McCain, McCarthy Try to Repeal RD-180 Provision in FY2016 Appropriations Bill

Sen. John McCain (R-AZ) and Rep. Kevin McCarthy (R-CA) are introducing
legislation to repeal a provision in the FY2016 Consolidated
Appropriations Act that undermines a section of the FY2016 National Defense
Authorization Act (NDAA) that limits the number of Russian RD-180 engines
that can be obtained by the United Launch Alliance (ULA) for its Atlas V rockets.  The appropriations law, enacted after the NDAA, essentially allows an unlimited number to be procured.   McCain announced his new legislation in conjunction with a Senate Armed Services Committee (SASC) hearing on the topic today.

Since Russia annexed the Crimean Peninsula two years ago, McCain has led efforts to end U.S. reliance on Russian RD-180 engines used in rockets that launch national security satellites.   He argues that Russia’s actions in Ukraine and elsewhere are inimicable to U.S. interests and the money ULA pays for the engines goes to Russian President Vladimir Putin and his “cronies.”  As chairman of SASC, he included language in the FY2015 and FY2016 NDAAs that limits the number of RD-180s ULA may obtain and directs DOD to fund the development of a U.S. alternative.  McCain also is a champion of SpaceX and its drive to compete with ULA for Air Force contracts to launch national security satellites.  The Air Force certified SpaceX’s Falcon 9 to launch its satellites last year. 

Little new was added to the debate at this morning’s hearing.  Secretary of the Air Force Deborah Lee James and Under Secretary of  Defense for Acquisition, Technology and Logistics Frank Kendall repeated their oft-stated position that they agree on the need to end reliance on Russian engines and to build a new U.S. engine by McCain’s target date of 2019.  They argue, however, that an engine is only part of a  launch system and it will take at least two more years, to 2021, to integrate a new engine into a new launch vehicle, test it and certify it to launch national security satellites.  McCain and other members of the committee insisted that the transition to a new rocket with an American engine must happen sooner.

The distinction between an engine and a complete launch system was reiterated by James and Kendall throughout the hearing.  They are seeking relief from language in the FY2016 NDAA (Sec 606) that restricts them to spending funds on developing new rocket engines only and not entire new launch vehicles. James and Kendall said if they can only use the money for a new engine to replace the RD-180, just one company will benefit, ULA, which would get a new engine for its Atlas V.    If instead they could use the money to invest in a public private partnership to develop a new, modern launch system to replace the Atlas V, greater benefits would accrue.  

According to James, Congress has authorized and appropriated over $400 million for a new engine:  $41 million that was reprogrammed in FY2014, $220 million in FY2015, and $227 million in FY2016.  Of that, $176 million has been obligated to date, she added.

One point on which McCain and the witnesses agreed was unhappiness that ULA chose not to bid on the first launch where SpaceX could compete.   Competition for that launch, of a GPS 3 navigation satellite, opened last fall, but ULA asserted that it could not enter a bid because of the limitation on how many RD-180 engines it may obtain under the FY2015 NDAA in effect at that time and for other reasons.

McCain repeatedly expressed exasperation at ULA’s decision not to bid.  James said the Air Force was “surprised and disappointed” and Kendall said “we are all upset.”  James said she has asked her legal team to review the Air Force contract with ULA to see what can be done possibly “including early termination” of the EELV Launch Capability (ELC) contract that pays for infrastructure and other ULA costs. That funding is separate from the money paid for individual launches.

McCain repeatedly referred to the ELC funding — approximately $800 million per year — as money the government pays ULA “to do nothing” or “to just stay in business.”  Kendall explained that the ELC contract was designed to cover fixed and variable costs associated with launch infrastructure and meant to ensure stability in a sole source environment.  ULA has been virtually a monopoly provider of national security launch services since it was formed in 2006 as a joint venture of Boeing and Lockheed Martin.  While Kendall defended the ELC as a good business deal under those circumstances and “not a subsidy,” he agreed it is the only DOD contract of its kind, is being phased out, and a model that will not be used in the future.  What DOD wants to do now is to provide “at least two launch service providers” with some of the capital to develop, test and certify new launch systems through public private partnerships.  A draft request for proposals (RFP) will be released this spring, he said, and a final RFP by the end of the year with awards expected in FY2017.

One new piece of information that surfaced today was the cost of an RD-180 engine.  Kendall pegged it at $30 million.  The fundamental dispute is whether ULA should be able to obtain nine more, or 14 more, RD-180 engines than the five they already have under contract as part of a 2013 block buy awarded by the Air Force.  That is a difference of five engines, or $150 million, money McCain argues would go to Putin and associates including three he said have been sanctioned by the United States – Igor Komarov, Sergey Chemezov and Dmitry Rogozin.   Rogozin is the Russian Deputy Prime Minister who oversees the aerospace sector.  Komarov is the head of Roscosmos, which recently transitioned from a government space agency into a state corporation.  McCain identified them as members of the Board ot RD-AMROSS, the intermediary between the Russian company that manufactures RD-180s. Energomash, and Pratt & Whitney Rocketdyne, which imports them for use in the Atlas V.

The Air Force and ULA want 14 more; McCain wants to limit it to nine.   The FY2016 NDAA states that only nine may be obtained, but Senate appropriators, led by Senator Richard Shelby (R-AL) and Dick Durbin (D-IL) included a provision in the DOD portion of the FY2016 Consolidated Appropriations Act that removes that limit. ULA builds its rockets in Alabama; Boeing is headquartered in Illinois.  McCain verbally attacked both Senators during a floor speech after the appropriations bill language became public. 

Just before this morning’s hearing, McCain revealed that he and House Majority Leader McCarthy will introduce legislation imminently to repeal the provision in the appropriations law.  In a statement, McCain said the provision was “airdopped” into the appropriations bill “in secret, with no debate” after the nine-engine limitation in the NDAA was “debated for months and passed by the Senate not once, but twice.”