Legislature(1999 - 2000)
02/25/1999 09:03 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
LOGNOTES
February 25, 1999
GENERAL SUBJECT(S): OVERVIEW: ALASKA AEROSPACE DEVELOPMENT CORPORATION
The following overview was taken in log note format. Tapes and
handouts will be on file with the Senate Finance Committee through the
21st Legislative Session, contact 465-2618. After the 21st
Legislative session they will be available through the Legislative
Library at 465-3808.
Time Meeting Convened: 9:03 AM
Tape(s): SFC-99 # 38, Sides A and B
PRESENT:
Senator Green
Senator Torgerson, chaired
the meeting
Senator Adams
Senator Parnell
Senator P. Kelly
Senator Donley
Senator Leman
Senator Phillips
Senator Wilken was absent
from the meeting.
ALSO PRESENT:
Senator Drue Pearce;
Mike Machulsky, Chair, Board of Directors, Alaska Aerospace
Development Corp.;
Pat Ladner, Executive Director, Alaska Aerospace Development Corp.;
Laura Gould, Director of Business Operations, Alaska Aerospace
Development Corp.;
George King, Hudson AIPF;
John Klinker, Council for Alaska Aerospace Development Corp.;
Jamie Kenworthy, Executive Director, Alaska Science and Technology
Foundation;
Brent Doutt, Fiscal Analyst, Division of Legislative Finance;
Larry Price, Director of Small Launch Vehicle Programs, Lockheed-
Martin;
John Thomas, Lockheed-Martin Astronautics;
Leif Selkregg, RISE Alaska;
Krystal Murphy, RISE Alaska.
Tape: SFC - 99 #38, Side A 9:03 am
Co-Chair John
Torgerson
Introduction. Refer to handouts
Michael Machulsky
Chairman of the Board of Directors of the
Alaska Aerospace Development Corporation.
Introduce others present.
About 7 years ago we started this foray
into the aerospace industry in Alaska.
When we talked about launching rockets in
Alaska, there were a few doubters. It was
just about a year ago that we had funding
come through to start construction of the
Kodiak Launch Complex. Since then we've
reached 45% completion of construction.
We're going to speak today about what we
need to finish construction and what it
means to the private sector as far has
enhancing our ability to attract customers
to the State Of Alaska.
Refer to business plan and info from
Lockheed-Martin's Athena program. We had a
strategic planning meeting and a board
meeting 2 weeks ago. We got an overview on
the aerospace industry in general and how
Alaska could fit it. Everybody walked away
from those meetings very excited about the
potential and opportunities.
Pat Ladner
The AADC is more than just the Kodiak
launch complex. I call it the AK aerospace
roadmap in that if you start in Fairbanks,
we have the satellite ground station. We
have the Challenge and Learning Center in
Kenai and also the launch complex in
Kodiak.
These all tie together for our present
efforts and also as a group to attract
future customers and enhancements for
aerospace development in Alaska.
Today we have 5 ground stations in
Fairbanks where 2-1/2 years ago we had
none. The Los Alamos laboratories located
two stations on the engineering building at
the University of Alaska - Fairbanks. They
also provided an at least $50,000 stipend
for graduate students in engineering. We
hope to expand the ground stations to the
point to where we are not only downloading
remote data but also processing that data.
It will increase jobs. Right now we have
2-5 people employed at each ground station.
When you start processing the data into a
finished product, the employment
opportunities go up as well as
opportunities for the university to
participate.
We also see the remote sensing data is very
useful to the State Of Alaska in GIS
mapping. Tracking and controlling the
spruce bark beetle infestation. Erosion on
the Kenai River.
The Kenai Challenge and Learning Center I
thought was really important to bring
something of aerospace to our children.
Mayor of Kenai spearheading, we don't have
the staff. They are starting construction.
How does that tie into the aerospace
business? We had our first successful
launch from Kodiak last November. Another
launch is scheduled this August. Lockheed
has a launch scheduled in August 2000.
People come to the state and do their
business and we also lean on these high-
tech people to interface with our children.
They've done a wonderful job working with
schools in Kodiak and the Kenai area.
The launch complex is something that
attracts people here. Our long-range plan
and our marketing strategy is to market the
aerospace capabilities in Alaska in a
package. You launch your rocket, the
satellite goes into orbit and the ground
stations in Fairbanks capture the data and
hopefully will process the data.
Lockheed plans to do 2-4 launches per year.
That also brings value-added industries to
our state. They start thinking about
tradeoffs to establish a presence. That's
what we're looking for. We found in our
launch that $1.3 million of new money was
brought into the state and stayed. That
will only expand with time.
We want to not only have launches, but also
to expand the infrastructure and the long-
range plan is to use the strategic position
of Anchorage as a distribution and assembly
point for satellites. What we're doing
right now is take care of the present in
completing the launch complex to support
Lockheed and other's requirements.
We're working with Lockheed and others to
establish those partnerships.
We had 13-15 industry people come to Juneau
and clearly stated that they want to be a
part of our efforts and they wanted to help
us to be a success. They saw the Kodiak
Launch Complex as a critical part of
commercial space in our country.
Co-Chair John
Torgerson
Senator Al Adams
We've had presentations a couple times in
the Legislative Budget and Audit committee
on this matter and we looked at the package
to complete this project at $40 million, of
which we received $28 million from the
federal government. You are asking for
another $5 million. Where are you looking
to use those funds?
Co-Chair John
Torgerson
Laura Gould
Director of Business Operations. Been
involved with the project about 5 1/2
years. This is an exciting time to see
this project coming together and launching
rockets.
I'd like to talk about the budget request
we have in the total package for the
construction of the Kodiak Launch Complex.
(Refer to handouts showing budget details
and summarizes.)
I'd like to start with the total budget
request, which is $40 million. That
capital budget does include all the
construction, all the engineering and
project management and contingencies
required for completion of the Kodiak
Launch Complex. It's important to point
out that budget contains no general funds.
This project has been very successful in
utilizing a minimal level of state funding
to leverage heavy support from the federal
government. We have worked closely with
Alaska Science and Technology Foundation
and did receive a grant from them in the
amount of $5 million for seed money. It
leveraged the $30 million in federal money,
which brings us to the $35 million Senator
Al Adams referred to.
We do have a $5 million capital budget
request. We had initially submitted a $12
million capital request in the FY00 budget.
In order to keep our project on schedule,
and accommodate the launch customers, we
did seek authority for the first $7 million
to secure federal funds. The Legislative
Budget and Audit Committee gave us approval
this month. That has allowed us to keep
our construction project on schedule.
We mentioned the reasonableness review by
AIDEA. The final $5 million is designated
as corporation receipts. We had lengthy
discussions with our board of directors
talking about what that final $5 million
was going to be.
We had initially anticipated additional $5
million in federal funding, that did not
come through. Our board had to look at all
the potential funding sources that could
satisfy that requirement.
We've had discussions with ASTF and AIDEA
since December. Part of the analysis AIDEA
did was to allow the ASTF look at the final
$5 million. ASTF said they are willing to
accept a grant application from AADC to
satisfy that $5 million.
We touched earlier on the economic impact
and the ISER study.
That $1.3 million is a key number because
it doesn't include airfare to and from
Alaska, which some people brought up. That
includes direct expenses within the state,
a portion of which leaves immediately. But
that money that's left circulating resulted
in that $13 million economic impact. We
anticipate with future launches and
commercial launches, we will see a much
larger impact. The launch in November was
a single stage and didn't include
satellite. When we get into larger
vehicles with more work involved, there's
going to be more people, they will be there
longer and we would expect to see a greater
impact.
Co-Chair John
Torgerson
The budget request is just asking for ASTF
grant authority to pass along to you if you
meet the criteria of the grant. It's not
GF money.
Laura Gould
Correct. (detail ASTF grant approval
process) We will still need Legislative
authority to get those funds.
Co-Chair John
Torgerson
Pat Ladner
Introduce Larry Price Director of Small
Launch Vehicle Programs, Lockheed-Martin
Astronautics.
Larry Price
I'm responsible for two programs, Athena
and an air force target program. We do
both commercial and government contracts.
I want to talk about our vehicle. There is
a lot of potential. We have finished
development and we're flying and having a
very successful mission. It is an attempt
down a new path as AADC has done with the
launch complex, we have been in parallel
doing a similar effort with a launch
vehicle. It's a matter of taking a 30-40
year launch technology and doing all the
things you have to do to fly successfully,
but do it as economically as possible. To
that end it's generating a new commercial
market.
The market is developing; the vehicles are
developed. The launch pad is developing
and these pieces are coming together.
Want to convey the importance of the Kodiak
launch site to my projects. We really
appreciate the work that's been done. It's
very aligned to our desires and needs to
meet this potential market.
Athena Launch System Handout. Page 3. We
are a program that's made up of 3
partners/teammates. We divided the
responsibilities between Primax, Thiokol
and Pratt & Whitney. Each took it upon
themselves to develop their piece of the
system. Then Lockheed Martin did the
system level nonrecurring qualification of
the launch. Even though they are existing
systems, it's not a trivial task to put
together and iterate them successfully.
This team arrangement has been expanded to
Kodiak, AK, CA and Florida. I'll show how
those spaceports are complementary in orbit
achievement.
Page 4. Lockheed Martin Corp. Overview. In
the last 4 years there have been a number
of mergers and acquisitions. We've grown
substantially. In the mergers we've
developed 5 sectors: aeronautics, space and
strategic missiles, information services,
electronics and energy and environment
cleanup. All of the launch vehicles have
been concentrated in the space and
strategic missiles sector. All of the
space launch vehicles have been
concentrated in astronautics, located in
Denver. My program has the benefit of
about 6000 engineers and support personnel
that build launch vehicles. My program has
100 people who rely of the resources of a
major resource capability.
Page 5. Athena Overview. Overview of what
the vehicle is. The product consists of 2
vehicle types Athena I and Athena II, plus
a conceptual program for an Athena III.
There is also one smaller than an Athena I.
The intent is to modularly be able to
expand. AADC has the larger version of
this rocket in their plan for the launch
site as well so it can accommodate growth
as well as other launch vehicles besides
mine.
Co-Chair John
Torgerson
In their plans, does that mean the
construction phase once completed won't
handle the Athena III?
Pat Ladner
When we designed the Kodiak Launch Complex,
we designed it for the Athena III. We
built it large enough. For instance, our
payload processing facility has a 50-ft.
hook height. When you have a satellite
sitting here and you encapsulate the
nosecone, you have to have enough height -
the height of the satellite plus the height
of the nosecone plus extra space. Larry's
vehicle only requires 28 feet. Ours is 50
feet. So if we ever wanted to go to an
even larger vehicle, we don't have to build
another. The same applied to the launch
pad. We only want to do this once.
Larry Price
If you do ahead of time you can leverage it
a little bit. Pouring more concrete is less
expensive. Working with Pat's people we've
tried to accommodate with where we think
we're going without making it too verbose.
We're in final negotiations with NASA for a
Kodiak launch we hope to public announce
next week.
Our system capability is 12 a year. That's
not limited by the launch site but is the
manufacturing capacity in Denver. We have 4
more vehicles built. We have a total of 7
on contract.
Page 6, Athena Flight Successes. The
launches we've done to date have been high
visibility, high pressure programs. Three
successful launches. (Detail two NASA moon
satellite missions.).
The third mission is the first time the
Republic of China has been to space. (Give
details of that mission.)
Page 7, Launch Sites - Current and Future.
Shows what we've done on launch sites. The
first is Vandenburg Air Force Base SLC-6.
The second is Spaceport Florida Launch
Complex 46.
The reason for two pads and the reason for
Kodiak, is (refer to Page 8) depending on
the type of mission the satellite will
perform, it must either go around the earth
east to west or north to south.
Accommodation with the navy path
Reason for Kodiak is depending on mission
objectives. Want to go north to south or
east to west.
Have to get to the equator. Communication
measures need closer proximity to the
ground.
Go out of Florida to be closer to the
equator.
Kodiak Launch Facility
As you pass the same place on the earth you
pass at the same time.
Wallops Island Launch Complex-OB explains
why they would use this facility.
$2 billion developing this facility.
Not just jumping into something new, harder
job each time.
Confidence in AAC. Cooperating with NASA
for flight next year.
Co-chair Torgerson
Where is Wallops?
Larry Price
It is in Virginia.
Co-Chair John
Torgerson
Why aren't you discussing the launch
facilities in Norway and Russia?
Larry Price
Explains how they identify the places most
cost effective to operate from. Settled
down on Kodiak and Florida
Explains why it is necessary to have two
launch sites. Need to avoid dropping
stages on populated areas and also need to
avoid flying over populated areas.
Where is the market for the small launch
areas? Studies say there is some number
like 800 or 1000 small launch vehicles over
the next five-ten year period. We think
200 of those may happen.
Have a business plan to capture one-third
of those. Varying by year it could be 1/3
or 2/3rds.
Kicker is a new niche in space. Had
previously been dominated by large
government payloads.
Larry Price
Launches are cheaper. So 1000 satellites
are trying to predict where we will be.
unknown
What is overriding authority of whom can
launch into what orbits? Space is large.
Senator Drue Pearce
All orbits cross over the poles. FCC
regulates usage of bands. If you can't get
a spectrum from FCC there is no point in
launching the satellite.
Larry Price
Even in the same orbit, satellites migrate.
They all migrate at the same speed
unknown
Does someone watch them all?
Senator Drue Pearce
Norad in Colorado tracks them all.
Larry Price
When doing imaging surfacing, you need to
be as close as possible to earth.
Summarize. A lot of things are coming
together now. Vehicles and launch pads.
We're a viable system. Has full backing of
Lockheed system. Wall Street. Credible
program.
Senator Randy
Phillips
Does NASA do an evaluation of your launch
site?
Larry Price
Yes in what manner?
Senator Randy
Phillips
I tried to get some answers but couldn't
get any
Nov 5/98 launch. I understood didn't have a
lab fuel tested. Next launch had solid
fuel
Pat Ladner
Explain.
Senator Randy
Phillips
What do you mean by lab?
Co-Chair John
Torgerson
Do you test your rocket fuel?
There was concern about the road was so
narrow that future larger rockets could not
negotiate.
Senator Randy
Phillips
Lockheed market evaluation on your systems.
Pat Ladner
Road. That question had to be answered
before Lockheed would even consider. State
DOT can fix bank curves with their budget
and they are doing that. Grade cannot be
fixed. Can't move mountains. Don't' think
will be problem we did test with a
caterpillar of same mass and didn't have
problems. We did test with switchbacks.
Working with DOT to fix and will do next
spring. Road is acceptable to NASA.
Evaluation of site by NASA we did thorough
review two years ago. They made
significant suggestions and we implemented.
Before NASA would agree to launch from
Kodiak had to do complete evaluation.
Tape: SFC - 99 #38, Side B
What about the question on the lab?
Co-Chair John
Torgerson
There was concern that liquid fuel was
being tested but there was no solid fuel
and there was no lab to test it.
Senator Randy
Phillips
We can address that.
Ladner
When we flew the Lunar Prospect Mission and
the Lewis Mission, NASA was involved. We've
been working with NASA for the last 4
months on this contract and although we're
not on contract with them, we've been
working on what involvement and
responsibility they want to have for this
upcoming mission. We've got quite a bit of
experience with them already.
Price
The lab item, I think could be that when we
use any gasses, pressurant, liquid
propellant and such, there are times that
they need to be certified before loading in
the vehicle. There was discussion as to
what lab facility we would use to certify
those liquids and gasses.
That's why Paradone Corp. is involved. They
have a method to use a certified small
container that you overnight express to the
Lower 48 and get an overnight reading. In
the future, when we have year-round
operations, that's one of those value-added
industries we hope would locate here.
Ladner
The only traffic problem experienced last
fall when we did the first launch was a
lone bison on the road. The State Troopers
had to stop all traffic to get him over the
hill and all traffic was affected.
Pearce
Is that road all in state ownership and
doesn't cross any private or Native land?
Co-Chair John
Torgerson
I believe the road is DOT-State owned.
Ladner
There is maybe some Native land but the
state has a right of way.
Pearce
Do you anticipate environmental impact
statement to take out the switchbacks?
Co-Chair John
Torgerson
The permits have already been done by DOT.
Ladner
If you have evaluations of the facility
from NASA or by Lockheed-Martin, I'd like
to see them.
Senator Randy
Phillips
No one with billions of dollars can wake up
one day and go in their back yard and build
a launch site. The USDOT is the regulatory
agency for commercial spaceports. In order
for us to do a launch from Kodiak we had to
submit all construction plans as well as
operating procedures for them to review and
ensure we had an operation that was safe
for the working people and the public.
They had to review every part of our
operation.
Ladner
That has been done?
Senator Drue Pearce
Yes.
Ladner
I looked at budget projections but I don't
think we've talked about the futures
market. He hoped that the agreement with
Lockheed required them to do 4 launches per
year. He was interested in looking at
future cash flow and predicted profit and
loss.
Senator Al Adams
I think the market will be covered when we
go into executive session. We also offer
to sit down and go through the entire
spreadsheet.
Michael
We do have an operating model that's not
presented in this public session because
there are some proprietary sensitivity to
the launch scene. We are trying to get a
feel for what the market will bear in terms
of costs. We can have some off-line
discussions. But publicly we don't want
our competitors to get a feel for where
we're targeting our launch costs at this
point.
Laura Gould
I've asked Dr. Kenworthy to be here to
answer any questions of ASTF on the $5
million capital request.
Co-chair Torgerson
Executive Director, Alaska Science and
Technology Foundation.
Dr. Jamie
Kenworthy,
ASTF
What kind of evaluation do you do on this
facility?
Senator Randy
Phillips
The reasonable review AIDA did was done at
our urging so we could understand the cash
flow issues and the budget. We believe
market has grown and there is more
opportunity here. With the grant
applications there will probably be a few
conditions we need to negotiate with AADC.
We will have 3 technical reviews on this
project. The board will review that.
Kenworthy
When will those technical reviews be
completed?
Senator Randy
Phillips
First need a full application. The Board
has two meetings this year. We usually
meet proposals 5 weeks before those
meetings. We spend a lot of time
identifying good technical individuals all
over the country to do reviews. They will
probably have a cash flow problem around
July to finance their construction
completion. That would meet with a June
board meeting decision. Look at market and
feasibility as a whole.
Recess to prepare for executive session.
Co-Chair John
Torgerson
Read provisions for executive session into
the record.
Said he would excuse himself from the
executive session.
Senator Randy
Phillips
Made a motion to convene into executive
session.
Senator Lyda Green
Without objection so ordered.
Co-Chair John
Torgerson
EXECUTIVE SESSION
Move to come out of Executive Session and
go back to the regular meeting.
Senator Sean
Parnell
No objection so ordered.
Co-Chair John
Torgerson
The last hour we've been talking about the
Kodiak launch complex. I'd like to remind
members that this is the Alaska Aerospace
Development Corp. A couple sessions ago the
Legislature approved statutes to change the
make-up of the board of directors. I'd like
to tell you who we are and where we'd like
to go. Members: Senator Drue Pearce,
Commissioner Deborah Sedwick,
Representative Gene Therriault,
Representative Alan Austerman, Dr. Joe
Hawkins, Interim Director of the
Geophysical Institute, University of
Alaska, General Mark Hamilton, President,
University of Alaska, Ms. Connie Yashamora
(ph spelling), Henry Penny, Dave Woodruff
and two outside representatives: Courtney
Stadd (ph), who worked for NASA and former
White House advisor of aerospace and
Captain Eugene Searnin (ph), Apollo 17
astronaut, the last man to walk on the
moon.
Michael
We are moving from the entrepreneurial
stage and the construction stage to the
operational stage of the Alaska aerospace
industry.
I want to bring this into perspective. Pat
Ladner, a staff, and competent contractors
has been able to get us to the point of
constructing a state of the art facility -
the first one ever licensed on non-
federally owned property in this country.
What does that mean as far as commercial
space transportation and the hoops we have
to go through to get that license? Mr.
Ladner and his staff have rewritten the
book. It's no longer in the government
sector to promote the aerospace industry.
It's moving more and more into the
commercial sector. Pat Ladner's efforts
have been commendable.
When we had our strategic planning meeting
a couple weeks ago, the most compelling
thing I walked away with was, "this isn't
about launching rockets, this is about
building infrastructure for the State Of
Alaska."
What we've spent on this project and the
amount it will take for completion is about
10% of what it would cost to build any
other facility in the country. Ours is $40
million versus $400 million for others.
The industry is wowed by the facility they
are going to receive.
Opportunity for our schools. We've already
started on our educational subcommittee and
our local advisory group in Kodiak. We've
had a NASA program in our high school.
Refer to the Lunar Prospector. Our high
school students actually launched that
mission. At the end of their mission they
did crash their satellite into the moon.
They were disappointed until they found out
part of the NASA mission was to actually
crash into the moon.
Alaska Pacific University put together
program with rural schools to do a space
camp and to spark interest in math and
science and future employment
opportunities. These are the models we're
using to spark that interest.
The University of Alaska - Kodiak Campus is
going to start offering this fall, an
associates degree program in Aerospace
Technology. Hope that will be a model for
other campuses to do also to provide jobs
in Alaska and for Alaskans. General
Hamilton spoke of the opportunities within
the aerospace industry. We don't want to
export opportunity like we do with fish and
timber.
The value added processing is something
that's very exciting for us in the
information age.
Congress approved Kodiak as a designated
international port of entry to allow us
activate a foreign trade zone, which will
allow us to launch foreign payloads.
Telecommunications systems are being
upgraded. Now the state has one or two
fiber optic lines linked to Lower 48. This
industry can really start feeding those
businesses.
Our business plan show that in few years we
will be standing alone as an organization
and will be returning money to the state.
Never as much as oil and gas industry but
still money well spent as far as providing
for the future.
Lay challenge to leadership that all state
organizations work together to get the most
out of industry.
Thank presenters. Should make this a yearly
event. Difficulties with lack of
information. Want to work to lift cloud.
My comfort level has risen over last couple
weeks. I'm ready to work with Senator Drue
Pearce to make this happen.
Co-Chair John
Torgerson
Adjourn 10:58 am
SENATE FINANCE COMMITTEE
LOG NOTES
2/25/99
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