Volume 2, No. 14                September 23, 1998

Government options to promote the commercial development of space transportation was the subject of a hearing (9/23/98) by the Senate Commerce Subcommittee on Science, Technology and Space. The hearing was requested by Senator John Breaux (D-LA), who is the author of legislation (S. 2121) to provide government loan guarantees to industry to reduce the cost of developing space transportation.

Breaux said "we must do more to help U.S. space launch companies...so [they] can recapture the lucrative international market." Breaux's bill was harshly criticized when introduced in June. The Louisiana Senator said the bill's provisions were "not written in stone" and he was open to suggestions to make improvements. He said he wanted to craft a final bill that was neutral to determining "winners and losers," would not discriminate as to the size of a company, and would be "technology neutral." He pledged to "make a full-scale effort in the next Congress" to pass his bill. Following are highlights from witnesses who appeared before the subcommittee:

Daniel Goldin, NASA Administrator

Mr. Goldin said the United States is "handicapped by outdated launch vehicle technology and a people-intensive, expensive infrastructure." As a country, he explained "we have not adequately addressed the issue of affordable, reliable access to space." While the U.S. has developed only one major launch vehicle and rocket engine the past 25 years (the Space Shuttle and its main engine), Goldin observed that "other nations have developed 27 rocket engines and dozens of launch vehicles."

To promote the commercial space launch industry, Goldin said NASA favors: 1) investments in high-risk technologies for future launch vehicles; 2) guaranteed government loans to reduce the cost of capital and leverage the amount that can be borrowed; 3) advanced purchase agreements for a number of launches if industry can meet a designated low price and schedule, and; 4) tax credits and tax holidays to encourage investments.

While Goldin called S. 2121 "an effective incentive," he cautioned that a loan guarantee program "must be contingent on industry first securing private investment" and recommended placing "some reasonable limit on the percentage of a project's value which can be guaranteed."

Commercial satellite businesses represent a $44 billion industry, about half of which are located in the United States, according to Mr. Bachula. "The commercial remote sensing satellite market," he said, "is projected to reach approximately $1 billion by the year 2000. The worldwide market for GPS goods and services is expected to double to $8 billion within two years and quadruple to $16 billion by 2003."

"Last year, for the first time," Bachula stated, "the number of commercial launches from the United States exceeded the number of government and military launches." To boost America's market share -- 40 percent in 1997 -- Bachula called for "significant investments in research and development" and endorsed the "concept of loan guarantees, advanced purchase agreements, cooperative R&D, and any number of other alternatives."

Mr. Graykowski described the growing demand for commercial space vehicles and space infrastructure. "Launch site operator licenses have been issued to facilities in California, Florida, and Virginia," he said, and "Alaska is well along in the licensing process" and pre-application consultations are underway with New Mexico. Graykowski described three DOT programs that could potentially be adapted to provide indirect support to the commercial space transportation industry.

Mr. Money briefed Subcommittee members on the Defense Department's Evolved Expendable Launch Vehicle (EELV) program, which is designed to replace the Titan, Atlas, and Delta vehicles with lower-cost launchers.

Private financing of a reusable launch vehicle such as Lockheed-Martin's proposed VentureStar "would be unprecedented and unlikely to be available without significant sponsor and government support," Mr. Randolph explained. "The United States government," he said, "will need to play a significant and active role" to finance the next generation of commercial launch vehicles. He called Breaux's legislation the kind of government program that would make private financing "more accessible and less costly."

"The highly technical nature of new launch vehicle development," Mr. Rising explained, "creates risks that cannot be well-measured by the global private investment community." He said the "most straightforward and effective means of facilitating private investor confidence would be through a government loan guarantee program." He added the "government should consider becoming an early customer, signing a Ôbankable' contract that could be helpful to raise private financing." Rising endorsed S. 2121, saying it "would make private debt financing feasible." Without loan guarantees, he warned "it would be literally impossible for companies to obtain private loans."

Mr. Schluter discussed government impediments to the growth of the U.S. commercial space launch industry. Topping his list is an erosion of indemnification protection. "NASA has taken the position it can not provide...indemnification to industry for some of its launches since there may be no national defense nexus," Schluter explained.

Another problem relates to the Commercial Space Launch Act. "The current CSLA," Schluter said, "is no longer adequate in scope or implementing language to effectively promote the U.S. commercial space launch industry...." Specifically, he said the government is not adequately investing in launch infrastructure to "support increased launch rates and reduced launch cycle times required by the commercial satellite industry."

While no one wants to transfer technology so new countries can build rockets, Mr. Vinter said "many non-U.S. underwriters believe that the U.S. government puts unnecessary restrictions on the transmission of technical information." Vinter called on "all relevant parties" to review the issues and to "determine the proper amount of information which could be shared while at the same time protecting the legitimate concerns of the government."

Mr. Wurst detailed problems small businesses face in raising capital to bring space transportation systems to market. To assist industry, he advocated government guaranteed loans, tax incentives, and advanced purchase agreements.

The National Space Society is an independent, nonprofit space advocacy group with headquarters in Washington, DC. Its 20,000 members and 75 chapters actively promote the creation of a spacefaring civilization.