[Federal Register Volume 87, Number 224 (Tuesday, November 22, 2022)]
[Rules and Regulations]
[Pages 71218-71238]
[FR Doc No: 2022-25288]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Parts 61 and 68

[Docket No. FAA-2021-1040; Amdt. Nos. 61-152 and 68-2]
RIN 2120-AL51

Medical Certification Standards for Commercial Balloon Operations

AGENCY: Federal Aviation Administration (FAA), Department of
Transportation (DOT).

ACTION: Final rule.

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SUMMARY: The FAA is amending its regulations to require airmen hold a
valid second-class medical certificate when exercising the privileges
of a commercial pilot certificate in a balloon for compensation or hire
except when conducting flight training in a balloon. In addition, the
FAA makes miscellaneous amendments related to medical certification
requirements for special medical flight tests and a minor change to the
BasicMed regulations.

DATES: This rule is effective December 22, 2022, except for the
amendments to Sec. Sec.  61.3(c)(2)(vi), 61.23(a)(2)(i),
61.23(a)(2)(ii), 61.23(a)(2)(iii), 61.23(b)(3), 61.23(b)(4),
61.23(b)(5), 61.23(d)(1)(iii), and 61.23(d)(2)(i)), which are effective
May 22, 2023.

ADDRESSES: For information on where to obtain copies of rulemaking
documents and other information related to this final rule, see ``How
to Obtain Additional Information'' in the SUPPLEMENTARY INFORMATION
section of this document.

FOR FURTHER INFORMATION CONTACT: Bradley Zeigler, Training &
Certification Group, Federal Aviation Administration, 800 Independence
Avenue SW, Washington, DC 20591; telephone<PHONE_NUMBER>; email
[email protected].

SUPPLEMENTARY INFORMATION:

List of Abbreviations and Acronyms Frequently Used in This Document

AMCD Aerospace Medical Certification Division
ADHD Attention Deficit Hyperactivity Disorder
AME Aviation Medical Examiner
ASI Aviation Safety Inspector
ATP Airline Transport Pilot
BFA Balloon Federation of America
IRFA Initial Regulatory Flexibility Analysis
LOA Letter of Authorization
NAS National Airspace System
NDR National Driver Register
NPRM Notice of proposed rulemaking
NTSB National Transportation Safety Board
PDPS Problem Driver Pointer System
PIC Pilot in Command
SIC Second in Command
SODA Statement of Demonstrated Ability

Table of Contents

I. Executive Summary
    A. Purpose of the Regulatory Action
    B. Changes Made in This Final Rule
    C. Summary of the Costs and Benefits
II. Authority for This Rulemaking
III. Background
    A. Need for Regulation
    B. National Transportation Safety Board (NTSB) Recommendations
    C. Summary of the NPRM
    D. General Overview of Comments
IV. Discussion of Comments and the Final Rule
    A. Application of Medical Certificate Requirement to Only
Operations Based on Size of Envelope or Passenger Capacity
    B. Application of Rule to Commercial Balloon Operations Without
Passengers
    C. Drug and Alcohol Testing
    D. Miscellaneous Issues
    E. Comments Regarding Miscellaneous Amendments
V. Regulatory Notices and Analyses
    A. Summary of the Regulatory Impact Analysis
    B. Regulatory Flexibility Act
    C. International Trade Impact Assessment
    D. Unfunded Mandates Assessment
    E. Paperwork Reduction Act
    F. International Compatibility
    G. Environmental Analysis
VI. Executive Order Determination
    A. Executive Order 13132, Federalism
    B. Executive Order 13211, Regulations That Significantly Affect
Energy Supply, Distribution, or Use
    C. Executive Order 13609, International Cooperation
VII. Privacy
VIII. Additional Information
    A. Electronic Access and Filing
    B. Small Business Regulatory Enforcement Fairness Act

I. Executive Summary

A. Purpose of the Regulatory Action

    This final rule implements section 318 (``Commercial Balloon Pilot
Safety Act of 2018'') of Public Law 115-254, the FAA Reauthorization
Act of 2018. In addition, this final rule responds to National
Transportation Safety Board (NTSB) Safety Recommendation A-17-034,
which recommends that the FAA remove the medical certification
exemption in part 61 for commercial balloon pilots \1\ receiving
compensation for transporting passengers.
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    \1\ The FAA uses the term ``commercial balloon pilots'' in this
rule to refer to airmen conducting operations in a balloon for
compensation or hire, including operations involving the carriage of
persons or property.
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    This final rule amends Sec. Sec.  61.3 and 61.23 of title 14 of the
Code of Federal Regulations (14 CFR) to require commercial balloon
pilots conducting

operations for compensation or hire to hold a valid second-class
medical certificate. However, this final rule will continue to allow
pilots to provide flight training in balloons without requiring a
medical certificate. The rule also amends the table setting forth
medical certificate durations in Sec.  61.23(d) for consistency with
amendments to Sec. Sec.  61.3 and 61.23(a) and (b).
    The FAA is also making two miscellaneous amendments. First, the FAA
is amending sections of part 61 to allow persons to act as pilot in
command (PIC) during a special medical flight test authorized under
part 67 without holding a medical certificate.
    The second is making a minor change to regulations amended or
established by the Alternative Pilot Physical Examination and Education
Requirements final rule to \2\ allow a required pilot flightcrew member
who is not acting as PIC to operate under BasicMed.
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    \2\ The Alternative Pilot Physical Examination and Education
Requirements final rule amended sections of part 61 and established
part 68 to allow persons to conduct certain flight operations in
powered aircraft while exercising the privileges of a private pilot
certificate without holding a medical certificate issued under part
67. The provisions established by Alternative Pilot Physical
Examination and Education Requirements final rule will be
collectively referred to in this preamble as BasicMed. 82 FR 3149
(Jan. 11, 2017).
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B. Changes Made in This Final Rule

    The FAA published a Notice of Proposed Rulemaking (NPRM), Medical
Certification Standards for Commercial Balloon Operations on November
18, 2021 (86 FR 64419). This rulemaking finalizes the proposal, without
change.

C. Summary of the Costs and Benefits

    This final rule will generate costs for balloon pilots to obtain a
second-class medical certificate and for some pilots to seek an
Authorization for Special Issuance of a Medical Certificate (special
issuance). There will also be costs to the FAA to implement this
requirement in terms of reviewing and processing submissions related to
certification. The FAA estimates the present value of total costs over
ten years is $2.4 million to $16.3 million with a mid-estimate of $6.9
million at a 7 percent discount rate and $2.9 million to $19.9 million
with a mid-estimate of $8.4 million at a 3 percent discount rate. The
annualized costs over ten years are $0.3 million to $2.3 million with a
mid-estimate of $1.0 million at a 7 percent discount rate and $0.3
million to $2.3 million with a mid-estimate of $1.0 million at a 3
percent discount rate. The wide range in the cost estimates primarily
reflects the uncertainty on the number of commercial balloon pilots who
will seek medical certification.
    The benefits of the final rule include enhanced safety of
commercial balloon operations through reduced risks of accidents,
fatalities, and injuries caused by medical impairment of balloon
pilots.

II. Authority for This Rulemaking

    The FAA's authority to issue rules on aviation safety is in Title
49 of the United States Code. Section 106 describes the authority of
the FAA Administrator. Subtitle VII, Aviation Programs, describes in
more detail the scope of the Agency's authority.
    The FAA is issuing this final rule under the authority described in
Section 44701, General Requirements; Section 44702, Issuance of
Certificates; and Section 44703, Airman Certificates. Under these
sections, the FAA prescribes regulations and minimum standards for
practices, methods, and procedures the Administrator finds necessary
for safety in air commerce. The FAA is also authorized to issue
certificates, including airman certificates and medical certificates,
to qualified individuals. This rulemaking is within the scope of that
authority.
    Further, Section 318 of Public Law 115-254 directs the
Administrator to ``revise 14 CFR 61.3(c) (relating to second-class
medical certificates) to apply to an operator of an air balloon to the
same extent such regulations apply to a pilot flightcrew member of
other aircraft.''

III. Background

A. Need for Regulation

    On the morning of July 30, 2016, a hot air balloon struck power
lines and burst into flames over a pasture near Lockhart, Texas,
killing all 15 passengers and the pilot. The flight was conducted in a
balloon (N2469L) operated by Heart of Texas Hot Air Balloon Rides under
part 91 as a sightseeing passenger flight. The pilot was exercising the
privileges of a commercial pilot certificate.
    Through its investigation, the NTSB determined that the pilot had
been diagnosed with depression and attention deficit hyperactivity
disorder (ADHD) \3\ and identified medications found in the pilot's
system that are known to cause impairment.\4\
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    \3\ ADHD is known to cause cognitive deficits that may affect
decision-making and, ultimately, safety of flight.
    \4\ The medications identified by the NTSB are listed on the
FAA's ``Do Not Issue'' and ``Do Not Fly'' lists found in the AME
Guide. https://www.faa.gov/about/office_org/headquarters_offices/avs/offices/aam/ame/guide/pharm/dni_dnf/.
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    The NTSB determined that the probable cause of this accident was
the pilot's pattern of poor decision-making that led to the initial
launch, continued flight in fog and above clouds, and descent near or
through clouds that decreased the pilot's ability to see and avoid
obstacles. The NTSB further determined that (1) the pilot's impairing
medical conditions and medications, and (2) the FAA's policy to not
require a medical certificate for commercial balloon pilots, were
contributing factors in the accident.\5\
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    \5\ NTSB Accident Report NTSB/AAR-17/03 PB2018-100161 at p. 49.
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    Prior to the Heart of Texas accident, the FAA generally considered
commercial balloon operations to be a low-risk and extremely small
segment of aviation in the United States. Research conducted by the FAA
revealed 54 commercial hot air balloon accidents between 2003 and 2013,
including four fatal accidents. In 2015, commercial sightseeing balloon
operations represented 0.057% of the flight hours of total civil
aircraft operations.\6\ Prior to this accident, pilots conducted
commercial balloon operations in the U.S. for decades without any
accidents specifically attributed to medical deficiencies.
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    \6\ FAA Docket Submission to the National Transportation Safety
Board for the investigation of the Heart of Texas Hot Air Balloon
Accident Balony Kubicek BB85Z balloon, N2469L, Lockhart, Texas; July
30, 2016, Dated April 19, 2017. Page 6.
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    In response to the Heart of Texas accident, the FAA worked with
industry advocacy organization Balloon Federation of America (BFA) to
support its 2017 Envelope of Safety Program.\7\ The voluntary program
promoted safety within the commercial balloon industry by educating
consumers with information when making balloon ride purchase decisions
and offered multiple tiers of safety accreditation by the BFA. While
the FAA supports the efforts of the BFA to enhance safety and
professionalism of the industry while providing consumers with more
information when choosing a commercial balloon ride operator, the
agency notes that not all balloon operators are members of the BFA, and
BFA members are not required to adhere to any specific standards in
order to maintain professional membership. Consequently, the FAA
considered BFA's efforts to achieve voluntary compliance with industry
standards to be insufficient alone to address the need for additional
oversight of airmen

conducting balloon operations for compensation or hire.
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    \7\ https://www.bfa.net/88888979-news/1579-envelope-of-safety-program-announced.
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    In Section 318 (``Commercial Balloon Pilot Safety Act of 2018'') of
Public Law 115-254, The FAA Reauthorization Act of 2018 (the Act),
Congress directed the FAA to ``revise section 61.3(c) of Title 14, Code
of Federal Regulations (relating to second-class medical certificates),
to apply to an operator of an air balloon to the same extent such
regulations apply to a pilot flightcrew member of other aircraft.''

B. National Transportation Safety Board Recommendations

    The NTSB made two Safety Recommendations in response to the 2016
Heart of Texas accident. Safety Recommendation A-17-034 urged the FAA
to ``Remove the medical certificate exemption in 14 [CFR] 61.23(b) for
pilots who are exercising their privileges as commercial balloon pilots
and are receiving compensation for transporting passengers.'' Safety
Recommendation A-17-045 urged the FAA to ``analyze your current
policies, procedures, and tools for conducting oversight of commercial
balloon operations in accordance with your Integrated Oversight
Philosophy, taking into account the findings of this accident; [and]
based on this analysis, develop and implement more effective ways to
target oversight of the operators and operations that pose the most
significant safety risks to the public.''
    The FAA agreed with the safety benefits of Safety Recommendation A-
17-034 \8\ and stated its intention to add the recommended change to
its rulemaking agenda. The FAA responded to Safety Recommendation A-17-
045 \9\ by initiating a plan to develop and implement more effective
ways to target oversight of operators posing the most significant
safety risk to the public. The FAA identified and increased
surveillance on the operators of the largest classes of balloons using
information obtained from the Civil Aviation Registry, repair stations,
and industry.
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    \8\ NTSB Safety Recommendation A-17-034 https://www.ntsb.gov/_layouts/ntsb.recsearch/Recommendation.aspx?Rec=A-17-034.
    \9\ NTSB Safety Recommendation A-17-045 https://www.ntsb.gov/_layouts/ntsb.recsearch/Recommendation.aspx?Rec=A-17-045.
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C. Summary of the NPRM

    The FAA proposed amending the exception to hold a medical
certificate for balloon pilots in Sec.  61.3(c)(2)(vi) by limiting it
to certain types of balloon operations. Specifically, the FAA proposed
that any person holding a pilot certificate with a balloon class rating
and exercising the privileges of a private pilot certificate in a
balloon; or providing flight training in a balloon in accordance with
Sec.  61.133(a)(2)(ii) is not required to hold a medical certificate.
As a result of the amendment, the general requirement in Sec.
61.3(c)(1) for a person to hold a medical certificate to serve as a
pilot flight crewmember would apply to balloon pilots conducting
operations for compensation or hire in a balloon (other than flight
training) to hold a medical certificate issued under part 67.
    Section 61.23 sets forth the specific requirements for when a
particular class of medical certificate is required. Under Sec.
61.23(a)(2)(ii), a second-class medical certificate generally is
required when exercising the privileges of a commercial pilot
certificate. Currently, under Sec.  61.23(b)(3), a second-class medical
certificate is not required when exercising the privileges of a pilot
certificate with a glider category rating or balloon class rating in a
glider or balloon, as appropriate.
    First, the NPRM proposed to amend Sec.  61.23(a)(2) to add a
requirement for any person exercising the privileges of a commercial
pilot certificate for compensation or hire in a balloon to hold a
second-class medical certificate. Second, the NPRM proposed to remove
the allowance in Sec.  61.23(b) by specifying that a medical
certificate is not required when exercising the privileges of a private
pilot certificate with a balloon class rating in a balloon or when a
person is exercising the privileges of a commercial pilot certificate
with a balloon class rating in a balloon and providing flight training
in accordance with Sec.  61.133(a)(2)(ii).
    Section 61.23(d) includes a table providing the duration for each
class of medical certificate depending on several factors, including
the medical certificate privilege that is being exercised. In order to
maintain consistency with other medical certificate privileges in Sec.
61.23(d), the NPRM proposed related amendments to the table of medical
certificate durations at Sec.  61.23(d)(1)(iii) and (d)(2)(i).
Specifically, the NPRM proposed to add persons who are exercising the
privileges of a commercial pilot certificate (other than for flight
training) in a balloon to the established medical certificate duration
table in Sec.  61.23(d).
    In addition, the NPRM proposed amendments to alleviate confusion
and eliminate burdens for persons obtaining special medical flight
tests and for persons operating under BasicMed.
    First, the NPRM proposed amending Sec. Sec.  61.3(c)(2) and
61.23(b) to allow persons to act as PIC during a special medical flight
test authorized under part 67 without holding a medical certificate.
Second, the NPRM proposed amending several sections to alleviate
certain burdens that resulted from the BasicMed final rule.
Specifically, the NPRM proposed amending Sec. Sec.  61.3(c)(2)(xiv),
61.23(c)(3)(i)(C) through (E), 61.113(i), 68.3(a) and (b), and 68.9(a)
by expanding the requirements to allow required pilot flightcrew
members to operate under BasicMed in addition to those individuals
acting as PIC.

D. General Overview of Comments

    The FAA considered 192 comments received during the 60-day public
comment period. Of the comments received, 15 were out of scope, 17 were
generally supportive of the proposed rule, and 112 generally opposed
the rule as proposed. A significant number of commenters (142
commenters) suggested changes to the proposed rule. The remaining
comments expressed neither support nor opposition to the rule. The
majority of commenters were individuals. Two industry advocacy
organizations submitted comments, as well as the NTSB.

IV. Discussion of Comments and the Final Rule

    This rule amends part 61 to require a person who holds a commercial
pilot certificate with a lighter-than-air category and balloon class
rating to hold a valid second-class medical certificate when exercising
the privileges of that certificate in a balloon for compensation or
hire, unless that person is conducting flight training in accordance
with Sec.  61.133(a)(2)(ii).
    Specifically, the exception in Sec.  61.3(c)(2)(vi) is amended to
reflect that any person holding a pilot certificate with a balloon
class rating who is exercising the privileges of a private pilot
certificate in a balloon; or providing flight training in a balloon in
accordance with Sec.  61.133(a)(2)(ii) is not required to hold a
medical certificate. By revising the exception in Sec.  61.3(c)(2)(vi),
balloon pilots conducting operations for compensation or hire in a
balloon (other than flight training), such as carrying passengers or
property and advertising operations, are required under Sec.
61.3(c)(1) to hold a medical certificate issued under part 67.
    Further and for consistency across the regulations, the FAA is
amending Sec.  61.23(a)(2) to require any person exercising the
privileges of a commercial pilot certificate for compensation or hire
in a balloon, except when conducting flight training, to hold a second-
class medical

certificate; and Sec.  61.23(b) to remove the allowance to exercise the
privileges of a balloon pilot certificate without a medical
certificate. Additionally, the FAA adds an exception at Sec.
61.23(b)(4)-(5) to explain under what circumstances balloon operations
are excepted from the requirement to hold a second-class medical
certificate.

A. Application of Medical Certificate Requirement to Operations Based
on Size of Envelope or Passenger Capacity

    Seventy-two commenters recommended that the proposed rule should
only apply to certain operations based on size of envelope or number of
people in the basket. Commenters proposed a passenger threshold ranging
from 3 or more to 8 or more people. The Balloon Federation of America
(BFA) stated that ``any medical requirement for commercial balloon
pilots should be limited to those operating balloons of such size as to
legally transport 6 or more passengers.'' Other commenters described
the threshold as balloons with envelopes with volumes ranging from
77,682 cubic feet to 180,000 cubic feet.
    Many of the commenters emphasized that these thresholds separated
small-scale commercial balloonists from large-scale professional
balloon ride operators. A common sentiment among commenters was that
small commercial balloon operators were being over-regulated as a
result of mishaps from larger balloon operators. Some commenters
suggested that the NTSB safety recommendations were specifically
directed toward the safety of larger passenger-carrying balloons.
    The FAA notes that the second-class medical certification
requirement represents a minimum safety standard for commercial
operations. For non-air carrier operations, the regulatory requirements
for medical certification do not vary based on the number of passengers
aboard the aircraft or the size of the balloon. The FAA has long held
that a passenger who engages with an aircraft operator in common
carriage has a higher expectation of safety and oversight. The FAA
notes that while operators of smaller balloons generally carry fewer
passengers per year, the risk to any individual passenger in a smaller
balloon is not significantly different than the risk to which they are
exposed in a larger balloon.
    The FAA does not concur with the assertion that the NTSB safety
recommendations were specifically directed toward the safety of larger
passenger-carrying balloons. Recommendation A-17-034 recommends that
the FAA ``remove the medical certification exemption in 14 Code of
Federal Regulations 61.23(b) for pilots who are exercising their
privileges as commercial balloon pilots and are receiving compensation
for transporting passengers.'' The FAA notes that while the NTSB
directed the recommendation towards operations receiving compensation
for transporting passengers, the NTSB did not distinguish between
classes of operators in terms of size or passenger carrying capacity.
Likewise, Congress included no distinction based on size or passenger-
capacity in Section 318 when it directed the FAA to remove the
exception from medical certification for commercial balloon pilots.
    Accordingly, this medical certification requirement will apply to
all holders of a commercial pilot certificate with a lighter-than-air
category balloon class rating when exercising the privileges of that
certificate in a balloon for compensation or hire, unless that person
is conducting flight training, regardless of the size of the aircraft
or the number of passengers carried.

B. Application of Rule to Commercial Balloon Operations Without
Passengers

    The medical certification requirement in this final rule does not
provide an exception to commercial operations not involving the
carriage of passengers.
    Several commenters contended that commercial balloon operations
that do not involve the carriage of passengers for compensation or hire
should not require the PIC to hold a second-class medical certificate.
BFA stated that ``there is no more risk to the flying public in these
activities, which include commercial advertising contract flying and
special shape flying, than private ballooning for sport.'' The BFA
strongly opposed the inclusion of commercial operations that do not
conduct paying passenger activities.
    Commenters to the proposed rule provided multiple examples of how
commercial operations frequently occur without passengers. For example,
one commenter operates a one-of-a-kind specially shaped balloon that is
hired by events for its uniqueness and popularity. The city of Albany
Parks & Recreation noted that the proposed rule would have a
significant impact on their ability to recruit pilots for their annual
festival. This commenter noted that ``the second-class medical
requirement may significantly impact the number of balloons available
for the festivals as some pilots may decide to forego the expense and
trouble.''
    Another commenter said that many companies incorporate balloons
into their marketing strategies, noting that these balloons are
utilized as portable billboards to either be displayed while tethering
on the ground or while conducting promotional flights during balloon
festivals. One commenter observed that some events exclude private
pilots from attending ``since they interpret that getting your room,
show up money or propane as `compensation'.'' \10\
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    \10\ The FAA notes that compensation for display of an aircraft
from the ground does not constitute a commercial operation. See
Legal Interpretation to Karen Torres (March 17, 2011). A balloon
operator may be compensated for attending an event and displaying a
balloon, including inflating the envelope while the aircraft remains
on the ground. An operation is generally considered a commercial
operation when the operator is compensated to fly the aircraft, with
or without passengers. Further, a balloon pilot may exercise private
pilot privileges to fly the balloon at an event he or she received
compensation for attending, provided the compensation was not
provided with the expectation that the operator fly the balloon
during the event. See Legal Interpretation to Tucker Comstock (Sept.
8, 1977); see also Legal Interpretation to Gary Bruce Eaton (Dec. 7,
2012).
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    Section 318 of the FAA Reauthorization Act of 2018 directed the FAA
to ``revise section 61.3(c) of title 14, Code of Federal Regulations
(relating to second-class medical certificates), to apply to an
operator of an air balloon to the same extent such regulations apply to
a pilot flightcrew member of other aircraft.''
    The FAA proposed this rule specifically to implement section 318 of
the FAA Reauthorization Act of 2018. Accordingly, the FAA proposed a
requirement that any person exercising the privileges of a commercial
pilot certificate for compensation or hire in a balloon, except when
conducting flight training, hold a second-class medical certificate.
The proposed rule made no distinction regarding whether the affected
operation involved the carriage of passengers for compensation or hire,
instead describing affected operations as including, but not limited
to, operations for purposes of passenger sightseeing, aerial
advertising, maintenance test flights, and research and development
flights.
    FAA regulations require a second-class medical certificate for all
commercial pilots of fixed-wing aircraft and rotorcraft, regardless of
whether the operation involves the carriage of passengers. Further, the
statute does not allow an exception for commercial operations not
involving the carriage of passengers. Therefore, in accordance with the
express statutory language in Section 318 of the FAA Reauthorization
Act of 2018, the FAA will require all commercial balloon pilots to hold
a

second-class medical certificate, as proposed in the NPRM.\11\
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    \11\ The FAA excluded flight training because the legislation
directed that the FAA to apply medical certification to commercial
balloon pilots to the same extent as commercial pilots of other
aircraft. The FAA has historically treated medical certification for
persons conducting flight training different from other commercial
operations.
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C. Drug and Alcohol Testing

    As discussed in the NPRM, the FAA considered whether to expand the
definition of an operator under Sec.  91.147 to include commercial
balloon operations carrying passengers for compensation or hire. Doing
so would have created a new requirement for such operators to obtain a
Letter of Authorization (LOA) from the FAA, which would include a
requirement to implement drug and alcohol testing programs in
accordance with 14 CFR part 120. The FAA specifically sought comment on
whether drug and alcohol testing should be required for commercial
balloon operations.
    Several commenters noted that the rule is insufficient because it
lacks drug and alcohol testing. Most of the commenters expressing this
sentiment used it as a rationale for opposing the rule, pointing out
that holding a medical certificate does not compel a person to be
randomly tested for prohibited substances and, as such, would have done
little to prevent the Lockhart, Texas and Albuquerque, New Mexico \12\
accidents.
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    \12\ On June 26, 2021, the pilot and 4 passengers of a balloon
were killed in an accident in Albuquerque, New Mexico. The accident
is currently under investigation by the NTSB. (NTSB Accident No.
WPR21FA242).
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    The FAA considered this alternative and concluded that such a
requirement goes beyond the scope of the statutory mandate. The FAA
established the Sec.  91.147 provision in the 2007 National Air Tour
Safety Standards final rule \13\ following a pattern of accidents in
powered aircraft. In that rule, the FAA specifically excluded balloon
operations. The FAA notes that any future revisions of National Air
Tour Safety Standards will require a risk-based assessment of need
based on available safety data.
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    \13\ 72 FR 19382, Apr 18, 2007.
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    While medical certification under part 67 does not include a drug
and alcohol testing component, it does require the applicant to
authorize the FAA to access the applicant's National Driver Register
(NDR) records. The NDR Problem Driver Pointer System (PDPS) identifies
records on individuals whose privilege to operate a motor vehicle has
been revoked, suspended, canceled or denied, or who have been convicted
of serious traffic-related offenses. Even if the applicant fails to
disclose these convictions on the medical certificate application, the
FAA receives a report from the NDR, providing an additional safeguard
and mechanism for verifying the accuracy of the information provided by
the airman.
    In the case of the pilot of the Lockhart accident, the accident
pilot had a 20-year history of drug and alcohol convictions. Even if
the airman had omitted his history of traffic offenses on an
application for a medical certificate, the FAA would likely have been
made aware of the motor vehicle actions from NDR records and had the
opportunity to deny the application for a medical certificate based on
evidence of substance dependence or substance abuse, in accordance with
Sec. Sec.  67.207(a)(4), 67.207(b), 67.107(a)(4), and 67.107(b).
    Accordingly, this final rule does not set forth a regulatory
requirement for commercial balloon operators and pilots to implement a
drug and alcohol testing program at this time.

D. Miscellaneous Issues

Whether Commercial Ballooning Poses a Risk Significant Enough To
Warrant Additional Regulation
    Multiple commenters stated that ballooning is an insignificant
activity in the National Airspace System (NAS) and should not be
subject to additional regulation.
    The FAA does not consider commercial ballooning an insignificant
activity. The FAA notes that the Lockhart, Texas and Albuquerque, New
Mexico accidents demonstrate that ballooning is not insignificant, and
the potential risk for catastrophic accidents is not insignificant.
While the FAA concurs with commenters who asserted that balloon
operations represent a small percentage of the total operations in the
NAS, the FAA notes that balloons are frequently used for carrying
passengers for compensation and present a risk that justifies a level
of medical oversight equivalent to that of pilots of powered aircraft
for certain operations such as commercial sightseeing operations.
Further, the NTSB and Congress have identified this risk and called on
the FAA to extend the requirements for medical certification to balloon
pilots operating for compensation or hire.
Effects to the Industry Due to the Cost and Ability To Comply With the
Rule
    A number of commenters expressed concerns that the final rule would
greatly reduce the number of balloon pilots due to costs associated
with obtaining a second-class medical certificate. The FAA acknowledges
that in some cases, some commercial operators--particularly low-volume
commercial operators--may opt to no longer conduct commercial
operations due to the cost of obtaining a medical certificate
outweighing the marginal economic benefit of conducting operations for
compensation. While some pilots may leave the industry, other balloon
pilots may opt to enter the commercial balloon industry to fill the
void left by departing commercial pilots.
    While the FAA does not expect a significant decrease in the
availability of balloon pilots, changes in supply of balloon pilots
could affect prices as well. The regulatory economic analysis does not
quantify any potential changes in consumer and producer surplus from
changes in supply. If the rule effectively screens out certain
individuals for disqualifying medical conditions as intended, any
potential adverse effects on individual applicants should be offset by
the safety gains to the public. Nevertheless, the cost to obtain a
second-class medical certificate is unlikely to be the sole reason to
cause a commercial balloon pilot to discontinue commercial operations.
The FAA estimates the cost per pilot to obtain a second-class medical
certificate would be between $160 and $685 annually, depending on
whether a special issuance would be necessary. This amount equates to
about 0.06% to 0.37% of average annual revenues for small entities.\14\
---------------------------------------------------------------------------

    \14\ See Final Regulatory Flexibility Analysis discussed later
in this preamble.
---------------------------------------------------------------------------

    The opportunity cost (including the time and fees) of seeking a
second-class medical certification for some pilots may outweigh the
monetary gains of operating commercially, resulting in some pilots
opting not to seek medical certification. The FAA does not have
sufficient information to predict how the supply of commercial balloon
pilots would change as a result of this rule.
    Multiple commenters stated that following the Heart of Texas
accident, the ballooning insurance providers have required all
commercial pilots flying balloons larger than 120,000 cubic feet to
hold a second-class medical certificate. The revised regulatory
economic analysis has factored in roughly 8.8% out of 4,869 commercial
pilots with balloon class ratings who probably fall into this group,
based on 2021 data from the Airmen Certification Database. The intent
of the rule is to provide safety protection for all balloon

passengers, not just passengers flying with companies operating larger
balloons.
Treatment of Balloon Operations for Compensation or Hire as Commercial
Aviation Operations
    Commenters acknowledged that, while they do receive compensation,
they do not consider themselves ``commercial'' in a traditional sense.
Many commenters used examples of being offered limited compensation in
the form of lodging or fuel to participate in ballooning events, often
without the expectation to carry passengers. Several commenters noted
that many commercial operators only occasionally conduct operations for
compensation or hire and do so to subsidize the cost of ballooning.
    The concept of conducting commercial operations for compensation or
hire for the purpose of defraying the cost of flying is not unique to
ballooning. The FAA has long held that when a passenger responds to an
offer made by an operator to the public to provide an aeronautical
service in exchange for receipt of anything of value that is contingent
on the pilot operating the aircraft, the public expects a higher level
of oversight and safety assurance. The FAA does not delineate the
volume of passenger activity for purposes of defining medical
eligibility requirements.
    The FAA notes that there are certain circumstances in which a pilot
may accept limited compensation for operating an aircraft when
exercising private pilot privileges. These exceptions are enumerated in
Sec.  61.113(b) through (h). Balloon pilots exercising private pilot
privileges may share expenses with passengers under Sec.  61.113(c),
provided those expenses are limited to items such as fuel, oil, airport
expenditures, or rental fees. Further, a pilot sharing expenses under
Sec.  61.113(c) may not pay less than the pro rata share of the
operating expenses, and must not engage in common carriage by ``holding
out'' to the public.
Suggestions for Alternative Methods of Establishing Medical Eligibility
    Several commenters suggested alternative methods of meeting medical
eligibility requirements. A few commenters suggested the FAA should
allow BasicMed in lieu of a second-class medical certificate for
commercial balloon operations. Multiple commenters proposed to allow
state division of motor vehicle (DMV) record checks or NDR checks in
lieu of medical certificate requirements. Finally, commenters suggested
the medical certificate requirement not be applied to existing
commercial pilot certificate holders.
    The FAA does not support allowing balloon pilots exercising
commercial pilot privileges to establish medical eligibility under
BasicMed. Section 318 of the 2018 FAA Reauthorization Act directed the
FAA to revise regulations relating to second-class medical certificates
to apply to commercial balloon pilots to the same extent such
regulations apply to pilots of other aircraft.
    Section 2307 of the FAA Extension, Safety, and Security Act of 2016
directed the FAA to issue or revise regulations to establish physical
examination and education requirements, resulting in BasicMed. BasicMed
was intended by statute to serve as an alternative means of
establishing medical eligibility for limited non-commercial operations
by persons exercising the privileges of a private pilot certificate.
Section 2307 specifically excluded operations conducted for
compensation or hire and specifically prohibited passenger or property
carried for compensation or hire.
    The FAA does not concur with the suggestion that the FAA implement
motor vehicle record checks for commercial balloon pilots instead of a
second-class medical certificate requirement. A motor vehicle record
alone provides an incomplete picture of a person's medical history and
does not provide enough information to determine whether that person
has a medical condition that would prevent him or her from safely
operating an aircraft. Further, the medical eligibility requirements to
hold a driver's license are not consistent from state to state and,
therefore, may not be sufficient to ensure the safety of pilots
operating a balloon carrying passengers for compensation or hire.
    When applying for a medical certificate in MedXPress, an applicant
authorizes the NDR, through a designated State Department of Motor
Vehicles, to furnish to the FAA information pertaining to his or her
driving record consistent with 49 U.S.C. 30305(b)(3). The NDR PDPS
identifies records on individuals whose privilege to operate a motor
vehicle has been revoked, suspended, canceled or denied, or who have
been convicted of serious traffic-related offenses.
    NDR checks are just one part of the medical screening process and
are insufficient alone to screen for disqualifying medical conditions.
A person's motor vehicle arrest record reveals only the times an
individual was arrested while operating a motor vehicle under the
influence of alcohol or another drug. Further, an NDR check alone would
not reveal evidence of a substance abuse problem if the applicant does
not operate a motor vehicle while intoxicated. Most substantially, an
NDR check alone would not uncover the myriad of potential non-substance
abuse-related medical conditions that are evaluated in conjunction with
a medical examination conducted under part 67.
    The FAA does not consider the concept of excluding existing
commercial pilot certificate holders from having to comply with a
medical certificate requirement to be in the interest of flight safety.
Existing commercial pilot certificate holders pose a similar medical
risk to the NAS as new commercial pilot certificate holders. Such an
exception for existing commercial pilots would remove this group from
the safety benefit of medical certification without any additional
medical risk mitigation.
Insurance Requirements
    Commenters contended the rule is unnecessary because commercial
insurers already require medical certificates. One commenter reported
that insurance companies now require second-class medical certification
for pilots of large passenger-carrying hot air balloons. The commenter
added that the insurance requirement makes the proposed rule redundant
and unnecessary.
    Commercial balloon operators are not required by regulation to be
insured, so withholding a regulatory requirement to hold a medical
certificate and relying on insurance companies and operators to comply
voluntarily with the insurance requirements would be insufficient alone
to address the need for additional oversight of airmen conducting
balloon operations for compensation or hire.
    The FAA notes that commercial insurance requirements are not
uniform and apply only to operators who choose to obtain such coverage
and comply with the policy conditions. Further, insurance requirements
for a medical certificate are not universal. Insurance providers
typically require medical certificates for the pilots of commercial
operations that are larger in terms of passenger capacity and number of
operations.
Focus on FAA Enforcement
    Commenters noted that the FAA should focus on enforcement of
existing rules and/or surveillance for balloon operators, rather than
put forward new

regulations requiring medical certification.
    The FAA establishes regulatory standards to ensure safe operations
in the NAS. The FAA's system is largely based on, and dependent upon, a
culture of compliance with regulatory standards within the regulated
community. FAA personnel use compliance, administrative, or legal
enforcement actions to uphold the public's safety interest in ensuring
that all regulated persons conform their conduct to statutory and
regulatory requirements.
    The FAA applies risk-based analysis to determine how, when, and
where oversight and surveillance activities take place. The Integrated
Oversight Philosophy allows both certificate holders and non-
certificate holders to work with the FAA to ensure corrective action is
appropriate and aims to address the root cause(s) of safety issues.
Using this philosophy, the FAA oversight focus has been on existing
surveillance, education, and awareness to the entire balloon industry
to reduce the accident rate and improve balloon safety.
Comparison of Balloon and Glider Operations
    Multiple commenters noted that the FAA stated in the NPRM that
gliders were out of scope because they carried only 1 or 2 passengers.
The commenters argued that based on the FAA's rationale, balloons that
carry 2 passengers or less should be excluded as well.
    The FAA proposed this rule specifically to implement section 318 of
the FAA Reauthorization Act of 2018 and respond to NTSB Safety
Recommendation A-17-034, which recommended that the FAA remove the
medical certification exemption in part 61 for commercial balloon
pilots receiving compensation for transporting passengers. Section 318
directed the FAA to revise regulations as they relate to operators of
balloons. The FAA considered whether glider operations conducted for
compensation or hire should be included in the scope of this rule. The
FAA ultimately determined that as a category of aircraft, the safety
record and general operational risk profile of gliders carrying
passengers for compensation or hire did not warrant further regulatory
oversight concerning the medical suitability of commercial glider
pilots.
Efficacy of Medical Certificate Requirement
    Several commenters expressed doubt that a medical certification
requirement will reduce the accident rate of commercial balloon
operations. Commenters noted that inflight medical incapacitation is
rare, and the FAA medical standards do not address the operational
considerations of ballooning versus other aircraft. They contended the
FAA lacks sufficient data to support a medical certification
requirement. Further, they contended that a medical certificate
requirement would not have affected the outcome of the two most recent
significant fatal commercial accidents in Lockhart, Texas and
Albuquerque, New Mexico.
    The FAA is statutorily mandated to establish standards necessary to
determine that an airman is physically able to perform the duties
related to the privileges of their pilot certificate. See 49 U.S.C.
44703. Further, the FAA is statutorily mandated to revise regulations
related to second-class medical certificates to apply to commercial
balloon pilots.
    In regards to whether medical standards address the operational
considerations of ballooning, the FAA notes that medical certification
standards address multiple dimensions of medical qualification,
including medical factors that could diminish judgment and decision-
making in addition to sudden physical incapacitation. While the
standards do not apply to any specific type of aircraft operation, the
standards do address general categories of medical considerations that
are applicable to balloon operations. These categories include: vision;
ear, nose, and throat; equilibrium; mental; neurological;
cardiovascular; and general health. The standards established under
part 67 are minimum standards. However, the Federal Air Surgeon does
have the discretion to authorize special issuance of a medical
certificate or a Statement of Demonstrated Ability (SODA), which offers
flexibility for the FAA to issue a medical certificate based on the
individual circumstances of an applicant.
    As noted in the proposed rule, the 2016 Lockhart accident served as
an example of how a lack of medical oversight allowed the pilot to
continue to operate a balloon for compensation or hire in spite of a
questionable medical history. While instances of sudden inflight
incapacitation are rare, there are documented cases of events
occurring. Medical incapacitation incidents are often not reported if
no accident occurred. When an accident does occur, it can be difficult
to pinpoint whether medical issues of the pilot were a factor, as
evidence is often limited to the pilot's available medical records,
postmortem toxicology and autopsy reports. Consequently, it is
difficult to quantify the impact of medical factors on aviation safety.
    While medical certification cannot completely mitigate the risk of
an accident due to a medical condition of the pilot, the public holds
an expectation for a higher level of operational oversight when the
flight is conducted for compensation or hire. One method the FAA has to
accomplish this objective is medical certification.
Medical Certificates for All Balloon Operations
    One commenter suggested that medical certificates should be
required for all balloon operations.
    The FAA will not extend the medical certificate requirement to
balloon pilots exercising private or sport pilot privileges. Non-
commercial balloon operations are among the lowest-risk operations in
the NAS and do not warrant the additional regulatory burden of medical
certification requirements. While pilots exercising the privileges of a
private pilot or sport pilot certificate in a balloon are not required
to hold a medical certificate, they must comply with the 14 CFR
61.53(b) requirement to abstain from operating an aircraft while that
person knows or has reason to know of any medical condition that would
make that person unable to operate in a safe manner. In addition, these
pilots have fewer privileges, and in the case of sport pilots, more
operational restrictions, than a commercial pilot holding his or her
flight services out to the public for compensation. The FAA has
determined that compliance with a prohibition from operating an
aircraft during a medical deficiency sufficiently mitigates the risk of
an accident in a balloon due to a medical-related issue in an operation
exercising private or sport pilot privileges.

E. Effective Date

    Commenters recommended the FAA should delay the effective date of
the medical certificate requirement provision beyond 180 days. Most of
those comments suggested that the rule take effect one year after
publication. Commenters cited a lack of Aviation Medical Examiners
(AMEs), the ongoing COVID-19 public health emergency, and delays in
processing applications by the FAA.
    Multiple commenters expressed concern that there are delays in
processing medical certificate applications if a special issuance is
required, preventing applicants from complying with the rule within 180

days. The BFA asserted that the process of obtaining a special issuance
is burdensome and may take months, or in some cases years, to obtain a
medical certificate.
    The FAA proposed in the NPRM that compliance with the medical
certificate requirement become effective 180 days from publication of
the final rule. This would provide sufficient time for the majority of
affected persons to comply with this rule by obtaining a medical
certificate prior to the effective date. For reasons explained below,
the medical certificate requirement will go into effect on May 22,
2023, 180 days after publication of this rule.
    Based on historical data, the FAA estimates that over 95% of
applicants, including those who need a special issuance, will have a
disposition within 150 days. Approximately 1% of all applicants for FAA
medical certificates are issued a denial. Of those denials, 95% of the
final dispositions resulted from a lack of response to FAA requests for
additional information. Only 4% of applicants take over 150 days for
certification. Many of these individuals have medical conditions, which
require mandatory periods of observation to demonstrate stability and/
or allow for the risk of recurrence to diminish.
    The FAA acknowledges that pilots with certain medical conditions
may be required to obtain additional evaluation(s) prior to issuance of
a medical certificate. The FAA recommends that affected airmen,
especially those with known health conditions, initiate the process to
apply for a medical certificate in a timely manner, taking into
consideration the time needed to obtain relevant medical information
and the time necessary for the FAA to review. Individuals who delay
applying for a medical certificate risk loss of some operating
privileges due to the inability to comply with the requirement to hold
a second-class medical certificate.
    Several commenters noted that the ongoing COVID-19 public health
emergency would affect the ability of balloon pilots to obtain a
medical certificate within 180 days. These commenters noted that there
is a limited availability of health care workers due to COVID-19.
    Commenters did not provide evidence that COVID-19 continues to
limit the access to AMEs. While initial response to COVID-19 did result
in significant restrictions and more limited access to healthcare
facilities and physicians, access to AMEs has since returned to pre-
pandemic levels.
    Multiple commenters noted that balloon pilots never had medical
certification requirements prior to this rule. BFA noted that a
significant proportion of commercial balloon pilots are older and at an
age where they likely have one or more medical conditions requiring a
special issuance. Accordingly, commenters suggested that, as a
population, balloon pilots will require more time to obtain a medical
certificate.
    The FAA notes that, as a group, older pilots are more likely to
have medical conditions that need additional evaluation. The FAA does
not have evidence to support the assertion that balloon pilots are as a
population older than other pilots.
    Multiple commenters noted a lack of available AMEs. One commenter
noted that there was only one AME serving Albuquerque, New Mexico.
    The FAA notes that at the time of publication of the final rule,
AMEs were practicing at 2,056 locations across the United States,
including 13 locations in New Mexico. Of the 11 AMEs practicing at 13
locations in New Mexico, six were practicing in Albuquerque.\15\
---------------------------------------------------------------------------

    \15\ FAA Designee Management System, as of Oct 17, 2022. https://designee.faa.gov/#/designeeLocator.
---------------------------------------------------------------------------

    In the NPRM, the FAA proposed that the two miscellaneous amendments
be made effective 30 days after publication of the final rule. No
comments were received regarding the effective date of either
miscellaneous amendment. Accordingly, both provisions will become
effective on December 22, 2022, 30 days after publication of this rule.

F. Comments Regarding Miscellaneous Amendments

    The FAA received generally supportive comments from individual
commenters and the Aircraft Owners and Pilots Association in regard to
the two miscellaneous amendments in the NPRM. The proposal to remove
the requirement for a medical certificate in order to act as PIC in a
special medical flight test received two supporting comments.
Accordingly, the FAA is implementing the amendments as proposed. To
allow persons to act as PIC during special medical flight tests, the
FAA is amending Sec.  61.3(c)(2) by adding new paragraph (xv), which
allows persons to act as PIC during authorized special medical flight
tests without holding a medical certificate. The FAA also adds a
parallel provision in Sec.  61.23(b)(12).
    The proposal to extend BasicMed to persons serving as required
flightcrew members but not acting as PIC received ten supporting
comments. Accordingly, the FAA is implementing the amendments as
proposed. Specifically, the FAA is amending Sec. Sec.  61.3(c)(2)(xiv),
61.23(c)(3)(i)(C) through (E), 61.113(i), 68.3(a) and, 68.3(b), and
68.9(a) by expanding the requirements to include required pilot
flightcrew members.

V. Regulatory Notices and Analyses

    Federal agencies consider impacts of regulatory actions under a
variety of executive orders and other requirements. First, Executive
Order 12866 and Executive Order 13563 direct that each Federal agency
shall propose or adopt a regulation only upon a reasoned determination
that the benefits of the intended regulation justify the costs. Second,
the Regulatory Flexibility Act of 1980 (Pub. L. 96-354) requires
agencies to analyze the economic impact of regulatory changes on small
entities. Third, the Trade Agreements Act (Pub. L. 96-39) prohibits
agencies from setting standards that create unnecessary obstacles to
the foreign commerce of the United States. Fourth, the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4) requires agencies to
prepare a written assessment of the costs, benefits, and other effects
of proposed or final rules that include a Federal mandate that may
result in the expenditure by State, local, and tribal governments, in
the aggregate, or by the private sector, of $100,000,000 or more
(adjusted annually for inflation) in any one year. The current
threshold after adjustment for inflation is $165 million, using the
most current (2021) Implicit Price Deflator for the Gross Domestic
Product.
    In conducting these analyses, the FAA has determined that this
rule: will result in benefits that justify costs; is not a
``significant regulatory action'' as defined in section 3(f) of
Executive Order 12866; may have a significant economic impact on a
substantial number of small entities; will not create unnecessary
obstacles to the foreign commerce of the United States; and will not
impose an unfunded mandate on State, local, or tribal governments, or
on the private sector.

A. Regulatory Impact Analysis

Benefits and Costs of This Rule
    The final rule will generate costs for balloon pilots to obtain a
second-class medical certificate and for some pilots to seek
authorization through special issuance. There is a separate cost for
the FAA to implement this requirement in terms of reviewing and
processing submissions related to medical certification. The FAA
estimates the present value of total costs over ten years is $2.4
million to $16.3 million

with a mid-estimate of $6.9 million at a 7 percent discount rate, and
$2.9 million to $19.9 million with a mid-estimate of $8.4 million at a
3 percent discount rate. The FAA estimates the annualized costs over
ten years is $0.3 million to $2.3 million with a mid-estimate of $1.0
million at a 7 percent discount rate and $0.3 million to $2.3 million
with a mid-estimate of $1.0 million at a 3 percent discount rate. While
lack of data on the effectiveness of the rule prevents quantification
of benefits, the FAA anticipates the rule will enhance safety of
commercial balloon operations, including reduced risks of accidents,
fatalities, and injuries caused by medical impairment of balloon
pilots. The FAA estimates that it would take between 0.3 to 2.8 averted
fatalities in the next ten years for the benefits to breakeven with the
costs of this rule.
    In addition to the requirement for commercial balloon pilots to
hold a second-class medical certificate, the rule made two
miscellaneous amendments. The first amendment addresses certain
inconsistencies in current regulations for conducting special medical
flight tests and the second amendment addresses inconsistencies
regarding who may operate under BasicMed. The FAA does not quantify the
effects of the two miscellaneous amendments, but anticipates there will
be minor cost savings. By allowing persons to receive special medical
flight tests under part 67 without holding a medical certificate, the
FAA aviation safety inspector will no longer have the burden of
assuming the responsibility as PIC while conducting a medical test
flight with an applicant. This also eliminates the inconsistency of
both having to hold a medical certificate for the purposes of receiving
a special medical flight test and needing the special medical flight
test to obtain a medical certificate. The amendment to extend BasicMed
eligibility to other required pilot flightcrew members reduces the
burden for those pilots not acting as PIC of having to hold a medical
certificate under current regulations and holds them to the same
standard as those pilots acting as PIC under BasicMed. This may also
result in more pilots seeking opportunities to serve as a safety pilot
by lowering the medical certificate barrier without compromising
safety. It also increases the number of pilots eligible to serve as
safety pilot, easing the burden of pilots with instrument privileges
conducting flights to meet recent flight experience requirements and
consequently increasing overall safety in the national airspace system.
Statement of Need
    This rulemaking addresses the need for additional oversight of
airmen conducting balloon operations for compensation or hire by
implementing the statutory mandate under the Commercial Balloon Pilot
Safety Act of 2018 and NTSB Safety Recommendation A-17-034 to extend
second-class medical certification requirements to operators of
balloons. As discussed elsewhere in this document, the 2016 Heart of
Texas accident highlights the potential for a pilot's medical condition
to pose safety risks, which are not necessarily less than that of
powered aircraft sightseeing operations that require at least a second-
class medical certificate (e.g., commercial transportation of
skydivers, banner towing, or aerial photography). Following the 2016
Heart of Texas accident, there have been voluntary efforts by the
industry to raise the standard for balloon pilots, notably through the
Envelope of Safety Program. While incentives to ensure a certain level
of safety exist in the private market for commercial balloon
operations, it is unlikely in the absence of federal regulation that
all balloon pilots would choose to comply with the requirements of a
second-class medical certificate. At the same time, consumers may be
insufficiently aware of the risks associated with balloon pilots
operating under a lower standard to demand full compliance. Therefore,
this rulemaking is necessary to achieve a higher level of safety for
commercial balloon operations.
Data and Assumptions
    This section summarizes key data sources and assumptions used
throughout the analysis:
     Costs and benefits are estimated over 10 years.
     Costs and benefits are presented in 2021 dollars.
     The present value discount rate of seven and three percent
is used, as required by the Office of Management and Budget.
     The cost for a medical examination fee with an AME is in
the following range: Low = $100, Mid = $150 or High = $200.\16\
---------------------------------------------------------------------------

    \16\ According to FAA subject matter experts and Phoenix East
Aviation, https://www.pea.com/blog/posts/the-faa-medical-exam-common-questions/, the cost per medical exam ranges from $100 to
$200.
---------------------------------------------------------------------------

     The hourly rate of a pilot (VPT) exercising their
commercial balloon rating varies greatly. Therefore, the FAA used the
following hourly wages: Low = $15, Mid = $31.50 or High = $48.\17\
---------------------------------------------------------------------------

    \17\ According to the FAA subject matter experts, responses from
the Balloon Federation of America and online sources, the FAA
estimates a commercial balloon pilot earns from $15 to $48 an hour.
Online source: https://www.jobmonkey.com/uniquejobs3/hot-air-balloon-pilot-jobs/.
---------------------------------------------------------------------------

     Vehicle operating cost per mile (VOC) as determined by the
Internal Revenue Service (IRS) is $0.16.\18\
---------------------------------------------------------------------------

    \18\ https://www.irs.gov/newsroom/irs-issues-standard-mileage-rates-for-2021. Accessed on April 21, 2021.
---------------------------------------------------------------------------

     The FAA assumes 1.5 hours to complete the MedXPress
form.\19\
---------------------------------------------------------------------------

    \19\ This estimate is consistent with FAA's estimated burden
hours associated with the MedXPress form 8500-8 approved under OMB
No. 2120-0034.
---------------------------------------------------------------------------

     The FAA assumes 1 hour to complete a medical examination.
     The FAA assumes 1 hour of travel time to and from an AME's
office.
Affected Entities
    At the time of writing, the FAA used 2021 data from the Airmen
Certification database to identify pilots certificated as commercial
balloon pilots. There are currently 4,869 commercial pilots with
balloon class ratings. During the public comment period, the FAA
learned that most insurance providers have required commercial pilots
flying balloons larger than 120,000 cubic feet to hold a second-class
medical certificate. FAA sources indicate that of the 4,869 commercial
pilots with balloon class ratings, 427 balloon pilots (approximately
8.8% of total commercial balloon pilots) fall into this category.\20\
Therefore, the updated estimated number of balloon pilots without
medical certification in 2021 is 4,442.
---------------------------------------------------------------------------

    \20\ FAA Airman Registry internal analysis as of July 2021.
---------------------------------------------------------------------------

    This balloon class rating does not have an expiration date, and
unlike certain other pilot ratings, a person exercising the privileges
of a balloon class rating is not required to hold a valid first-,
second-, or third-class medical certificate. Because of this, there is
uncertainty in the number of commercial balloon pilots actively
exercising commercial pilot privileges. For this reason, the FAA
produced a low, mid, and high-range estimate of how many pilots would
possibly be affected by this final rule.
    In addition to the current number of certificated pilots with a
commercial balloon rating, the FAA gathered data from the last 14 years
to estimate an average growth of newly certificated commercial balloon
pilots per year. Over the course of the last 14 years, from 2007
through 2020, there was, on

average, 56 newly certificated commercial balloon pilots per year.
    As mentioned earlier, there is uncertainty with the number of
active pilots exercising their commercial balloon privileges. The FAA
assumes a low estimate of 20%, a mid-estimate of 50% and a high
estimate of 100% of the 4,442 impacted commercial pilots with a balloon
class rating. Table 1 displays the potential number of airmen that
would be affected by the final rule over the course of ten years. Note
that in the first year and thereafter, the number of impacted
commercial pilots includes an additional 56 newly certificated
commercial balloon pilots each year to account for growth over time.
Corresponding to the number of active balloon pilots is the number of
expected application submissions for second-class medical certificates
each year.

    Table 1--Low, Middle and High Estimates of Active Balloon Pilots
------------------------------------------------------------------------
                     Year                        Low     Middle    High
------------------------------------------------------------------------
1............................................      944    2,277    4,498
2............................................    1,000    2,333    4,554
3............................................    1,056    2,389    4,610
4............................................    1,112    2,445    4,666
5............................................    1,168    2,501    4,722
6............................................    1,224    2,557    4,778
7............................................    1,280    2,613    4,834
8............................................    1,336    2,669    4,890
9............................................    1,392    2,725    4,946
10...........................................    1,448    2,781    5,002
                                              --------------------------
    Total....................................   11,960   25,290   47,500
------------------------------------------------------------------------

Benefits
    The benefits of this rule come from the value of averted accidents
attributable to pilots operating commercial balloons with medical
deficiencies. While under current regulations, balloon pilots must
comply with Sec.  61.53(b), which states that ``a person shall not act
as pilot in command, or in any other capacity as a required pilot
flight crewmember, while that person knows or has reason to know of any
medical condition that would make the person unable to operate the
aircraft in a safe manner,'' the second-class medical certificate
requirement would provide greater assurances of safety to balloon
passengers and other balloon operations conducted for compensation or
hire. By requiring balloon pilots to undergo a medical certification
process, an AME will have the opportunity to identify potentially
impairing medical conditions and treatments thereof to ensure
sufficient mitigation of any associated risks.
    To quantify the benefits from this rule, it is necessary to: (1)
forecast a baseline level of accidents attributable to medically
impaired balloon pilots in the absence of this rule and (2) estimate
the extent to which the medical certification requirement effectively
reduces the risk. Based on the FAA's analysis of the NTSB accident
database during the ten-year period from 2010-2020, the FAA finds that
there has been one accident, the Heart of Texas accident, where the
medical condition of the pilot was a factor. The Heart of Texas
accident resulted in 16 fatalities. The commercial pilot and all 15
passengers were killed, and the balloon was destroyed by impact forces
and post-crash fire. For an accident of this magnitude, the FAA
estimates that the social cost associated with the loss of life alone
is $185.6 million using a value of statistical life of $11.6
million.\21\ Additional costs of a similar accident would include non-
fatal injuries, the value of property loss and damage as well as the
cost of the accident investigation and clean-up efforts. However, the
FAA currently does not have enough information to monetize those
additional costs.
---------------------------------------------------------------------------

    \21\ Value of a statistical life in 2020 is $11.6 million. See
DOT published values at https://www.transportation.gov/office-policy/transportation-policy/revised-departmental-guidance-on-valuation-of-a-statistical-life-in-economic-analysis.
---------------------------------------------------------------------------

    The FAA finds that the requirement for a second-class medical
certificate could have prevented the Heart of Texas accident if: (1)
information made available through the NDR database as part of the
medical review process revealed the pilot's history of drug- and
alcohol-related traffic offenses and resulted in a disqualification,
(2) a medical review either prompted effective treatment of or
disqualification for the pilot's medical conditions (depression and
ADHD), or (3) discussion of the use of certain medications with an AME
would have resulted in the pilot adjusting his behavior to avoid usage
as a PIC during a balloon operation.
    Due to the infrequency of such events and limitations in the
available data, it is difficult to quantify and monetize the benefits
of the rule. The FAA intended to update its estimates of quantified
benefits for the final rule based on additional information and data
identified during the comment period. Specifically, the FAA requested
information and data, including references and sources that could be
used to predict the number of similar accidents that may occur in the
future and the number of accidents that may be averted by this rule. No
additional data was provided during the comment period.
    While the FAA describes the benefits of the rule qualitatively, the
FAA expects that second-class medical certification provides additional
screening to reduce the risk of commercial balloon pilots operating
while medically impaired. In the section below, the FAA conducted a
breakeven analysis to show that the monetized benefits of the rule
equates costs if it averts 0.3 to 2.8 fatalities in the next ten years.
Costs
    This final rule results in private sector costs to balloon pilots
for obtaining a second-class medical certificate, including the
opportunity cost of time and fee for the medical exam with an AME. Some
balloon pilots with certain health conditions that are otherwise
disqualifying may also incur the cost of seeking a special issuance
medical certificate or SODA. The FAA incurs costs for reviewing and
processing the applications (i.e., MedXPress forms) and reviewing NDR
information for a subset of submissions.
Cost to Industry
(1) Costs of Obtaining Second-Class Medical Certification
    To obtain a second-class medical certificate, an applicant needs to
complete the MedXPress form and a medical exam with an AME. Because the
second-class medical certificate expires 12 months after the date of
the medical exam, the FAA assumes that pilots incur these costs on an
annual basis. The FAA estimates the opportunity cost of time for each
applicant would include 1.5 hours to complete the MedXPress form, 1
hour for the medical examination, and 1 hour of travel time to and from
the exam for a total of 3.5 hours.\22\ The FAA assumes an hourly wage
for a balloon pilot ranges from $15 per hour to $48 per hour, with a
mid-estimate of $31.50 per hour, to value time for the medical exam and
completing the MedXPress form. For valuing travel time, the FAA uses an
estimate of $13.60 per hour consistent with 2016 DOT guidance (in this
analysis, $14.44 was used for year

2021).\23\ Multiplying the value of time by the amount of time spent
yields an estimate of $51.94 to $134.44, with a mid-estimate of $93.19
per applicant in opportunity cost of time. FAA subject matter experts
estimate the cost per medical exam with an AME ranges from $100 to
$200, with an average of $150. Additional costs arise from vehicle
operating costs (VOC) of 16 cents per mile for an average of 50 miles
traveled by vehicle to and from a medical exam, which yields $8 for
each exam. Taking the sum of the value of time spent, medical exam fee,
and VOC, the FAA estimates that each applicant incurs costs of
approximately $160 to $342, with a mid-estimate of $251 to obtain a
second-class medical certificate each year.
---------------------------------------------------------------------------

    \22\ According to the ``FAA Aerospace Medical Certification
Services Airman Satisfaction Survey,'' (April 2017), over 60 percent
of applicants traveled between 0 and 25 miles one way for an exam
with an AME. (Retrieved from: https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201904-2120-007).
    \23\ Department of Transportation. ``The Value of Travel Time
Savings: Departmental Guidance for Conducting Economic Evaluations
Revision 2 (2016 Update). Available at: https://www.transportation.gov/office-policy/transportation-policy/revised-departmental-guidance-valuation-travel-time-economic. This analysis
assumes that the value of travel time grows 1% a year. Year 2021:
14.44.
---------------------------------------------------------------------------

    Table 2 below shows the range of total costs to industry for
obtaining a second-class medical certificate. The FAA derives the
aggregated low, middle, and high costs by multiplying the estimated
number of active pilots (low, middle, high) as shown in Table 1 by the
corresponding low, middle, and high costs per applicant by cost
category.

                                   Table 2--Costs to Industry by Category To Obtain Second-Class Medical Certification
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                       Opportunity cost of time for exam,       Fee for medical exam with AME             Vehicle operating costs
                                           MedXPress form, and travel      -----------------------------------------------------------------------------
                Year                ---------------------------------------
                                         Low         Middle        High         Low         Middle        High         Low         Middle        High
--------------------------------------------------------------------------------------------------------------------------------------------------------
1..................................      $48,899     $211,875     $604,081      $94,400     $341,550     $899,600       $7,552      $18,216      $35,984
2..................................       51,940      217,412      612,240      100,000      349,950      910,800        8,000       18,664       36,432
3..................................       54,996      222,965      620,414      105,600      358,350      922,000        8,448       19,112       36,880
4..................................       58,080      228,559      628,650      111,200      366,750      933,200        8,896       19,560       37,328
5..................................       61,180      234,169      636,903      116,800      375,150      944,400        9,344       20,008       37,776
6..................................       64,297      239,795      645,173      122,400      383,550      955,600        9,792       20,456       38,224
7..................................       67,430      245,439      653,460      128,000      391,950      966,800       10,240       20,904       38,672
8..................................       70,581      251,100      661,764      133,600      400,350      978,000       10,688       21,352       39,120
9..................................       73,748      256,777      670,084      139,200      408,750      989,200       11,136       21,800       39,568
10.................................       76,932      262,471      678,421      144,800      417,150    1,000,400       11,584       22,248       40,016
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The low, middle, and high estimates correspond to the low, middle, and high estimates of the number of active pilots and the range of costs per
  applicant in each category of costs.

(2) Cost of Obtaining a Special Issuance
    For applicants that do not initially meet the requirements of a
second-class medical certification, there may be an additional cost to
seek a special issuance medical certificate or SODA.\24\ The FAA
assumes that an applicant seeking special issuance would incur the same
costs and time of a second-class medical certification as estimated per
applicant above. Based on the historical rate of special issuances, the
FAA assumes that approximately 10 percent of affected balloon pilots
would seek special issuance, including SODAs. Therefore, the FAA takes
the sum of costs in each cost category for obtaining a second-class
medical certification and multiplies by 0.1 to obtain the total
industry cost for obtaining special issuances. Table 3 below shows the
range of special issuance costs in each year.
---------------------------------------------------------------------------

    \24\ The cost to obtain a SODA is included in the estimated
costs to obtain a special issuance medical certificate. Based on the
FY2022 data from Aerospace Medical Certification Division, the FAA
estimates that on average approximately 0.02% (or no more than one
applicant a year) of medical certificate applicants will require a
SODA.

                               Table 3--Total Industry Cost for Special Issuances
----------------------------------------------------------------------------------------------------------------
                                                                      Total private sector costs for special
                                                                                issuance
                              Year                               -----------------------------------------------
                                                                        Low           Middle           High
----------------------------------------------------------------------------------------------------------------
1...............................................................         $15,085         $57,164        $153,967
2...............................................................          15,994          58,603         155,947
3...............................................................          16,904          60,043         157,929
4...............................................................          17,818          61,487         159,918
5...............................................................          18,732          62,933         161,908
6...............................................................          19,649          64,380         163,900
7...............................................................          20,567          65,829         165,893
8...............................................................          21,487          67,280         167,888
9...............................................................          22,408          68,733         169,885
10..............................................................          23,332          70,187         171,884
----------------------------------------------------------------------------------------------------------------
Present Value at 7%.............................................         131,272         441,519       1,136,479
Annualized at 7%................................................          18,690          62,862         161,809
Present Value at 3%.............................................         161,857         540,060       1,385,536
Annualized at 3%................................................          18,975          63,311         162,427
----------------------------------------------------------------------------------------------------------------

Summary of Total Cost to Industry
    The FAA estimates the present value of total cost to industry
associated with obtaining a second-class medical certification and
special issuances to be $1.4 million to $12.5 million, with a mid-
estimate of $4.9 million at a 7 percent discount rate and $1.8 million
to $15.2 million, with a mid-estimate of $5.9 million at a 3 percent
discount rate. The annualized value of total cost to industry are $0.2
million to $1.8 million with a mid-estimate of $0.7 million at a 7
percent discount rate and $0.2 million to $1.8 million with a mid-
estimate of $0.7 million at a 3 percent discount rate. In Table 4
below, the FAA shows these total costs to industry for obtaining a
second-class medical certification and special issuances in each year.
The low, middle, and high estimates correspond to the range of
estimates on the number of affected pilots and costs associated with
obtaining medical certification.

                                          Table 4--Total Industry Costs
----------------------------------------------------------------------------------------------------------------
                                                                              Total cost to industry
                              Year                               -----------------------------------------------
                                                                        Low           Middle           High
----------------------------------------------------------------------------------------------------------------
1...............................................................        $165,936        $628,805      $1,693,632
2...............................................................         175,934         644,629       1,715,419
3...............................................................         185,949         660,470       1,737,223
4...............................................................         195,993         676,355       1,759,096
5...............................................................         206,056         692,259       1,780,987
6...............................................................         216,138         708,182       1,802,897
7...............................................................         226,237         724,122       1,824,825
8...............................................................         236,356         740,082       1,846,772
9...............................................................         246,493         756,059       1,868,737
10..............................................................         256,648         772,056       1,890,721
----------------------------------------------------------------------------------------------------------------
Present Value at 7%.............................................       1,443,990       4,856,705      12,501,274
Annualized at 7%................................................         205,592         691,486       1,779,900
Present Value at 3%.............................................       1,780,422       5,940,655      15,240,897
Annualized at 3%................................................         208,720         696,426       1,786,698
----------------------------------------------------------------------------------------------------------------

Costs to FAA To Implement Requirement for Second-Class Medical
Certification for Balloon Pilots
(1) FAA Cost of MedXPress Review and Processing
    The FAA incurs costs associated with reviewing and processing
applications submitted through MedXPress. Based on internal FAA data on
total personnel costs and benefits attributable to labor hours spent on
review of airmen medical certification in FY 2019 through FY 2021, the
FAA estimates an average cost of $30 to review and process each
application. In Table 5 below, the Agency derives the FAA cost to
review applications in each year using the estimated range for the
number of submissions based on the forecasted number of active balloon
pilots in each year.

                              Table 5--FAA Costs To Review and Process Applications
----------------------------------------------------------------------------------------------------------------
                                                                        FAA costs for review and processing
                              Year                               -----------------------------------------------
                                                                        Low           Middle           High
----------------------------------------------------------------------------------------------------------------
1...............................................................         $27,944         $67,402        $133,146
2...............................................................          29,601          69,060         134,804
3...............................................................          31,259          70,717         136,462
4...............................................................          32,917          72,375         138,119
5...............................................................          34,574          74,033         139,777
6...............................................................          36,232          75,690         141,435
7...............................................................          37,890          77,348         143,092
8...............................................................          39,547          79,006         144,750
9...............................................................          41,205          80,663         146,408
10..............................................................          42,863          82,321         148,065
----------------------------------------------------------------------------------------------------------------
Present Value at 7%.............................................         242,207         519,347         981,108
Annualized at 7%................................................          34,485          73,943         139,688
Present Value at 3%.............................................         298,552         635,141       1,195,954
Annualized at 3%................................................          34,999          74,458         140,202
----------------------------------------------------------------------------------------------------------------

(2) FAA Cost of Special Issuance Review
    A MedXPress application that requires a special issuance medical
certificate is deferred to the Aerospace Medical Certification Division
(AMCD) for further consideration. Based on FAA internal data on
personnel compensation and benefits attributable to labor hours spent
on reviewing and processing special issuance medical certificates in FY
2019 through FY 2021, the FAA estimates an average cost of
approximately $126 per special issuance review. The table below
displays the FAA cost for special issuance review assuming that 10
percent of the applicants do not initially qualify for second-class
medical certification.

                                  Table 6--FAA Cost of Special Issuance Review
----------------------------------------------------------------------------------------------------------------
                                                                       FAA costs for special issuance review
                              Year                               -----------------------------------------------
                                                                        Low           Middle           High
----------------------------------------------------------------------------------------------------------------
1...............................................................         $11,931         $28,779         $56,851
2...............................................................          12,639          29,487          57,559
3...............................................................          13,347          30,195          58,267
4...............................................................          14,055          30,903          58,974
5...............................................................          14,763          31,611          59,682
6...............................................................          15,470          32,318          60,390
7...............................................................          16,178          33,026          61,098
8...............................................................          16,886          33,734          61,806
9...............................................................          17,594          34,442          62,513
10..............................................................          18,302          35,150          63,221
----------------------------------------------------------------------------------------------------------------
Present Value at 7%.............................................         103,418         221,751         418,915
Annualized at 7%................................................          14,724          31,572          59,644
Present Value at 3%.............................................         127,476         271,193         510,650
Annualized at 3%................................................          14,944          31,792          59,864
----------------------------------------------------------------------------------------------------------------

(3) Cost of FAA Review of the National Driver Register (NDR) Reports
    Included within the medical certificate application is the
applicant's authorization for the FAA to receive NDR data, which
provides a report of applicable motor vehicle actions within the
preceding three years. Intentional failure to report required drug or
alcohol motor vehicle actions is grounds for suspension of a pilot
certificate. NDR checks help to identify persons who may have substance
abuse or dependence issues. Although the bulk of the process is
automated, the FAA estimates there is roughly a 3% return rate that
requires additional review and investigation. The FAA estimates that it
takes approximately 40 hours of additional review time by a special
agent for each applicant that is flagged through the NDR database.
Using a special agent hourly wage adjusted for fringe benefits of
$60.18, as shown in Table 7 below, the FAA estimates that each
submission that requires further investigation would cost $2,407. The
total costs to FAA associated with NDR review are estimated in Table 8
using the range of estimated submissions.

                                Table 7--Special Agent Wage With Fringe Benefits
----------------------------------------------------------------------------------------------------------------
                                                    Yearly          Hourly       Fringe benefits       Total
----------------------------------------------------------------------------------------------------------------
Special Agent.................................         $91,877          $44.17            $16.01          $60.18
Federal Fringe Benefit Factor \1\ \2\ \3\.....  ..............  ..............            36.25%  ..............
----------------------------------------------------------------------------------------------------------------
\1\ https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2008/m08-13.pdf.
\2\ Percent of position's basic pay.
\3\ Dallas-Fort Worth, TX-OK locality plus fringe benefits, GS-12 Step 4. Retrieved from https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2021/DFW.pdf.

                                        Table 8--FAA Costs for NDR Review
----------------------------------------------------------------------------------------------------------------
                                                                             FAA costs for NDR review
                              Year                               -----------------------------------------------
                                                                        Low           Middle           High
----------------------------------------------------------------------------------------------------------------
1...............................................................         $68,172        $164,436        $324,828
2...............................................................          72,216         168,480         328,872
3...............................................................          76,260         172,524         332,916
4...............................................................          80,304         176,568         336,960
5...............................................................          84,348         180,612         341,004
6...............................................................          88,392         184,656         345,048
7...............................................................          92,436         188,700         349,092
8...............................................................          96,481         192,745         353,136
9...............................................................         100,525         196,789         357,180
10..............................................................         104,569         200,833         361,224
----------------------------------------------------------------------------------------------------------------
Present Value at 7%.............................................         590,895       1,267,013       2,393,537
Annualized at 7%................................................          84,130         180,394         340,786
Present Value at 3%.............................................         728,356       1,549,507       2,917,681
Annualized at 3%................................................          85,386         181,650         342,041
----------------------------------------------------------------------------------------------------------------

Summary of Total Costs to FAA
    The total costs to the FAA to implement the requirement for
commercial balloon pilots to hold a second-class medical certificate is
the sum of the costs for FAA review and processing of MedXPress
applications, review of special issuances, and review of NDR
information associated with certain applications. The FAA estimates the
present value of total costs to the Agency to be $0.9 million to $3.8

million, with a mid-estimate of $2.0 million at a 7 percent discount
rate and $1.2 million to $4.6 million, with a mid-estimate of $2.5
million at a 3 percent discount rate. The annualized value of total
cost to FAA is $0.1 million to $0.5 million with a mid-estimate of $0.3
million at a 7 percent discount rate and $0.1 million to $0.5 million
with a mid-estimate of $0.3 million at a 3 percent discount rate.
    The FAA acknowledges the difficulty in estimating FAA burden and
cost after the effective date of this rule given uncertainties in the
number of pilot applicants and those pilots that would either receive a
second-class medical certification or be granted a special issuance
certification.

                                           Table 9--Total Costs to FAA
----------------------------------------------------------------------------------------------------------------
                                                                                Total cost to FAA
                              Year                               -----------------------------------------------
                                                                        Low           Middle           High
----------------------------------------------------------------------------------------------------------------
1...............................................................        $108,047        $260,617        $514,825
2...............................................................         114,456         267,027         521,235
3...............................................................         120,866         273,436         527,644
4...............................................................         127,276         279,846         534,054
5...............................................................         133,685         286,256         540,463
6...............................................................         140,095         292,665         546,873
7...............................................................         146,504         299,075         553,282
8...............................................................         152,914         305,484         559,692
9...............................................................         159,323         311,894         566,102
10..............................................................         165,733         318,303         572,511
----------------------------------------------------------------------------------------------------------------
Present Value at 7%.............................................         936,521       2,008,111       3,793,560
Annualized at 7%................................................         133,339         285,910         540,118
Present Value at 3%.............................................       1,154,385       2,455,842       4,624,285
Annualized at 3%................................................         135,329         287,900         542,107
----------------------------------------------------------------------------------------------------------------

Total Costs of the Rule
    The total costs are shown in the table below, which includes both
costs to industry and to the FAA. The total costs over the ten years
include the costs for pilots to obtain their second-class medical
certificate, special issuances and costs to the Agency for review of
applications, special issuances, and NDR information. The FAA estimates
the present value of total costs over ten years is $2.4 million to
$16.3 million with a mid-estimate of $6.9 million at a 7 percent
discount rate and $2.9 million to $19.9 million with a mid-estimate of
$8.4 million at a 3 percent discount rate. The FAA estimates the
annualized costs over ten years is $0.3 million to $2.3 million with a
mid-estimate of $1.0 million at a 7 percent discount rate and $0.3
million to $2.3 million with a mid-estimate of $1.0 million at a 3
percent discount rate.
    As stated previously, in some cases, where the airman's medical
condition does not meet the part 67 standard, the airman may still be
issued a medical certificate by authorization for special issuance when
the Federal Air Surgeon determines the risk associated with the medical
condition(s) to be sufficiently mitigated. Based on the rate of special
issuance for general aviation pilots, the FAA assumes that 10% of the
commercial balloon pilot applicants would require a special issuance.
For purposes of this analysis, the FAA assumes that most applicants
would ultimately either receive a second-class medical certificate or
be granted a special issuance and therefore does not quantify costs
associated with not meeting the requirements.
    However, the FAA expects some applicants who would have otherwise
been able to operate as commercial balloon pilots may not meet the
requirements of a second-class medical certification nor the
requirements for a special issuance. Furthermore, the opportunity cost
(including the time and fees) of seeking a second-class medical
certification for some pilots may outweigh their private gains from
operating commercially, resulting in some pilots opting not to seek
medical certification. The FAA does not have sufficient information to
predict how the supply of commercial balloon pilots would change as a
result of this rule.
    While the FAA does not expect a significant decrease in the
availability of balloon pilots, changes in supply of balloon pilots
could affect prices as well. This analysis does not quantify any
potential changes in consumer and producer surplus from changes in
supply. If the rule effectively screens out certain individuals for
disqualifying medical conditions as intended, any potential adverse
effects on individual applicants should be offset by the safety gains
to the public.

                                        Table 10--Total Costs of the Rule
----------------------------------------------------------------------------------------------------------------
                                                                              Total cost of the rule
                              Year                               -----------------------------------------------
                                                                        Low           Middle           High
----------------------------------------------------------------------------------------------------------------
1...............................................................        $273,983        $889,422      $2,208,457
2...............................................................         290,390         911,656       2,236,654
3...............................................................         306,815         933,907       2,264,867
4...............................................................         323,269         956,201       2,293,150
5...............................................................         339,741         978,515       2,321,451
6...............................................................         356,232       1,000,847       2,349,770
7...............................................................         372,742       1,023,197       2,378,108
8...............................................................         389,270       1,045,566       2,406,464
9...............................................................         405,816       1,067,953       2,434,839

10..............................................................         422,381       1,090,359       2,463,232
----------------------------------------------------------------------------------------------------------------
Present Value at 7%.............................................       2,380,511       6,864,816      16,294,834
Annualized at 7%................................................         338,931         977,395       2,320,018
Present Value at 3%.............................................       2,934,807       8,396,497      19,865,182
Annualized at 3%................................................         344,049         984,326       2,328,805
----------------------------------------------------------------------------------------------------------------

Breakeven Analysis
    Given the uncertainties and limitations in the available data, the
FAA conducted a breakeven analysis to determine the number of averted
fatalities necessary to generate benefits equal to costs. The FAA
divided the present value of total costs of the rule by the present
value of a statistical life to estimate the number of fatalities needed
to break even with the costs of the rule over a ten-year time horizon.
Using a value of statistical life of $11.6 million and the range of
present value of costs presented in Table 10 above, the monetized
benefits of this rule will break even with costs if the new medical
certification requirement averts between 0.4 to 2.8 fatalities under a
7 percent discount rate and between 0.3 to 2.3 fatalities under a 3
percent discount rate.\25\
---------------------------------------------------------------------------

    \25\ Departmental Guidance on Valuation of a Statistical Life in
Economic Analysis https://www.transportation.gov/office-policy/transportation-policy/revised-departmental-guidance-on-valuation-of-a-statistical-life-in-economic-analysis.
---------------------------------------------------------------------------

Regulatory Alternatives
    As discussed in the NPRM, the FAA considered one alternative to the
proposed rule: Letter of Authorization (LOA) and Drug and Alcohol
Testing.
    With this alternative, the FAA would have instituted both a medical
certificate requirement as well as a requirement for obtaining an LOA
from the FAA and mandatory drug and alcohol testing. This alternative
would have expanded the definition of an operator under Sec.  91.147 to
include balloons, which would have required the commercial balloon
operators to obtain an LOA from the FAA in accordance with Sec.  91.147
prior to conducting air tour operations, and implement a drug and
alcohol testing program in accordance with 14 CFR part 120. However, as
discussed elsewhere in this final rule, this alternative goes beyond
the statutory mandate. Therefore, the FAA did not adopt this
alternative.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) of 1980, Public Law 96-354, 94
Stat. 1164 (5 U.S.C. 601-612), as amended by the Small Business
Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121, 110 Stat.
857, Mar. 29, 1996) and the Small Business Jobs Act of 2010 (Pub. L.
111-240, 124 Stat. 2504 Sept. 27, 2010), requires Federal agencies to
consider the effects of the regulatory action on small business and
other small entities and to minimize any significant economic impact.
The term ``small entities'' comprises small businesses and not-for-
profit organizations that are independently owned and operated and are
not dominant in their fields, and governmental jurisdictions with
populations of less than 50,000.
    The FAA published an Initial Regulatory Flexibility Analysis (IRFA)
in the proposed rule to aid the public in commenting on the potential
impacts to small entities. The FAA considered the public comments in
developing the final rule and this Final Regulatory Flexibility
Analysis (FRFA). A FRFA must contain the following:
    (1) A statement of the need for, and objectives of, the rule;
    (2) A statement of the significant issues raised by the public
comments in response to the IRFA, a statement of the assessment of the
agency of such issues, and a statement of any changes made in the
proposed rule as a result of such comments;
    (3) The response of the agency to any comments filed by the Chief
Counsel for Advocacy of the Small Business Administration (SBA) in
response to the proposed rule, and a detailed statement of any change
made to the proposed rule in the final rule as a result of the
comments;
    (4) A description of and an estimate of the number of small
entities to which the rule will apply or an explanation of why no such
estimate is available;
    (5) A description of the projected reporting, recordkeeping, and
other compliance requirements of the rule, including an estimate of the
classes of small entities which will be subject to the requirement and
the type of professional skills necessary for preparation of the report
or record; and
    (6) A description of the steps the agency has taken to minimize the
significant economic impact on small entities consistent with the
stated objectives of applicable statutes, including a statement of the
factual, policy, and legal reasons for selecting the alternative
adopted in the final rule and why each of the other significant
alternatives to the rule considered by the agency which affect the
impact on small entities was rejected.
Statement of the Need for and Objectives of the Rule
    This rulemaking addresses the need for additional oversight of
airmen conducting balloon operations for compensation or hire by
implementing the statutory mandate under the Commercial Balloon Pilot
Safety Act of 2018 and NTSB Safety Recommendation A-17-034 to extend
second-class medical certification requirements to operators of
balloons.
    The objective of the rule is to enhance safety for passengers of
commercial balloon operations by requiring pilots to obtain and hold
second-class medical certificates, in compliance with Section 318, to
prevent potential accidents in commercial balloon operations.
Significant Issues Raised in Public Comments
    The FAA received 192 comments during the public comment period. One
significant issue commenters raised was the concern that the proposed
rule would impose significant burdens on balloon pilots and could put
some of them out of business, causing the supply of balloon pilots to
shrink. The FAA assessed this concern and does not believe that the
costs of the rule would cause such an undue burden. The cost estimate
per pilot to obtain a second-class medical certificate is between $160
and $685 annually, depending on whether a special issuance would be
necessary, which is the equivalent of 0.06% to 0.37% of average annual

revenues for small entities. The FAA considers this expense to be non-
significant to cause such a decline in the number of balloon pilots. A
more detailed analysis may be found under the Description and an
Estimated Number of Small Entities Impacted section.
    In addition, several commenters noted that larger balloon
operations require their pilots to carry second-class medical
certificates as part of insurance requirements. These balloon pilots do
not have to incur additional costs as a result of the final rule. The
FAA estimates about 8.8% of balloon pilots fall into this category.
However, the vast majority of balloon pilots are not currently required
to hold second-class medical certificates either by the FAA or
insurance carriers. There was no change made to the final rule as a
result of public comments.
Response to SBA Comments
    The FAA received no comments from the Chief Counsel for Advocacy of
the Small Business Administration.
Description and an Estimated Number of Small Entities Impacted
    The final rule affects commercial balloon pilots and establishments
involved in commercial balloon operations. The FAA does not maintain a
database of commercial balloon operators actively operating in the
United States. Using commercial sources, the FAA estimates that number
to be about 356 \26\ companies. Approximately 4,870 commercial pilots
hold balloon ratings, and approximately 4,940 balloons are registered
with the FAA. The commercial balloon industry estimates that 100,000 to
250,000 passenger rides are conducted annually, as well as aerial
advertising and other commercial activities.
---------------------------------------------------------------------------

    \26\ http://www.blastvalve.com/Balloon_Rides/USA/index.shtml.
---------------------------------------------------------------------------

    FAA used the definition of small entities in the RFA for this
analysis. The RFA defines small entities as small businesses, small
governmental jurisdictions, or small organizations. In 5 U.S.C. Sec.
601(3), the RFA defines ``small business'' to have the same meaning as
``small business concern'' under section 3 of the Small Business Act.
The Small Business Act authorizes the Small Business Administration
(SBA) to define ``small business'' by issuing regulations. SBA (2019)
has established size standards for various types of economic
activities, or industries, under the North American Industry
Classification System (NAICS).\27\ These size standards generally
define small businesses based on the number of employees or annual
receipts. Note that the SBA definition of a small business applies to
the parent company and all affiliates as a single entity.
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    \27\ Small Business Administration (SBA). 2019. Table of Size
Standards. Effective August 12, 2019. https://www.sba.gov/document/support--table-size-standards.
---------------------------------------------------------------------------

    To identify small entities, the FAA first identified the primary
NAICS of the airline or parent company, and then used data from
different sources (e.g., company annual reports, Bureau of
Transportation Statistics) to determine whether the parent company
meets the applicable size standard. Businesses affected by this rule
are classified using the 2017 North American Industry Classification
System \28\ under NAICS code 487990 ``Scenic and Sightseeing
Transportation, Other.'' This industry comprises establishments
primarily engaged in providing scenic and sightseeing transportation
(except on land and water). The U.S. Small Business Administration
(SBA) defines entities in this industry as ``small'' using an average
annual revenue threshold of $8 million.\29\ With limited information
and data on sales revenues for each of the affected commercial balloon
operators, the FAA has uncertainty as to how many entities would meet
the SBA's small-entity criteria.\30\ Furthermore, the FAA has
uncertainty as to how the burden associated with the final rule would
be distributed across commercial balloon companies versus individual
balloon pilots employed by an operator. The FAA requested comment and
data on the average annual sales revenues for the affected small
businesses and to what extent the costs of obtaining a second-class
medical certification would be considered an ``out-of-pocket'' cost
incurred by commercial balloon pilots rather than a cost to the
commercial balloon operator. The only information received was that the
ballooning insurance providers have required commercial pilots flying
balloons larger than 120,000 cubic feet to hold a second-class medical
certificate. Data indicated 427 balloon pilots have second-class
medical certificates, and the FAA has made this adjustment to recompute
the costs of this final rule. As previously described, the FAA
estimates the cost per pilot to obtain a second-class medical
certificate would be between $160 and $685 annually, depending on
whether a special issuance would be necessary.
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    \28\ https://www.census.gov/naics/?input=487990&year=2017&details=487990.
    \29\ https://www.sba.gov/sites/default/files/2019-08/SBA%20Table%20of%20Size%20Standards_Effective%20Aug%2019%2C%202019_Rev.pdf.
    \30\ Rainbow Ryders is one of the larger commercial balloon
companies and are under the Small Business Administration small-
entity criteria. Therefore, the FAA estimates that all of the
Commercial balloon companies are a small entity. It's Been a Year of
Growth for Rainbow Ryders, https://www.abqjournal.com/1095655/its-been-a-growth-year-for-rainbow-ryders.html, September 9, 2019.
---------------------------------------------------------------------------

    For purposes of this final regulatory flexibility analysis, the FAA
assumes that the private sector costs of this rule (i.e., the cost to
obtain a second-class medical certification or special issuance) fall
entirely on commercial balloon operators. In the absence of data on
annual receipts specific to the commercial balloon industry, the FAA
relies on the most recent data available on average revenues for all
businesses, including commercial balloon operators, classified under
NAICS 487990 ``Scenic and Sightseeing Transportation, Other'' from the
2017 Census Bureau's Statistics of U.S. Businesses (SUSB) \31\ to
inform the analysis. Note that the total number of firms identified for
this industry is less than the FAA estimated number of commercial
balloon operators. In this analysis, the FAA uses the SUSB data to
estimate the proportion of balloon companies for each size category by
annual receipts.
---------------------------------------------------------------------------

    \31\ Available at https://www.census.gov/data/tables/2017/econ/subs/2017-annual.html, retrieved on August 15, 2021.
---------------------------------------------------------------------------

    The table below summarizes the total number of firms, employment,
and estimated annual receipts by annual receipt category for the entire
industry classified under NAICS 487990 ``Scenic and Sightseeing
Transportation, Other'' for the year 2017. Note that blanks in the
table below reflect data that the Census Bureau withheld to avoid
disclosing data for individual companies but are included in the
higher-level totals. After adjusting the 2017 dollar values to constant
2021 dollars using the GDP deflator,\32\ the FAA estimates that
approximately 93 percent of companies (or about 331 balloon operators
extrapolating from this percentage) may be considered small entities
under the SBA definition.
---------------------------------------------------------------------------

    \32\ Available at: https://www.whitehouse.gov/omb/historical-tables/.
---------------------------------------------------------------------------

    To compare the compliance costs of the rule to the average revenues
of small entities, for each receipt size category the FAA multiplies
the proportion of total employment by the annualized private sector
costs of the rule and divides by the estimated annual receipts

in 2021 dollars.\33\ Assuming that costs are proportional to employment
size, which may be reasonable given that costs are driven by the number
of pilots requiring a second-class medical certification, the FAA
estimates that the costs of the final rule constitutes 0.06% to 0.37%
of average annual revenues for small entities. Given the currency and
level of aggregation of the data available, the FAA requested comment
on accuracy of these estimates and any other information or data that
would be relevant for estimating the effects of the rule on small
entities but did not receive any during the comment period.
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    \33\ For this calculation, the FAA uses the mid-estimate of
$691,486 for the total private sector costs annualized at a 7
percent discount rate.

   Table 11--Number of Firms, Establishments, Employment, and Estimated Receipts by Enterprise Receipt Sizes for the United States, NAICS 487990: 2017
                                                         [Census statistics of U.S. businesses]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Cost for all
                                             Number of     Percentage of                   Percentage of     Estimated     firms in size     Cost as a
       Enterprise receipt size \a\           firms \b\         firms        Employment         total         receipts        category      percentage of
                                                                                employment       ($1,000)        ($1,000)        receipts
--------------------------------------------------------------------------------------------------------------------------------------------------------
<$100,000...............................              53              17              48               1           2,255               9            0.37
$100,000-499,999........................             119              39             192               5          29,644              37            0.11
$500,000-999,999........................              47              15             237               7          32,765              45            0.13
$1,000,000-2,499,999....................              43              14             365              10          63,134              70            0.10
$2,500,000-4,999,999....................              18               6             323               9          65,788              62            0.09
$5,000,000-7,499,999....................               6               2             106               3          29,465              20            0.06
$7,500,000-9,999,999....................               5               2             213               6          41,585              41            0.09
$10,000,000-14,999,999..................               4             1.3             196               5          50,270              38            0.07
$20,000,000-24,999,999..................  ..............  ..............  ..............  ..............  ..............  ..............  ..............
$25,000,000-29,999,999..................               3             1.0              93               3          19,490              18            0.08
$30,000,000-34,999,999..................  ..............  ..............  ..............  ..............  ..............  ..............  ..............
$35,000,000-39,999,999..................  ..............  ..............  ..............  ..............  ..............  ..............  ..............
$50,000,000-74,999,999..................  ..............  ..............  ..............  ..............  ..............  ..............  ..............
$100,000,000+...........................               4               1           1,044              29         251,871             200            0.07
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................             309             100           3,611             100         762,426             691            0.08
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Using the Gross Domestic Product (GDP) deflator, the FAA finds that $7.49 million in 2017 dollars would be approximately $ 8.16 million in 2021
  dollars. Therefore, the FAA assumes firms with receipts of less than $7.49 million in 2017 dollars would be considered small.
\b\ The FAA notes that the number of firms in NAICS 487990 is lower than FAA's estimate of the number of balloon operators. For purposes of this
  analysis, the SUSB data is used to estimate the percentage of small entities and the distribution of costs relative to revenues.

Description of the Recordkeeping and Other Compliance Requirements
    The FAA requires that airmen hold a valid second-class medical
certificate when exercising the privileges of a commercial pilot
certificate in a balloon for compensation or hire. A medical
certificate is not required for commercial pilots conducting flight
training in a balloon. As determined by a physical examination and
review of medical history, airmen must meet the applicable medical
standards of part 67 in order to receive an unrestricted medical
certificate. In cases where the airman's medical condition does not
meet the part 67 standard, the airman may still be issued a medical
certificate by authorization for special issuance or SODA when the
Federal Air Surgeon had determined that the risk associated with the
medical condition(s) is sufficiently mitigated.
    A person obtains a medical certificate by completing an online
application (FAA form 8500-8, Application for Medical Certificate)
using the FAA's medical certificate application tool, MedXPress,\34\
and undergoing a physical examination with an FAA-designated AME. An