Crowell & MoringJonathan T. LindePaul AlpSteve McBradyJonathan M. Baker

Over recent months, NASA’s plan to replace the space shuttle with commercial space lift has encountered some turbulence. Optimists insist that NASA’s transition to commercially-operated manned spaceflight is inevitable given the ingenuity of public private partnerships, the remarkable opportunities for profit, and the lessons of history. While this may be true, the development of a robust, commercially-viable spaceflight industry involves substantial risk and numerous unknowns. This blog explores in broad strokes the current status and the potential future trajectory of the commercial space flight industry.

We invite a dialog from experts, entrepreneurs, “space flight participants,” and the public.

The Recent Turbulence In The Development Of Commercial Space Flight

On May 2nd, NASA announced that Congressional funding cuts in the Commercial Crew Program (CCP) had delayed its plans to transport U.S. astronauts to and from the International Space Station (ISS) using commercial launch services offered by U.S. companies. Under the CCP, NASA has entered into contracts totaling $1.1 billion with the three private companies currently vying to transport astronauts to the ISS,[1] but recent cuts have pushed NASA’s planned use of these U.S. commercial lift services from 2015 to 2017. To compensate for the delay, NASA has extended its contract with the Russian space agency Roscosmos to provide lift services for U.S. astronauts at a cost of $424 million.

Twenty years ago, even in the midst of a period characterized by spending cuts in the military, few would have predicted that the U.S. space agency would lack a spacecraft capable of manned spaceflight within a single generation. Any suggestion that the U.S. would soon be forced to purchase lift from Russia – its former cold-war enemy, the nation that launched the epic space race, and NASA’s one-time archrival, would have been considered heretical.

Yet, here we are.

What Is The Path Forward?

In the longer view, commercial space flight optimists see this is as a minor bump.

Your company may not be one of the three poised to manufacture and launch its own commercial spacecraft; your company may not yet be a supplier to one of these three companies; or your company may not even exist today. But if you are raising capital, developing a business plan that contemplates a vibrant and robust international market for commercial space launch services, you are preparing to push into new territory.

Whatever your situation, the opportunities for success are immense. But so are the risks – an uncertain regulatory environment, ambiguous liability standards, conflicting international legal regimes, novel procurement and government contracts questions, and undefined operational requirements, to name a few. Your company is likely to operate in a highly-regulated environment, but the regulations are still on the drawing board and there is no consensus on what the final regulatory regime will look like. It is also almost certain that, whatever the “final” regulatory regime looks like – it will continue to evolve.

History, however, does provide some guidance, and Crowell & Moring has lived through that history in both the development and evolution of the laws, regulations, and public policy applicable to aviation, government contracts, insurance, tort, public private partnerships, and commercial space flight.

For example, our aviation practice can trace its roots back to the FDR administration and the dawn of commercial aviation regulation. We have counseled airlines and other clients for decades, before the Department of Transportation, Federal Aviation Administration (FAA) and Transportation Security Administration. We understand the impact that a regulatory framework and its adaption to emerging technologies can have on the success of an industry and on the profitability of clients. We understand how the FAA works, both the good and the bad.

Applying those lessons of history, we see risks, but we also see opportunities. For example, under the current Commercial Space Launch Law, Congress intended to promote the development of the Commercial Space flight industry. As we have observed: “Congress did not intend that the safety of commercial space flight participants be protected through regulation to the same extent as passengers on commercial airlines. . . . The FAA considers the Act’s definition of ‘space flight participant’ as signifying that ‘someone on board a launch vehicle or reentry vehicle is not a typical passenger with typical expectations of transport, but someone going on an adventure ride.’” See Alp, “Limitations On Liability As To Space Tourists,” Newsletter of the Aviation & Space Law Committee, American Bar Association Tort Trial & Insurance Practice Section (Summer 2011). If commercial space flight is to be a large and vibrant industry, will it always be an “adventure ride”? What law should apply? How can it be made uniform? What should the regulations be? Who should make them and where should they be enforced (international, national, state, local)? How can the industry function if, for example, airworthiness, safety, tort, indemnification, and liability standards vary by jurisdiction? The answers are not clear, but the lesson of history is that participation in the process of fashioning those answers, as they evolve, is vitally important to successful participation in the industry.

Space exploration started as an exclusively government endeavor. Governments contracted with private industry to build its capabilities under detailed government contracting regulations like the Armed Services Procurement Regulation (ASPR), the Defense Acquisition Regulation (DAR), and the Federal Acquisition Regulation (FAR). With commercial space flight and budgetary constraints, space flight, like the terrestrial pursuits of infrastructure development, is moving towards the paradigm of public private partnerships. Laws and regulations are typically necessary to assist that shift. The structure of the public private partnership in space needs similar assistance. The reality is that a mature public private partnership industry is based on a stable environment (with infrastructure projects, this translates into stable national or local governments, in space this may mean a known world-wide regulatory environment), the ability to secure financing, and the prospects of long term profitability.

Again these are examples. We invite your thoughts and comments.

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[1]  Companies currently funded under the CCP are Space Exploration Technologies Corp. (SpaceX), Sierra Nevada Corp., and The Boeing Co.