June 27, 2016

After more than a year of considering public comments on its February 23, 2015 proposed rules regulating the commercial use of small (weighing less than 55 pounds) unmanned aircraft systems ("UAS" or "drones"), the United States Federal Aviation Administration ("FAA") on June 22, 2016 issued its final rule, bringing the use of drones one step closer to mainstream commercial integration.

While the personal and commercial use of drones has mushroomed in recent years, a practical regulatory framework has lagged behind the technological innovation and economic demand driving the boom.  Proponents of the commercial use of drones have argued that this regulatory lag was stifling the growth of a market that is estimated to generate over $80 billion in the U.S. economy by 2025.

Under FAA regulations, drones fall under the broad definition of "aircraft," and therefore have been subject to the same regulations as a 747 passenger airliner.  These regulations include certification requirements for both the aircraft and the pilot before an aircraft can be operated in the national airspace, but the FAA acknowledged that the processes for obtaining these certifications were not designed for the unique considerations associated with small UAS.  

In 2012, Congress passed the FAA Modernization and Reform Act of 2012 (Public Law 112-95) ("Reform Act") in part to address these issues.  Section 332 of the Reform Act directed the FAA to develop a regulatory framework for the civil use of small UAS.  And until the framework was finalized, Section 333 of the Reform Act allowed the agency to make determinations on a case-by-case basis that a standard FAA airworthiness certification would not be required for a particular use of small UAS.

Although the Section 333 certification process was tailored specifically to address small UAS, and hence was a definite improvement over the general FAA airworthiness certification process, any commercial use of a small UAS still required a certification from the FAA nonetheless.

On February 23, 2015, the FAA released its proposed rules pursuant to Section 332 of the Reform Act.  After considering public comments (over 4,600 comments, as reported by the agency), the FAA published the final rule on June 22, 2016, which will go into effect after a 60-day public comment period.   

Overview of the Final Rule - Part 107

The FAA final rule adds a new Part 107 to Title 14 of the Code of Federal Regulations to allow routine commercial operations for small UAS without the need for airworthiness certification, exemption or other certificates of waiver or authorization (e.g., pursuant to Section 333).  In order to qualify for a Part 107 general authorization, the UAS and the UAS operator must satisfy several criteria set forth in the new regulations. 

With a few exceptions, many of these criteria remain unchanged in their terms as set forth in the February 23, 2015 proposed rules.  Some of the key requirements are as follows:  

  1. As in the proposed rule, the UAS must weigh less than 55 pounds, and fly at groundspeeds of less than 100 miles/hour;
  2. The maximum altitude for authorized small UAS use was lowered in the final rule from 500 to 400 feet, with a new exception that the UAS can break the 400-foot ceiling if it remains within 400 feet of a structure (i.e., to allow drones to inspect structures taller than 400 feet);
  3. The UAS can only be operated within daylight hours, although the final rules make an allowance for operation during "civil twilight" hours (30 minutes prior to sunrise and 30 minutes post sunset) if the UAS utilizes anti-collision lighting;
  4. The minimum age of a drone pilot was lowered from 17 to 16; and
  5. UAS pilots must obtain a remote pilot certification in order to operate a small UAS (or operate under the supervision of a certified holder).

Critically, particularly for certain segments of the commercial sector, the final rule did not change certain restrictions floated in the proposed rules which will have a significant limiting effect on the scope of commercial UAS use, namely:

  1. The UAS must be operated within the line-of-sight ("LOS") of the pilot or a "visual observer;"
  2. A UAS cannot be flown over persons not involved in the operation of the UAS; and
  3. If property is attached to the UAS, it cannot be flown across state or national boundaries, or the pilot would be deemed by the Department of Transportation to be an "air carrier" engaged in "air transportation," which is not covered by Part 107.

Response from Industry: A Good First Step but More Is Needed

Although the final rules have been fairly well received by drone manufacturers and industry trade associations as an important milestone in the commercialization of drone use, the general consensus even among proponents is that Part 107 is merely a first step in an ongoing process, and that much yet remains to be done in order to fully take advantage of and support growth of the burgeoning UAS sector. 

To be sure, certain commercial users of drone technology, including those engaged in television and film production, agriculture, rural real estate development, and surveying and inspection activities, are more pleased with the current state of regulation under Part 107 than are others, as Part 107 largely authorizes their needs.

Many other commercial players are not so content, particularly those who would like to use drones in some of the ways that have garnered more attention and discussion in the media – such as cross-country package delivery, an activity which arguably represents one of the largest potential growth areas for commercial use of UAS.  The current restrictions, particularly LOS restrictions, place these aspirations on hold for now.

In addition, the current 'overflight' restrictions significantly curtail the use of drones in metropolitan areas for a wide variety of potential users, including journalists, media and entertainment companies, urban real estate developers, and many others.

Many of those dissatisfied with the pace or results of regulatory change addressing UAS in the United States often point to parallel regulatory efforts in Europe by the European Aviation Safety Agency as both an example and a warning.  Set to be finalized later this year or in early 2017, the European legislation governing the commercial use of drones is expected to be more lenient than the rules set forth this week in Part 107, setting up (some argue) an uneven playing field for U.S. companies operating at home.

Finally, in the United States, federal lawmakers and regulators are not the only game in town when it comes to regulating commercial use of UAS.  Various state and local authorities will continue to have their input as well, and in fact, in its final rule the FAA explicitly denied to invoke federal preemption, stating instead that "[p]reemption issues involving small UAS necessitate a case-specific analysis that is not appropriate in a rule of general applicability."  This lack of general federal preemption likely will create, at least in the short run, a potentially complex patchwork of federal and state regulations that commercial drone operators will need to navigate in the United States. 

What's Next:  Slow and Steady

The limitations still present in Part 107 are in some measure intentional.  The FAA has acknowledged that the final rule does not address all of the current issues related to commercial use of small UAS, or the concerns of industry.  But rather than delay rulemaking further until a comprehensive framework could be developed (which to be fair may be a bit of a moving target considering the pace of technological change in the industry), the FAA has noted that its rulemaking is intended to be "incremental" "to enable certain small UAS operations to commence upon adoption of this rule and accommodate technologies as they evolve and mature."

In addition, the waiver process for deviations from the standard Part 107 requirements still exists. Part 107 includes a process for obtaining ad hoc certificates of waiver from the FAA for proposed uses of small UAS outside the standard guidelines.  The FAA has noted it will be creating an online portal to enable and streamline this process.

In addition, the release of the final rules marks commencement of another 60-day comment period, providing the public and industry with another opportunity to advocate for further last-minute amendments before the rule becomes effective in late August.

Conclusion

In sum, for many companies eager to reap the practical and economic benefits of UAS in the United States, the FAA's final rules embodied in Part 107 represent a welcome step in the right direction by doing away with the certification requirement for drone use that stays within the firm guidelines.  However, LOS and overflight restrictions still contained in Part 107 likely will continue to act as a significant obstacle to full realization of the potential of commercial drone use in the United States.

Industry will almost certainly want to continue to engage both federal and state regulators to advocate for broader authority in the commercial sector, particular if forthcoming European regulations addressing UAS create a marked disadvantage for companies in the United States.


Gibson Dunn's lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, or the authors of this alert:

Perlette Michèle Jura - Los Angeles (+1 213-229-7121, pjura@gibsondunn.com)
William J. Peters - Los Angeles (+1 213-229-7515, wpeters@gibsondunn.com)
David A. Wolber - Washington, D.C. (+1 202-887-3727, dwolber@gibsondunn.com)

Please also feel free to contact any of the following leaders and members of the firm's International Trade Practice Group:

United States:
Judith A. Lee - Co-Chair, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com)
Ronald Kirk - Co-Chair, Dallas (+1 214-698-3295, rkirk@gibsondunn.com)
Jose W. Fernandez - New York (+1 212-351-2376, jfernandez@gibsondunn.com)
Marcellus A. McRae - Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com)
Alexander H. Southwell - New York (+1 212-351-3981, asouthwell@gibsondunn.com)
Daniel P. Chung - Washington, D.C. (+1 202-887-3729, dchung@gibsondunn.com)
Adam M. Smith - Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com)
Mehrnoosh Aryanpour - Washington, D.C. (+1 202-955-8619, maryanpour@gibsondunn.com)
David A. Wolber - Washington, D.C. (+1 202-887-3727, dwolber@gibsondunn.com)
Nicholas A. Klein - Denver (+1 303-298-5795, nklein@gibsondunn.com)
Kamola Kobildjanova - Palo Alto (+1 650-849-5291, kkobildjanova@gibsondunn.com)
Lindsay M. Paulin - Washington, D.C. (+1 202-887-3701, lpaulin@gibsondunn.com)

Asia:
Robert S. Pé - Hong Kong (+852 2214 3768, rpe@gibsondunn.com)

Europe:
Peter Alexiadis - Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com)
Attila Borsos - Brussels (+32 2 554 72 10, aborsos@gibsondunn.com)
Patrick Doris - London (+44 (0) 207 071 4276, pdoris@gibsondunn.com)
Penny Madden - London (+44 (0) 20 7071 4226, pmadden@gibsondunn.com)
Benno Schwarz - Munich (+49 (0) 89 189 33 110, bschwarz@gibsondunn.com)
Mark Handley - London (+44 (0) 207 071 4277, mhandley@gibsondunn.com)  


© 2016 Gibson, Dunn & Crutcher LLP

Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.