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Third, the Administration has also decided to adopt, through departmental regulation, a more equitable sharing of the risks associated with commercial launch operations at Government ranges. We have decided that when property loss or personal injury results from Government's own willful misconduct or its own reckless actions the Government will not make claims against the insurance which launch firms must carry to cover Government property loss or personal injury.
In summary, the Administration is currently drafting appropriate legislation to cap third-party liability and the Department is engaged in a rulemaking process that will implement the policies affecting liability for Government property loss. In that rulemaking we plan to specify the factors the Department will consider in setting insurance requirements. Once published, the proposed rule will be followed by a comment period during which, obviously, Congress, industry and the public will have the chance to make their views known.
We believe that together Congress and the Administration can move expeditiously in the next few months to resolve the more difficult aspects of the liability issue. We believe this could be accomplished through regulation and by enacting legislation along the lines I've described.
With your permission, Mr. Chairman, a few additional comments on some other key provisions in the amendments. I believe the committee is already aware of our view that the proposed amendments should retain the original language calling on the Department to promote this industry. In September 1986 the committee reaffirmed the need for this language. If anything, I would suggest that development since then have underscored the wisdom of that original decision.
Secondly, regarding the section entitled "Launch Incentives for Eligible Satellites," I concur with my colleague from NASA's views concerning the problems with implementing it. Furthermore, given the number of foreign satellite owners which would stand to benefit, the U.S. might find itself in the rather anomalous position of providing assistance to foreign satellite operators.
Third, section 3(a) addresses application of direct costs. Although we commend this effort to clarify the definition of direct costs, we believe it would serve to only confuse the working definitions developed by NASA and the Air Force in cooperation with the industry to date.
Section 8 calls on the Government to explore establishing principles for fair international competition in commercial space activities. As noted earlier in my statement, the Department is actively supporting the USTR in discussions with the Europeans in exploring the feasibility of establishing fair trade practices in international launch services.
Mr. Chairman, this committee originally proposed the Commercial Space Launch Act in order to foster an American commercial launch industry. Well, that visionary goal of yours is becoming a reality and, just as we have in the past, we look forward to working closely with you and your colleagues to address in an intelligent and timely manner the outstanding issues associated with this
Courtney A. Stadd
Director, Office of Commercial Space Transportation
Subcommittee on Space Science and Applications
February 16, 1988
MR. CHAIRMAN, MEMBERS OF THE SUBCOMMITTEE, THANK YOU FOR GIVING ME THIS OPPORTUNITY TO ADDRESS THE ISSUES FACING AMERICA'S COMMERCIAL SPACE TRANSPORTATION INDUSTRY TODAY.
AMERICA IS THE ONLY NATION IN THE WORLD WITH A FULL COMPLEMENT OF INDEPENDENT, FOR-PROFIT FIRMS THAT ARE AGGRESSIVELY MARKETING LAUNCH SERVICES TO A WIDE RANGE OF DOMESTIC AND INTERNATIONAL CUSTOMERS. IN THE LAST YEAR, WE PROCESSED SIX COMPLETE OR PARTIAL LICENSE APPLICATIONS FROM THREE FIRMS. AND JUST THREE WEEKS AGO, MY OFFICE ISSUED OUR FIRST LAUNCH LICENSE. IT WAS ISSUED TO CONATEC, INC. AN ENTREPRENEURIAL ROCKET FIRM WITH HEADQUARTERS HERE IN THE WASHINGTON AREA. CONATEC IS ONE EXAMPLE OF THE KIND OF ENTREPRENEURIAL OPERATION THE COMMERCIAL SPACE LAUNCH ACT HOPED TO ENCOURAGE WHEN IT WAS ENACTED THREE AND A HALF YEARS AGO.
THE FIRMS THAT HAVE COME FORWARD WITH APPLICATIONS REPRESENT WHAT IS REALLY JUST THE TIP OF THE ICEBERG. BENEATH THE SURFACE IS A COMBINED CORPORATE INVESTMENT THAT NOW TOTALS SOME $400 MIL
LION. BY THE END OF 1987, INDUSTRY REPORTED THAT THIS INVESTMENT HAD YIELDED MORE THAN $500 MILLION DOLLARS WORTH OF FIRM COMMERCIAL LAUNCH CONTRACTS. RIGHT NOW, THE RETURN ON THAT INVESTMENT IS APPROACHING TWO TO ONE: AMERICA'S THREE MAJOR AEROSPACE CORPORATIONS HAVE CONTRACTS TO LAUNCH 13 PAYLOADS, WORTH A TOTAL OF APPROXIMATELY $700 MILLION. TEN OF THESE ARE FOREIGN PAYLOADS, WHICH WILL CONTRIBUTE TO IMPROVING OUR BALANCE OF TRADE. IN ADDITION TO THIS REVENUE, THE "BIG THREE" AEROSPACE MANUFACTURERS HAVE ESTIMATED THAT THEIR COMBINED LAUNCH BUSINESS INITIATIVES WILL ADD SOME 8,000 NEW JOBS TO THE ECONOMY, AND THIS IS WITHOUT THE DIRECT AND INDIRECT JOBS THAT COULD BE ADDED ONCE THE ENTREPRENEURIAL
BEGIN SELLING LAUNCH SERVICES.
OF THOSE 13 PAYLOADS, THREE ARE U.S. GOVERNMENT SATELLITES. PRESIDENT REAGAN HAS DIRECTED ALL AGENCIES TO COOPERATE IN SUPPORTING COMMERCIAL SPACE ENTERPRISE
PARTICULARLY NASA, AND THE
DEPARTMENTS OF DEFENSE, COMMERCE AND TRANSPORTATION. HE
RECOGNIZES THAT GOVERNMENT AGENCIES MUST WORK EFFECTIVELY WITH EACH OTHER AND WITH INDUSTRY TO DEVISE MEASURES THAT WILL FOSTER THE GROWTH OF COMMERCIAL SPACE SERVICES AND INDUSTRIES.
IN OUR ROLE AS FACILITATOR OF AMERICA'S COMMERCIAL LAUNCH INDUSTRY, ONE OF THE DEPARTMENT'S GOALS IS TO HELP GOVERNMENT LEARN HOW TO BE A "BETTER" CUSTOMER.
GOVERNMENT IS A BETTER
CUSTOMER WHEN IT CAN BUY THE PRODUCTS AND SERVICES IT NEEDS MORE ECONOMICALLY THAN IT CAN UNDER TRADITIONAL PROCUREMENT PRACTICES. CONSIDER, FOR EXAMPLE, THE POTENTIAL SAVING TO OUR GOVERNMENT WHEN
IT BUYS LAUNCH SERVICES COMMERCIALLY RATHER THAN BUYING THEM IN THE TRADITIONAL MANNER: GENERAL DYNAMICS IS REPORTEDLY SELLING ITS COMMERCIAL ATLAS CENTAUR FOR ABOUT $59 MILLION. IN 1985, THE FIRM SOLD THAT SAME VEHICLE TO THE U.S. NAVY FOR $80 MILLION, ABOUT 26 PERCENT MORE. ONE REASON FOR THE APPRECIABLE PRICE DIFFERENCE IS THE ENORMOUS AMOUNT OF DOCUMENTATION GOVERNMENT
REQUIRES OF ITS CONTRACTORS AND WHICH CONTRACTORS MUST THEN BUILD
INTO THEIR PRICING STRUCTURES.
THE DEPARTMENT DOES NOT FORESEE A LAUNCH INDUSTRY WHOSE
SURVIVAL DEPENDS SOLELY UPON GOVERNMENT BUYS, WHETHER OF COMMERCIAL LAUNCH SERVICES OR DIRECT PROCUREMENT OF LAUNCH VEHICLES.
THE DEPARTMENT OF TRANSPORTATION IS ORGANIZING ITSELF FOR A COM
MERCIAL LAUNCH INDUSTRY THAT TRANSPORTS CARGO TO SPACE NOT UNLIKE
OUR TRUCKING, RAIL OR AVIATION INDUSTRIES TRANS PORT CARGO HERE ON EARTH. BECAUSE OF THE CAPITAL-INTENSIVE NATURE OF SPACE TRANSPORTATION, HOWEVER, INNOVATIONS IN BOTH TECHNOLOGY AND BUSINESS PRACTICES ARE NEEDED. ONE SUCH INNOVATION SEEMS ALREADY TO HAVE ENTERED PRACTICE, AND THAT IS THE TURNKEY ARRANGEMENT, UNDER WHICH A SATELLITE CUSTOMER PAYS A LAUNCH FIRM A FIXED AMOUNT TO HAVE HIS SATELLITE DELIVERED TO ORBIT. THE LAUNCH COMPANY THEN ARRANGES EVERYTHING
INSURANCE, LAUNCH SITES, PERSONNEL REQUIRED TO ACCOMMODATE THAT CUSTOMER. ONE OF MARTIN MARIETTA'S EARLIEST COMMERCIAL CONTRACTS WAS A TURNKEY ARRANGEMENT WITH A DOMESTIC SATELLITE MANUFACTURER TO LAUNCH A BRITISH COMMUNICATIONS SATELLITE. MARTIN MARIETTA HAS FORMED A SIMILAR TYPE OF ARRANGEMENT WITH GENERAL ELECTRIC, UNDER WHICH THE FIRMS WILL SELL TELE