SUBCOMMITTEE ON SPACE SCIENCE AND APPLICATIONS HEARING ON COMMERCIALIZATION OF EXPENDABLE LAUNCH VEHICLES ROOM 2325 RHOB; 1:30 P.M. - 4:00 P.M. WITNESS LIST

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92B00181R001701610005-0
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 40
• Document Creation Date: December 27, 2016
• Document Release Date: February 24, 2012
• Sequence Number: 5
• Publication Date: May 18, 1983
• Content Type: MISC

Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
COMMITTEE ON SCIENCE AND TECHNOLOGY
U.S. HOUSE OF REPRESENTATIVES
WASHINGTON, D.C. 20515
SUBCOIN'M I TTEE ON SPACE SCIENCE AND APPLICATIONS
Hearing on
Commercialization of
Expendable Launch Vehicles
Room 2325 RHOB;
1:30 p.m.
- 4:00 p.m.
May
18, 1983
WITNESS 1. I
Peter B. Teets
Vice President and General Manager
Space Launch Systems Division
Martin Marietta
P.O. Box 179
Denver, Colorado 80201
Dr. Klaus Heiss, Former President
The Space Transportation Company, Inc.
22 Chambers Street
Princeton, New Jersey 08540
Allan McArtor
President & Chief Operating Officer
FEDEX Space Transportation Company
889 Ridge Lake Blvd._
Memphis, Tennessee 38119
William F. Rector III
Vice President and Director of Space Programs
General Dynamics Convair Division
P.O. Box 80847
San Diego, California 92138
James C. Bennett
Vice President for Government Affairs
Arc Technologies
837 2nd Avenue
Redwood City, California 94603
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
May 18, 1983
STATEMENT OF
WILLIAM F. RECTOR, III
VICE PRESIDENT, SPACE PROGRAMS
GENERAL DYNAMICS CONVAIR DIVISION
before the
SUJ3COMMITTEE ON SPACE SCIENCE AND APPLICATIONS
COMMITTEE ON SCIENCE AND TECHNOLOGY
U.S. HOUSE OF REPRESENTATIVES
Mr. Chairman and Members of the Subcommittee:
Mr. Chairman, it is a privilege to appear before this
distinguished Subcommittee on behalf of General Dynamics
to participate in this series of hearings on commercial
activities in space. My comments today will be focused on
launch vehicle issues which have resulted from two years
of very serious assessment and analysis activities by our
company including numerous interactions with potential customers
and responsible U.S. Government organizations. These hearings
are very timely in light of the near term nature of key
milestones and solutions that we feel must be met before
management and implementation responsibility of current
U.S. Government space programs can be transferred to the
private sector.
We are awaiting the final signature of the President
on the Space Policy covering Commercialization of Expendable
Launch Vehicles that the Senior Interagency Group (SIG)
- Space has been diligently preparing. As you will see,
the timeliness of the release of this policy and subsequent
negotiation of agreements has a major impact on our ability
to transition our existing systems and their derivatives
to the private sector in a cost effective manner.
Our company's involvement in space programs parallels
the entire span of space activity over the past quarter
century. The first flight of the Atlas rocket in 1957 occurred
a few months before the Soviet Union successfully launched
the first Sputnik. Our Atlas missions include such outstanding
U.S. space programs as MERCURY, RANGER, MARINER, SCORE,
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
OGO, TIROS, NOAA, NAVSTAR and others. More than 25 years
later 471 Atlases have flown, 190 of them as space launch
vehicles.
Shortly after'the first Atlas flight, work began on
this nation's, and the free world's, first cryogenic high
energy upper stage-Centaur. In the more than 20 years since
its first flight, Centaur has been the upper stage on 60
Atlas/Centaur vehicles and on seven Titan/Centaurs. Many
scientific and nearly all planetary and interplanetary missions
by the United States have been launched on either, or both,
Atlas and Centaur. Such highly successful programs as SURVEYOR,
PIONEER`; OAO, MARINER, HEAO, HELIOS, VIKING and VOYAGER
were launched by these systems.
This nation has launched 69 commercial communications
satellites, one third of which have been on the Atlas/Centaur.
At this very''moment; Atlas/Centaur number 61 is poised on
launch pad 36B at Cape Canaveral, ready to launch spacecraft
number 6 of the INTELSAT V commercial communication satellite
series on Thursday evening. This will be the twentieth
consecutive launching for INTELSAT on Atlas/Centaur vehicles,
beginning with the first INTELSAT IV in January 1971. In
addition, Atlas/Centaur has successfully placed five military
FLTSATCOM'comrninication satellites in geosynchronous orbit.
With the advent of the Space Shuttle era, General Dynamics
has continued to contribute to the United States space effort.
We are proud of our role in designing and building the Mid-fuselage
for the Space Shuttle Orbiter. The Mid-fuselage for OV-104,
the ATLANTIS, was delivered on schedule less than two weeks
ago. We are also on schedule with the modification of Centaur
for use as an upper stage in the Space Shuttle for NASA
planetary missions GALILEO and ISPM. In addition the DOD
is jointly involved in this program and we will be providing
Shuttle/Centaurs for key military missions that require
high energy performance.
These comments on the background and current status
of General Dynamics' participation in space programs are
intended to provide some insight into the factors which
have led us to today's discussions - a strong belief that-
there is a-continuing need for the mature, proven launch
vehicle systems which have performed so well over the years.
What I would like to do today is to put the question of
commercialization of Expendable Launch Vehicles (ELVs) into
a broader context - how the commercialization of space-related
activities can further enhance the United States' space
prgram, national security and economy.
There appear to be three broad commercial areas where
space is already, or soon will be, playing a major role.
These areas are: information transfer, materials processing,
and energy. In some cases,. involvement either with the
Space Shuttle, or possibly, permanent manned platforms.
The Space Shuttle itself was envisioned from the beginning
as only one element of a complete space system which includes
manned space stations, orbital transfer vehicles and possibly
large geosynchronous platforms.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
J
The Space Shuttle was conceived as a reusable vehicle
that could transport crews and payloads to low earth orbit.
In addition to the Space Shuttle's role as an important national
asset, it provides a unique capability by virtue of its very
large payload capacity, on-orbit versatility and recovery
agility. The presence of man increases the Space Shuttle's
flexibility for mission implementation. Extra-vehicular activ-
ity, problem solving and on-orbit repair capability are signifi-
cantly increased. Only a vehicle such as the Space Shuttle
could make possible the prospect of convenient space station
logistics support, retrieval and return to earth of low altitude
spacecraft, commercially produced products such as pharmaceuticals,
or valuable test samples which had been left in orbit.
As a corollary to the planned development of the Space
Shuttle, the U.S. Government made a conscious decision to
phase down and eventually terminate ELV programs with the
expectation that the Space Shuttle would be able to handle
all available traffic at a cost and schedule to satisfy all
potential customers. In other words, the ELVs were destined
to "go out of business" by the early 1980's.
Projected space launch traffic demands have been thoroughly
examined by several U.S. Government and private groups. There
is a rapi-dly.expanding launch demand for the class of satellites
particularly well suited for ELV's, the geosynchronous communication
satellites. Based upon General Dynamics' continuing reviews
of these various mission models and numerous discussions with
both foreign and domestic users, we conservatively project
the need for launch service for approximately 245 commercial
communication satellites between 1986 and 1995. This market
represents over $10 billion in potential launch vehicle revenue
over this ten year period. Schedule flexibility and reliability
are ranked more important than launch costs by most commercial
communication satellite users.
When commercial communication satellite launch requirements
are considered in conjunction with the planned DOD, NASA and
other U.S. Government missions; the demand exceeds the supply
capability of the Space Shuttle in both near and far term.
This near term overflow was also projected by James E. Beggs,
NASA's Administrator, during these hearings two weeks ago..
This represents a classical "supply deficiency" which has
always offered the private sector an incentive to participate.
The European Ariane launch system has emerged as formidable
competition to U.S. systems with an advantageously sized booster
system, progressive financing strategies, substantial financial
backing from governments and aggressive marketing. Ariane
should not be allowed to take over the ELV business unchallenged.
Commercializing today's proven U.S. ELVs will provide a capability
to accommodate the overflow in launch requirements in direct
competition with Ariane.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
Besides the obvious desire to keep America first in space
as the free world's space launch source, we must also consider
bow a back up capability can be provided for the Space Shuttle.
Our own experience over 25 years shows that unforseen delays
caused by technical problems or untimely hardware anomalies
can inject schedule perturbations unacceptable to either the
DOD or NASA. Commercial ELVs can provide a ready source of
back up.
I support the views stated by Dan Fink, Chairman of the
NASA Advisory Council, in his testimony before the Subcommittee
two weeks ago on the subject of ELV/Space Shuttle competition.
As you recall, he noted that commercial success of the ELVs
will create "some unloading of" the Space Shuttle manifest,
but that this should be viewed as an encouraging event since
it will open up greater opportunities for using the unique
properties of the Space Shuttle: its size, the use of man,
and its servicing and retrieving capabilities.
In the longer view, it would appear that the application
of the Space Shuttle to those missions for which its unique
capabilities are required will result in the generation of
sufficient demand to fully utilize the STS Orbiter fleet.
There are also certain subclasses of payloads, such as the
emerging Direct Broadcast Satellites (DBS), for which adequate
commercially. viable, upper stages for the Space Shuttle do
not currently exist. These satellites, which are too heavy
for the smaller perigee kick stages currently employed with
the Space Shuttle are good matches for Atlas/Centaur. Space-
craft designers have traditionally designed to utilize existing,
proven launch capability.
It has also been argued that in the general spirit of
free enterprise on which so much of this Nation's progress
has been built, co-existence of both the Space Shuttle and
U.S. ELVs will have the beneficial result of making both systems
operate more competitively, and hence, more efficiently.
We certainly feel that this principle will be in full force
among the various ELV options which will be available in the
event commercialization is permitted to proceed; indeed, we
do not ask for, nor wish to see, any "favored status" of one
system over another.
As I stated at the beginning of my remarks, we, at General
Dynamics, have been pursuing the possibility of commercializing
our current Atlas/Centaur system and derivatives for two years.
In April of 1982, after one year of assessment and analysis,
we expressed our interests in proceeding with such a venture
in letters to both NASA and the U.S. Air Force. This was
followed by a formal proposal to NASA in January, 1983, to
continue the Atlas/Centaur on a commercial basis. The positive
cooperation of NASA-and the U.S. Air Force, as well as the
encouragement we received from the State Department, OMB,
and staff members of the White House has been helpful in our
efforts. We also appreciate the difficulties of making this
transition of valuable national assets and capabilities to
the private sector and the magnitude of the effort the many
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
-5-
U.S. Government agencies must expend in order to assure-that
this process is orderly and in the best interest of the United
States.
What we do hope to see is a positive U.S. Government
policy regarding commercialization of U.S. ELVs. If such
a policy is not forthcoming in a timely manner, much of the
opportunity and business incentive will pass from the U.S.
to foreign interests. If private sector commercial operation
does not take over the tools, facilities, and equipment used
to manufacture, test, and launch the ELVs, this entire capability
will b(:?-lost to the United States. The U.S. Government is
already clearly Qn record as planning to terminate this activity.
We will produce our last Atlas/Centaurs in 1985 and have already
begun receiving parts from vendors for these vehicles. Vendor
production lines for our system are scheduled to close down
this year. In addition to the loss of these capabilities
there will be substantial reductions in the work force, both
for the prime producers and their suppliers. The existence
of a foreign competitor will, as already demonstrated, result
in American communications satellite operators electing to
procure their launch services outside the United States.
We in the private sector are offering to maintain, operate,
and preserve?this national asset at no additional cost to
the U.S. Government..
Additionally, we have proposed that we reimburse the
government for those added costs directly incurred in support
of commercial operations from U.S. Government facilities,
such as the range costs at the Eastern Space and Missile Center.
While it is theoretically feasible for private operators to
build and operate a luanch range independent of the current
U.S. Government-owned and operated sites, this course of action
would not only be prohibitively expensive but would result
in the same loss of existing capability that will result if
all ELV operations are terminated as planned.
We are encouraged by the recent actions of SIG'Space
which will soon result in issuance of a policy directive.
Implementation of the policy is crucial with direction to
the several U.S. Government agencies involved to take the-
necessary actions to make it happen, e.g., definition of range
support and facility usage costs to be charged for commercial
launches. A simplified regulatory process, along the lines
already outlined by pending legislation, would be welcome.
We do not feel, however, that any significant new U.S. Government
organization or structure is required. 'Adequate expertise
to provide the necessary management already exists in several
branches of the government.
Mr. Chairman, precedents have been set for private operation
of U.S. Government developed assets. This practice has been
well established in the aircraft, railroad, steel and other
industries. Now, we believe that there is an excellent new
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
-6-
opportunity to encourage the "privatization" of a valuable
national resource which has taken many years and many millions
of dollars to develop, and thus, preserve it for long term
benefit to the economy and security of our country. It is
our sincere belief that the Space Shuttle and ELVs can comfortably
coexist, and do so to the benefit of the nation, each providing
the services for which it is best equipped. Commercialization
of the ELVs by General Dynamics, and other firms, will be
an important step toward a broader base of industrial space-
related activity.
Mr. Chairman, we solicit the support of this Subcommittee
toward these ends, and I appreciate the opportunity to present
our views. I will be pleased to respond to your questions.
Thank you.
W.F. Rector, III
0
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
COMMI I -TEE ON SCIENCE AND TECHNOLOGY
U.S. HOUSE OF REPRESENTATIVES
WASHINGTON, D.C. 20515
SUBCOMMITTEE ON SPACE SCIENCE ANJ APPLICATIONS
Hearing on
Ccmmercialization of
Expendable Launch Vehicles
Room 2325 RHOB;
1:30 p.m.
- 4:00 p.m.
May
18, 1983
TNESS LIST
Peter B. Teets .
Vice President and General Manager
Space Launch Systems Division
Martin Marietta
P.O. Box 179
Denver, Colorado 80201
Dr. Klaus Heiss, Former President
The Space Transportation Company, Inc.
22 Chambers Street
Princeton, New Jersey 08540
Allan McArtor
President & Chief Operating Officer
FEDEX Space Transportation Company
889 Ridge Lake Blvd.-
Memphis, Tennessee 38119
William F. Rector III
Vice President and Director of Space Programs
General Dynamics Convair Division
P.O. Box 80847
San Diego, California 92138
James C. Bennett
Vice President for Government Affairs
Arc Technologies
837 2nd Avenue
Redwood City, California 94603
V-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
Statement
of
Mr. Peter B. Teets
Vice President and General Manager
Space Launch Systems Division
Martin Marietta Denver Aerospace
Subcommittee on Space Science and Applications
Committee on Science and Technology
U. S. House of Representatives
May 18, 1983
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
Mr. Chairman and Members of the Committee:
Martin Marietta Aerospace welcomes the opportunity to address this
committee on the commercial development of space. We feel that a viable
commercial United States space industry will yield important benefits for
decades to come. Martin Marietta has already race commitments to foster the
commercial space business and we applaud you: efforts to encourage the private
sectot-in this important national endeavor.
My comments today are organized into three parts. First, I will address
the national benefits of a successful commercial space industry. Next I will
discuss the status of our efforts to produce and launch Titan vehicles on a
commercial basis. Finally, I will review specific government actions that
will help stimulate an emerging commercial space industry.
National-Benefits of a Successful Commercial Scare Industr
The national benefits of a U. S. comme=cia. space industry are numerous.
The development of such an industry serves many of the federal government's
stated policies. One theme of President Pea_an's economic policy has been to
improve the economy by reducing the role cf :ove:nment and emphasizing private
sector initiatives. The development of a cc-Ter_ial soace industry will
directly help the economy. A proven lower cost alternative to foreign space
launch systems will reduce imports and contribute to our balance of trade.
Likewise, the acknowledged U. S. leadershic in space technology will be
enhanced by commercial launch capabilities without burdening the federal
budget. These activities directly translate into increases in high-technology
jobs with the usual multiplier effects on employment in other sectors of the
economy.
A commercial space industry has national security value. Titan, in
particular, can provide a backup capability to Shuttle for certain national
security payloads. Moreover, Titan can launch a satellite under conditions of
international tension or conflict in which it would be undesirable to launch
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
an orbiter. Our national defense will be further served by the maintenance
and expansion of the high technology industrial base. Mobilization of this
base during times of conflict will be much faster if a commercial space
industry is in place.
Another benefit of commercial Titan, in particular, will accrue directly
to the Air Force. A commercial Titan business provides the potential for Air
Force 4ecoupment of its investment in residual Titan boosters ano components.
In acdition, the commercial Titan business can ne a consumer of residual
Titan II propellants, thereby solving an environmental and safety problem
facing the USAF.
We feel that expendable launch vehicles, especially Titan, complement the
Space Shuttle. Titan will provide a back-up capability to the Shuttle for
non-military payloads in the event of schedule delays or priority DoD
missions-.- Moreover, Titan will provide domestic supplementary launch
capability during periods of peak civil and military demand. As well as
launch capability for hazardous payloads and payloads that are neither
technically nor economically feasible to upgrade to man-rated standards. The
economic viability of Shuttle will be enhanced by Titan through the provision
of attractive launch backup for commercial users.
Since we are discussing the relationship between Shuttle and Titan, I
would 'Like to digress momentarily to address the potential for Shuttle and
Titan competition. Let me assure you that Martin Marietta has no intention to
allow commercial Titan vehicles to compete with the Shuttle. We are pursuing
the commercial Titan business because we believe both programs are mutually
reinforcing and we believe that launch demand will exceed the Shuttle
capacity. Titan launches will compete for this excess demand which otherwise
would be forfeited to the Ariane. There is no question that the Shuttle is
the dominant and most important United States launch system, but we are
convinced that there will be at least one expendable launch vehicle
co-existing in the world. The question is will we build Titan in America or
will the French build Ariane in France. We estimate that that there are
p
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
approximately 6,000 jobs for 220 Titan suppliers in 25 states at-stake on this
question.
The benefits of a commercial space industry to the United States are large
and diverse. Some might argue that these benefits could warrant a significant
amount of government investment to stimulate the industry. However, we do not
see the need for any government investment :o commercialize Titan. What is
ree3?d is that no institutional barriers p=ec_uce our implementation. I will
discuss some specifics on this subject it t-ie last section of my testimony,
but let me talk first about our commercial space activities.
Martin Marietta's Commercial Space Business Activities
Martin Marietta's endeavors in commercial space have focused on two
distinct product lines. They are the Titan expendable launch vehicle and
orbital transfer vehicles. Today, I intenc to limit my discussion to the
Titan business venture.
The United States has been buildinc Titans since 1955. Some 466 Titans
have been built and 293 have flown. The Titan is indeed a mature launch
vehicle. It has evolved through ten distinct configurations, including the
man-rated Gemini. The success record of Titan has been unparalleled by any
other expendable launch vehicle. In the last 5 years, there have been 23
Titan IIIs launched and the success rate has been 100%. In the operational
Titan III series, there have been 122 launch attempts and 119 successes - - a
97.5% success rate. Today, the Titan has more payload capacity than any other
expendable launch vehicle in the free world; some 31,000 lbs. to low-earth
orbit.
At the present time many American products are being criticized for lack
of quality. That is clearly not the case with Titan. Americans can be
extremely proud of the performance of Titan over the last 28 years. However,
the Air Force is phasing out the Titan program and the last government-owned
Titans are currently in production. As a result, last summer we took an
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
in-depth look at the market for commercial satellite launches and developed a
conviction that the.total launch demand will exceed the capabilities of the
Shuttle. The development of the Ariane expendable launch vehicle and its
intended use by some American satellite firms has further reinforced this view.
Encouraged by the results of our market analysis, we decided to pursue the
commercial launch vehicle business using the Titan vehicle. Our major
associa e contractors - - the Chemical Systems Division of United Technologies
Corporation (UTC) and the Aerojet Liquid Rocket Company - - made a similar
decision. In October, 1982, all three companies signed a memorandum of intent
with the Space Transportation Company, Inc. (SpaceTran) to act as our agent
for commercial Titan sales. Since then, the Titan team of SpaceTran, Martin
Marietta, UTC and Aerojet have worked together to establish this business.
Since establishing a market base is critical to long term success, the
majority--of-the-team's resources have been devoted to the preparation of a bid
to the International Telecommunications Satellite Organization (INTELSAT) for
the launch of their INTELSAT VI satellite series. Our proposal to INTELSAT
involves a bid for the launch of two satellites, designed to be a complement
to the Shuttle and a direct competitor to the Ariane. Production of the Titan
vehicles will begin in 1983 and they will be available for launch in 1986.
Our belief is that INTELSAT will select the Shuttle as well as one expendable
launch vehicle to implement their total launch strategy.
INTELSAT received bids from NASA, Ariane, General Dynamics and SpaceTran.
A final decision by INTELSAT is expected in June, and we are confident that
the technical merits and performance record of Titan will weigh heavily in our
The financial commitments of the Titan team have been substantial.
Significantly larger financial hurdles remain ahead. Funds will be needed for
the development/modification effort and for actual production of the
vehicles. Our marketing successes in the next few months will be crucial to
our decision to move forward with this project. The success of our INTELSAT
bid plays a central role in that decision.
.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
There should be no mistake about the uncertainties associated with this
commercial space venture. The opportunity to successfully commercialize Titan
will only exist for a limited number of months. If commercial contracts are
not signed in the near future, then the Titan production line will be closed.
Personnel will be reassigned and machinery will be dismantled. It will be
extremely costly to regain these production capabilities. Moreover, the
investment capital needed to support a commercial Titan venture will not be
available unless there is some evidence of near-term sales. Delays in
government approval/support would be fatal to commercial Titan. Conversely,
any action that the Congress can take to show support for the commercial space
launch business would be extremely helpful. I will next review the status of
Gcvernment actions in the last section of my testimony.
Government Actions
We..are encouraged to hear that the President has approved a new Space
Policy encouraging private sector entry into the expendable launch vehicle
business. Our understanding is that the policy states clearly that the U. S.
Gcvernment will encourage and facilitate the licensing and/or use to the
private sector of those expendable launch vehicle systems that it previously
operated. This support will include designs, tooling, ground support
equipment, facilities and property that is being phased out. The policy
states that government will not seek to recover sunk costs. Moreover, the
policy encourages and facilitates the use of national ranges by the private
sector. We feel it is only reasonable for the government to retain priority
access to joint-use facilities, support services, and private sector ELV
launch vehicles for national security or launch opportunity-critical
missions. We believe that NASA and DoD should be encouraged to charge private,
sector ELV operators on an additive cost basis for joint use facilities and
support services.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
Private sector operators of ELVs must coordinate with the Department of
State to assure compliance with applicable national and international laws and
treaties. At the same time, ELV operators must meet all applicable security,
safety and environmental requirements and regulations. With regard to
insurance, ELV operators will need to indemnify the USG, up to appropriate
limits, against liability for damage/injury and will indemnify the USG against
loss or damage to USG owned equipment and facilities. On the other hand, ELV
operators should expect that the USG would provide assistance to private
sector ELV operators in any disputes concerning other nations.We do not
believe that there is a need to establish any new agency, regulatory
authority, or commission.
In your invitation to testify, Mr. Chairman, you asked for views on The
"Space Commerce Act" proposed by Mr. Akaka (HR 1011). We applaud the
motivation and direction of the Space Commerce Act.It encourages the private
sector.to.pursue expendable launch vehicles as a business venture. In fact,
the findings and purposes of the bill parallel today's discussion. A
question, however, is whether additional legislation is necessary. Our legal
staff has found that existing legislation appears adequate. The Air Force,
for example, has the authority to grant the use of Launch Complex-40 at the
Eastern Test Range. In an approval in principal letter, Secretary Orr has
acknowledged this fact. Nonetheless, he deferred final approval to us pending
the on-going executive branch review of commercial ELVs.
The Space Commerce Act seems to be focused primarily on institutional
arrangements necessary for centralized control. It centralizes the entire
licensing process to expedite the approval process. However, there are some
issues that the Act omits. The Act does not direct DoO and NASA to-allow
private sector use of any government launch facilities. Nor does it encourage
the DoD and NASA to allow use of government design and tooling without
recapturing sunk development costs. Finally, there do not seem to be adequate
safeguards that will prevent premature launch attempts without sufficient
development and testing of the launch vehicle system.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
This concludes my prepared remarks. We believe the United States would be
well served by the development of a commercial space industry. The actions
that the government needs to take involve little or nothing in the form of
budget outlays, but what actions are required must be taken quickly. The
companies involved in commercial space technologies cannot afford long delays
in government policy-making or implementation. Production lines and key
personnel involved will be lost if commercialization is not successful in the
very near future.
Thank you very much for giving me the opportunity to testify before you
today.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
THE SPACE TRANSPORTATION COMPANY INC.
(SPACETRAN)
PRINCETON, NEW JERSEY
SUBCOMMITTEE ON SPACE SCIENCE AND APPLICATIONS
COMMITTEE ON SCIENCE AND TECHNOLOGY
UNITED STATES HOUSE OF REPRESENTATIVES
MAY 18, 1983
r.
Declassified and Approved For Release 2012/02/28: CIA-RDP92BOO181 ROO1701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
Thank you very much for the oppcrtunity to present my views on the
question of commercial space transportation issues and opportunities.
My own involvement in this and related questions dates back to the late
11960's and early 1970's.
In the late 1960's and early 1970's, I directed the economic studies
that led to - among other considerations - the space shuttle decision of
early 1972; in the mid-1970's, I had the privilege of developing the
framework of economic principles that ought to underly the space shuttle
user charge policy of NASA; in February of 1979, I formed the first
United States company whose sole objective it was to bring about the
private organization and financing of space transportation systems; and
since then, I have been very active in market leased initiatives of both
the space shuttle and U.S. expendable launch vehicles - the Titan launch
vehicle system in particular.
The issues and opportunities in the commercialization of space
transportation are several, among them:
(1) are commercial opportunities cf the space shuttle system such that
the private sector, rather than taxpayers, ought to be asked for
the funding of an additional space shuttle orbiter;
(2) should one create a government monopoly in U.S. space
transportation or should one follow a market oriented, competitive
5/18/83 -1-
p
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
approach between any U.S. space launch systems willing to risk
private'funds in commercial enterprises;
(3) can and should ELV's compete with the space shuttle in world space
transportation markets, and why; and finally
(4) what are economically efficient roles for commercial ELV's and the
space shuttle system to fairly - and efficiently - compete in world
markets in the 1980's and 1990's.
To explore these questions, I have prepared a rather comprehensive
written. statement, which I submit with your permission for the record.
The key findings in the prepared statement include:
(1) Estimated Demand for Non-U.S. Government Space Transportation
? The key space shuttle issue identified in 1971 was the need for a
strong U.S. space science and applications program to make use of
the space shuttle in the 1980's. Such a program - parallel to the
shuttle development - was not created in the 1970's. As a result,
we see today a substantial reduction in the government demand - and
possibly commercial demand as well - for space transportation
flights for the rest of this decade.
? A substantial commercial and world market exists for space
transportation services, estimated by us at between $10 billion to
S15 billion from 1983 to 1995. Without an economically efficient
5/18/83 -2-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
U.S. space transportation system, this market will increasingly be
serviced by foreign launch systems.
? An assessment of the potential commercial demand for space
transportation is summarized in Figure 1.1-1 and Table 1.1-2 of the
a~- prepared statement: a total of 183 commercial payloads from 1985
to 1995 are projected. These projections assume competitive
operations costs and user charges.
? A more uncertain and exciting part is the demand for shuttle unique
capabilities by the commercial sector. The most immediate of
these - material processing in space - may range from a low of 42
payloads up to 234 payloads through the end of the century.
?
(2) Commercial Orbiter Opportunity
? The funding of Orbiter V is a pivotal issue to the shuttle and
space program. When the nation decided in 1972 to proceed with the
development of a new Space Transportation System, a minimum of five
and possibly as many as nine orbiters were considered necessary for
the 19R0's and 1990's.
? Given the relative lack of U.S. Government demand for space
transportation in the 1980's, the U.S. Government need for
additional orbiters in the 1980's is uncertain.
5/18/83 -3-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
? Given the commercial and worldwide space transportation market, and
with the establishment of a reliable, fully operational government
fleet of four orbiters over the next few years, the private sector
can afford to fund one or more orbiters in the 1980's and 1990's.
If Orbiter V were funded by the private sector, the terms and
conditions will have to be on an additive cost basis for orbiter
vehicle costs and the cost per flight reimbursement to the
(government) operator of the space shuttle fleet throughout the
life of Orbiter V.
(3) Commercial ELV Initiatives
? In the near term, the commercialization of U.S. expendable launch
vehicles (ELV's) - such as the Titans, Atlas Centaur, and Delta,
among others - will allow the U.S. to capture a significantly
larger share of the world space transportation market. At the same
time, such commercialization will discourage and delay the full
development of foreign competition.
? A "Mixed Fleet" (space shuttle and ELV's) will capture a
substantially larger share of the world space transportation market
than either a "shuttle only" or "commercial ELV only" approach.
? The space shuttle share in world markets may be substantially
larger with commercial U.S. ELV's (Titans in particular) since this
would allow commercial payload users to grow to larger spacecraft
5/18/83
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
sizes - a launch capability wherein the United States today has a
monopoly.
? No new government funding is required to bring about the
commercialization of U.S. ELV's. Let the market determine which
system finds what role in worldwide competition. However,
government decisions are needed right now to give U.S. ELV's a
chance to compete efficiently in world markets.
(4) Competitive Cost and Pricing Issues
13asic to"the success of commercial U.S. space transportation ventures is
a fair, efficient, equitable and "market oriented" government policy on
user charges - costs and prices. Fundamental therein is the requirement
to have the space shuttle compete efficiently in world markets.
Mr. Chairman and members of this Cornittee: You may_rightly question
whether all these "adjectives" and objectives can be met by any policy,
however well intentioned. Nevertheless, a rather straightforward policy
is suggested:
? The delay in Orbiter V procurement and the concurrent reduction of
the demand for space transportation have made a four-orbiter fleet
cost inefficient throughout the 1980's: a "freeze" of the shuttle
fleet at four orbiters for the rest of this decade will make the
shuttle fleet non-competitive through possibly 1995.
5/18/83 -5-
p
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
? The operations cost per flight of a four-orbiter fleet will be at
least $120 million (1983 dollars) averaged over a 12-year period -
and may be even higher. An increase of the shuttle user charge
from $71 million (1986 to 1988) to $120 million (12-year average
operations cost per flight) will leave most of the commercial space
transportation market to foreign ELV's.
? An additive cost ("out-of-pocket," incremental, marginal: cost)
pricing policy will have to be applied throughout at least the
1980's if the United States is not to lose world space
transportation markets to foreign competition. In the 1986 to 1988
period, even "out-of-pocket" costs for the space shuttle will have
to be partly subsidized by the government to meet the projected $71
million user charge for space shuttle flights.
? The user community should be asked to make the same contribution -
per payload carried - to the recovery of costs of government
facilities and services whether carried on the space shuttle or
commercial ELV's.
? As long as space shuttle commercial user charges do not make any
contribution to government facilities and services above real
(actual) "out-of-pocket" launch costs, commercial ELV's should have
similar - i.e., no cost - access to such facilities.
? The "out-of-pocket" user charge policy for the space shuttle and
for ELV use of government facilities and services may have to be
5/18/83 -6-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
continued as long as foreign ELV's are competing on that same basis
(or less) in world markets.
The United States cannot afford any other policy without seriously
endangering its market share in worldwide space transportation in the
1980's and 1990's - a $10+ billion market.
Beyond the question of commercial space transportation activities is an
affirmation of government and industry cooperation to realize the full
potential for U.S. space enterprise in the next two decades.
-The- retrenchment of the U.S. space program in the 1970's - leading to
the questions and issues of today - needs to be reversed by a
forward-looking government space program, including a new space goal,
.
that will make use of the technical capabilities created by the
expendable launch vehicle technology of the 1960's and by the space
shuttle of the 1980's. For the United States to advance and capture its
part in space enterprise in the 1990's, government initiatives and
private sector initiatives have to go forward jointly. The private
sector can make its contribution with full government cooperation and
efficient rules for the transition to more expanded commercial, private
sector initiatives - including space transportation.
The U.S. aerospace industry has been the most dynamic and innovative
sector of U.S.. industry in world markets and is the largest contributor
to net trade (exports minus imports): for every $1 of sales, the
aerospace industry makes a net trade contribution of more than 20c; and
5/18/83 -7-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
for every $1 of sales, aerospace spends 20c on research, development and
testing (see the table in prepared statement).
The aerospace industry has been for some time an example of successful
government and industry cooperation. Let us continue this example in
space matters: the economic stakes for the United States are enormous.
Too much time has already past.
The commercialization of space transportation - particularly of ELV's -
is not a "zero sum" situation where whatever the commercial sector
gains, the government necessarily loses. Rather, like most economic
issues, *space in particular is a "positive sum" opportunity: if pursued
jointly and fully, the United States' share in world space markets of
the 1990's will be large indeed. Without such new direction, we may
well repeat the mistakes of the 1970's, while other nations will catch
up and overtake where the United States has led for so long.
In the context of such a new, forward-looking space program - centered
around a new civil space goal, and an active policy of encouraging
commercial enterprise in space transportation and space applications -
the. need for additional orbiters - including Orbiter V - will become
obvious, and the private sector is willing to do its share to bring such
funding about.
5/18/83 -8-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
"COMMERCIALIZATION OF SPACE"
TESTIMONY OF T. ALLAN McARTOR
SUBC0114ITTEE ON SPACE SCIENCE AND APPLICATIONS
COMMITTEE ON SCIENCE AND TECHNOLOGY
UNITED STATES HOUSE OF REPRESENTATIVES
MAY 18, 1983
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00l81 R001701610005-0
SUBCOMMITTEE ON SPACE SCIENCE AND APPLICATION
TESTIMONY OF T. ALLAN McARTOR
Mr. Chairman:
It is ?.pleasure to address this Committee today and to represent Federal
Express Corporation in its commercial space initiatives.
Much activity has taken place recently concerning commercial space ventures
and the Federal Express involvement in particular.
With the-.Chairman's permission, I'd like to take just a moment and recap for
you the recent turn of events.
As many in this room have been aware, Federal Express has been a minority
equity partner in the Princeton based company, The Space Transportation
Company, Inc.
As of last week, Federal Express and the Princeton group reached final
agreement such that Federal Express would acquire 100% of SpaceTran's
commercial Titan program and will continue to pursue that program under the
name FEDEX SPACETRAN.
We took this step in order to present INTELSAT with the best possible proposal
for launch services of INTELSAT VI spacecraft. As you are aware, INTELSAT
will enter into launch services contracts in June.
Hearing, May 18, 1983 -1-
._
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00l81 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
SUBCOhn-1ITTEE ON SPACE SCIENCE AND APPLICATION
TESTIMOPJY OF T. ALLAN McARTOR
Specifically...FEDEX Space Transportation Company will be a wholly owned
subsidiary of Federal Express and will devote itself (as a service company) to
the pursuit of commercial space initiatives. It is anticipated that I will
assume the Chief Operating Officer position of FEDEX SPACETRAN and Fred Smith
(the Founder, Chairman and Chief Executive Officer of Federal Express) will be
Chairman of FEDEX SPACETRAN.
I will assure this Committee and the industry that our entry into the emerging
commercial space arena is done with caution. This is not a philanthropic
gesture nor simply an adventure! We intend to identify the appropriate niche
for commercial involvement and to profit from it.
G.
We do not intend to replace government nor to absolve government of its
responsibilities in space operations. However, space transportation and the
attendant services surrounding space transportation can begin'to involve the
private sector now.
We feel. it is particularly appropriate for Federal Express to not only-be
involved in commercial space operations but to assist the government and the
industry in developing appropriate policies, procedures, and controls so that
this new frontier can provide new opportunities to those bold enough and
imaginative enough to pursue them.
Hearing, flay 18, 1983 -2-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
SUBCOMMITTEE ON SPACE SCIENCE AND APPLICATION
TESTIMONY OF T. ALLAN McARTOR
Federal Express is very much involved in new technologies of all kinds
including an ever increasing use of communications satellites. We operate our
aircraft fleet to standards of unparalleled reliability, and our determination
to provide totally reliable and predictable services make it only fitting that
these management philosophies be transferred to the disciplines required of
space operations.
FEPEX SPACETRAN is not, however, a traditional "aerospace" company and hence
not burdened with a vested interest in a particular piece of space hardware.
Rather,FEDEX SPACETPAN is a service company...able to look at the user
community objectively and to provide services that are totally responsive to
their needs.
Long range plans of FEDEX SPACETRAN might include launch services and
marketing services for shuttle and ELV's, development and marketing of upper
stages, financial and insurance programs, payload logistics, and other related
services.
Our current activities involve our commitment to commercialize the-Titan
launch vehicle and to position the Titan as the most reliable and flexible ELV
to augment the U.S. Space Transportation System.
We chose the Titan because of its throw weight capability, reliability, and
flexibility...and because of its availability.
Hearing, May 18, 1983 -3-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00l81 R001701610005-0
SUBCOMMITTEE ON SPACE SCIENCE AND APPLICATION
TESTIMONY OF T. ALLAN M1cARTOR
How do we see the role of government?
If we can assume...and I believe all of us here can...that commercial space
operations are certainly in the national good and are as strategic to our
economy as energy exploration and other transportation infrastructures, then...
1. The government should provide, maintain, and operate launch
facilities and ranges just as it does with harbors, canals, bridges,
airports, highways, and other transportation "bases" that allow the
commercial operator to access this "base" under some appropriate but
not burdensome user fee basis.
2. The government should encourage private initiatives in space through
tax incentives, loan programs, or even guarantees.
3. "Space development corporations" similar in design to SBIC's or
MESSIC's might be set up to not only encourage initiatives, but to
provide necessary start up capital.
4. An inter-agency group should be formed with the authority to develop
appropriate oversight controls and to implement the government's
commercial space program. Currently, no single agency has all the
necessary skills to become the lead agency at this time... and it
Hearing, May 18, 1983 -4-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00l81 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
SUBCOMMITTEE ON SPACE SCIENCE AND APPLICATION
TESTIMONY OF T. ALLAN McARTOR
would take too long to educate any given one - rithout delaying the
commercial initiatives now underway! Plus, a special commission
could operate on a new and streamlined basis.
NASA has all the space expertise, but the FAA has experience in
licensing and administering controls, etc.
5. Each commercial space "launch" services company should apply for a
license that includes a demonstration of technical competency and
---that pertains to a particular class of launch vehicle using specific
fuels. These certificates would parallel the authorities granted air
carriers today.
In closing, I would simply like to reiterate that in order for the United
States to retain its supremacy in space operations and exploration, it must
provide totally responsive services to meet the needs of the "space user"
community. This industry that will approximate $10 billion in only a decade
has already expressed the necessity for a viable Space Shuttle program plus a
reliable ELV, a broader based finance and insurance pool, and a streamlined
process for accessing the space transportation network.
Federal Express Corporation, through its subsidiary FEDEX SPACETRAN, looks
forward to making a positive contribution to the solution of these commercial
space problems and to enhance this Nation's space transportation system.
Hearing, May 18, 1983 -5-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00l81 R001701610005-0
May 18, 1983
STATEMENT OF
JAMES C. BENNETT
Vice-President of Government Affairs
Arc Technologies
before the
SUBCOMMITTEE ON SPACE SCIENCE AND APPLICATIONS
COMMITTEE ON SCIENCE AND TECHNOLOGY
U.S. HOUSE OF REPRESENTATIVES
Mr. Chairman and Members of the Subcommittee:
I would like to begin by expressing on behalf of Arc Technologies and its
president, Mr. Michael Scott, our gratitude for this opportunity to introduce
our company to-you this afternoon. Arc is very encouraged by the timely
interest shown by the Committee in what is a new and rapidly accelerating
commercial sector, the industrialization of space.
We trust this hearing will be one of many exchanges between this Committee
and new enterprises, such as Arc, in order to better explore the ways in which
governmental policy can encourage more American activity in this high-risk
but increasingly vital growth area.
It is. our perception that space development is in the midst of a transition
from an experimental and exploratory phase to an era in which more and more
activity is undertaken on a commercial basis. Policy decisions made now by
the federal government will impact this process, either positively or
negatively.
Arc Technologies has held from its beginning that this transitional period
can be facilitated by a Federal policy based on the principle of competitive
privatization: the substitution of competitive privately-financed activities
for governmental activities whenever possible; and allowing the market to
guide decisions currently made by government fiat.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00l81 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
The government has a valid, indeed, necessary interest in this area. However,
instead of direct government involvement, what is required is a reaffirmation
of the principle that the civilian space arena has been unequivocally opened
to commercial activities. As a result, current involvement of private
investors in areas such as space transportation, remote sensing, space
industrial research, and advanced space-based communications will broaden
into s gnificant investment and entrepreneurial innovation. Once the government
stands back and declares space open to business, our own activities will be
testimony to the tremendous American entrepreneurial spirit of innovation
(unequalled in the world) ready and eager to take on the foreign challenge
in space.
As the field matures, space activity will separate into civilian space research
and science, purely commercial activities, and defense spheres with activities
carried out in each by appropriate sectors: a strong NASA dedicated to
leadership in space science and exploration, a strong private sector seizing
leadership in space commercialization and transportation, and a strong national
security effort.
Arc believes that this emergence of market-driven decisions in the field
of space transportation is the key to the development of a diverse, readily
available, commercially oriented transportation segment in America's space
arena. Arc expects to create its market niche in this area by developing and
operating targetted transportation services developed to meet the special
needs of customers.
We expect to derive cost-effectiveness through flexible and short turn-around
decision-making, as well as some of the financing and marketing approaches
common to other American high-technology entrepreneurial industries. This
market-oriented, customer-sensitive approach, combined with reduced prices,
can be expected to create a new level of demand and use of space by American
industry across the board. To fill the void for a launch system tailored to
meet the needs of customers, Arc went back to the drawing-board to design a
new system intended to avoid the high labor, material, and capital costs
._
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
-3-
associated with today's launchers which are oriented to military, manned,
and exotic reseach missions.
Although its particular service may appear futuristic, Arc believes that
its approach is very much within the renowed American tradition of
entrepreneurial innovation. As shown by the range of witnesses who have
appeara-d before this Committee, there is a growing community of private
space firms eager to offer an entrepreneurial response to maintain this
nation's preeminence in space technology.
The pressing need now is not for-the commitment of large amounts of government
funds in transportation or industrialization; rather the call is for private
risk and reward through a policy committed to a clear mandate for private
action in space. In so doing, business will look to government to keep
regulations at-the minumum needed to meet public security/national security
objectives.
Arc Technologies was founded in early 1981 by a group of entrepreneurs in
the San Francisco Bay Area with the goal of offering a variety of commercially
financed and developed launch services. The company was founded with the
view that the financial and business approaches which have proven so
successful in the electronics industry, and which are now extending to
biotechnology, can be applied to space development.
Over the past two years, Arc has worked at its business and technology
development strategy, raised sufficient funding for its initial launch
activities, and increased its staff to the level necessary for its current
activity. We have brought on board senior management personnel, including
Arc's President, Michael Scott, formerly president of Apple Computer, and
other senior management and technical personnel from United Technologies,
Lockheed, Ford Aerospace, and other well-established aerospace firms.
I-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 ? Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
Arc expects to succeed in this business by selecting the most cost-
effective technical approaches rather than the most performance efficient
technical approaches. By innovatively selecting alternative technical
approaches with modestly lower technical performance, Arc expects to
eliminate categories of cost and risk which are unavoidable using traditional
launch technologies. Essentially, Arc will introduce a 'Mack truck' level
of performance in space, rather than the current 'Porsche' level of technical
efficiency. This emphasis on economic efficiency, rather than aiming-for
the limit of technical possibility, will enable Arc to achieve a high level
of reliability quickly, with low development risk and at relatively low
development cost.
Drawing on currently available technology, Arc is designing, assembling
and fabricating its vehicles in house. We are employing aerospace subcontractors
only for'-s-elected components and subassembly. We intend to rely as much as
possible on commercial standards of operation and commercial business practices.
We have successfully conducted propulsion tests of engines of our own design
and manufacture, including full scale flight-size engines, and have worked
on the marketing, regulatory, legal and other aspects of this business.
Our development schedule calls for a flight test of our launch vehicle this
year. Following the conclusion of flight testing, Arc will offer a sounding
rocket */service on a commercial basis. Our long term objective, proceeding
from a systematic effort to match our technology to meet changing customer
needs, is to develop a launch system with orbital capability.
_*/Sounding rockets are used for investigations in, among other
areas, astrophysics and microgravity processing research. They
carry packages of scientific instruments and experiments to
altitudes from twenty to a thousand or so miles. A sounding rocket's
effective lifetime until it drops back to Earth usually lasts
no longer than several minutes. Its advantages to scientific and
industrial users are several. It is the only vehicle which can
perform investigations in the region from 30 to 100 miles above
the Earth. Balloons cannot carry equipment above 30 miles and
satellites are generally impractical to use below altitudes of
100 miles due to atmospheric drag. Above all, the relative ease
(cont. on page 5).
I-
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
Although based on existing knowledge and materials, Arc's launch system
has several innovative features. One of the more prominent of these is that
the vehicle will be launched directly from the open seas. In fact, our test
launch will be off the California coast. In order to minimize the risk from
launch activities, it is probable that the launch site will be 200 miles or
more out in the Pacific. The initial test vehicle, designated the 'Dolphin',
will achieve an approximate altitude of 100 miles and a downrange trajectory
of about 10 miles.
This test launcher will not be carrying a payload. We intend to recover both
the booster and payload bay, which will be landed by parachute, retrieved and
carried back to harbor for refurbishment.
Among other objectives, this flight test will demonstrate our operational
capabili-ty to.?take from the drafting board to development a privately
financed and designed rocket, launch and recover it. A critical objective
is to strive for a cooperative relationship with the appropriate government
agency officials and, thereby, lay the basis for a launch permit review process
which will accomodate the need for certainty and predictability required by
investors and customers in routine commercial operations.
In the interests of achieving such a relationship with the government, last
summer Arc initiated a low-key approach to acquainting officials with our
company's background and goals. These discussions, which involved officials
in the White House, State Department, Defense Department, NASA and FAA gave
both the agencies and Arc a chance to explore the various issues generated by
our business venture prior to actually seeking the government's approval to
launch.
We are happy to report that so far all of our discussions and dealings with
the agencies have been conducted in a spirit of mutual cooperation and
encouragement. NASA Administrator, James Beggs, one of the first officials
we briefed on our plans, set the tone for our subsequent talks with the government
by offering his support and saying, 'Welcome to the club.'
*/(cont. from page 4)of launch and payload recovery operations
give the user flexibility in terms of conducting-an experiment
at the time and place preferred.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
0-
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00l81 R001701610005-0
-6-
Arc is in the midst of a governmental review of its request to launch and,
thus, lacks sufficient information to make specific comments on the impact,
adverse or otherwise, of regulations and agencies on private launch activities.
Instead, we would like to provide a brief overview of the steps Arc is taking
to obtain approval of its launch. We would then like to bring to the Committee's
attention some general characteristics of a launch approval process whose
incorporation would greatly assist in encouraging commercial space activities.
As a result of Arc's intention to move its launch vehicle from U.S. territory
and launch it from the high seas, the company is required to obtain a temporary
export license (under the Arms Export Control Act) from the Department of
State's Office of Munitions Control (O.M.C.) . Because of the liability assumed
by the U.S. in the event of damage to third parties (under the Outer Space
Treaty and the Convention on the International Liability for Damage Caused
by Space Objects), the Department of State has requested that launch operators
obtain adequate,insurance and agree to indemnify the U.S. for any damages that
may result. In this regard, Arc is*currently negotiating with a leading
insurance broker for the necessary coverage.
Also, Arc intends to initiate the procedures for the issuance of notices to
mariners and airmen, and has discussed with the Department of Defense procedures
for DOD officials to be given prior notice of our flight testing.
To satisfy itself that Arc's launch procedures and operations do not pose undue
risks to persons and property not directly involved in the launch activities,
O.M.C. has referred our application to DOD, NASA and FAA for their technical
input. During the past several months, we provided technical briefings to these
agencies on our systems and launch plans. After completing their evaluations,
the agencies will report back to O.M.C. with their comments. O.M.C. will then
render its decision.
Although our view may change as we continue to seek an export license to launch,
it appears that this approach will achieve launch approval as long as the operator
is in a development, prototype stage. However, in order for investors and
customers to have faith in the availability and predictability of private space
**/Also, the State Department has defined a launch per se as an export activity.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
-/-
transportation, a long term regulatory structure oriented to commercial
business practices must evolve. Although it is too early for us to define
exactly what that system ought to be, we can make a number of general
observations and recommendations:
o first and foremost, the regulation of commercial space activities
should be kept at the bare minimum required to meet public
safety/national security objectives;
o the federal government should reaffirm its commitment concerning
the private sector's right to pursue activities in space and
should support an even-handed approach to defining impartial,
non-burdensome standards for meeting its concerns;
o launch service operators should not be required to undergo
redundant permit review processes. E.g., an operator should not
be mandated to go through an export license review if another
procedure for accomplishing the same goal has been established;
o the` government should avoid subsidizing, or in anyway unfairly
supporting, one launch operator against another;
o the government should not impose inflexible means for meeting
public safety standards, especially when dealing with different
types of launch technology. Nor should national range standards
be automatically and universally applied to different launch
operators;
o in its deliberations on public policy in this area, the government
should recognize that it can offer no more than an interim solution
to coordinating private launch activities. Any long term approaches
(e.g., designating a permanent lead agency and setting long term
safety and security criteria) can only be developed in the light
of growing operational experience.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
-U-
In our view, the following characteristics should be incorporated into
any government involvement in the commercial launch business:
o the lead agency should have a mandate to promote space industry,
as well as protect the public interest. If it rejects a launch
permit request, it should be constrained to offer reasonable
alternative approaches to obtaining approval;
o U.-A' it should be granted real preemptive powers to make decisions.
To expedite the process and, thereby, protect all parties
involved in the approval process, the federal government should
seek to preempt state laws which might divide or dilute the
lead agency's authority;
o any regime overseeing private launches should be flexible enough
to permit innovative approaches to meeting safety standards.
E.g:', the government could set the basic safety standards with an
understanding that launch operators have the resident expertise
to carry-out their own range safety review. It is our belief
that the requirement for insurance coverage (to a level
set by the government) would provide an incentive for operators
to satisfy public safety concerns;
0 any attempt by the government to define safety standards should
be based on the extent to which a launch activity poses an undue
risk to persons and property not directly involved in the operations.
This scrutiny should be related to the potential risk represented
by the operator's particular launch technology, where the launch
.takes place, and so on. In this regard, mandatory insurance
requirements should not be uniform;
o the costs to the launch operator for meeting launch permit
review requirements ought not. to be unduly burdensome.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
 Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0
-9-
In summary, Arc Technologies is part of a growing number of entrepreneurs
who, have amassed the capital and talent necessary to undertake the risks
associated with commercial space development. To date, the federal
government has been most cooperative and supportive in our efforts to
obtain permission to demonstrate our launch technology. However,
if routine, commercial space transportation operations are ever to become
established, the government must create an environment which fosters
this nascent business rather than impedes or stifles it. We have suggested
ways in which the government's launch approval process might be made
more sensitive to the pressing needs of commercial space transportation
operators for certainty and predictability.
To assist the Committee in its deliberations in this public policy area,
Arc will be happy to keep you informed of our progress as we continue to
seek approval for our demonstration launch this year.
At this point, I will try to answer any questions that you may have.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610005-0