Science, Technology, and Space Subcommittee/House Science & Space Subcommittee joint hearing scheduled for Thursday, July 24, at 10:00 a.m. in room 216 of the Hart Senate Office Building. Members will hear testimony on the future of commercial human space flight. Senator Brownback will preside. Tentative witness list will be announced at a later time.
Witness Panel 1
Mr. Dennis Tito
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Mr. Jon B. Kutler
Chairman Brownback, Chairman Rohrabacher and members of the subcommittees, thank you for inviting me to testify this morning. My name is Jon B. Kutler and I am the Chief Executive Officer and Founder of Quarterdeck Investment Partners, LLC, an investment bank focused exclusively on the aerospace and defense industries. Today, it is my pleasure to discuss what we see as the major issues facing the commercial human space flight industry as its pioneering companies progress to the point of seeking external financing from the capital markets. I must start by applauding the efforts of the individuals who have spoken before me. They are the kind of leaders and risk takers who have traditionally pushed this country to new heights of technological advancement and created whole new industries and jobs. It is appropriate that we sit here today in the centennial year of celebration of the Wright Brothers’ successful completion of the first manned powered flight, to discuss the transition of manned space travel from a government pursuit to an economic business opportunity. The only question the Wright Brothers faced as they started their tests was “can we?”. They did not have investors questioning their return on investment or a federal regulator asking to certify the aircraft. The question before these gentlemen today, however, has become “will we be allowed?”. The most important people to answer that question are not scientists pushing the bounds of technology. They are regulators here in Washington, D.C. who set a framework for these efforts and institutional investors who will judge whether this industry is ready to be a profitable business opportunity worthy of large-scale investment. I am sure that most regulators and investors believe that at some point in the future there will be a prosperous commercial human space flight industry. The foundation of this discussion, however, remains whether the transition from novelty to viable industry will be observed in our lifetime. To the surprise of many, the sheer size of the capital required to fund commercial human space flight is not the issue. There are numerous examples of new companies in fields such as biotechnology and telecommunications that have raised billions of dollars on the basis of someone’s dream. The hurdle is the perceived risk profile and return on that investment. Some initial start-up capital has already been raised and will continue to be 1
Mr. Phil McAlister
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Mr. Jeff Greason
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Mr. Elon Musk
STATEMENT OF ELON MUSK, SPACEX CEO BEFORE THE JOINT HEARING ON COMMERICAL HUMAN SPACEFLIGHT; U.S. SENATE SCIENCE, COMMERCE AND TECHNOLOGY SUBCOMMITTEE ON SPACE; U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON SPACE AND AERONAUTICS JULY 24, 2003 Senator Brownback and members of the Senate Science, Commerce and Technology Space Subcommittee; Congressman Rohrabacher and members of the House Space and Aeronautics Subcommittee; on behalf of the Space Exploration Technologies Corporation I would like to express my thanks and appreciation for the opportunity to come before you today to address issues related to access to space. It is despairing to consider that the cost and reliability of access to space have barely changed since the Apollo era over three decades ago. Yet in virtually every other field of technology, we have made great strides in reducing cost and increasing capability, often in ways we did not dream existed. We have improved computing costs by a factor 10,000 or more, decoded the human genome, built the Internet and made inter-continental flight available to the average citizen for no more than a few hundred dollars. The exception to this wave of development has been space launch, but why? My best guess at the origin of the problem relates to a breakdown of a process that the economist Schumpeter called “creative destruction”. He postulated that the way an industry improves is that new companies enter a market with a lower price or superior product. This creates a forcing function for the whole market to improve. Looking at space launch vehicles, we see a situation where there has been not one single, successful new entrant in four decades, apart from one firm established in the late 1980s. Even in that case, the solid rocket motors that constitute a majority of the manufacturing costs of its launchers are in fact built by existing aerospace companies. So we have really seen no truly new entrants to the American launch vehicle market and, as such, should not be surprised that costs have not been reduced. To address this problem, we must create a fertile environment for new space access companies that brings to bear the same free market forces that have made our country the greatest economic power in the world. If we can create such an environment, my expectation is that progress in space launch costs and capability will be no less dramatic than in other technology sectors. If we truly desire to reduce costs and substantially improve access to space, we must seek new approaches, new ideas, and support new entrants into this difficult and challenging field. We are at a crucial turning point today. The recent entrepreneurial activity in space (my company perhaps included) shows promise, but is still embryonic and fragile. It is very important that our government in all its forms proactively adopt a nurturing and supportive approach to new launch vehicle developments, whether orbital or sub-orbital, manned or unmanned. The SpaceX Approach It was to change the equation of space exploration that I established SpaceX and set as our goal revolutionizing the cost and reliability of access to space, for nothing less is needed. Our first offering is a semi-reusable orbital launch vehicle, called Falcon. Initially, we will exclusively deliver cargo to orbit in the form of satellites and spacecraft, however we do believe in the long term market for commercial human transportation. The reasoning for an early focus on satellites is that we feel this is the path of least market risk and it allows Falcon to prove itself as a satellite carrier, before we extend its use to other payloads. There is no simple sound bite that describes why our launch vehicle is a fraction the cost of efforts by existing launch service providers. Our approach has been to focus on reducing all the cost elements of a launch vehicle company, those being propulsion, structures, avionics, launch operations and general overhead. We have also listened carefully to the collective wisdom of key engineers involved with all major rocket developments of the past three decades to glean whatever lessons may be learned. At this point, we are very comfortable that selling the Falcon for six million dollars per flight is economically viable. This is a reduction of over 75% compared with our nearest competitor. Moreover, Falcon has 30% more payload and objectively fewer catastrophic failure modes, which speaks to reliability. How Can the Federal Government Support this New Era of Space? What I will provide today is the SpaceX view on concrete and rational actions that can be taken by the government to foster the nascent entrepreneurial activity. SpaceX is just over a year old, so these reflect only what we have learned to date. No doubt, there will be more to report a year from now, when, if the future is kind, we will have placed our first satellites in orbit. It is worth noting that the perspective I bring to the launch vehicle industry is drawn from a particularly Darwinian experience in the business world, having founded and helped build two successful Internet companies in Silicon Valley. Seldom have we seen a faster moving, more voraciously competitive business environment or one with more tombstones. However, for all the problems associated with that era, the rise and fall and perhaps rise again of the NASDAQ, it is easy to forget that the vast majority of the monumental work required to build what we know as the world wide web was done in less than a decade. If you doubt that we can possibly see such progress in space access, please reflect for a moment that the Internet, originally a DARPA funded project, showed negligible growth for over two decades until private enterprise entered the picture. At that point, growth accelerated by more than a factor of ten. We saw Internet traffic grow by more in a few years than the sum of all growth in the prior two decades. Our Suggestions: Regulatory Authority As you will no doubt hear from others on this panel, there needs to be clear regulatory authority for commercial launch vehicles of all kinds. It is also critical that such regulatory authorities recognize the early and experimental nature of the commercial launch vehicle industry, providing only the minimum regulatory burden necessary to ensure reasonable safety for the general public. We recommend reaffirming the authority of the AST office of the FAA as the primary regulatory agent for space vehicles. Moreover, progress in fostering new launch vehicle developments should be a key metric of success in the performance evaluation of FAA-AST and other federal agencies when they report to Congress. Environmental Approval For existing launch facilities, where launches are routinely conducted, we believe a blanket Environmental Impact Statement that covers all launch vehicles within a certain size and capability would be very helpful. This would save a substantial amount of capital and processing time. In particular, certain issues of environmental concern seem to defy common sense. For example, the population of seals in the waters around Vandenberg increased by 12.7 percent last year, yet much concern is raised about how rocket launches might disturb them and we are forced to spend $10,000 every launch to see if our relatively small rocket affects their quality of life. This makes little sense. With that population growth rate, it seems clear that if anything the Vandenberg launch activity serves as an aphrodisiac. Range Safety Approval SpaceX has been asked by senior leadership in the Air Force to prepare a report on range safety approval once the process is complete for Falcon. That will be our definitive view, but these are our preliminary conclusions: First, we suggest funding a zero-based revision of EWR-127-1 and the FAA equivalent documentation with a focus on simplicity, along with a clearly defined process for range approval. Rather than trying to amend the existing document, we feel, based on conversations with range safety personnel who have said as much, that the right approach is to do a ground up revision. Second is the difficulty of designing and obtaining approval for flight termination systems, an important system on untested, high energy launch vehicles. This is the onboard equipment and explosives that, if needed in a major malfunction, would destroy the launcher and its payload. Today’s low launch rates only sustain a few companies that provide these components. The result is that our flight termination system is one of the most expensive and difficult to integrate elements of our launch vehicle. If the U.S. government wishes to advance commercial launch at our ranges, we suggest that range safety offer a standard, integrated flight termination system that it could pre-certify and then have launch firms simply buy them from the range authority. This would also improve issues of compatibility across launch vehicle designs. Our discussions with range safety indicate they would be amenable to such an approach. We would also strongly recommend eliminating the use of explosive for flight termination in favor of non-explosive engine shutdown, particularly for reusable components where explosives present a hazard upon recovery. Liability One of the surest ways of preventing companies like SpaceX from offering human transportation in the future is to make it an unlimited liability business, where a single, unintentional mistake can result in a hundred million dollar jury award. It would instantly kill not only the company that made that mistake, but the entire industry. General aviation almost perished in the 1980’s as a result of one massive jury award of questionable justice after another. It only revived once legislation placed reasonable limits on liability. Moreover, in contrast to the fledgling status of entrepreneurial space, aviation was a strong and mature industry with a well developed immune system. We are seeing a crisis in medical care for similar reasons. We believe it is appropriate that a limit be placed on liability such that, notwithstanding clearly egregious conduct, a mistake or force majure event resulting in third party injury, loss of life or damage to property be limited to a reasonable maximum dollar figure. For those that choose to fly on early passenger carrying spacecraft, an individual should have the right to waive liability provided the risks are fully explained, just as would be done for extreme sports, such skydiving or mountain climbing. Whatever the final outcome of such efforts, it is critical that a complete review be conducted of the liability issue as applies to new passenger carrying commercial launchers. Access to Government Markets All we seek is the opportunity to sell our launch vehicles to the various agencies of the federal government. That requires full and unfettered access in which the government buys services, and does not enter into competition with us, using the public’s money. Several ballistic missile assets have been retrofitted into commercial launchers. These vehicles, built and paid for to defend the country, might now prove to be an obstacle to commercial development of space. We seek government as a customer, not a competitor. The Value of Commercial Human Spaceflight The market for satellite delivery, while significant, has limitations in size and application. I suspect the far larger market in the long term is serving people that wish to travel to space for enjoyment. For many people, as shown by a number of marketing studies, this is the fulfillment of a lifelong dream and they are willing to spend a substantial portion of their savings to see that dream realized. There is some skepticism about the market size and dependability, but such skeptics should study the early days of aviation as a guide. For many years before Air Mail service became the anchor that allowed the growth of commercial aviation, a thriving airplane business was underway around the nation, supporting the fun or adventure factor. Barnstormers satisfied that interest and became the crop of entrepreneurs and pilots from which commercial aviation would be developed. Why do we think that commercial space passenger services will be any different? If we believe humanity should one day expand to the stars, then people must have some way to see for themselves what space is all about. They must share in its wonders and experience firsthand its meaning. And, in so doing, open the doorway to space for all. That is what true access to space is about: creating affordable ways for people, payloads, satellites, and experiments to develop the space frontier. Again, my thanks for the opportunity to come before you today, and I look forward to answering any questions that you may have. -30- SpaceX 1315 East Grand Avenue El Segundo, Ca. 90245 Spacex.com