Monday, March 28, 2016

Interorbital Exchange - Economically competitive development through an international authority

I've recently stumbled across the NexGen Evolvable Lunar Architecture study via NSS.
This is a NASA-funded study examining how a lunar propellant facility could be developed via public-private partnership. Definitely worth reading.

 I'd like to explore their proposal for an international lunar authority to manage access to lunar resources. This really fills in the blanks with regard to operational authority and funding sources without necessarily requiring one particular architecture or approach to the actual propellant production.

Discussion after the jump.

In case you don't feel like reading the entire report, it is essentially two separate works.

 The first section discusses a proposed architecture to produce lunar propellant and offer it for sale at an EML2 depot. This is broadly similar to my earlier posts in this series, though the authors have much deeper technical expertise and more reliable numbers. They include a crew of four on the lunar surface on six-month rotations, in a permanent habitat. Their schedule runs from 2017 to 2034 for the initial buildup, costing $34 billion over 17 years and resulting in 200 tons of propellant to EML2 annually at an ongoing cost of $3 billion per year. $3 billion was the target maximum annual funding level for full NASA control. That's an all-inclusive and very conservative value of $15 million per ton in recurring costs. This is about three times what I estimated, though their numbers are much more complete and include a permanent human presence throughout the program. Also included is a much longer period of exploration to identify the best location for resource extraction. Their ISRU plant masses 21.7 tons including nuclear power, cryogenics and rover / excavators; their annual production alpha is just over 36 tons propellant per ton of plant. I'll likely put together a followup post to explore what a different architecture could achieve with this kind of ISRU performance.

 The second section discusses in depth how to manage access to lunar resources under current legal frameworks. The short version is that the authors prefer an international authority modeled on the Port Authority of NY and NJ. This would be an international authority established by treaty and given the power to regulate activities in lunar orbit and on the lunar surface, to resolve disputes, to levy taxes and fees, to issue debt, to build and operate infrastructure and to contract with private entities to provide services in furtherance of a stable economic presence on the Moon.
 The ILA would start off government-funded (USA/Canada/JAXA, possibly including ESA and/or India) with a goal of becoming financially self-sufficient over time through taxes and use fees on lunar operations. It would function much like a modern corporation with a board of directors collectively setting policy objectives and naming an executive to pursue those objectives. Board members would be appointed by member nations with terms of service long enough to smooth over any short-term political turmoil.

 This I think is a brilliant approach to solving a number of problems with private lunar operations. Citizens and corporations under the law of member nations would be bound by law to obey the rules of the ILA. The Authority should be bound to preserve the lunar environment and would have the ability to prevent member entities from building giant ads on the lunar surface, for example, or embedding nuclear reactors inside ice-bearing craters. ILA would balance the goals of environmental preservation, scientific exploration and resource exploitation with the need for a stable economically viable system that encourages private participation. It would serve as an initial 'anchor' tenant for surface facilities and a major purchaser of services. Infrastructure that is too expensive or risky for a single company to develop would be developed by the ILA and provided on a fee for use basis.

 Using the approach outlined in the report (and extrapolated somewhat by me), NASA would initially work with private companies using programs similar to COTS / CCDev to establish a permanent habitable base and ISRU facility on the moon. ILA would issue infrastructure bonds to provide partial funding for this bootstrap phase as well as LEO and EML2 depots. Depots would be built and operated by private entities under contract to ILA and would operate as a market for propellant. Propellant would be treated as a commodity with ILA guaranteed to purchase any amount delivered to the depot that meets quality standards, within capacity limits. Both the operator and ILA would collect a fee to cover their expenses and reasonable profit, then the propellant would be available to any conforming buyer. ILA would have the power to reserve propellant for specific customers if they choose, but all operations, terms and prices must be publicly available. An example use for this option would be to guarantee a certain amount of propellant for a NASA Mars mission on a certain date even if other buyers want so much that reserves would have been depleted.

 The initial private partners working with NASA would own their hardware and would provide services to NASA under contract. For example, the habitat provider would charge a fee to NASA for housing four astronauts year-round but could also offer habitat space to other ILA member nations or corporations under whatever terms they choose. They would be responsible for maintenance and operations. NASA could in turn pay some of that fee in the form of maintenance hours of labor provided by on-site astronauts. The initial public funding of these systems is intended to jump-start the market for lunar space services, so the overall program encourages operators to offer services as broadly as possible. A reasonable tax would be applied on services exchanged within the ILA's sphere of influence. Individual member nations are not restricted in their ability to tax or regulate economic activities of companies under their jurisdiction provided those controls do not interfere with the ILA. In other words, a US space services company would still pay taxes on revenue earned through in-space operation even though they also pay fees to the ILA.

 Once this initial ISRU project is under way, competing service providers will be able to enter the market at any point and rely on the availability of other services at reasonable (in most cases published) prices. For example, a startup with a better ISRU plant could contract with SpaceX for earth launch service, ULA for lunar transport service and NASA for night-time nuclear power while selling propellant to ILA at EML2 and excess solar power to multiple customers on the surface. A guaranteed primary market with well-known prices and reliability for related services greatly reduces the risk to an investor, which means that startup is much more likely to get private funding. Inefficient players get priced out of the market, innovation can flourish and the balance of cooperation and competition can ensure a healthy market for all involved. Government funding becomes unnecessary to keep the market moving and NASA can step back to become a simple purchaser of propellant rather than the regulator, funder, designer and operator of all major activities as it often is today.

 The ILA then becomes a diplomatic tool. Any nation can join by contributing funds and ratifying the treaty, which would (among other things) cede any future claim to sovereign territory on or around the moon. An attractive market and the opportunity to gain leverage through board positions could induce Chinese and Russian participation and continue the tradition of open space.

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