One of the world’s leading experts on the commercialization of space questions the California Franchise Tax Board’s move to make the Golden State the first to impose state taxes on private space launch and tourism firms.

John Logsdon, co-founder of George Washington University’s Space Policy Institute, told the San Francisco Chronicle that the commercial launch business was heating up, with private “spaceports” as well as leased military facilities being use to send cargo and – before long – tourists in the state. 

The $2 billion in revenue that launch firms generated in 2014 worldwide is expected to continue to grow and make it a lucrative niche industry. Elon Musk’s Hawthorne-based SpaceX company is one of the world’s best-known space firms; a recent launch is pictured above. Vandenberg Air Force Base on the Santa Barbara County coast is considered a superior launch facility.

Against this backdrop, Logsdon questioned why California would seek to lead on space taxation: “States that don’t levy taxes would have that competitive advantage over states that do. If California puts in a tax and Florida or Texas doesn’t have a similar tax, I’m not sure that helps California in a competitive way.”

But Thomas Lo Grossman, the Franchise Tax Board official interviewed by the Chronicle, contended that the tax regulatory framework would actually make private launch firms more comfortable being based in California.

As a recent Quartz.com analysis noted, the state framework is what space companies prefer as the overall basis for taxation and hope it is copied by governments around the world.

“The complicated new formula … sets a tax rate based on how often rockets are flown from California. It uses the 62-mile trip to space as a standard, and reduces the levy on revenue earned in launches from other sites,” wrote space business reporter Tim Fernholz. “The new rules, based on formulae used for terrestrial transport industries, appear to ensure that a California-based company like SpaceX won’t be excessively taxed for revenue generated by launches in other states, while Colorado-based ULA pays its fair share for using California spaceports.”

Florida has already lured away California space venture firm

But unlike Quartz, the Chronicle report addressed Logsdon’s point about the business-friendliness of California becoming the first to levy a state tax in a nation in which a half-dozen states already have launch sites and many more are interested in building them. It noted that Moon Express – a well-financed venture capital firm that hopes to mine the moon for valuable natural resources – had relocated from Mountain View in the Bay Area to Florida. Company CEO/founder Bob Richards cited incentives proved by Space Florida, the state’s ambitious space economic development program.

California’s state efforts to promote space economic development are based with the Office of Strategic Technology in Los Angeles County – but space is only one industry the office seeks to help, unlike Florida’s more specific approach. Project California’s Council on Science and Technology also does some related work.

The Franchise Tax Board will consider adopting the rules after a public hearing on June 16. The board is taking comments on the FTB proposal until June 5.

Amid ongoing controversy over the economic impact of California’s thick regulatory environment, its leading space pioneers continued to notch new successes, underscoring the potential value of orbital and interplanetary technology to more earthbound challenges and opportunities.

Off the Pacific coast, a SpaceX capsule successfully returned to Elon Musk’s company cutting-edge research samples developed above the skies. “The pressurized capsule carrying about two tons of science projects splashed down in the Pacific Ocean off Baja California on Sunday after a five-hour free-fall from the International Space Station,” the San Jose Mercury News reported.

“Human stem cells were included in the Dragon cargo. It’s very difficult to expand stem cells on Earth but, in space, microgravity is believed to allow for accelerated expansion – which could improve treatment of stroke victims and others. Among other research, scientists looked at why microgravity causes wounds to heal more slowly, how it impacts muscle contraction, and how future antibiotic-resistant bacteria may mutate.”

Meanwhile, in Palm Springs, Amazon CEO Jeff Bezos joined other industry leaders in giving the latest tech with potential space applications a spin. He climbed into a “14-foot-tall Method-2 robot, developed at Hankook Mirae Technology’s lab near Seoul in South Korea” and unveiled at an exclusive conference presented by Amazon, MARS 2017, according to GeekWire. “To create the 1.5-ton monstrosity, Hankook Mirae’s engineers worked with Hollywood robot designer Vitaly Bulgarov, who has been involved in mech-monster movie franchises such as Transformers, RoboCop and Terminator.”

From Earth to Mars?

In a bit of quintessentially Silicon Valley humor, Bezos tweeted an image of himself inside the mech with the #MARS2017 hashtag, raising speculation that he might sense an opportunity to link up massive exoskeletal technology with his own spacefaring program, Blue Origin. “Method-2 is controlled by a pilot who sits inside a cockpit in the robot’s torso, as Bezos demonstrates in the picture he tweeted.”

At the event, the Bezos-led firm let Americans gain a peek at one of its other leading-edge initiatives – a delivery drone – tested in England rather than California due to a smoother regulatory path. “The drone demonstration suggests that Amazon is making progress in its Prime Air development effort. When the service goes commercial, it’s expected to deliver packages in 30 minutes or less, using flying robots that can travel up to 50 mph,” GeekWire added separately. “It shouldn’t be a surprise that Amazon is providing a sneak peek at its delivery drones at MARS 2017. Amazon is presenting the semi-secret conference this week to show off technologies in Machine learning, home Automation, Robotics and Space exploration for a select audience.”

Rocketeering

Bezos has joined Musk in pushing for greater and faster human space travel, methodically building and testing increasingly powerful engines capable of propelling rockets beyond Earth’s gravitational pull – and back. Blue Origin “has the suborbital New Shepherd, and engineers are working on the heavy-lifter New Glenn, an orbital vehicle that’s scheduled to fly for the first time by 2020,” as Space.com noted. “This same incrementalist philosophy will also apply to crewed flights, which will begin aboard New Shepard. (Blue Origin also intends to launch people to orbital space eventually, Bezos has said.)”

Musk has already announced that, pending preemption by a NASA crew, several private citizens have ponied up for a personal flight extending past the moon’s orbit. “Musk says the trip is scheduled to happen in late 2018 and if he and his company manage to pull it off, it will be the first time in 45 years that humans will venture that deep into space,” ABC San Francisco recalled. “They’ve not yet been identified, but two people have put down significant deposits for a trip around the moon. Musk says they will fly faster and farther into the solar system than anyone before them.”

High-flying clean-energy industrialist Elon Musk has doubled down on his production plans in California. Tesla, his auto company, “took a major step toward its ambitious goal of one day building 1 million cars a year by seeking to double the size of its Fremont, Calif., assembly plant,” the Los Angeles Times reported. “Under a long-term zoning proposal submitted to Fremont’s Planning Commission, the electric car maker wants to eventually add 4.6 million square feet of space to its factory’s existing 4.5 million square feet.”

Musk “told analysts this spring that the Palo Alto-based automaker hopes to ramp up annual production to 500,000 vehicles in 2018 and build 1 million vehicles by the end of 2020,” the paper added. “The 2018 goal alone is nearly a tenfold increase from the 50,580 vehicles that Tesla produced last year in Fremont. The automaker has forecast this year’s deliveries at 80,000 to 90,000. Quality problems and production delays plagued the plant early this year and threatened sales plans. But the company said last week that those problems are behind it and that it expects to come close to its forecast for 2016.”

Broad deals

Musk has not hesitated to link up with government resources and opportunities in order to advance his business interests. This month, he aligned SpaceX closely to take advantage of President Obama’s call to use private industry to help bring Americans to Mars. “Within the next two years, private companies will for the first time send astronauts to the International Space Station,” Obama announced. “One of those private companies tasked with ferrying astronauts to the ISS and who will essentially return human spaceflight to American soil in late 2018 is SpaceX,” the Observer noted.

And last month, Musk inked a deal to change the way California backstops its energy needs. “Tesla Motors Inc. will supply 20 megawatts (80 megawatt-hours) of energy storage to Southern California Edison as part of a wider effort to prevent blackouts by replacing fossil-fuel electricity generation with lithium-ion batteries,” Bloomberg reported. “Tesla’s contribution is enough to power about 2,500 homes for a full day, the company said in a blog post on Thursday. But the real significance of the deal is the speed with which lithium-ion battery packs are being deployed,” the site added — “months not years.”

Outracing critics

As Musk has accelerated his increasingly ambitious plans, however, he has attracted a greater share of criticism toward the mechanics of his business operations. “The pressure is now on Tesla for a smooth launch of the relatively affordable Model 3. A quality product pumped out at low cost and high volume is essential to meeting the ambitious goals of the company and its investors, auto analysts say, whereas long delays could threaten the company’s reputation — and survival,” according to the Times.

Meanwhile, wariness has centered separately around SolarCity, a startup run by family members. “The Tesla-SolarCity deal looks so bad on paper that many investors worry it’s simply a bailout of SolarCity, which Musk co-founded and continues to chair,” the MIT Technology Review noted. “While SolarCity dominates the market for leasing, installing, and maintaining solar panels for residences and businesses, it’s racked up more than $2 billion in losses over the past five years. “

“Its business model requires it to raise huge amounts of capital to cover the up-front costs of providing panels for no money down to consumers on multiyear contracts. Since its inception, the company has accumulated more than $3 billion in debt against just $1.5 billion in revenue. Now it is having a harder time convincing people to lend it money.”

What’s more, Musk has had to contend with a rebellion among his own shareholders. “As of earlier this week, seven Tesla stockholders have filed lawsuits against Elon Musk over the proposed acquisition of SolarCity and alleged Musk was in breach of his fiduciary duties for not disclosing the proposed merger properly. Some of these stockholders are asking the judge for an injunction to prevent the merger from going through,” Recode reported. But the two companies have announced the merger is going ahead anyway. “The companies have set the date for their respective shareholders to vote on the $2.6 billion all-stock transaction for Nov. 17.”

Hyperloop Transportation Technologies, one of the leading companies dedicated to taking SpaceX CEO Elon Musk’s revolutionary brainchild off the drawing board and into reality, went public with news of its plans to break ground this year. “Construction is set to begin in the second quarter of 2016,” Entrepreneur noted.

In an interview with CNBC, HTT COO Bibop Gresta framed the details in ambitious new terms. “We are announcing the filing of the first building permit to Kings County to the building of the first full-scale hyperloop, not a test track,” he said. “In 36 months we will have the first passenger in the first full-scale hyperloop.”

Ben Cooke, a spokesman for the company, supplied some additional details separately. HTT, he indicated, “hopes to do geological surveys and map out the track in the next six months, then start building. The plan is to use a hyperloop to whisk residents around a proposed development called Quay Valley, south of Kettleman City. Preliminary estimates based on construction bids are that the hyperloop’s cost will be between $100 million and $170 million,” noted Southern California Public Radio.

Rival locations

Gresta made clear, however, that Californians won’t be able to cue up for travel up and down the state quite so soon, CNBC reported, noting that the completed track HTT plans to build won’t stretch between cities. “Gresta said that a full-scale city to city hyperloop could be a reality within five years, but said it will most likely not be in the U.S.,” the network added.

In an interview with a separate network, Gresta raised more eyebrows by suggesting that Russia could be among the first countries to bankroll a hyperloop that does reach from city to city. “Hyperloop Technologies is in talks with a Russian investor to finance the possible building of a new kind of transport, the company’s COO told RT at the World Economic Forum in Davos,” RT reported. “It is likely the government will also be keen on the idea, he believes.”

Speaking about HTT’s current negotiations, Gresta told RT, “We’re talking with a Russian private investor to basically have the first route in Russia, and we’re analyzing different possible solutions between different cities. You can connect Moscow and St. Petersburg in 35 minutes.”

Three ways forward

But HTT, which isn’t alone in the race to develop the hyperloop, made waves at Davos while another company rolled out development news of its own. According to SpaceX itself, Aecom, a global infrastructure firm, will construct “a one-mile track at SpaceX headquarters near Los Angeles International Airport,” as SCPR reported. “If all goes well, by summer’s end, the track will host prototype capsules that emerge from a design competition this weekend at Texas A&M University. The prototype pods would be half the size of the system that Musk envisioned and would not carry people.”

Michael Burke, Aecom chairman and CEO, released a statement portraying the company’s foray into hyperloop construction as a natural next step. Aecom, he said, “has designed and built some of the world’s most impressive transportation systems, so we appreciate how the development of a functioning Hyperloop with SpaceX can dramatically expand the ways people move across cities, countries and continents.”

A third firm has already forged ahead with a similar test track across the California border in North Las Vegas, “Hyperloop Technologies Inc. says that track will be used to develop ways to propel capsules,” SCPR observed. “The company plans to build a second, full-scale loop to test a prototype, spokeswoman Meredith Kendall said.”

As the latest model of Musk’s Tesla automobile scored the highest-ever rating given by Consumer Reports (99 out of 100) his even more revolutionary Hyperloop concept gained new respect, with one firm closing key deals that could bring established global expertise to bear on the Hyperloop’s demanding requirements.

Construction heavyweights

The Los Angeles-based Hyperloop Transportation Technologies, or HTT, recently announced a significant new agreement with Oerlikon Leybold Vacuum and with engineering goliath Aecom. The three companies agreed “to begin construction on a full-scale Hyperloop prototype running alongside Interstate 5 through five miles of Quay Valley in the San Joaquin Valley of California,” as the International Business Times reported. Despite stubborn skepticism around the ultimate feasibility of Musk’s Hyperloop concept, “HTT’s new partnership with Oerlikon and Aecom (which is involved with the rail tunnel being constructed beneath the streets of London), publicly traded companies with a responsibility to shareholders, is validation that Musk’s blueprints could eventually pay off,” IBT noted.

Adding to Aecom’s expertise with massive construction projects, the Oerlikon partnership sent a strong signal that investors and tech watchers ought to take Hyperloop much more seriously. “Oerlikon has been in the vacuum business for more than a century, and has worked on projects like the large hadron collider at CERN,” Wired observed.

Although energy and cost were substantial hurdles to success, according to Oerlikon business development chief Carl Brockmeyer, the most surreal aspect of Hyperloop — the sheer creation of a vaccuum-sealed shuttle track hundreds of miles long — ranked relatively low on the list of challenges. “I don’t think the construction hurdles are significant compared to other technologies that are already out there,” he told Wired. “From a technical point of view, it’s not a challenge. We are used to much higher and harsher applications.”

Still, said Brockmeyer, “you will be surprised” by how low the energy requirements could be, relatively speaking. “In fact, he says the energy could be generated by the solar panels and wind turbines” that HTT chief Dirk Ahlborn has decided to set up in Quay Valley — the planned community paralleling California’s Interstate 5 highway, alongside which a closely-watched Hyperloop test track will be constructed.

The race for design

Hyperloop still has not settled on a specific design for the “pods” that will carry passengers inside the vacuum train. But with a Musk-sponsored contest around the bend, researchers — especially in academia — are gearing up to the task. Universities including Purdue and Texas A&M were set to introduce courses on Hyperloop design and engineering, with the University of Illinois and other schools assembling teams to vie for victory in Elon Musk’s SpaceX Hyperloop Pod Competition, according to Gizmodo.

“The competition, which is slated for June 2016, is aimed at university students and will enable selected applicants to try out their pod design on a one-mile Hyperloop test track that will be built adjacent to the SpaceX headquarters in Hawthorne, California,” Business Insider reported when Musk announced the event this June. Finalists will be selected by committee and announced at the start of next year, at the so-called Design Weekend hosted by Texas A&M itself.

According to the detailed rules laid down by SpaceX, pods must weigh in under 11,000 pounds and measure under 14 feet long, Popular Science reported. “Among the other requirements, they also have to have brakes, communications, telemetry, and it is recommended that the pods levitate.” the SpaceX rules state that, while any “mechanism(s) for levitation is up to the entrant and is not actually required,” vehicles with wheels “(e.g. an ‘electric car in a vacuum’) can compete, but are unlikely to win prizes.”

But back to Musk and his new technology. Hilariously enough, it’s inspired by California’s epic public-works boondoggle:

“In an extensive analysis published on the website Motherboard, Mr Gardi concluded: ‘I believe that Hyperloop is merely a modern day version of the pneumatic tubes used in banks, stores, and industry to move money and small items over long distances or to other floors of a building.’ …”

“Mr Musk’s intended location for the first Hyperloop is California, between Los Angeles and San Francisco. His motivation for the project came from disillusionment with the Golden State’s high speed rail project, which has been dubbed the ‘bullet train to nowhere’ after a series of setbacks.”

Bullet train ‘actually worse than taking the plane’

“He believes the Hyperloop could be built for a tenth of the cost and deliver passengers between the two cities in just 30 minutes, compared to three hours for the bullet train.

“The bullet train is currently estimated to be costing $68 billion and may not be completed until 2028. It would reach top speeds of only around 130 mph. In a survey seven in 10 people said, if the train ever does run, they would ‘never or hardly ever’  use it anyway.

“In an internet conversation this week with Sir Richard Branson, Mr Musk said: ‘I originally started thinking about it when I read a thing about California’s high speed rail project, which was somewhat disappointing. It is actually worse than taking the plane. I get a little sad when things are not getting better in the future.'”

If Musk’s breakthrough really is transformative, at least the bullet-train fiasco had one upside.

By Joseph Perkins

The dawning of the commercial space age begins Tuesday. That’s when SpaceX is expected to launch from Cape Canaveral in Florida for a rendevous with the International Space Station — the first time a private spacecraft will do so. A Saturday launch was canceled due to technical problems.

SpaceX, the Hawthorne, Calif. space transport company, was co-founded in 2002 by Elon Musk, who currently serves as its CEO. He is one of the Golden State’s great entrepreneurs, having also co-founded PayPal and Tesla Motors.

Musk is persuaded that the commercial space industry is going to lift off.

“There are some similarities to the commercial awakening of the Internet in 1994,” he said, “when the Internet went from being almost an entirely government and academic institution to getting commercialized and accessible to the general public.”

California companies led the way in commercializing the Internet. It remains to be seen whether the Golden State will play a similar role in the growth of the commercial space industry.

As it is, the nascent industry already generates more than $200 billion a year in economic activity, according to the Federal Aviation Administration’s Office of Commercial Space Administration.

And with the federal government ending its half-century monopoly on space, Musk and others expect exponential growth in the commercial space business.

Florida wants to remain the center the space industry, which, during the Space Shuttle program, contributed $8 billion a year to the Sunshine State’s economy, while also accounting for more than 40,000 jobs.

But there’s no reason California can’t compete for the lion’s share of commercial space industry.

Indeed, while SpaceX will launch its Falcon 9 rocket with its Dragon capsule from Florida’s Cape Canaveral, Musk will monitor the launch from SpaceX mission control inH awthorne.

After docking with the space station, after delivering its payload of more than 1,000 pounds of food and supplies for the station’s crew, Falcon will return not to Florida, but to California. It will splash down two weeks from now in the Pacific Ocean, a safe distance off the San Diego coast.

Californi acould have been the site of tomorrow’s historic SpaceX launch, just as surely as it is the site of the spacecraft’s scheduled return to earth. In fact, a 235-foot Delta IV rocket was launched into space last year from Vandenburg Air Force Base.

A private launch facility here in California would make the state extremely competitive withFlorida. No longer would commercial space companies, most of which are based here in the West Coast, have to ship their spacecrafts all the way to Cape Canaveral, as SpaceX was forced to do. They can save time and money by launching right here in California.

Thanks to the federal government,Florida enjoyed a near monopoly on space-related activity from the Gemini program to the Space Shuttle program. But we have now entered the era of commercial space activity. And California should compete with Florida to be the industry’s hub.