blank.gif (51 bytes) Cover Story
Houston, We
Have No Purpose

The Commercial Space Industry
Comes to Southern Nevada

by  D. Dowd Muska

n Christmas Day, 1997 a rocket lifted off from Kazakhstan, carrying with it AsiaSat 3, a television satellite. But the upper stage of the Russian-made rocket failed to fire, leaving the satellite in a useless orbit—destined to pointlessly circle Earth until it eventually reentered the atmosphere and burned up.

Then the boys at Hughes took a look at the problem.

Hughes Space and Communications Company had built the satellite for AsiaSat, an Asian telecommunications corporation. Engineers were understandably dismayed that their still-functional product was now a high-priced piece of space junk, so they came up with a solution: bounce it off the moon. By carefully firing the satellite’s thrusters, they would nudge it into a lunar orbit, then slingshot it back toward Earth.

Tricky stuff, but Hughes was so confident in its plan, it cut a deal with the 27 insurance companies that took title to the satellite after the disaster over Kazakhstan. Under the agreement, Hughes assumed ownership of the satellite. If engineers could establish a workable Earth orbit—and then find customers for the satellite—Hughes would share any profits from the venture with the insurers.

Complex as it was, the plan worked. In June, what a Hughes press release called "the first known lunar mission involving a communications satellite and the first mission financed by a non-government entity" came to a successful end—after two trips around the moon, the satellite fell into a geosynchronous orbit over the Pacific Ocean.

This unprecedented salvage operation went all but unnoticed by the dominant media, but it highlights a snowballing trend NASA has yet to cope with: the entry of for-profit firms into space.

Thirty years after man first walked on the moon, the commercial promise of space—satellite launches, tourism, manufacturing and even mining—is close to realization. Whereas governments once controlled all activity in the heavens, the private sector now regularly intrudes on NASA’s domain.

And there’s a role for Nevada to play in this movement toward markets in the final frontier. Kistler Aerospace, maker of the K-1 reusable rocket, plans to set up shop in the Southern Nevada desert. Kistler is just one of several companies that plan to turn a profit laying the foundation for mankind’s future in space.

The Wrong Stuff

his year NASA celebrates its 40th anniversary. While images of spacewalks and moonshots linger in the minds of many older Americans, clearly the agency’s glory days are over. In the eyes of a mounting number of critics, NASA is no longer gee-whiz proof that government can indeed accomplish great things—it’s simply another bureaucracy in search of a purpose. These days NASA finds itself a victim of empty nest syndrome. It fulfilled its original mission (catch up to the Soviets, and then beat them to the moon), and is now scrambling to justify its existence.

Keith Cowing, a NASA gadfly who publishes the online NASA Watch, spoke about the agency’s troubles before the House Science Committee’s Subcommittee on Space and Aeronautics in October: "NASA’s core problem today is that it has no clear compelling vision to guide it. Nor has NASA had such a vision for decades."

Certainly the space shuttles no longer inspire awe. Perhaps they never should have in the first place—as Space Frontier Foundation (SFF) President Rick N. Tumlinson told the subcommittee, the shuttle program was the product of "the old government contracting system" and "endless compromises … between NASA’s perceived needs and that of the military." The shuttle fleet, Tumlinson contended, "lost its original pedigree as a low cost space transportation system before it ever left the drawing board." Economist Ed Hudgins, in the Cato Handbook for Congress, refers to the shuttle as "a costly white elephant."

As for the International Space Station (ISS)—the other big item in NASA’s current budget—cost overruns and delays are the norm. In the 1980s, President Reagan proposed an all-American, $8 billion station named Freedom. In time the stripped-down project morphed into an international behemoth, with a current price tag of almost $100 billion. American taxpayers have already contributed $17 billion to the ISS, a joint venture with Russia, European nations, Canada and Japan. But the crisis in Russia has caused its space agency to miss countless ISS deadlines. The launch of the station’s U.S.-funded, Russian-built service module has been delayed three times since 1997. Without that key component, no further space-based work on the ISS can proceed.

Writing in the Wall Street Journal, author Robert Zimmerman placed the blame for the ISS debacle squarely with "the Clinton administration, which … insisted on including the Russians, and which has refused to rethink its decision." But America’s space bureaucrats shouldn’t get off on the just-following-orders defense. As James Oberg noted recently in The American Spectator, NASA has a record of stifling those who don’t toe the ISS line. In 1993, the career of Gene Kranz—the mythical mission control chief portrayed by Ed Harris in the film Apollo 13—suddenly came to an end a few months after he wrote a memo critical of the U.S.-Russia partnership. In early 1997, NASA imposed strict media controls after a Dallas television reporter documented Russian space officials’ extravagant lifestyles on American tax dollars. The agency has also refused to grant press credentials to Cowing’s indefatigable NASA Watch.

CATS Fight

riticisms of individual missions and programs aside, the biggest—and most damning—allegation in the arsenal of NASA naysayers is the agency’s failure to achieve a cheap way to reach space.

Simply getting up into orbit—regardless of the reason for doing so—has always been the greatest obstacle to extraterrestrial human activity. Presently it costs aerospace companies about $10,000 to put a one-pound payload beyond Earth’s gravitational pull. The shuttle may deliver payloads for as little as $6,000 a pound, but independent accountants have found NASA’s bookkeeping to be dizzyingly byzantine. One analyst, after factoring in the capital and developments costs of the shuttle, concluded NASA spends around $35,000 per pound of payload. (During the heyday of America’s space program, Apollo launches cost only around $3,800.)

With a budget determined by congressional appropriations—not market forces—NASA has had little incentive to make space travel cheaper. That’s the belief of John S. Lewis, a planetary science professor at the University of Arizona-Tucson. "Sadly, the domination of space activities by governments has caused the price of space travel to remain very high," he wrote in his mind-blowing book Mining the Sky. "Governments," Lewis added, "do not need to show a profit, and they have strong institutional incentives to keep costs (and therefore budgets) as high as possible."

Forty years after America’s initial investment in space technology, the aspirations of space explorers and entrepreneurs alike continue to be squashed by the astronomical cost of reaching orbit. "Here we are more than a quarter century after the first and last moon landings, and Americans still can’t enter the frontier they paid to have explored," laments the SFF.

Charles "Pete" Conrad—a veteran of the Gemini, Apollo, and Skylab programs—made note of this disappointing reality during October’s subcommittee hearing: "In 1903, people aboard an airplane were called ‘aeronauts.’ Forty years later, they were called ‘passengers.’ Where are the passenger tickets to space available for purchase today?"

"Cheap access to space" (CATS) is fast becoming the rallying cry for those who believe in a galaxy-wide Manifest Destiny. Last year, SFF announced The CATS Prize, a $250,000 reward for the first private firm to launch a 2 kilogram payload 200 kilometers or higher. The stakes are much greater for the first successful private effort to put a three-man team into orbit—the X Prize Foundation has raised $1.5 million of an announced $10 million reward for that accomplishment.

That government will never provide cheap access to space is now widely accepted in the space community. To some, though, CATS isn’t a game—it’s a business.

Rocket Men

ecent decades have not been kind to the Nevada Test Site (NTS). Once the center of U.S. atomic weapons testing, the Rhode Island-sized plot of land in Southern Nevada has suffered since the end of the Cold War. The implosion of the Soviet Union has meant the disappearance of thousands of high-paying jobs at the facility, and the loss of even more jobs in the region.

But an ambitious aerospace firm has plans to bring a few jobs back to the NTS—and its workers won’t be public employees.

Kistler Aerospace, based in Kirtland, Washington, has big plans for an 800-acre lot at the NTS. Located in Area 18, about 80 miles northeast of Las Vegas, the site is to be the spaceport for Kistler’s American operations.

While many Southern Nevada business leaders and politicians mistakenly see "public-private partnerships" and renewed federal involvement as the NTS’s salvation, Kistler is strong evidence that the site is ripe for full-scale privatization. It’s also living proof—or at least, it soon will be—that NASA shouldn’t be in the launch business.

Kistler is one of a handful of companies known as "The Four Musketeers." The phrase was coined by a musketeer executive, Geoffrey Z. Hughes of Rotary Rocket. His company, Kistler, Kelly Space & Technology and Pioneer Rocketplane are all developing ways to lift satellites into orbit using reusable vehicles.

Since the launch of Sputnik in 1957, single-use, expendable rockets have been used to put satellites in orbit. Making just one addition to the global communications system costs between $10 million and $140 million—and the tool used to place that satellite in space can never be used again. As Fortune writer Erick Schonfeld observed, "That’s like flying a Boeing 777 once—and then throwing it into the ocean."

Reusable rockets—or rocketplanes—can dramatically lower the cost of payloads. Some experts believe reusable vehicles will cause payload prices to drop to around $1,000 per pound. Still pretty steep, but nonetheless a major improvement.

Kistler’s K-1 reusable vehicle is a two-stage rocket. Using engines that generate 1.02 million pounds of thrust, the K-1 soars to an altitude of 135,000 feet. There the first stage is jettisoned. It deploys its parachutes at 10,000 feet, and then drifts back to the launch site, where its fall is cushioned by airbags. Meanwhile, the second stage climbs to a low Earth orbit (400 to 1,000 miles), where it releases its payload. Then the second stage heads back to the launch site, landing with parachutes and airbags as well. A ground crew reassembles the K-1, and within days it’s ready for another launch.

Kistler has put together what Wired contributing editor Stewart Taggart calls "the finest collection of post-Apollo space engineering talent ever assembled" to test, build and operate the K-1. George Mueller, an 80-year-old who once headed the Apollo program and several other high-profile NASA projects, came out of retirement to serve as Kistler’s CEO. A comment Mueller made to Taggart about the difference between working at NASA and working at Kistler succinctly captures the difference between public and private space work: "Now, while the schedule is just as intense, you also have shareholders to worry about."

Its technical team isn’t the only thing Kistler can brag about—its market research is just as impressive. The company has identified a long list of potential customers. Although estimates vary, around 2,000 satellites will be placed in orbit in the next decade alone. (In 1997, commercial satellite launches outnumbered government launches for the first time.) The best prospect is Teledesic, a massive communications network whose primary investors are Bill Gates and Prince Alwaleed Bin Talal Bin Abdul Aziz Alsaud of Saudi Arabia. Teledesic’s system will have 288 satellites in its "communications constellation." Space Systems/Loral has already signed a $100 contract with Kistler, and Motorola, GE and TRW could also become customers.

Kistler’s long-term potential is even brighter. Since most satellites have short lives—an average of five years—the company plans to grab as big a share as possible of the "second-generation communications satellite deployment market." No wonder so many investors are putting their money behind the K-1—Kistler has raised $300 million in venture capital so far. With its techies so experienced and its financial footing so sound, it’s clear that Nevada has the musketeer with the sharpest sword.

Resistance is Futile

n July, Kistler broke ground for its first spaceport. Having obtained all the necessary environmental and regulatory authorizations, the company began constructing a tower for K-1 launches. Don’t hop on U.S. 95 to catch a glimpse of this spaceport, though—it’s in central Australia.

Nevada isn’t the only location where Kistler plans to do business. Its Australian facility will be ready long before any spaceport in the Silver State, and the company will soon begin test flights of the K-1 Down Under.

Why is Kistler hedging its bet? Because unlike the Aussies, the American government has yet to design a regulatory framework for reentry vehicles. Congress recognized the possibility of private space companies back in 1984, when it passed the Commercial Space Launch Act. But the Federal Aviation Administration’s Advanced Space Transportation office was given no authority to license the reentry of vehicles or payloads.

In other words, the Four Musketeers can get permission to launch their vehicles over American skies, but if they bring them back to earth, they’ll be breaking the law.

As Tumlinson notes, this is akin to "someone from the FAA running alongside Orville Wright … and telling him he could not land."

Adopting a minor addition to the FAA’s regulatory authority appears simple enough. But congressional supporters of commercial space have had to wage a protracted battle to pass legislation which permits the K-1 to parachute back to the Southern Nevada desert. James Sensenbrenner, the chairman of the House Committee on Science, blamed mixed signals from the Clinton administration and bureaucracies "who still do not have their act together and are willing to use scare tactics" for the legislation’s delay. As Nevada Journal went to press, the Commercial Space Act of 1998 had finally passed both houses of Congress and was awaiting a presidential signature.

However, the Four Musketeers’ troubles won’t end with a Rose Garden ceremony. Having won approval for a law they need, they fear passage of a law which could kill their nascent industry.

The Space Launch Cost Reduction Act (SLCRA), sponsored by Louisiana Sen. John Breaux, establishes a low-interest loan program for "qualified private companies" seeking to build reusable vehicles. The battle lines drawn over the SLCRA highlight the difficulty of breaking up the 40-year-old space partnership between big government and big business. Establishment satellite launchers, led by Lockheed Martin and Boeing, support the bill. (So do the Commerce Department and NASA.) Lockheed Martin’s Jerry Rising, in testimony before a Senate subcommittee, said his employer believes "the most straightforward and effective means of facilitating private investor confidence [in commercial launch companies] would be through a government loan guarantee program."

Hanging on to what they’ve got makes good business sense for the aerospace giants, of course. To the Four Musketeers, a loan guarantee program is an unwelcome return to outmoded policies of the past. Freedom to innovate (and strict adherence to the bottom line) has led the Four Musketeers to run from federal support. In fact, being subsidy-free is a prerequisite to membership in the group. Kistler executives don’t seem as willing to attack federal funding as do their colleagues, but their company’s promotional literature indicates where they stand: "Kistler Aerospace has not used government funds. All financing for our projects has been, and will be, funded from private sources such as international investors, contractors, institutional inventors, strategic partners, and potential customers."

That’s the right way to go, according to Tumlinson. "We must avoid the market warping effects of loan guarantees," he insists. "The idea of federally subsidized loan guarantees is being promoted by one or two firms whose planned vehicles will require the most extreme outlays of cash, and are the most financially dubious of all the ideas being proposed."

The SCLRA’s passage is iffy, but many existing space pork programs refuse to die. Lockheed Martin, for example, is currently receiving $1 billion from NASA to build the VentureStar, the space shuttle’s replacement. (Ironically, the Nevada Test Site is one possible location for a VentureStar base.)

That sort of taxpayer-funded giveaway makes Rotary Rocket’s CEO go, well, ballistic. On Capitol Hill last spring, Gary C. Hudson denounced the sweetheart deal: "Lockheed Martin did not have to say it would actually deliver an orbital vehicle to get this cash. It merely promised to dabble in sub-scale sub-orbital work that might some day be of use in getting us into orbit."

Calling the $760 million NASA has planned for additional subsidies in the next few years "aerospace socialism," Hudson told Congress, "I am here to testify that at least four companies do have shareholders who believe in their skills. And these companies have bankers and other investors who are putting hundreds of millions of dollars at risk in the quest for affordable space transportation."

The Financial Frontier

f privatized launch services are given the freedom to get off the ground, the long-term payoff is almost impossible to exaggerate. Satellites are only one part of a space-faring economy. Theorists have long spoken about the potential for space tourism, the advantages of manufacturing products in weightlessness and the untold wealth that could result from mining mineral- and water-rich asteroids and comets. For now, these industries only exist on paper, but with launch costs reduced by a factor of ten or more, the solar system could become a vast boomtown very quickly.

Earlier this year a NASA study concluded that the market for space tourism would skyrocket if cheap access to space were achieved. Passenger prices could plummet to around $10,000 within 10 years, meaning half a million people each year could boldly go where no tourist has gone before. Pharmaceutical companies are eager to conduct zero-gravity tests on the structure of protein crystals, since such experiments could help design new drugs. Shipping companies would benefit from CATS immensely—Pioneer Rocketplane Vice President Mitchell Burnside Clapp once boasted to BusinessWeek about delivering "a package to San Francisco a day before it was sent from Japan."

In 2001, entrepreneur James Benson plans to launch a probe to study one of the 400 asteroids in Earth’s neighborhood. SpaceDev, his publicly traded company, will examine the space rock’s size, mineral composition, and economic value. In Mining the Sky, Lewis estimates the asteroid belt between Mars and Jupiter contains 825 quintillion tons of iron. There’s uranium, gold, silver and many other valuable materials in the belt as well—all there for the taking, if miners can get there cheaply.

Given Kistler’s position as the de facto leader of the Four Musketeers, Southern Nevada is well positioned to reap the benefits of mankind’s overdue space enterprise. The question is whether NASA and its longtime corporate companions will facilitate a thriving commercial space community, or stand in its way.

If the Four Musketeers and their inevitable descendants can overcome both technical and governmental obstacles, and make access to space cheap at last, mankind may make it to the stars faster than most people think. And with a state-of-the-art spaceport within its borders, the Silver State could become a major hub for extraterrestrial commerce.

Business leaders and elected officials in Nevada usually look to California, the East Coast and overseas nations for ways to diversify their state’s one-industry economy. Perhaps they should look up, too.  NJ

D. Dowd Muska is a contributing editor of Nevada Journal.

News to Use
Kistler Aerospace

Rotary Rocket

Kelly Space & Technology

Pioneer Rocketplane

Space Fontier Foundation

NASA Watch


D. Dowd Muska

Mining the Sky, by John S.Lewis, Helix Books, 1996


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