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Spaceports: A New Frontier for Financing

With the rising dependence on space technology and space-based services, ensuring low-cost and reliable access to space for commercial companies has become paramount. The accelerated pace of new space-based industries (ranging from constellations of nanosatellites to mining of space assets to space tourism), and the increasing influence of commercial actors, require adequate support from launch facilities. Hence, along with the traditional state-sponsored launch sites, a number of commercial launch sites, or spaceports, have been, or are in the process of, being established

In a 2005 study by the Futron Corporation, a commercial spaceport was defined as "a launch facility whose main target market is commercial vehicle operators, and whose primary mission is to generate revenue by offering competitive, responsive, and efficient launch services with minimal bureaucratic and regulatory burden."1 While "minimal" burden may be the goal, the laws currently governing the licensing and operation of spaceports are largely inadequate to support the growing industrial needs.2 The current space law regime is particularly unusual in that it is governed primarily by international treaties – treaties which were entered by nation states before the commercial nature of space could be envisioned.

The fundamental space law treaty is the Outer Space Treaty which came into force in 1967, during the Cold War.3 It is an exceptionally broadly worded treaty, aimed at specifically limiting nation states from using outer space in an aggressive manner. The Convention on International Liability for Damage Caused by Space Objects, also known as the Space Liability Convention, requires the launching nation state in which the spaceport is located to be responsible for claims of damages.4 Now, public international law does not (and was never intended to) bind commercial, private companies. It was always expected that each nation state would enact its own domestic, regulatory framework for evolving space activities, but the commercial uses of space based technology were not particularly well-anticipated. As such, the legal and regulatory regime for many commercial space activities is uncertain at best, and, in some cases, may be illegal.5 As financiers know all too well, legal uncertainty makes it challenging to raise funds traditionally.

Since the international liability rests, primarily, with the launching nation state, there is no doubt that, notwithstanding the business need for efficient, commercial spaceports, there still needs to be significant financial and operational involvement by the launching state. Financing for spaceports, therefore, will best occur through the use of public-private partnership ("P3") financing.

In a P3 financing, a partnership between the public sector entity and a private party is created. The beauty of P3 financing (in addition to lifting some of the burden on the relevant state's taxpayers) is the ability to stimulate private investment into spaceport development. The government sector involved in a P3 financing can bring much needed regulatory certainty to a spaceport development project, as well as the requisite public sector oversight needed to fit within the current international space law treaty regime.

For those of us who are involved with aerospace finance, P3 financing is not novel. Most recently, the P3 financing method was used to fund "NextGen" satellite-based air navigation systems in several nation states via creation of "Air Navigation System Providers" or "ANSPs." These ANSPs were public-private partnerships that turned state-owned air space regulation departments into viable, efficient businesses. We can expect to see a similar trend in respect of financing commercial spaceports.

Indeed, potential P3 financing for spaceports has already begun. For example, the United Arab Emirates has plans to develop a spaceport in Abu Dhabi in cooperation with Virgin Galactic. The project is backed by Abu Dhabi state-owned investment firm Aabar Investments.6 Virgin Galactic has also entered into an agreement with ALTEC–a joint venture between Thales Alenia Space and the Italian Space Agency–to jointly analyse the operational opportunities of a spaceport in Italy.7

Recent legislative efforts (both at a nation state and at more local levels) specifically foster future P3 financings. The United Kingdom (UK), which (pursuant to its National Space Policy) has publicly committed to establishing a spaceport for commercial space flights by 2018, set up the cross-functional National Space Flight Coordination Group to oversee regulation and investments in space plane operations and the selection of a UK spaceport.8 By March 2015, five potential locations for a spaceport had been identified: Campbeltown, Glasgow Prestwick and Stornoway in Scotland, Newquay in England and Llanbedr in Wales. On May 18, 2016, the Queen's Speech announced the Modern Transport Bill, which aimed to secure low-cost access to space and to develop legislation allowing for the construction of the first UK commercial spaceport.9 In February 2017, the UK government announced a funding scheme offering £10 million grants to partners with the aim to "develop spaceflight capabilities, such as building spaceport infrastructure or adapting launch vehicle technology for use in the UK." (emphasis added)10. Clearly, these grants and industry-government teams pave the way for P3 financing for UK spaceports, when the engineers are ready.

Similarly, in view of the expected exponential growth in the commercial launch services market in the United States (US)11, there have been legislative efforts by various individual states to offer a wide range of incentives to encourage the building of US commercial spaceports within such state's borders. Within the State of Florida, an agency "Space Florida," has been statutorily empowered to attract and retain aerospace partners from the private sector that enhance the economy within the State of Florida by developing and operating targeted infrastructure facilities to enhance the state's existing spaceport at Cape Canaveral.12 More recently, the Senate of the State of Georgia passed a bill to facilitate spaceflight operations for the development of a spaceport in Camden County. One of the objectives of the Georgia bill was to limit the liability of space flight entities based on informed consent of space flight participants – mirroring the provisions of the Virginia Space Liability and Immunity Act and the Florida Informed Consent for Spaceflight Act. The underlying purpose of each of these states' "liability" statutes, however, is to promote investment in these spaceport projects with the support of the government sector.

While the regulatory framework to support spaceport developments is still being formulated and updated, it is evident that a new sort of "space race" is taking place. This is not just a contest to get up there first, but a contest between nation states (and local governments within nation states) to be the best "home" for these new, commercial launching sites. With governments around the world actively wooing developers of spaceports to set up shop in their respective jurisdictions, providing both regulatory certainty and economic incentives, we know that a myriad of P3 financings are coming soon (to a galaxy not so far away).

  1. Futron Corporation, Feasibility Study of a Florida Commercial Spaceport for Florida Space Authority, September 2005
  2. Commercial Spaceport Licensing Review and Recommendations White Paper, Commercial Space Transportation Advisory Committee (COMSTAC) Space Transportations Operations Working Group, October 10, 2012. It was concluded that the current regulations provided in Part 420 of 14 Code of Federal Regulations do not cater to the evolving commercial landscape for launch vehicle operators and launch site operators. Commercial Space Launch Insurance: Views Differ on Need for Change to Insurance Approach but Clarification Is Needed, United States Government Accountability Office (GAO), November 2016. The GAO, in this report, observed that there is ambiguity in the guidelines regarding insurance requirements for commercial spaceport operators regarding their status as "involved parties" or "third parties".
  3. Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies, adopted by the General Assembly in its resolution 2222 (XXI), opened for signature on 27 January 1967, entered into force on 10 October 1967.
  4. Convention on International Liability for Damage Caused by Space Objects adopted by the General Assembly in its resolution 2777 (XXVI), opened for signature on 29 March 1972, entered into force on 1 September 1972 Article II of the Liability Convention provides that "a launching State shall be absolutely liable to pay compensation for damage caused by its space object on the surface of the earth or to aircraft flight."
  5. "When Canadian-American tech mogul Elon Musk stood before an International Astronautical Congress audience in Mexico in September [2016] to roll out a widely ambitious plan to start ferrying human settlers to Mars over the next decade or so . . . . [t]he tiny international community of specialists in space law . . . zeroed in on a different question – whether what Musk was planning would be legal. Sounds academic, right? It's not – not anymore." Beazley, Doug, Who Owns Space? CBA/ABC National, Winter 2016, p. 18.
  6. "Branson vows to build Abu Dhabi spaceport in two years," The National, 10 February 2014
  7. "An Italian spaceport for space tourism: Altec-Virgin Galactic agreement," Research Italy, 12 December 2016
  8. "[The National Space Flight Coordination Group's] cross-cutting nature is recognition of the scale of the challenge inherent in identifying, approving and building a UK spaceport and in supporting all the necessary innovation and technology that it would require." Government Response to the UK Space Innovation and Growth Strategy 2014 – 2030 Space Growth Action Plan, April 2014, p. 8
  9. However, these plans could be delayed. The final date for the introduction of the Modern Transport Bill has been postponed due to constraints on parliamentary time by Brexit discussions. "Spaceport plans delayed by Brexit," BBC, January 28, 2017
  10. "Government announces boost for UK commercial space sector," Press release from the UK Department for Business, Energy & Industrial Strategy, UK Department for Transport, UK Space Agency, Jo Johnson MP, February 9, 2017
  11. "Space Florida CEO expects up to 200 launches per year," Orlando Sentinel, 28 September 2016
  12. See, Section 331.301, Florida Statutes.