Ken Murphy / 8:30 pm February 16th, 2010

Gounelle, Matthieu
“Que sais-je?: Les Météorites”
Puf
2009
ISBN13: 978-2-130-57428-6
Publisher’s Web Site

EVA / 1:19 am February 12th, 2010

Welcome back to EVA Interviews: The Business of the new Space Age™ as we leave the Lunar Editions and return to Earth orbit. Our next guest is Hoyt Davidson, Founder and Managing Partner of Near Earth LLC. Near Earth specializes in providing Investment Banking and Advisory Services to companies and investors in the commercial Space, satellite, telecom and aerospace industries. Hoyt Davidson has extensive expertise in Space financing, and has many insights into the emerging commercial Space sector to share with us in this very informative discussion.

 

EVA:     Welcome Hoyt! I’m delighted to have you join us at EVA Interviews and Out of the Cradle. I am really looking forward to our conversation and hearing your unique perspective on Space commerce, the industry and Space investment activities! As these interviews are about Space, as well as the economic aspects of our exodus Out of the Cradle, I like to begin by asking about Space. You operate an investment bank specializing in, among other areas, satellites, and you write extensively about commercial Space activities in your newsletter. Which came first? Have you always had a interest in Space or was the creation of Near Earth LLC exclusively a business decision?  How did you decide to open a firm with such a unique specialty?  

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Ken Murphy / 1:36 am February 7th, 2010

The space program announcement on Monday was, in my view, status quo shattering.

It engages a lot of risk, but if you look carefully at what it says (as opposed to what the mass media says it says), you will see that it unlocks an enormous realm of opportunity. In my view, the opportunity far outweighs the risks.

When NASA operates the only crewed vehicle to space, then NASA decides who gets to go. NASA’s choice is a select cadre of individuals, highly trained not only in the systems and environment of space, but also in how to keep it together when the crap hits the fan. Taking this training to the private sector will no doubt prove remunerative for many.

From a company perspective, not being able to send the employee you choose because NASA said no rather works against your business decisions. When a company can pay a launch provider to take their chosen employee to an orbital site to do whatever, then a barrier to entry has been removed, making it easier for a company to make the decision to send an employee to orbit to do research or production in space.

By choosing to end NASA’s monopoly on the provision of crewed transport to orbit, the President (via his advisors, I’m sure) has made the decision to open space commerce to all of the American enterprise.

The challenge is the provision of transport to orbit. I’ve seen a lot of negative comments regarding whether U.S. industry can step up to the plate and deliver on their potential. Given that Boeing and Lockmart are the legacies of the companies that have built our spacecraft, it seems a bit unreasonable to say that they cannot provide a crewed vehicle for their existing launch vehicles. They may choose not to take that route, but I have a strong feeling that they can in fact do so.

There are folks who say that we shouldn’t rely on the private sector, yet that is what everyone does every day. As I look around my apartment I the only thing that I can think of that is actually government-provided is my clean water. Sure the government has touched pretty much everything in my apartment in some way, shape or form, but for my DVD player I rely on Dynex. For my laptop I use Fujitsu. The bowl with all my pens in it is from Clark of the Navajo. My desk was made by Leopold Co. of Burlington, Ohio. My ride to work is a Volkswagen.

Let’s talk about rides to work for a minute. The shuttle and Soyouz are, right now, the rides to work for those on orbit. The Soyouz has a long track record of getting its passengers home alive. Not spotless, but definitely solid. The Shuttle has had two major stand-downs in the last quarter century, for a hair’s breadth over 20% of that time. In essence, one year in five was non-performing. Imagine if your car could only get you to work four days out of the standard five day work week.

So when people say that only government can provide transportation to orbit, they’re saying that the U.S. is limited to the transportation that NASA provides, when NASA can provide it, and who they say can go. I don’t know about other folks, but I tend to chafe under that kind of diktat.

“Oh, but there’s no business up in space!” cry the nattering nabobs of negativity. As if they have any clue of what business is about. Their lack of imagination should not be my burden.

So what kinds of things are there to do on orbit? My first suggestion would be to scrounge up a copy of the book “Space Industrialization Opportunities“, edited by Jernigan & Pentecost, and then actually read through it. Sure it’s long at 601 pages, and there’re sections that can be skipped over, but reading through it is absolutely eye-opening as far as seeing what kind of research still awaits us.

So there are going to be two initial approaches - a continuation of the existing Mid-Deck Locker (MDL) model, and infrastructure pieces that allow for more crewed work, the orbital equivalent of the lab bench. It’s unknown (or at least, I don’t know) whether the Bigelow facilities will conform to the ISPR standard (which the MDLs fit in), but my guess is that would be the decision of the lessor or the lessee and the terms of the contract.

Microgravity science research is not a make-believe industry. People paid Richard Garriott to take their experiments to orbit. The former SpaceHab (now AstroTech) is doing breakthrough research on orbit. Before Challenger, NASA had a long list of private companies queueing up to send their payloads to orbit. After Challenger, and then catching up with the military payloads, and then the NASA science payloads, and then the runs to Mir, and the private companies could never get back on board. You can’t blame them, they don’t have the capital to keep people on payroll on standby waiting for NASA to take their payload up maybe at some point. Business can’t operate like that, but that is where we have been for the last couple of decades.

And who’s going to provide human crewed transport to orbit in competition with NASA and Energia? That made no business sense, but everyone talked as if that was the way it had to be.

Now we have a different path to not only the ISS, but additional (thank you Mr. Bigelow) destinations on orbit. And Man, in the generic species-wide sense, does not live on science alone. What other things could we be doing in enclosed microgravity environments? I imagine part of the reason that Mr. Cameron wrote such a glowing editorial in support of the changes proposed is that he has his eye on a large hollow three-dimensional space with cameras everywhere, as could be provided by a Bigelow balloon. He could pay a company to take his team and equipment to orbit, and he would be able to film in a way that no one ever has before, although the IMAX films come close. I can also see Hong Kong filmmakers doing away with the wires and filming radical new combat scenes. I don’t know about the Apollo folks, but my generation grewup on Ender’s Game, and I was a huge fan of the Battle Room. Laser Tag in 3-D? You know that’s going to be a popular workout.

Habitation is a de rigeur requirement of humans in orbit, so there exists any number of opportunities in that domain. From the design of sleeping quarters to the provision of supplies, there are a number of niches for companies to exploit. Final Frontier Beef Jerky seems to have already cornered the market on dried beefstuffs on orbit, but there are lots of other things that go well with the microgravity environment.

What to do in space? Sightseeing is already a favored pastime on the ISS, so I have no doubt it will be popular in that regard amongst a broader audience. Certain adult recreational activities are oft cited, and if you want to do some research in that regard I would point you to the 3-DVD set “The Uranus Experiment” [Link absolutely totally not safe for work or children]. This is an adult film that is absolutely not for amateurs, but does contain the first cinematic instance in microgravity of what is colloquially referred to as the Money Shot. And no, things don’t behave the way they do here on Earth.

There’s actually an interesting story behind the movie. A German adult film company decided to make a science-fiction film sometime in the mid to late 1990s. They toured NASA, but when NASA found out what they wanted to film on the Vomit Comet, they declined to license their services. So the company went to the Russians, who said “You pay us how much? Okay! And you clean up afterwards!” Having flown on Zero-G, I have a great deal of respect for the professionalism of the actors and actresses who performed under unique and difficult circumstances. I’ve already got an idea for “Murphy Straps” to help facilitate the process, perhaps do a licensing agreement with Victoria’s Secret. So is there a market for that sort of stuff? Duh! Because in addition to The Uranus Experiment there is also Rocket Girls, Emmanuelle in Space, Space-Thing and others. Oh, can’t forget Wham! Bam! Thank you Spaceman!

One obvious piece of orbital hardware, part of the “infrastructure” that people talk about, is a Universal Docking Node (UDN). This would allow unlimited modularity of vehicles and modules. Setting universal interface standards is a key way to accelerate cislunar development. Provision of a UDN would more easily allow a private venture to cobble together a couple trans-LEO vehicles, some Bigelow balloons for habitation and storage, and sufficient fuel for a trip to take-your-choice destination. GEO, EML-1, LLO, a visit to an asteroid, maybe park out at L5 for a while to get some preliminary environmental readings. That’s the power of opening space to private interests. It allows for a much greater variety of projects, and more destinations can be explored.

That of course, is not enough to sustain a LEO economy, so let’s consider other ways to add value. One obvious way is post-launch inspection and repair of satellites. The roughest part of the trip for a satellite is the launch through the atmosphere of Earth. Stuff ends up not working right after launch, and being able to inspect and repair satellites may be a key part of the service sector in LEO. There’s also going to need to be an aggregation of materials in LEO for pushes further out. Things like research and development on propellant depots will help to accelerate this process. As will the availability of storage so that longer-term assets can be parked in orbit for a while.

So where would one have facilities in LEO? Given how tough it is to change inclination that deep in the gravity well, facilities are likely to spring up at inclinations of particular utility. Equatorial would provide a fair amount of GEO CommSat traffic that might be interested in a post-launch overhaul. Jon Goff over at the Selenian Boondocks (one of my old haunts) suggested something in the low-40s that would be readily accessible to most inland spaceports, making it of particular interest to the tourist trade. ISS has the benefit of passing over 85% of the land mass of Earth over the course of its orbits, making it an excellent platform for Earth observation. So different markets are going to be available.

Looking further out, the Earth-Moon L-1 point (EML-1) is the next logical destination, as it is indifferent to the LEO inclination. This is not necessarily intuitive, but the best way to think about it is like this - imagine the Earth and Moon in three dimensions, about 240,000 miles (384,000 km) apart. Now draw a line from the center-of-mass of the Earth to center-of-mass of the Moon. Hold that line fixed in 3-D space.

Now drop the Earth and Moon into gravity wells. The Earth’s gravity well is quite deep, the Moon’s a dimple in comparison. Perched about 86% of the way to the Moon along that fixed line is where those gravity wells peak, at EML-1. This is the lowest delta-V launch point in cislunar space to more places than anywhere else.

Now draw a Hohmann ellipse from LEO out to EML-1. This is traditionally done in the plane of orbit of the Moon, but we’re dealing with space, you have to think in three dimensions. Rotate that ellipse around the fixed line, and you have your map of orbits to EML-1, and they basically all cost the same delta-V, which helps to standardize fuel delivery requirements. Polar orbits are the exception, as the Earth is a bit pudgy around the middle and that messes things up a bit.

EML-1 serves as a crossroads in cislunar space, making it a key logistics point. It will also serve as a stockpiling point, enabling missions to the Moon, the asteroids, and even Mars. I would love to be the bartender on that facility.

Cargo and Machinery is going to be heading out to the Moon, eventually you want LOX to head back all the way down to LEO. Hydrogen we really need to be getting from asteroids, but the Moon’s polar deposits can help serve as a stopgap measure to supplement shipments from Earth.

Dropping back down to GEO, one long-term business plan is to provide near-constant Solar power as baseline electricity. It has been noted that we have been beaming Solar power to Earth for decades now, via our communications satellites, so to say that solar power satellites are a flight of fancy is patently false. What is a flight of fancy is to presume that terawatt-scale facilities are going to be launched from the surface of the Earth. That’s just not going to happen. Doesn’t mean we shouldn’t do space-based Solar power, we just have to consider alternate paths to that end.

One of the most valuable exports from the Moon is going to be mass. Luckily, it’s a lot easier to get stuff into cislunar space from the Moon than the Earth. LOX is the most frequently cited export, and it is one of the easier business cases to close, thanks to its manifold utility and abundant availability on the Moon, just locked up in minerals. LOX/LH is pretty much our best possible chemical propellant combo (unless you want to deal with some really, really nasty stuff), but oxygen represents about 7/8ths of the combined mass. Lifting that from the Earth’s gravity well is hard, and we could be sending more useful mass up instead. That’s why, over the long term, there is even a market for Lunar LOX in LEO.

A byproduct of Lunar oxygen production is slag. This could be exported to serve as radiation shielding for long-term facilities out beyond the Earth’s magnetosphere.

Another possible Lunar export could be the high-mass/low-value added components of a GEO Solar Power Satellite system, such as structural members and cheap and plentiful, if not terribly good, solar cell arrays.

The point is that the only thing you need to be lifting out of the Earth’s gravity well is the kind of high-value-added stuff like electronic components or high-precision parts. Earth is like the Switzerland of cislunar space; its contributions to commerce have to be small-mass/high-value-added items, at least until we can get a space elevator in place.

As capabilities grow on the Moon, more value-added can be brought to bear on the raw resources found there. Commerce will start stepping up the value-added chain. Foodstuffs is a good example. It’ll be easier to get foodstuffs from the Moon to LEO, even with a detour to EML-1, than to get it up from the Earth. Not by much, but it’s still a transport advantage. Given the unique terroir of the Moon, it’s not difficult to imagine a trade springing up in specialty food items, akin to the spice trade of yore.

If you’re interested in Lunar commerce, there are a few books I can recommend. First and foremost is Neil Ruzic’s “The Case for Going to the Moon“, written in 1965. Mr. Ruzic was editor and publisher of Industrial Research magazine, so he had a pretty good handle on what industry was all about. Decades have passed and the book is still relevant, as Mr. Ruzic understood the roles of things like vacuum and extreme temperatures in industrial processes. If you ever only read one book about Moon business, make it this one.

Another title I would highly recommend would be “The Once and Future Moon” by Dr. Paul Spudis. Dr. Spudis is one of the leading Lunar scientists in the world, and I’ve long considered him something of a Moon mentor. His book lays out a lot of geological background on the Moon, but also talks about how commerce and industry can take advantage of that. He blogs at “The Once and Future Moon” blog, and has, to my surprise, expressed a certain amount of disdain regarding the new policy. I can understand his point. The strategic objective of “Provide the tools and the processes to open up cislunar and translunar space to American enterprise” allows for a lot of interpretation. That’s not the NASA way. They want something like “Go to the South Pole of the Moon, explore, go to Asteroid B612, characterize, go to Phobos, set up base camp.” This makes it easier to design an optimized system, close out all the variables in the parametric models, and run some Monte Carlo simulations to nail down the budget.

However, as nice as those would be to have, that’s not the point of opening space to private industry. We don’t need a transport system optimized for going to the South Pole of the Moon. We need a transport system that allows for multiple destinations, because there’s no surer way to set off a rancorous frenzy in the space community than to assign a particular goal such as the Moon or Mars. I’m a known Moonatic. I have zero interest in Mars, and I don’t see it as THE Goal of our space efforts. That doesn’t mean that I don’t want to help the folks who want to go to Mars to get there (for a fair price). But I’m not going there, so if Mars is set as NASA’s (and by extension the U.S.’s) goal, bypassing the Moon, then I’m being excluded and will react accordingly. This is no different from the resentment felt by Mars Advocates when they see the Moon, what they consider a cul-de-sac, given a priority over their goals. And then there’s the long simmering angst of the asteroid folks, who know that their destinations are the best (and they’re right), but everyone ignores them. There’re also the L-5 colonists, who think the gravity-well-bound-thinkers are ignorant and can’t understand the human cultural potential that could be unleashed by micro-cultures in the different L-5 colonies. (Sort of what the U.S. is supposed to be about with the different cultures in the different states) We also can’t forget those who thought we would be exploring the Jupiter Moons by now.

So while I think I understand Dr. Spudis’ perspective, I have to disagree with his conclusions. I have no doubt that if we set the folks at NASA on, say, optimizing the design of inflatable fuel depots that use straps to transfer propellant, what I call Murphy Bags, then they would blow our minds with their results. By using straps controlled by electric motors, you’re doing away with the need for pumps. And by having multiple electric motors used to tighten the straps, the failure of a couple of them doesn’t negate functionality of the propellant bag (whereas if your pump breaks you’re hosed). How do you best place the restraining guides for the straps so that they don’t tangle? What are the actions/reactions at work during that kind of transfer process? That’s the sort of stuff that the NASA folks eat for breakfast. They have much, much to contribute to where we’re going.

Another obvious book choice, and of much more recent vintage is “The Moon: Resources, Future Development, and Settlement“. Lots of good stuff in there on Lunar industries. A little more hardcore is “The Lunar Base Handbook“, and beyond that is the first ISU Summer Session Project, the “International Lunar Initiative Organization“, which contains the best discourse I’ve found on Lunar Medicine. There’re over 2000 pages of densely packed info in those three. Other good titles include “Moonrush” and “Return to the Moon“.

Given how extensively these questions have been examined over the past few decades, it amazes me that there is so much ignorance being displayed in the comments and responses around the blogosphere. It’s almost as if there is a national schizophrenia at work regarding space activities. No one ever really supports space activities that much. Public polls show that time and again. Were that not the case then NASA would have no problem getting funding from Congress each year, and certainly at a higher level than 0.5 - 0.7% of the regular budget. Yet those who follow the process can tell you it is a fight year after year. But have the media trumpet that “The Moon program is dead!” and people start coming out of the woodwork.

There are also the logical disconnects. Some people point to the cancellation of the Orion capsule as the end of trans-LEO human spaceflight. Never mind that Space Adventures has already sold one Lunar free-return trajectory visit to the Moon (they need two for the flight). It is claimed that Orion could be ready by 2014, and yet the vehicle on which it would ride won’t be ready for another 4-5 years. The original Vision for Space Exploration (VSE) (pdf) called for the Orion to have its first test flight in 2010 and operational by 2014. Here we are in 2010 about 4 years from test flight.

I can remember back to the heady days of 2004, when various space companies were proposing solutions for the CEV during the Concept Exploration & Refinement (CE&R) stage of the process. This was in line with what the VSE had proposed, and which had also stated, and I quote:

“NASA does not plan to develop new launch vehicle capabilities except where critical NASA needs - such as heavy lift - are not met by commercial or military systems.” [p. 15]

Which brings us to another topic - that of heavy lift. There is a widespread and ingrained belief in the space community that a heavy-lift launch vehicle (HLLV) is required to do anything in space. My guess is that it stems from the “economics for engineers” analysis which demonstrates that the best way to scale down the cost of a kilo to orbit is to scale up the volume launched on any one vehicle, thereby distributing the fixed and variable costs amongst a greater number of kilos. Which is a fine analysis as far as it goes, but bears little relationship to the actual existing market of space launch vehicles.

There is a vehicle that can take heavy payloads to orbit, the Energia rocket. The Russians looked at the global market and saw that there was no demand for that volume of mass to orbit in one shot, and so don’t manufacture the rocket for the marketplace. And apparently the NASA version, Ares V, won’t be ready until the late 2020s. If all of your budget is being sucked into the design and manufacture of the rocket, then what can you afford to put on top? This particular path of logic seems to assume that there will be NASA budget increases in the future to pay for the equipment to ride on top. I question that assumption.

What became the Ares rockets were proposed back in 2004 at about the same time that the CE&R studies were being reviewed. I know this because I have an ATK marketing DVD for the shuttle-derived rockets and the files on it are dated August 2004. But it wasn’t part of the CE&R process, even if it was marketed as Safe, Simple & Soon. My guess is that it was because the SS&S rockets were a solution to a requirement that NASA didn’t have, that of “develop[ing] new launch vehicle capabilities”.

So what did we get? A new rocket development program and not a trans-LEO CEV. NASA was supposed to be out of the launch business and back into the exploration business, but here we are five years later and it’ll be nigh on a decade before NASA can get us into LEO, and another decade still until the Ares V allows us to go trans-LEO. And private industry is supposed to wait on that before we’re ready to develop space? I think some folks are really, seriously underestimating the capabilities that exist in the U.S. Do I think the private sector can get us back to the Moon in less than two decades? Heck yes!

By refocusing NASA’s capabilities on accelerating the development of the tools necessary for cislunar, Lunar, and translunar space, we can ensure that it happens a lot faster.

I’m excited by this new direction. Especially because as an investor I can put some capital into the industry and, if I do it carefully, profit from where we are now going. That excites me a whole lot more than watching a cadre of select government employees planting a flag on [pick your celestial destination]. I want human spaceflight to be a growth industry for our economy, not a government program delimited one.

The U.S. is desperately in need of industries and trades that will lead to economic growth. We have no choice, as we are leveraging our existing future to an unsustainable level. Space is a domain in which the United States has a competitive advantage. We need to exploit that advantage, to the ends of providing energy and resources so that we can start remediating the damage we do to our own planet to get those things.

This new direction opens the door to more than just NASA to achieve those ends. Therefore I applaud the President’s choices, and look forward to American enterprise taking us into space.