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 Page 14