With an almost eagle-eye-view of the Rocky Mountains from his office in Denver, Robert Attai advises clients on the emerging field of unmanned aircraft systems (UAS), otherwise known as drones. A partner in the law firm of Husch Blackwell, his clients sometime seek advice after acquiring a smaller firm that is using UAS in their operations.  Other times, a manager in the field starts using UAS without running it by headquarters first, leaving the company open to legal complications. Despite much of the legal confusion surrounding the use of UAS, Attai’s message is clear: without prior permission by the FAA, commercial use of drones is still illegal. That, however, is not the end of the story.

Military Gone Silicon Valley

Over the past few years, drones have undergone a radical transformation. Once the purview of the military and hobbyists, drones have become big business, with companies as diverse as humanitarian groups to big oil trying to cash in on the promised efficiency.

For the energy industry, the uses are well documented. The technology promises to improve efficiency, increase worker safety, and cover territory faster and more efficiently than humans.  For solar, drones can detect malfunctioning panels. For pipeline operators, drones can scan vast areas to spot problems. And for utilities, drones can identify outages after a big storm.

“The uses are just as broad as your mind can envision,” said David Agee, another lawyer with Husch Blackwell, whose client list includes a major agricultural company and real estate firm with interest in utilizing UAS. Agee added that, “a lot of the energy companies are pining for the ability to quickly, remotely, quietly, efficiently and cleanly survey huge areas of land.”  Still, the technology has outpaced the law. In a rare act in 2012, Congress mandated the Federal Aviation Administration (FAA) to speed up the process of commercial drone integration.

Hands Off the Joystick

Operating a drone for commercial uses is still illegal in most cases, not to mention that insurance typically doesn’t cover any accidents. “There’s a misconception by many people that the FAA has no control over the ground space under 500 feet,” said Attai. “Under current positions of the FAA, the only way you can lawfully utilize a drone for commercial use is to request a certificate of authority,” he added. 

Quick Facts:

• Despite confusion over a 400 or 500-foot buffer zone, the FAA regulates airspace from the ground-up. Non-commercial, model aircrafts are permitted within 400-feet of the ground, 3 miles from an airport and a “sufficient distance from populated areas.”
• Raphael Pirker was fined $10,000 for flying an UAS in 2007, but fought the charges. In March 2014, the National Transportation Safety Board found that FAA had no authority to impose a ban on UAS, nor was there an enforceable rule or regulation applicable to the case.
• As of December 2013, there were 545 active COAs.
• BP was the first company allowed to fly UAS over land.
• SG&E was the first utility granted access to pilot a UAS project.
• Six congressionally mandated test sites for UAS are operational throughout the US.  These include Virginia Polytechnic Institute and State University (Virginia Tech), the University of Alaska, the Griffiss International Airport in Rome, N.Y., the State of Nevada, the North Dakota Department of Commerce and Texas A&M University–Corpus Christi.
• Industries outside of energy are looking to use drones: on behalf of its members, the Motion Picture Association is seeking regulatory exemption.
• Only two UAS are approved for commercial use: the AeroVironment Puma and Boeing’s Scan Eagle.
• Imports and exports of UAS are restricted by the US government, since they are categorized as military-technology.
• Concerns about drones are not just for air safety; many questions about the safety of data transfer remain unanswered. Other areas of concern include the so-called lost link and the ability to “detect and avoid” collisions.
• The FAA’s budget is limited and does not include police enforcement to seek out violators, according to Agee.

The FAA is still working on proposed rules for small UAS (those under 55 pounds), expected out later this year. Those recommendations will not necessarily be automatically implemented. The FAA states on its website that it’s a myth that commercial UAS operations will be allowed after September 30, 2015 (the deadline Congress gave the FAA to come up with a plan for “safe integration” of drones). Still, “the FAA has indicated they are going to become a little more expansive and open on commercial use,” Agee told Breaking Energy. 

Despite its toy-like connotations (a vestige from its hobbyist origins), drone operations are complicated business. While anyone with $150 and an amazon account may be able to pick up an iPad and operate a drone (or crash one into Yellowstone), commercial operations are more complex. For San Diego Gas & Electric (SDG&E), the first utility granted a certificate of authority (CAO), that meant putting together a “specialized team,” including a pilot, according to Amber Albrecht, the company’s communication manager.

The requirements needed to fly a drone legally in the US can be arduous. Agee estimates it took BP over a year and a significant investment before the FAA approved its plans to use drones over the Prudhoe Bay oil field in Alaska. It was the first over land, commercial approval granted by the FAA. Even still, the company is only allowed to use the UAS in remote areas, far from population centers and major airports.

The BP approach is the way forward, according to Agee, at least until new regulations are put in place.  Companies need to apply for a CAO and decisions will be made on case-by-case basis. A quick search shows at least 27 current petitions for exemption under Section 333 of the FAA Modernization and Reform Act of 2012. The complicated procedure and legal uncertainty surrounding UAS are one of the reason Agee and Attai’s law firm have a team dedicated to the practice.

A Case Study: When Drones Equal Big Brother

The use of drones for government purposes – even when done in conjunction with private entities – remains complicated.  While public entities have the right to use UAS under certain circumstances, they must also obtain a CAO, according to Agee. Public entities run the risk of seeming like big brother, especially if UAS are used without transparency.

Several years ago, a Minnesota city considered an offer from a private contractor to survey the conditions of park property with an UAS.  Any data collected would be used to identify changing environmental patterns. The city checked for FAA regulations on the topic and didn’t find them; this is a common complaint.  (Another complaint is that the FAA does not have the authority to regulate or fine UAS operators.) Despite a willingness by the private contractor to provide the data without compensation, the operation would have fallen under commercial activity.  Ultimately, the city did not go ahead with the project.  While there is not an expectation of privacy on government grounds, city officials expressed concern that residents would see this as an unwarranted intrusion in their lives.

Other developed countries have similarly stringent regulations. That means development of the drone marketplace for commercial use is still years off, according to Agee. But that hasn’t stopped some drone companies from going further afield. Earlier this month, Silicon Valley-based Matternet started testing their drones in Bhutan, after earlier tests in Latin America. Their technology is meant to transport life-saving medicine in areas without infrastructure, but it doesn’t take much imagination to see how this could benefit remote energy projects. In a petition for exemption under Section 333, Amazon Prime said it had been “limited to conducting R&D flights indoors or in other countries,” despite the “wide latitude” granted to hobbyist.

Early Adopters

While legal use of drones remains relatively obscure, industry is watching a few key companies. SDG&E told Breaking Energy they have been contacted by other utilities interested in their findings. The company is still in testing phases and is looking to answer the question: “Is it good enough and are we getting the detail that we need,” according to Albrecht.

For now, the world will wait and watch how the early adopters fare with the new technology. Law firms like Agee and Attai’s will expand coverage to service the increasing numbers of companies hoping to cash in on the technology. Hobbyists will continue to crash drones into buildings while Silicon Valley works to make the technology better and cheaper. After all, the drone revolution has just begun.