The Alaska Aerospace Corporation officials said at a public meeting on Tuesday that an increase in the number of annual launches from the Pacific Spaceport Complex - Alaska on Narrow Cape will be used to generate additional revenue, which will then be paid back to the state and borough.
“Increased launches mean increased revenue,” said Mark Lester, president and interim CEO of AAC.
Over the next decade, AAC intends to increase from 1-2 launches per year to 24-36 launches per year, Lester said.
“We know the past history has been a rough one. We’ve taken money and we’ve taken land and we’ve built poorly. We’re trying to rectify that for the future,” said Craig Campbell, who served as ACC’s CEO for almost eight years prior to Lester’s tenure.
AAC had a net operating loss of almost $1.8 million for the 2018 fiscal year, according to the corporation’s 2018 annual report. At the meeting, AAC officials stressed the importance of increasing the number of launches to ensure the corporation’s profitability.
Once ACC starts making a profit, Campbell said the corporation would begin paying a dividend back to the state and pay the Kodiak Island Borough through Payment in Lieu of Taxes. Because AAC is a state-owned corporation located on land owned by the Department of Natural Resources, it is exempt from property tax.
“We think we owe the local community some money. We’re on DNR land and we’re a state corporation,” Campbell said. “Yeah, we have the legal argument for why we don’t have to pay any money. But we think — and our board has already confirmed — that they want us to start doing Payment in Lieu of Taxes back to the borough.
“When we make a profit, there’s a formula that the board will use to take that profit and divide it between the state and the borough based on a percentage.”
The AAC board can give up 20 percent of the corporation’s profit in dividends and Payment in Lieu of Taxes to the state and borough.
“Our board will make that decision annually, based on a 5-year average of what our profits are, and how much we can afford,” Campbell said.
“So, we are driven to make money, but not so we can profit and be a rich company, but so we can pay our shareholder, the state and our landlords, the borough, and state business. That’s our driving factor as to why we’re trying to make this thing profitable.”
According to Lester, while AAC is a state-owned corporation, it has been run like a business for the past five year, without relying on state funds. However, it has received significant public funding in the past.
AAC received $32 million in sustainment money from the legislature over a five year period that ended in 2014. In addition, they received $36 million in capital investment money from the state. In total, the state has provided about 25 percent of AAC’s infrastructure funding. Moreover, AAC receives $4 million in annual enhancement money from the federal government.
Moving forward, AAC hopes to give back to Alaskan taxpayers, rather than taking money.
“If this business is going to work, we owe the dividends back to the citizens that gave us that sustainment money in the first place. I still feel obligated that I have a debt of $32 million back to you. And, so by making this profitable, we can start giving a dividend back to the state and pay back what you all gave us to stay alive,” Campbell said, addressing an audience of more than 30 community members.
AAC presented a low-range demand forecast of 16 annual launches by 2030, a mid-range forecast of 38 annual launches and a high-range forecast of 56 annual launches. All predictions estimate government launches to remain between one and two annually, with commercial launches making up the majority of the increase.
AAC’s 10-year master plan is based on the mid-range estimate of up to 38 annual launches. The master plan is in the formulation process. Though Campbell expects it will be complete in a year, with additional public meetings scheduled throughout the process to address ongoing concerns.
The spaceport currently has one military and one commercial contract. AAC officials could not confirm the identity of the commercial customer because of a non-disclosure agreement, but the only commercial operator currently licensed to operate in Alaska is Astra Space Incorporated.
ROAD, AIR AND WATER CLOSURES
Lester acknowledged that in order to sustain an increase in launches, AAC’s operational procedures must change, particularly with regard to closures of roads, waterways and airways.
“The closures are all about public safety,” Lester said. “We understand that we need to do that in a way that doesn’t put a burden on other people’s livelihood.”
In an effort to mitigate the effects of closures on the community, the spaceport is working to narrow the closure windows. In the past, closures have been as long as 7 to 10 days at a time.
According to Campbell, AAC is now working with commercial partners to reduce the closure window to 3 to 5 days for 2 to 3 hours on each of those days, offsetting the hours to early morning or evening.
However, “we’re not there yet,” Campbell said.
With 30 launches a year, even the restricted windows could still amount to 100 days of closure per year, Campbell confirmed. He added that ACC intends to have launches year round, so that road closures are not concentrated in the summer and fall months.
“Historically, the government (launch) has been in the summer, but the commercial customers are very willing to work year round,” Campbell said.
Kodiak residents expressed concern over the effects of closures, both economically and recreationally. In the past, airway closures have cut off the flyway between Kodiak and Old Harbor and waterway closures have been scheduled during season openers, impacting access to a prime fishing area.
The closure area depends on the size of the launch vehicle, but can range from 10 to hundreds of nautical miles. Though the Coast Guard can fine fishing boats that violate waterway closures, according to Campbell, fines haven’t been imposed thus far.
“We’re not in the business of being punitive,” Campbell said. “We’d like to know what’s going on and then solve the problem.”
While roadway closures usually do not restrict access to Surfers Beach, they do stop public access to Fossil Beach, a popular recreation site for Kodiakans. Narrow Cape is also home to numerous hiking trails, some of which are inaccessible during road closures.
“You’ve effectively shut the public out of that whole area,” said Kodiak resident Kent Cross during the public comment period. “The people here are concerned about access to it. They’re maybe willing to put up with a bunch of crap that you are going to hand out if there’s some payback, but you pay no property taxes.”
Kodiak resident Dana Carros proposed to relax the waterway closures in order to ease the burden on commercial fishermen.
“I used to fish right where you guys are shooting,” he said. “You are putting us out of business. The seasons are very short now. You can’t do this. My thought is: instead of making it mandatory that the guys leave the grounds, get the rules changed so that you put the advisory up and fishermen violate at their own peril.”
Lester promised to consider the option moving forward, but acknowledged that the ultimate decision was in the hands of the Coast Guard.
Lester said he is working with the Kodiak Fisheries Group, fish processors and the Department of Fish and Game to try to address their concerns, emphasizing the effort to prevent the overlap of closures and season openers.
“The fishing community is pretty diverse,” Lester said. “I’m learning this lesson the hard way — going to lots of meetings.
“I have full commitment from the commercial customer in the fall to work around schedules. It might not be perfectly right. I’m not promising what we can accomplish, but they said, ‘We’re on board to make sure that we pick a time and a day that makes the most sense.’”
For the military contract, however, Lester said their influence is limited.
“We don’t have the luxury of them coordinating dates ahead of time,” he said. “I can’t get ahead of them on that schedule so it is a little bit more challenging.”
However, AAC is required to notify the Coast Guard and the Federal Aviation Administration 30 days ahead of planned launches, both for government and for commercial contracts. The Coast Guard and the FAA then impose the restrictions for waterways and airways respectively. AAC works with the DNR to set road closures.
Members of the public can check the AAC’s launch webpage in order to find out about air, water and road closures. Road closures are also announced via a road sign in Bells Flats. Information about closures is also announced in the media.
MILITARY CONTRACT AND ISRAELI PRESENCE
AAC officials did not address the details of the current military contract, which has led to the construction of a 210-person temporary Life Support Area at the spaceport.
“We cannot speak to any specifics about our government contract,” Lester said. “We can tell you that we have a Missile Defense Agency contract, but I cannot speak to any specifics about what is going on with the current operation or future operations.”
Information about classified military operations is typically divulged to ACC officials on a clearance and need-to-know basis, according to Lester. Only one AAC board member has the clearance required to be briefed about the details of the current military contract.
According to previous reports, the U.S. Missile Defence Agency is working on a joint project with the Israeli Missile Defense Organization to test the Arrow 3 defense system, an Israeli anti-ballistic-missile system. The system is designed to intercept long-range missiles at a high enough altitude that it could safely destroy a nuclear warhead.
The temporary Life Support Area — or living quarters — was built in 2018 near the launch site, at a cost of over $1 million. The facility includes a dining hall, a recreation area and a business center, as well as a kosher kitchen and a synagogue.
The living quarters are made up of multiple trailers and was referred to by AAC officials as the “Kodiak Hilton.”
The Israeli launch was intended to take place last year, but was delayed. According to AAC officials, the living quarters are occupied and the planned launch will take place this year. Following the launch, the living quarters will be dismantled and removed.
Multiple community members expressed concern over the future of the Life Support Area trailers, asking for assurances that they would be removed from the island.
“When this mission is done, these will be removed,” Campbell said, speaking of the trailers. However, he noted that the trailers are not owned by AAC, since the Life Support Area construction was contracted to an outside company.
“We’ve been very adamant with the customer about it needing to be demobilized,” Lester said.
“Future launches may have need to house a number of people. We have told the customer that that solution does not work for the community. We have learned that lesson. We need to work together to figure out what we would do in the future.”
Some members of the public expressed concern over the possible weaponization of the spaceport. However, both Lester and Campbell denied any current or future weaponization.
“At the level of classification that some of us have, we are aware of what is going on at our site,” Campbell said. “The policy of our board is that we are not to be a weaponized military facility. Our goal is to test and research, and our goal is commercial launch. If it were to get to the point that it looked like we were weaponizing our facilities, that would be reported to the board.”
“There’s a significant difference between the skin of an airframe and what’s inside it,” Campbell added.
Kodiak community member Douglas Pengilly expressed discontent over AAC’s alleged collaboration with the Israel Missile Defense Organization.
“I would like to see a value that says [AAC] will not take on projects with or that benefit any organization or entity that is committing war crimes or crimes against humanity,” Pengilly said, calling for more transparency from AAC.
“This is not a hypothetical. It is an open secret that the Israeli Defense Forces are out there right now. Whether or not I like it, I am a part owner of this because I am an Alaskan, and that does not fit with my values.”
AAC officials denied receiving funds from foreign governments.
“We do not receive any foreign money. All investment we get comes from the U.S. government,” Campbell said.
Campbell confirmed that as part of the military contract, there had been a request to instate a more permanent road closure during the military launch project but that AAC refused the request in the interest of recreational use of the area.
“We want to do this together,” Lester said. “This is a Kodiak community thing. I view the spaceport as part of the community.”