Virgin Galactic future at Spaceport America uncertain

Company pushing for liability protection

Virgin Galactic's future at Spaceport America uncertain

LAS CRUCES, N.M. - The dream of commercial space flight in New Mexico could come to a halt.

Virgin Galactic is threatening to reevaluate its lease agreement with Spaceport America near Upham, N.M., if the state does not protect its suppliers.

Virgin has already sold at least 500 tickets for commercial flights to space, but the company says it could take its business elsewhere if the state does not pass a liability exemption law for parts suppliers.

"I think it would be a big loss for New Mexico in many ways," Sen. Mary Kay Papen (D-NM) told ABC-7. "I am hoping in this next upcoming session we'll be able to pass informed consent for the passengers that would be flying."

An unsigned, undated copy of the lease agreement provided by the state calls for Virgin Galactic to be penalized $2 million if it breaks its lease with New Mexico and then begins flying elsewhere within two years. State officials said Wednesday the company won't post that deposit until it activates the lease. That would bring the state just a small fraction of the moran than $200 million it has invested in the facility.

"We gave the liability limitations to Virgin Galactic originally. It was a mistake not giving it to their subcontractors, so we should do it now," Sen. Lee Cotter (R-NM) said.

For the past two years, the state legislature has refused to pass the exemption.

Virgin Galactic President and CEO George Whitesides denied reports the company will leave the state if the law isn't passed, but he didn't rule it out.

He said the company will work with lawmakers and reevaluate the deal.

Spaceports are popping up all across the country from Texas to Virgina, down to Florida.

Virgin Galactic has already entered a deal to develop another spaceport in the emirate of Abu Dhabi.

State senators told ABC-7 they're hopeful an agreement will be reached.

"I think they are working on a compromise as we speak," Papen said. "We've already invested $209 million in the property. It's a fabulous property and built pretty much to their specifications and to others that would also be able to use the same facility, so I'm hoping that not only will they stay, but they will be attracting others as well."

"It's hard to tell. It's been several years in the legislature. We'll hope they'll actually let us get a vote on it this year," Cotter said.

Both senators said this is a top priority for the upcoming session next month. 

Spaceport America Executive Director Christine Anderson acknowledged Virgin Galactic could walk away from the project, but she remains hopeful the company will keep its commitment.

"They really could, if they are not committed. I would hope that they are and I think that they are," Spaceport America Executive Director Christine Anderson said.

Asked if she thought the state failed to properly protect itself in the deal, she said, the agreement negotiated under former Gov. Bill Richardson and approved by lawmakers in 2005 was for the state to build the spaceport and Virgin Galactic to develop the spacecraft.

"It's easy to second guess what was in people's minds," she said. "I'm sure everybody was excited to have Virgin Galactic as an anchor tenant."

Paul Gessing, president of the conservative Rio Grande Foundation, said the lack of protections for the state was not surprising, "given the Richardson administration's record of throwing money at 'development' of these big vision projects" like the spaceport and a $400 million commuter train.

Richardson's spokeswoman did not respond to an email seeking comment.

Other states, including Texas and Florida, are also developing spaceports and aggressively courting commercial space businesses with incentives. Most of them are revamping old airports or other facilities. New Mexico's is unique because it is the first to be developed from scratch.

With an elegant and futuristic design, the spaceport is intended to become an attraction unto itself.

Building the spaceport with taxpayer money could be likened to governments spending taxpayer dollars on stadiums or arenas for sports teams, Gessing said, noting that building a stadium "is not completely speculative with an industry in mind that may never materialize."

"What is truly unique about this project is that it was completely, 100 percent speculative," he said.

Tourism and spaceport officials have estimated as many as 200,000 people a year will visit the first-of-its kind center. And officials promised it would spur economic development and bring high-paying jobs to the mostly rural state.

But other space companies have passed New Mexico over and there is growing skepticism about whether Virgin, which has pushed its estimated date for starting flights from 2011 to 2014, will ever move into the spaceport.

A provision in the development agreement prohibiting it from operating its aircraft at competing spaceports without permission expires at the end of the month.

Investors from Abu Dhabi have contributed hundreds of millions of dollars to help Virgin Galactic develop its spacecraft.

Due to delays in both the construction of Spaceport America and development of Virgin's spacecraft, the company has yet to begin paying rent on the facility, which is located in remote southern New Mexico, about 45 miles from Las Cruces and 200 miles from Albuquerque.

When asked for copies of the quarterly business plans Virgin Galactic is supposed to submit to the state, officials with the state economic development said those updates were given orally to Anderson.

Anderson and state Economic Development Secretary Jon Barela said they expect the company to begin paying rent next month.

Virgin Galactic President and CEO George Whitesides was less specific and noted the company, which is testing its spacecraft in the Mojave Desert, has an office in Las Cruces and will move to Spaceport America "when the Spaceport Authority finishes the level of the work that it has agreed to provide on our building."

Whitesides denied news reports that quoted him as saying Virgin might leave if lawmakers for a third year in a row refuse to approve exemptions for parts suppliers from being sued for liability by any passengers on spacecraft launched from New Mexico. But he also didn't rule it out.

He said that it was "very concerning" that companies were not coming to the spaceport. The company, he said, signed up for a "healthy spaceport" with multiple businesses that could divide the costs. Whitesides said Virgin Galactic would work with lawmakers, and then reevaluate.

New Mexico has exempted spacecraft operators from liability lawsuits from passengers, but competing states have also extended that exemption to parts suppliers.

Virgin Galactic officials "have not told me that they are going to leave if they do not get this done," Barela said. "By the same token, I can assure you they are getting calls constantly from other states saying, 'New Mexico hasn't passed the law and we can get you a better deal.'"

In Sierra County, one of three counties that implemented a special tax to help develop spaceport infrastructure, some remain optimistic about project.

"I think Richard Branson is not where he is by luck," said Gary Whitehead, a car dealer in Truth or Consequences and a former Spaceport Authority board member, adding that he feels encouraged because of Branson's history of success.

Rancher Jim Taylor, however, calls the project a "terrible, terrible rip-off."

"Some people are concerned that Virgin might leave, conversely some wish it would all just go away," he said. "Maybe they could convert the 'hangar' into a concert hall for 'Woodstock West' or something that would actually generate money."

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