Texas Bar Journal July 2022

Building a New Highway From Texas to Mars

A Discussion About Adapting to Innovations in Aerospace Law

Written by Victor A. Flores

In 1862, the Central Pacific and Union Pacific Railroad companies raced to build the country’s transcontinental railroad. The two tracks competed for a set of government initiatives, including land grants and government bonds for every mile of track built. On May 10, 1869, the railroad was completed, creating an extensive network of tracks that opened up the American West and provided direct travel for the 3,000-mile journey across the United States.¹ At the time, it was one of the country’s largest infrastructure projects. It challenged America’s concept of reality, reshaped the scale of commerce, and expanded long distance travel.

Today, companies like SpaceX and Blue Origin are competing to establish a more complex intragalactic highway to Mars and beyond. For the skeptics dismissing commercial space travel as a viable possibility, Morgan Stanley recently estimated that the global space industry could generate revenue of more than $1 trillion in 2040, up from $350 billion, currently.² Additionally, the increasing global demand of satellite-based services has launched a reusable rocket revolution.

As space travel becomes safer and more cost efficient, lawyers familiar with space law and other areas of the law impacted by new space developments will be in higher demand. Just as the railroad needed public-private partnerships to address various infrastructure and financing gaps 160 years ago, building a new space highway will have its own set of unique needs that must be resolved. Texas attorneys need to be aware of the changing legal landscape surrounding the aerospace industry and prepare to provide innovative legal solutions for their clients.

Texas, an Anchor for New Space Innovation
With 98% of SpaceX’s Starship being built in Brownsville, our state has a front seat to this new season of space innovation. In addition to Cape Canaveral Space Force Station and Kennedy Space Center in Florida and Vandenberg Space Force Base in California, SpaceX has communicated plans to expand its testing site at Boca Chica (Starbase) to the list of commercial launch sites.

SpaceX’s South Texas testing site is located within minutes of Brownsville, a tropical city of roughly 180,000 near the Texas-Mexico border and its international seaport, the Port of Brownsville. Helen Ramirez, deputy city manager of the city of Brownsville and executive director and CEO of Greater Brownsville Incentives Corporation, said, “SpaceX, the most revolutionary rocket company in the world, continues to prove out its technology and economic force in Brownsville, Cameron County, and the great state of Texas.” In 2021 alone, the presence of SpaceX in Brownsville contributed to 1,600 direct employees, supported more than 6,000 jobs in Cameron County, created more than $430 million of direct investment (payroll, construction, and capital expenditure), and added $903 million in gross economic output from aggregate market value of goods and services produced in the U.S. economy. At the state level, during the same period, SpaceX spent $1.05 billion on 742 supplier partners, representing more than 7,100 small business jobs.³

Still, innovators in the space industry—even SpaceX—face significant challenges, including access to funding, regulatory barriers and market readiness. As Marc Gravely, insurance claims and construction attorney and author, stated in his book, Reframing America’s Infrastructure, “The government must mitigate some of these problems, creating an environment more conducive to innovation and success. If cutting-edge space innovators and spacecraft developers cannot find a sustainable business model, space infrastructure will likely suffer.

Effectiveness of Public-Private Partnerships to Fuel Growth
The city of Brownsville has been a prime case study in local government adopting policies of innovation and creativity to meet the demands of an ever-changing landscape of aerospace technology and manufacturing.

One of the gaps in aerospace development has been a ready workforce, including engineers, welders, and other precision manufacturing jobs. The demand for these jobs has increased but the growth has not caught up. Recognizing this gap, the Greater Brownsville Incentives Corporation, or GBIC, approved the creation of the Launch BTX Grant Program. A first for the state, this program supports grant opportunities for universities, community and technical colleges, state colleges, and high schools that collaborate with Brownsville startups and businesses that are involved in testing, researching, and developing new products in aerospace, “new space,” urban mobility, and technology sectors.

GBIC, along with other Type A and Type B Economic Development Corporations, are created under Chapters 501, 504, and 505 of the Texas Local Government Code. The Development Corporation Act authorizes Texas municipalities to adopt a sales tax to fund the corporations and define projects that economic development corporations, or EDCs, are permitted to undertake. Type A EDCs typically fund industrial development such as business infrastructure, manufacturing, and research and development. This is a huge asset for local municipalities.

However, to secure and maintain large scale business development, partnerships between cities and the state are necessary. As an example, Boeing had once contemplated relocating its headquarters to the Dallas-Fort Worth metroplex. However, after the Illinois Legislature provided $30 million in additional economic incentives, Boeing elected to move its headquarters to Chicago instead.⁴

Brownsville Mayor and fellow Texas attorney Juan “Trey” Mendez III addressed local-state collaborations: “What we need to do as a state is create a unified plan to incentivize aerospace and space-related companies to relocate and/or open in Texas. The space industry is rapidly expanding, and we are extremely well positioned to take advantage of it.”⁵

Recently, the state of Texas has taken steps to improve those partnerships. On May 6, 2022, the Texas Aerospace Legislative Caucus met with local Brownsville officials and their economic development team, toured SpaceX’s South Texas campus, and discussed ways to promote initiatives to secure Texas’ ranking as a world leader, including the potential creation of a focused research and development tax credit program for space technology development or possibly the creation of a space technology opportunity zone that supports and helps streamline aerospace research, development, and manufacturing.

Additionally, the state of Texas has established the Aerospace and Aviation Advisory Committee to advise Gov. Greg Abbott on the recruitment and retention of industry jobs and investment, assist in meeting the state’s economic development efforts to recruit and retain industry jobs, and collect and disseminate information on federal, state, local, and private community economic development programs, among other duties.

As local and state entities continue to collaborate and innovate with commercial partners, Texas attorneys need to be prepared for a similar aerospace law awakening.

Outdated International Aerospace Regulations Illicit Change
David Alexander, director of the Rice Space Institute at Rice University, said, “One of the biggest issues with respect to space law is how outdated the outer space treaty is with respect to commercial enterprises at the moon and Mars.”⁶ In a recent presentation, Alexander explained three sets of aerospace laws or directives: the Outer Space Treaty of 1967, the U.S. Commercial Space Launch Competitiveness Act of 2015, and the Presidential Space Directive of 2018.

As the initial aerospace law, the Outer Space Treaty of 1967 provides directives for that era of space exploration. It was geared toward regulating national space activities. For example, “the exploration and use of outer space shall be carried out for the benefit and interests of all countries and shall be province of all mankind.”

In 1984, another international agreement was enacted called the Agreement Governing the Activities of States on the Moon and Other Celestial Bodies, also known as the Moon Agreement. Specifically, Article 11 of the Moon Agreement prohibits the appropriation of any resources obtained from the moon.

However, in 2015, the United States initiated the Office of Space Commerce and passed the U.S. Commercial Space Launch Competitiveness Act. Under Title IV, Space Resource Exploration and Utilization, “A United States citizen engaged in commercial recovery of … a space resource … shall be entitled to … possess own, transport, use and sell the … space resource obtained in accordance with applicable law…”

As evidenced, regulations on commercial exploration aren’t clear in many circumstances. As an example, according to the provisions listed here, since the United States has not signed the Moon Agreement, then a U.S. citizen may recover space resources from the moon.

As commercial exploration continues to outpace international regulations, the international community will be compelled to provide a revised set of international space exploration standards.

Commercialization of the Space Industry Shifts the Perspective of Aerospace Law
With the commercialization of the space industry, aerospace law will require legal practitioners to innovate as regulatory law attempts to merge with corporate and transactional law.

Like the first transcontinental railroad, innovation comes more quickly at the hands of the private sector. This doesn’t discredit the efforts of public sector entities like NASA. Instead, it notes the importance of public-private partnerships. Each has distinct strength. Working together fuels innovation.

As an example, according to NASA’s inspector general, the Space Launch System, or SLS, which was initiated in 2011 and is expected to be the organization’s heavy-lift rocket, has endured “rising costs and delays,” “shortcomings in quality control,” “challenges with program management,” “infrastructure issues,” “technical issues,” “development issues,” and “performance issues.”⁷ Originally, at its inception in 2012, NASA officials estimated each SLS launch mission would cost about $500 million. The current estimated costs for a single SLS launch are now $4.1 billion.⁸

Conversely, SpaceX’s Starship, currently being manufactured near Brownsville, is capable of similar heavy cargo loads at significantly lower costs—approximately $10 million per launch. The main difference between the two models is that SpaceX’s Starship is reusing each rocket and booster, thereby dropping the costs of production.⁹

Private space exploration will still be required to comply with state, federal, and international space regulations. However, as NASA and other federal agencies continue to contract with SpaceX and other private companies, a large portion of aerospace law will include incorporate, corporate, and transactional legal matters.

Texas Attorneys: Responding to the Aerospace Law Awakening
Over the course of time, different innovators in transportation have changed the world we live in:

1903—The Wright Brothers invent and fly the first engine airplane.
1908—Henry Ford improves the assembly line for automobile manufacturing.
1947—First supersonic jet flight.
1969—First manned mission to the Moon.
1981—First Space Transportation System, or space shuttle, mission launched by NASA.

In 2022, we’re due for another ground-breaking innovation in transportation and SpaceX’s heavy cargo Starship is slated to transform Earth-to-space travel. These changes in the aerospace industry will be accompanied with appropriate revisions in law.

Some of the developing areas of law that Texas attorneys should be following include air and space regulations, state and federal procurement standards, environmental regulations, economic development allowances, public-private partnerships, and land use restrictions. From a corporate and transactional law perspective, many new space startups will need guidance in developing appropriate business structures, understanding mergers and acquisitions, and complying with commercial debt and financing procedures. Additionally, as previously mentioned, “space mining” and the possibility of an intragalactic “gold rush” for space materials and the application of international codes and treaties is a rapidly growing area of concern.

If the state of Texas is going to be the anchor for this new space revolution, then as attorneys, we need to be prepared for the rapid changes approaching in aerospace law. As John F. Kennedy once said: “Change is the law of life. And those who look only to the past or present are certain to miss the future.” ^TBJ

NOTES
1. History.com editors, history.com, Transcontinental Railroad (April 20, 2010; updated: September 11, 2019), https://www.history.com/topics/inventions/transcontinental-railroad.
2. Research, Morgan Stanley, Space: Investing in the Final Frontier (July 24, 2020), https://www.morganstanley.com/ideas/investing-in-space.
3. In-person interview with Helen Ramirez, deputy city manager, city of Brownsville, and executive director and CEO of the Greater Brownsville Incentives Corporation, May 4, 2022.
4. “A Snapshot of the Texas Aerospace Industry and a Comparison of Competitor States, Texas Aerospace Commission Report, 2020, page 5, https://bush.tamu.edu/wp-content/uploads/2020/02/Texas_Aerospace_Industry_report.pdf.
5. Phone interview with Juan “Trey” Mendez III, mayor of Brownsville, date May 6, 2022.
6. Email interview with David Alexander, director of the Rice Space Institute at Rice University, date May 10, 2022.
7. Opinion, The Editors, Bloomberg, Scrap the Space Launch System (February 18, 2021, 9:30 a.m. CST), https://www.bloomberg.com/opinion/articles/2021-02-18/scrap-nasa-s-space-launch-system (as cited by Marc Gravely, Reframing America’s Infrastructure: A Ruins to Renaissance Playbook).
8. Michael Sheetz, CNBC, NASA’s massive moon rocket will cost taxpayers billions more than projected, auditor warns Congress (March 1, 2022, 4:07 p.m. EST; updated March 1, 2022, 7:40 p.m. EST), https://www.cnbc.com/2022/03/01/nasa-auditor-warns-congress-artemis-missions-sls-rocket-billions-over-budget.html.
9. Michael Sheetz, CNBC, Elon Musk, defending the value of space travel, presents SpaceX’s Starship as the ‘holy grail’ (February 11, 2022, 11:44 a.m. EST; updated February 11, 2022, 5:04 p.m. EST), https://www.cnbc.com/2022/02/11/elon-musk-spacexs-starship-is-solution-to-efficient-space-travel.html.

VICTOR A. FLORES serves on the Texas City Attorneys Association Board of Directors, is the past president of the Texas Young Lawyers Association, and is the city attorney for the city of Brownsville.

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