(New throughout, adds FAA response, background on victims)
WASHINGTON, Oct 17 (Reuters) - Federal aviation regulators came under fire on Tuesday after a probe found that they had failed to impose adequate oversight or rules on hot-air balloons before 16 people were killed in a July 2016 Texas crash, including the pilot who was impaired by medication and had been incarcerated twice.
The National Transportation Safety board faulted the Federal Aviation Administration (FAA) and the pilot in the deadliest U.S. aviation accident in more than seven years.
Earlier this year, the FAA said no new balloon regulations were needed, despite the board's long-standing push for more oversight.
The balloon hit a power line and plummeted in flames into a pasture near Lockhart, about 30 miles (50 km) south of the state capital Austin. It was the deadliest crash ever involving a hot air balloon in the Western Hemisphere, according to the Balloon Federation of North America.
The victims included a mother and daughter, a newly married couple and an expert at the U.S. Army Institute for Surgical Research.
Investigators found the pilot and owner of the balloon, Alfred "Skip" Nichols, 49, should never have flown because of poor weather and was impaired after taking too much Benadryl, the NTSB said. They said he did not disclose a series of drug and alcohol related arrests dating back to 1987 and did not have a valid driver's license at the time of the crash.
NTSB Chairman Robert Sumwalt said at a board hearing that Nichols "was literally and figuratively operating under the radar." He said the FAA was not providing adequate oversight.
"I am disappointed that the FAA appears to be shirking its responsibility," he said.
Balloon pilots cannot operate if they have certain medical conditions, but are not required to obtain a pilot medical certificate. The NTSB said the FAA should require medical certification and find "more effective ways to target oversight" of pilots "that pose the most significant safety risk to the public."
The agency rarely inspects individual balloon flights outside festivals, the NTSB said, a policy that "does not effectively target" the riskiest operators.
The Trump administration has been moving ahead with a sweeping deregulatory push. The FAA said the agency "will carefully consider the NTSBs recommendations." In July, the FAA had rejected new regulations, saying they would not control renegade balloon pilots.
Representative Lloyd Doggett, a Texas Democrat, said the FAA must "strengthen balloon safety to avert another disaster" and wants Congress to mandate changes. He said "FAAs rejection of NTSB recommendations would condemn more unsuspecting families to death.
In July, the FAA found that the pilot made errors during the flight, had disqualifying medical conditions and was under influence of drugs. On Tuesday, the NTSB said investigators found that the amount of the antihistamine known as Benadryl in the pilot's system had the "impairing effect" equivalent to a intoxicated driver. (Reporting by David Shepardson; Editing by Marguerita Choy and David Gregorio)