALJ's decision, which had the effect of staying the court's decision. Thus, until the NTSB rules, UAS are still considered subject to FAA regulatory oversight consistent with existing regulations and the 2007 policy statement. 

Given the tenor of the ALJ's decision, one might assume that he is typically hostile toward the FAA. That is not the case. Judge Geraghty is generally considered by the FAA's enforcement attorneys to be a fair and reasonable arbiter. His reputation for even-handedness may be the greatest indicator of risk for the FAA on appeal. Judge Geraghty likely went too far in finding that Mr. Pirker's glider was not an aircraft because UAS are not defined as aircraft in statute or the agency's regulatory definition of aircraft. These definitions are meant to be broad precisely because developing technologies foreclose a precise definition. Additionally, contrary to the finding that the FAA had ceded all jurisdiction over model aircraft through the 1981 advisory circular, the FAA has specifically regulated the use of model aircraft in notices to airmen and has never issued a regulation waiving jurisdiction. In contrast, the FAA has specifically waived its oversight of amateur rockets in its regulations applicable to commercial space.[5] 

While it is fair to argue that the FAA cannot enforce a requirement for an experimental airworthiness certificate or pilot license requirements for small UAS in the absence of a specific regulation, to say that the FAA has no authority to rely on existing regulations to address the careless and reckless operation of a small UAS as a model aircraft would appear to go too far. However, by dragging its feet in developing specific regulations, the FAA opened the door to a determination that it lacks the authority to act at all. The NTSB may well agree with Judge Geraghty that the distinction between small UAS flown for recreational purposes and small UAS flown for business purposes cannot be sustained in the absence of specific regulations. The sole question before the Board then becomes whether agency publication of an advisory circular encouraging the compliance with voluntary standards precludes the FAA from characterizing such contrivances as aircraft subject to general oversight related to the safety of the NAS. Left unanswered is the question of whether the FAA can constrain the operation of larger UAS that do not qualify as model aircraft in the absence of a new regulatory scheme. 

FAA's Regulatory Plan 

On December 29, 2013, the FAA announced the six test sites that will be used to study how best to safely and efficiently integrate UAS into the NAS. The test sites were chosen for geographic, climatic, and airspace diversity, as well as the site operators' proposals to provide research in particular areas of concern. The test sites will focus on different types of research ranging from aircraft safety standards, to human factors, to the impact of congestion in integration. Research at the test sites, which will not be funded by the FAA, is expected to continue through at least 2017. 

On November 7, 2013, about two months prior to the test site announcement, the FAA published a series of documents in an effort to comply with the FAA Modernization and Reform Act of 2012[6] (the "Act"), in which Congress mandated that the Department of Transportation ("DOT") develop a plan to integrate civil UAS operations with the current traditional aircraft regulatory scheme by September 30, 2015. While the released documents are short on specific regulatory requirements necessary for successful integration, they should be useful in plotting a course forward.  

The three documents released by DOT and FAA are: 

• U.S. Department of Transportation's Unmanned Aircraft Systems (UAS) Comprehensive Plan (the "Comprehensive Plan");
• First Edition of the Integration of Civil Unmanned Aircraft Systems (UAS) in the National Airspace System (NAS) Roadmap (the "Roadmap"); and
• Final Privacy Requirements for the Unmanned Aircraft System ("UAS") Test Site Program (the "Final Privacy Requirements").           

The first two documents should be read together as they set forth the government's strategic vision for integration of UAS of all sizes into the NAS. The Comprehensive Plan serves as the broad vision shared by all federal government users of the airspace, while the Roadmap provides the strategic goals and measureable metrics by which the FAA will ensure that this vision is realized.           

The Comprehensive Plan outlines the broad approach that will be taken by a variety of agencies, including the Departments of Transportation, Defense, Commerce, and Homeland Security; the National Aeronautics and Space Administration; and the FAA, to safely and successfully integrate UAS into the NAS. The most important information in the Comprehensive Plan is that, while purporting to meet the Congressional objective of full integration by 2015 for small UAS and public UAS, the FAA does not foresee routine civil operations of UAS in the NAS until 2020, the same year that automatic dependent surveillance-broadcast out ("ADS-B Out") becomes required equipment for all aircraft operating in the NAS.  

As implied by the name, the Roadmap lays out the FAA's assessment of the steps required to fully integrate UAS into the NAS. The Roadmap takes a three-phase approach, which the FAA terms accommodation, integration, and evolution. The accommodation phase envisioned by the FAA is a continuance of the model currently being used by the FAA for public UAS, where UAS operations would be permitted on a limited basis in reserved airspace. During the accommodation phase, the FAA will work with industry groups, standards development organizations, and other regulatory bodies to develop standards and technology necessary to integrate UAS into airspace shared with traditional aircraft. At the same time, the FAA will be developing UAS training standards for aircrews, mechanics, and air traffic controllers. The FAA expects integration to occur within the next 10 years. In the integration phase, the FAA plans to take the experience gleaned from the accommodation phase and expand UAS operations into the full NAS. Finally, in the evolution phase, the FAA plans to focus on long-term refinement of regulations and development of full type certification for UAS with the goal of seamless operations of UAS with traditional manned aircraft. 

UAS Privacy Regulation 

With the rise of UAS technology, many individuals and advocacy groups have raised alarms regarding privacy intrusion by UAS. These privacy concerns are largely directed toward public UAS operations, such as UAS controlled by the military and local police departments. Fewer concerns have been expressed with regard to commercial UAS operations. The third document published by the DOT and FAA is the Final Privacy Requirements, in which the FAA states that it will rely on individual operators and existing privacy laws to address privacy concerns. As the Final Privacy Requirements state, "[t]he FAA's mission is to provide the safest, most efficient aerospace system in the world and does not include regulating privacy."  

However, the FAA recognizes its obligation to address the public's privacy concerns with regard to its control over the UAS test sites. To that end, the Final Privacy Requirements place the privacy burden squarely on the shoulders of the test site operators. The test site operators are required to develop privacy policies for operations in the test site, make the privacy policies public, and receive and consider public comment on the privacy policy. Further, the test site operators must conduct annual reviews of the privacy policy to ensure that it remains current and effective and must ensure that the policy is applied to all operations at the test site.  

Alternative Approach

While the three documents released by the FAA outline the road ahead for UAS integration, the documents provide goals and aspirations but lack specific guidance. The target dates set by the Comprehensive Plan are fast approaching, and clear regulation will be required to meet some of those targets. Significant progress is needed to meet the Comprehensive Plan's goal of beginning small public and civil UAS operations in the NAS by 2015. Additionally, the Pirker decision highlights the very real risk that in the absence of some regulatory structure, the FAA will be limited to only the most basic regulatory oversight of small UAS in the NAS. 

The FAA has acknowledged that a key element of the small UAS rule is the development of operating experience (and accompanying data) that could inform the agency on its longer-term regulatory initiative, the safe integration of larger drone technology into the airspace—technology that undoubtedly will require a regulatory structure to ensure its safe integration. This is a legitimate goal. However, there are faster ways to achieve this goal than issuing an entire new set of regulations to govern these operations of small UAS.  

The FAA has several options, depending on the NTSB's ultimate resolution of the agency's appeal of Pirker. As an initial matter, the FAA needs to publish a definition of "model aircraft" that clearly reflects the recreational nature of the operations. Congress has already developed a definition that incorporates this concept in the 2012 Act.[7] The existence of a statutory definition is sufficient to permit the FAA to amend 14 C.F.R. 1.1, to include a definition without notice and comment. Adopting a regulatory definition would allow the FAA to focus immediately on the small UAS operations that it is interested in actively monitoring.  

For small UAS used for business purposes, the FAA could simply modify its policy to more closely align with the historical distinctions between private and commercial aircraft. Thus, the distinction would no longer be whether there was a "business purpose" but whether the operation provided services to another for "compensation or hire." Safety considerations of small UAS not used for compensation or hire could be addressed through the development of best practices or voluntary standards. Alternatively, the FAA could decide that all small UAS operations, regardless of the reason for their use, are best governed by voluntary standards and best practices. Under either approach, the FAA could set up a voluntary reporting database or use its other transaction authority to enter into agreements with operators to gather the data the FAA hopes to acquire by virtue of the contemplated regulation. Such an approach would permit the commercial use of this technology and provide valuable information that could be used to evaluate the appropriate integration of larger UAS into the NAS much sooner than under the regulatory approach to which the FAA appears to be committed. 

Lawyer Contacts 

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