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Mr. NELSON. Thank you, Mr. Yardley.

Mr. Brackeen.

Mr. BRACKEEN. Thank you, Mr. Chairman. I'm also quite pleased to be here today and to tell you how appreciative we are of your committee's efforts. Your action-and I underline the word action-sends a clear signal, I think, that America intends now to move forward with our space launch recovery program.

Like Mr. Yardley, I'd like to just extract some comments from my written testimony. We provided that to you for the record. I will kind of give you a status report. Since I testified before you last September, we have been working hard to firmly establish Martin Marietta's commercial launch business. As has been noted this morning, we recently entered into a long-term agreement— and I stress the words long term, for the stability that that inferswith the General Electric Corporation under which we're going to supply up to 15 commercial launches to them, resulting now in our plans and contracts to launch a total of 19 satellites on commercial Titans over the next several years.

You may know our first launch, which is going to carry the Japanese JCSAT satellite and the British Skynet satellite, is now planned for the summer of 1989. We committed to building these launch vehicles three years in advance of that date. In addition, as Mr. Crockett mentioned, we have contracts to launch two INTELSAT-6 satellites, one in 1989 and one in 1990.

On the status reporting side of governmental issues, we're very pleased with the progress on several fronts, and we're very encouraged by the strong support of our industry that's been reported in the press releases from the President's recent space policy initiatives. Particularly we're encouraged by the administration's willingness to share the risks for potential liability of commercial launches.

I might also add of very considerable importance to us was the State Department's recent reaffirmation of its policy protecting critical U.S. technology from potential loss through launching U.S. satellites in Russia on the Proton launch vehicle. We believe that the same risk of U.S. technology loss, exacerbated by the Chinese government's vigorous thrust to obtain Western launch contracts at any price, will likely require similar action and support of the commercial launch industry, also.

Turning now to H.R. 3765, I just have to express our appreciation for your resolution, your proposed resolution, to the key remaining problem critical to this new industry. As we all testified last September, the single overriding concern that we must take into account with each new investment decision are these unbounded launch risks, however improbable. I spoke then of a need for a risksharing approach in the remote event that damages resulting from a commercial launch accident might exceed insurance coverage reasonably available in the marketplace. I think this need has been fully documented in the excellent testimony by the AIAA yesterday and by others today.

As we all have said, it's clear a strong precedent exists for sharing the space launch risk between the U.S. Government and the private sector, and I won't go into detail. Of course, I'm referring to

the shuttle process and precedent, and we think that is a very appropriate precedent for our industry.

I would point out that in the case of shuttle-launching commercial satellites, no third party claim was ever filed. As I will discuss later the fact that NASA as well as the satellite customer and their subcontractors entered into cross-waivers is very important, and we're going to propose that addition to your bill, also.

In our deliberations-and they were long and thoughtful-in entering this business, we were hopeful that the NASA precedent would be followed in legislation that would equitably allocate these risks. We proceeded to aggressively develop this new business quite honestly on the presumption that the action you're taking today would ensue. And should there be any confusion from earlier testimony, we would certainly have to reassess new expansion continued operation after we satisfy existing contracts should some risksharing solution not be found.

As you know, our current agreements with the Air Force requires us to obtain the maximum amount of insurance commercially available at a reasonable price, to be determined by the U.S. Government. To the extent available, this insurance has to cover all third party risks, all the risks of damage to U.S. Government property, all losses resulting from injuries to U.S. employees, regardless of fault. The maximum probable insurance level of 500 million dollars is probably reasonable, although you can argue it should be less. I'd like to differentiate and say the maximum possible loss from an accident, of course, not only far exceeds the amount of insurance reasonably available on a given policy; it also exceeds current worldwide insurance capacity.

I have to stress that the risk of maximum possible loss is very remote, and were it to occur, however, as we have all said, it could be well beyond the resources of any company to handle. And every contract we've signed in anticipation to the action you're proposing to take has increased our cumulative risk.

As has been testified, an additional problem we have and concern to us is that the current situation does put us at a competitive disadvantage internationally. As has been stated repeatedly and in prior testimony, foreign launch programs do receive substantial support from their governments. Arianespace is held harmless by the European Space Agency and the French Government from third party claims exceeding about 70 million dollars, or 400 million French francs. As we understand it, they're indemnified from launch facilities damage at a level far below what might be caused in a probable accident, and as Mr. Yardley testified in the case of the Proton and Long March vehicles, the Soviet and Chinese Governments appear to assume all the risks and can evidently price below their costs if they can give rides away.

And the truth of it is, this support enables our foreign competitors to realize savings which they pass on to their customers in price reductions. Mr. Crockett testified from a half-million up to three-quarters of a million dollars per launch is enough money to make a decision swing from an American launch vehicle of any of these manufacturers to an Ariane.

It's also worth noting that foreign launches occur in a far more favorable commercial risk environment, and that does make each

new decision to build a new launch pad or to expand business easier if it's going to be done in Karu and not at Cape Kennedy.

I'd like to say that the commercial launch industry is, I think, fulfilling a key role in maintaining American space launch recovery and our leadership in space. Our industry is already having a favorable impact on the national economy and the foreign trade deficit. For example, at Martin Marietta, in 1987, we booked contracts worth approximately a third of a billion dollars for commercial launches, all of it from foreign customers. Testimony earlier pointed out the fact that this industry could be expected to contribute nearly a billion dollars in foreign trade, to the balance of payments, and nearly 200 million dollars in taxes-local, Federal and State taxes. So it's an important industry for us all.

We are aware, based on what we've seen, that the President's recently announced space policy initiatives on launch risk liability and risk sharing do differ from the approach you have proposed. I have not seen the details yet. However, since there seems to be an obvious agreement in objective, we are hopeful that an approach acceptable to both branches can be quickly developed. A lengthy delay in resolving this issue is going to have a dampening effect on our industry, and that's the truth.

A few comments on specific sections of your bill. Commenting on section 4, as it now stands we certainly support it. As had been proposed earlier, we would suggest a slight modification, and that would be that the launch company should assume liability for private sector and U.S. Government risks up to the maximum probable loss, as defined by DOT, or the maximum insurance capacity available at that time, whichever is less, because as did occur in the case of shuttle launches at one time, there was not sufficient capacity to acquire 500 million dollars, and that was adjusted down. With that change, we can certainly support what you proposed. We are also strongly in favor of establishing dollar limits and periodic reviews of that required insurance.

As regards to the reciprocal waivers proposed in your bill, we have already adopted those principles and they're in every one of our commercial contracts. We would also support the extension of that reciprocal waiver proposal to require the U.S. Government to participate in such a plan. I think your bill proposes that at the option the Government can participate. But this will have an important effect. It will essentially increase launch insurance capacity by removing the bill's property insurance requirement to the U.S. Government from the same property insurance pool. That satellite replacement insurance pool is very important to our customers if they're going to launch on American launch pads.

To turn briefly to two other sections of the proposed bill, we can't support section 5(b) regarding eligible satellites which, as written, could be interpreted as requiring us to abrogate our existing contracts. Mr. Crockett of COMSAT testified earlier this provision is going to prove terribly disruptive. It creates essentially a potential preemptive right which is going to have an adverse effect on our ability to market launch services to the many customers who do not own eligible satellites, and our international competitors will exploit this when we're in competition against them for a foreign launch. And even if this subsection were amended to

remove the potential of contract abrogation, we can't get enthusiastic about it because it's going to have a dampening effect on marketing for these international programs, most of the commercial launch business.

Second, we also share the Air Force's concern with respect to proposed section 6, which mandates the payment of liquidated damages under certain launch preemption circumstances. This section will have an unintended effect of dramatically reducing the number of launch opportunities the Air Force will allocate to commercial launch operators on their pads. They're going to have to seek to limit their possible exposure to the payment of liquidated damages. If this were to occur, we'd all experience significant delays in honoring our current commitments and, again, unintended, it would have the effect of jeopardizing our competitive posture in this international marketplace.

Mr. Chairman, we have several other comments on H.R. 3765. We have submitted some of them in our current testimony, and we're going to submit some more in writing in the future.

In conclusion, let me again express our appreciation for what you and the committee are doing. This action is very critical to our proceeding in establishing America as the leader in commercial space launch.

Thank you very much.

[The prepared statement of Mr. Brackeen follows:]








February 17, 1988

Mr. Chairman and Members of the Subcommittee, I welcome this opportunity to come before you today. We are deeply appreciative of your continuing support of America's new commercial launch services industry.

Since I testified before you last September, we have been working hard to establish our business. Recently, as you may be aware, we entered into a long-term agreement with the General Electric Corporation under which we will supply up to 15 launches, resulting in plans to launch a total of 19 satellites on commercial Titans over the next several years. We have a number of launch proposals outstanding, and hope to announce additional contracts in 1988.

On the governmental side, we have been pleased with progress on several fronts. We are encouraged by the strong support of our industry contained in the President's recent Space Policy Initiatives, and we are particularly

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