Beyond Earth (ATWG) - Chapter 29 - Lunar Commercial Development for Space Exploration by T.L. Matula and K.A. Loveland

From The Space Library

Chapter 29

Lunar Commercial Development for Space Exploration

By Thomas L. Matula and Karen A. Loveland

Opening the Lunar Frontier

Historically, frontiers are driven by the potential for commerce. The desire for increased trade, identification of new resources or the discovery of new knowledge have driven humanity's quest to see what is beyond the next horizon. Pioneers and settlers follow the explorers; attracted by the opportunities for economic gain revealed by exploration, they put down roots to establish new communities on the frontier. It should be no surprise that the majority of the world's cities were first established to exploit unique natural resources or dominate natural trade routes; space settlement will be no different. Permanent lunar settlement will be driven not by scientific curiosity but by the potential for building economic wealth; the lunar frontier will be opened by extending the world's economy to encompass the Moon. Only by making lunar settlement economically viable will humanity extend its presence permanently to a new world and open the lunar frontier.

The frontier has long been an underlying theme of the American vision for space (McCurdy 1997 p248). President Kennedy built on America's frontier heritage in his 1962 speech at Rice University (Kennedy 1962): "Those who came before us made certain that this country rode the first waves of the industrial revolutions, the first waves of modern invention, and the first wave of nuclear power, and this generation does not intend to founder in the backwash of the coming age of space. We mean to be a part of it—we mean to lead it."

President Kennedy also recognized the importance of commerce in the opening of a frontier when he called for America to send a man to the Moon and accelerate "the use of space satellites for world-wide communications."(Kennedy 1961). This request led to Communications Satellite Act of 1962 (Comsat Act 1962) which was the major driver in the expansion of the economic frontier of humanity to the geosynchronous orbit 24,000 miles about the Earth's center. Communication satellites have become such an integrated part of the global economy since 1962 that it is difficult to imagine how it functioned with them. It is also difficult to imagine what the global space industry would look like today without the demand for communication satellites driving the global launch market.

Perhaps no one better communicated the vision for a space frontier than President Reagan who stated in his 1984 State of the Union Address (Reagan 1984): "A sparkling economy spurs initiatives, sunrise industries, and makes older ones more competitive. "Nowhere is this more important than our next frontier: space. Nowhere do we so effectively demonstrate our technological leadership and ability to make life better on Earth. The Space Age is barely a quarter of a century old. But already we've pushed civilization forward with our advances in science and technology. Opportunities and jobs will multiply as we cross new thresholds of knowledge and reach deeper into the unknown."

On January 14, 2004 President Bush once again reinvigorated the vision of space as a frontier in his announcement of a Vision for Space Exploration (VSE). In his speech President provided a clear link between the opening of the space frontier and the opening of the American West (Bush 2004): "Two centuries ago, Meriwether Lewis and William Clark left St. Louis to explore the new lands acquired in the Louisiana Purchase. They made that journey in the spirit of discovery, to learn the potential of vast new territory, and to chart a way for others to follow. "America has ventured forth into space for the same reasons. We have undertaken space travel because the desire to explore and understand is part of our character. And that quest has brought tangible benefits that improve our lives in countless ways. "

President Bush went on to address the importance of lunar resources to opening the space frontier (Bush 2004): "Lifting heavy spacecraft and fuel out of the Earth's gravity is expensive. Spacecraft assembled and provisioned on the moon could escape its far lower gravity using far less energy, and thus, far less cost. Also, the moon is home to abundant resources. Its soil contains raw materials that might be harvested and processed into rocket fuel or breathable air. We can use our time on the moon to develop and test new approaches and technologies and systems that will allow us to function in other, more challenging environments."

Creating a Lunar Economy

If America is going to take a lead role in opening the lunar frontier and creating a lunar economy it must change its perspective from viewing space as a program like Project Apollo. Instead, space exploration should be viewed from the broader perspective of economic policy. Opening the lunar frontier is not about developing specific hardware to reach a specific destination like previous space programs (e.g., Project Apollo). Instead, the systematic opening of the lunar frontier to permanent settlement and economic development requires the federal government to move beyond technological innovation and develop the necessary policies to create a sustainable infrastructure for lunar economic development. Using the American frontier as an analogy is necessary to develop the policy and organizational framework to build lunar equivalent of the forts, trading posts and wagon trails that enabled the permanent settlement of the American West.

It is important to learn from the history of frontier development of America when developing policies for opening the lunar frontier. Unique organizations have been created to overcome the challenges of the frontier from the Virginia and Massachusetts Bay Companies that founded the first English settlements in America to the creation of Comsat, which pioneered the creation of a space based global telecommunications systems. That same spirit should be applied to the lunar frontier to create the unique organizations needed to open the Moon for economic development.

The Lunar Development Corporation (LDC) could be created in the spirit of other highly successful American infrastructure corporations. Key infrastructure, including the Erie Canal, the Transcontinental Railroad, the Panama Canal, the Alaska Railroad, Boulder Dam, Tennessee Valley Authority, Bonneville Power Authority and Comsat were all created using public/private partnerships. The LDC could follow in this successful path to open the lunar frontier.

The basic idea of a Lunar Development Corporation is not new:

Robert Heinlein's novel "The Moon is a Harsh Mistress" used a Lunar Authority as part of its plot line (Heinlein 1966).

Hayam Benaroya proposed a Lunar Industrialization Board to coordinate lunar economic development (Benaroya 1994).

In 1995, the United Societies in Space proposed the creation of a Lunar Economic Development Corporation (LEDA) as a private development corporation to stimulate lunar development (Harris, 1996 p295).

David Schrunk proposed a Lunar Electric Power Company to develop lunar energy resources (Schrunk 1999, p330).

All of these proposals recognized that a lunar specific organization was a necessary ingredient in any plans for lunar development. The LDC proposed here expands on these basic proposals while implementing the Aldridge Commission recommendations for developing a strategy for integrating the commercial sector into a lunar return mission (Aldridge Commission, 2004). The Aldridge Commission was created by President Bush in 2004 to develop recommendations for implementing his Vision for Space Exploration. One of its findings was that it was important to leverage the abilities of the commercial sector in reducing the costs of space exploration (Aldridge Commission, 2004).

An Act of Congress could create the LDC proposed here as a corporation in the District of Columbia. The LDC would be structured as a liaison between NASA and the emerging space commerce sector. Exemptions or modifications to federal procurement regulations could be included in the Act to streamline the procurement process and encourage new commercial firms to become vendors. Provisions also could be included for new management models to encourage joint ventures with private firms and the adoption of innovative approaches to building and operating lunar infrastructure. Most importantly, a new organization could bring a new culture of innovation and economics, one more suited to building and operating lunar infrastructure than NASA's culture of science and technology research.

Advantages of a LDC

Many advantages are associated with using the LDC to build and manage lunar infrastructure. The first advantage is that the new organization would have a new culture, one developed specifically around building and operating lunar infrastructure. One reason Project Apollo was so successful was because NASA was a new organization full of young engineers and technicians who created a culture suited to successfully implementing a scientific mission to the moon. The LDC would be like the NASA of the 1960's and attract a new breed of engineers, technicians, and administrators that bring a youthful vigor to the creation of a culture of innovation that parallels the cultures found in the new commercial space commerce firms. Another advantage of the LDC is sustainability through multiple presidential administrations. As a government agency, NASA derives its funding from appropriations that vary due to political changes in Congress. The LDC would derive its funding from bonds and private investors (e.g., issuing common stock); thus, the LED would be able to focus on long term planning and development without the difficulties caused by funding changes. The LDC would also offer the incentive to pursue innovative revenue models to insure its independence from political budget battles for funding the development and expansion of lunar infrastructure. The LDC would be more likely to repeat the success of Comsat which was also enjoyed independence from the congressional budget cycle.

The government would still retain control over LDC's assets and any lunar infrastructure built as a government owned corporation; this advantage makes the LDC available for future national security needs. The LDC would also simplify the process of working with other government agencies like Department of Defense (DOD), Department of Transportation (DOT), Department of Energy (DOE) and the State Department on issues involving lunar policy. For example, lunar communication/navigation infrastructure built by the LDC would be readily available to the DOD for any national security needs that might arise in space or in lunar orbit.

A further advantage of the LDC is that it allows easier interaction with foreign space partners. The LDC would simply contract with foreign launch system providers for more spacelift capacity as needed. The LDC could also contract to do experiments on the moon for a foreign space agency. Complex State Department international agreements would not be needed because the LDC is a corporation and could use less complex business contracts making the bartering of services more attractive. However, international trade and arms reduction (ITAR) regulations would still govern the LDC just as NASA and private industry are governed.

The LDC relationship with NASA would be a strategic alliance/partnership. NASA would provide technical support, just as the Army Corps of Engineers provided support to the Alaska Railroad, Panama Canal, etc… and NASA provided support to Comsat. The LDC would not be limited to NASA as its only option for technical support. Comsat, Tennessee Valley Authority (TVA), and Bonneville Power Authority (BPA) contracted with private firms for needed services; the LDC would have the same options. This freedom would jump start lunar commerce among the commercial space commerce firms and help accelerate the development of a lunar economy by providing the emerging space firms with a major new customer, one with a more streamlined procurement process than NASA. Once the LDC built its infrastructure, NASA could become both a technical partner and a customer paying LDC for various services.

This business arrangement would free NASA from some of the difficulties associated with being anchored to specific infrastructure on the Moon such as those it is experiencing with the International Space Station (ISS).

Because the LDC manages the infrastructure, NASA would be free to focus on the scientific and technical aspects of space exploration. The LDC would operate the lunar infrastructure NASA requires for long range space exploration; Thus, the LDC could play a key role in the success of the VSE as a result by enabling NASA to keep its focus on the far horizon while the LDC stays focused on the Moon.

The LDC could also provide direct support for NASA in its efforts to return to the moon. Currently, under the VSE, NASA plans to use technology evolved from Project Apollo to return humans to the Moon in the 20182020 timeframe. Central to the NASA strategy for a lunar return will be the Crew Exploration Vehicle (CEV) which will sit atop a two-stage Crew Launch Vehicle (CLV). The CLV/CEV will be designed to place up to 25 metric tons and four humans into low Earth Orbit (LEO). In 2006, NASA is designing the new CLV and CEV based on improved Apollo-era technology and on components currently used with the Space Shuttle (Hammond 2006). Supporting the CLV/CEV will be a Cargo Launch Vehicle (CaLV) capable of launching 106 metric tons to LEO in its baseline configuration and 125 metric tons to LEO using an Earth Departure Stage (EDS). The addition of an EDS would also give the CaLV the capability of launching 55 metric tons into a lunar transfer orbit (Hammond 2006). Like the CLV, the launch vehicle for the CaLV will evolve from Apollo-era technology and Space Shuttle components. NASA plans to develop the CaLV in the 2011-2018 timeframe. As a government charted corporation (on the Comsat model), the LDC could provide NASA with additional financial support for developing the CLV/CEV and CaLV as well as serving to lower operational costs for the equipment by providing opportunities for using it for commercial payloads.

Prior to establishing a lunar outpost NASA will use unmanned orbital spacecraft to survey high priority sites on the Moon's surface. The lunar South Pole appears to be the most likely site for an initial human outpost on the Moon (King and Cook 2005). Other high priority sites on the Near Side of the Moon include the Aristarchus Plateau, Rima Bode, Mare Tranquillitatis, Mare Smythii, and Oceanus Procellarum while on the lunar Far Side NASA is considering the Orientale Basin Floor and South Pole-Aitken Basin (King and Cook 2005). One role of a LDC could be to leverage the capabilities of commercial firms for conducting the initial reconnaissance of potential lunar outposts by investing in commercial lunar missions.

NASA plans to establish the outposts themselves incrementally over multiple missions. Each lunar outpost will require a surface power system, communications/navigation systems, Rovers, habitat and laboratory facilities (King and Cook 2005). A LDC could serve as a mechanism that would allow NASA to partner with commercial firms for the construction and operation of these components, allowing NASA to supplement its lunar funding with commercial investment.

Financing The LDC

The financial structure of the LDC would be determined by Congress when the LDC is created. However, the major source of financing for LDC as a corporation focused on infrastructure development will most likely be bonds. Ideally, these Lunar Development Bonds will be issued by the LDC and fully guaranteed by the federal government. The LDC will issue the bonds through the U.S. Treasury at the prevailing market rate for federal securities. The bonds will be paid back through the revenues generated from the operation and sale of lunar infrastructure, lunar materials, intellectual property and other revenue sources identified by the LDC.

The initial funding of the LDC should be also involve the issue of public stock. Issuing a small portion of the stock to the public would allow directors from the public to be elected to join those nominated by the government.

The LDC Act should also include a "sunset" provision that requires the LDC to redeem the bonds within a specified period or face dissolution of the corporation. For example, the Act could give the LDC 30 years to generate sufficient revenue to eliminate the original bond obligation. If the LDC is unable to fulfill its obligation through revenues (and the issuance of additional public stock), the federal government would cover any balance between proceeds from the sale of LDC assets and the outstanding value of LDC bonds. This provision means LDC will have the advantage that comes from stable long-term financing and it offers it also means if the LDC fails to generate sufficient revenue it will be liquidated. Additional investigation would be required to determine the appropriate period for the sunset provision based on revenue and cost projections.

In addition, the LDC Act should provide that additional federally guaranteed bonds may be issued beyond the initial series by the LDC only after it has demonstrated the ability to generate revenue from the initial series. The amount of the new issues should be limited by revenue levels (e.g., 10 dollars for each dollar of revenue generated per year). Any amounts in excess of that limit will require Congressional approval of a business plan for future redemption.

LDC Revenues

Revenues to repay the bonds initially could come from other agencies using the infrastructure the LDC would build and operate. For example, NASA would pay LDC for lunar oxygen used for NASA spacecraft. DOD might also be a customer for lunar fuel that would be used to extend the flexibility and life of its satellites. Other revenue sources would likely include the National Science Foundation (NSF) and the DOE paying for placement and servicing of lunar experiments or for using lunar samples for research.

Benroya (2000) listed a number of activities at a lunar base that could be conducted commercially if a framework existed to do so. Blair (2000) outlined the value of mining lunar raw materials, especially oxygen for space development. Dennis Wingo's book "Moorush" provides a comprehensive review of the potential lunar resources including the possible presence of abundant platinum group metals (PGMs) (Wingo 2004). The presence of the LDC would greatly facilitate the commercial development of these resources by reducing the costs and risks for commercial firms.

The LDC would not be limited to revenues from U.S. agencies. It also could aggressively pursue revenues from foreign space agencies. For example, the European Space Agency (ESA) might pay the LDC to service an ESA telescope on the Moon, to send an ESA astronaut a LDC facility, or for samples of the lunar surface. The LDC could also provide support for a private lunar observatory similar to Steve Durst's proposal (Durst 2000). Other nations, private individuals, and for profit and not-for-profit organizations may pay the LDC for services. Universities also may pay LDC for experiments on the lunar surface or lunar soil for researchers to use.

Government agencies, foreign space agencies, and private firms would purchase goods and services based on a market-driven driven approach rather than costs. It is unlikely that revenues will cover 100% of the cost in the short-term. However, initial losses are common with government owned infrastructure. Mass transit systems often cover 50% of their costs or less with revenues. The lack of sufficient initial revenues is why a public corporation is necessary rather than a private one. However, the LDC will be unlike other government infrastructure systems because it will have one major incentive forcing it to search for the best deals, the requirement that the LDC pay off its debts within a specified period or be liquidated.

NASA and the LDC

NASA and its (NACA) ancestor were designed to administer technology programs, not to build and operate economic infrastructure (Centennial Commission 2003a). NACA was born in the midst of World War I when the United States had fallen so far behind in aviation technology it had no combat aircraft capable of surviving on the front lines in Europe. NACA's first mission was to close the gap and enable America to catch up with the major aviation powers of Europe. It was successful with a series of technology development programs that enabled America to dominate the skies in War World II (Centennial Commission 2003a).

NACA became NASA when Sputnik rocketed into the space in 1957, and its new mission was to develop the technology needed to allow America to overcome the Russian lead in space technology (Centennial Commission 2003b). NASA received its major input of resources, and its formative culture when its primary mission was to beat the Russians to the Moon during Project Apollo.

The culture that developed as a result of the NACA/NASA history focused on creating successful programs to rapidly advance technology. Project Apollo was such a technology program, and a very successful one. Projects Viking, Mariner, Pioneer, Voyager, Galileo, Hubble and many of NASA's other great success were also technology programs, designed to push the art of spaceflight to the cutting edge. These programs fit well into NASA's culture because each had a clear goal at the beginning that led to a clear conclusion at the end.

This contrasts with both the Space Shuttle and ISS, which were intended as infrastructure designed to enable future programs with no specific end game strategies. However, the shuttle and ISS have not been managed as infrastructure projects. NASA's culture viewed them as technology programs that required the latest, newest, most risky technology. Successfully opening the lunar frontier requires recognizing NASA does not have the culture or expertise needed for successfully implementing infrastructure projects.

NASA's key role in opening the lunar frontier will be in serving as a customer for commercial lunar services and in working with industry in developing the technology needed for lunar industries, not building and operating the lunar infrastructure. NASA should not be responsible for producing the lunar oxygen for missions, building the solar power arrays required for processing of lunar ore, nor the mining of that ore. Instead NASA's role should be the one it most suited to, namely pioneering the basic technology needed for development of lunar resources and conducting the preliminary human exploration of the Moon surface. NASA can operate then as the frontier scout it is, and move on to the next far horizon, Mars, leaving the operational work of building lunar infrastructure and mining its resources to a corporation specifically created for that purpose, the LDC.

The strategy of allowing NASA to pioneer the technology and then move on while another organization builds the operational infrastructure is not new. It has already been successfully demonstrated with the communication satellite revolution. NASA pioneered the first test of communication satellites in the early 1960's. Congress then created the Communication Satellite Corporation in 1962 to build the operational communication satellite network (Comsat 1962). NASA provided critical technical support to Comsat, and the new organization freed NASA to focus on the more demanding challenges of Project Apollo.

Summary

Although firms like Bigelow Aerospace (orbiting tourism hotels in LEO) and Virgin Galactic are developing commercial systems for Earth orbit, business models for lunar commerce are speculative at this time (Hammond 2006). The speculative nature of lunar commerce and the high investment costs needed for developing a lunar transportation system requires some form of government investment, just as the transcontinental railroad required in the 1860's. This is why NASA and/or the DoD need to provide the initial lunar transportation system. However the development of lunar commerce is critical if America's return to the Moon is to be sustainable and it is expected that post-2020 an increasing fraction of the lunar transportation system will be commercially funded and developed (Hammond 2006).

It must be recognized that opening the lunar frontier is too large a task for any single government agency. It must also be recognized that NASA's culture is that of a frontier scout, working on the ragged edge of technology. Once an organization's culture is set it requires a major effort to redirect it. Cassini, Hubble, and the Mars Rovers demonstrate that NASA is successful when the missions it is given are consistent with its culture. NASA's focus on cutting edge space technology is critical for leading the scientific exploration of space. Many have called for NASA to be converted into a space development agency instead of the space exploration agency it is today. Once such a conversion occurred, the need still would exist for an agency to explore the far frontiers of space. Why change NASA into something it will never be? Instead, those involved should recognize NASA's role and strengths and give it missions that build on these instead of trying to extend its charter to do missions not fitted to its resources. Why destroy a great agency by trying to convert it into a mission far from its core culture, expertise, and experience base?

Those building the American West recognized that frontier scouts made poor railroad builders. NASA embodies the spirit of the frontier scout, always seeking new horizons. The creators of NASA recognized this when they gave the implementation of President's Kennedy's goal of creating a satellite based communications system to the Communication Satellite Corporation and the goal of a space based weather forecasting system to the United States Weather Service (now NOAA) in the 1960s. NASA played key roles in achieving both goals by developing the space technology needed, but the systems built were owned and operated by organizations with cultures more suitable to integrate these innovations into the nation's economy. COMSAT and NOAA were successful and it is difficult to imagine how America's economy would function today without communication satellites and the accurate weather forecasts now take for granted by the average American. Frontier scouts played a critical role leading railroad survey crews through the wilderness and charting the path of the railroad. NASA engineers played a similar role in charting the technology path required for building the Comsat and weather satellite systems. However, building the railroad was left to others, and NASA left building these satellite systems to others. The same should be true for space solar power (SSP), Helium 3 (He3) mining, lunar PGM extraction and lunar oxygen (LUNOX) production. Creating the LDC to build and operate the infrastructure needed to harvest these new space resources for the future of humanity will allow NASA to once again take the point and explore the far horizons of the frontier "for the benefit of all mankind".

Research Questions

Question 1 - What changes in U.S. policy would be required to open the lunar frontier to economic development?

Question 2 - What are the key technologies required to develop lunar infrastructure and resources?

Question 3 - What are the specific costs and benefits of using the LDC instead of NASA to build and operate lunar infrastructure?

References

Aldridge Commission (2004) President's Commission on Implementation of United States Space Exploration Policy (2004), Report: A Journey to Inspire, Innovate and Discover," June 2004, Retrieved from http://www.nasa.gov/pdf/60736main_M2M_report_small.pdf

Benaroya, Hayam (1994). Lunar industrialization, The Journal of Practical Applications in Space, 6 (Fall), 85-94.

Benaroya, Hayam (2000). Prospects of commercial activities at a lunar base in Return to the Moon II: Proceedings of the 2000 Lunar Development Conference, July 20-21, 2000, Las Vegas, NV.

Blair, Brad (2000). An economic paradigm for commercial lunar mineral development, in Return to the Moon II: Proceedings of the 2000 Lunar Development Conference, July 20-21, 2000, Las Vegas, NV. Bush, George (2004). President Bush Announces New Vision for Space Exploration Program, White House Press Releases, http://www.whitehouse.gov/news/releases/2004/01/20040114-3.html

Centennial of Flight Commission (2003a). "The National Advisory Committee for Aeronautics (NACA)" http://www.centennialofflight.gov/essay/Evolution_of_Technology/NACA/Tech1.htm Centennial of Flight Commission (2003b). "The National Aeronautics and Space Administration" Retrieved from http://www.centennialofflight.gov/essay/Evolution_of_Technology/NASA/Tech2.htm

Comsat Act (1962). "Communications Satellite Act of 1962," Public Law 87-624, Proclaimed on August 31,1962, http://www.jaxa.jp/jda/library/space-law/chapter_1/1-1-2-5/index_e.html

Durst, Steve (2000). International lunar observatory/power station: From Hawaii to the Moon in Return to the Moon II: Proceedings of the 2000 Lunar Development Conference, July 20-21, 2000, Las Vegas, NV.

Hammond, Walter E. (2006), NASA Senior Engineer, Personal Communication

Harris, Philip Robert (1996). Living and working in space: Human behavior, culture and organization, Praxis Publishing: West Sussex, England.

Heinlein, Robert A. (1966). The Moon Is a Harsh Mistress, Putnam: NY, NY.

Kennedy, John F. (1961). "Special Message to the Congress on Urgent National Needs" Delivered in person before a joint session of Congress," May 25, 1961, Retrieved from http://www.jfklibrary.org/j052561.htm Kennedy, John F., (1962). "Address at Rice University on the Nation's Space Effort" Delivered in person at Rice University, Houston, Texas, September 12, 1962, Retrieved from http://www.jfklibrary.org/j091262.htm

King, David & Steve Cook (2005), "MSFC and Exploration: Our Path Forward," Briefing at Marshall Spaceflight Center (MSFC), Huntsville, AL by David King, MSCF Director and Steve Cook, September 23, 2005.

McCurdy, Howard E,(1997). Space and the American imagination, Smithsonian Institution Press: Washington, D.C.

Reagan, Ronald (1984). Address Before a Joint Session of the Congress on the State of the Union - Delivered in person before a joint session of Congress," January 25, 1984 Retrieved from http://klabs.org/richcontent/Speeches/ReaganSpeech.htm

Schrunk, David, Burton Sharpe, Bonnie Cooper and Madhu Thangavelu (1999). The Moon: Resources, future development and colonization, Praxis Publishing: West Sussex, England. Wingo, Dennis (2004). Moonrush: Improving Life on Earth with the Moon's Resources, Apogee Books: Burlington, Ontario, Canada

About the Authors

Thomas L. Matula

Karen A. Loveland