Is the once-bullish Branson having second thoughts on his $1 million annual rent obligation as the launch of space tourism drifts farther into the future?
Virgin Galactic has agreed to start paying New Mexico rent on the nearly quarter-billion dollar spaceport the state built for British businessman Richard Branson’s space tourism business, but it says it is doing so under protest and without waiving its right to walk away from the project, according to documents obtained by The Associated Press.
In a Jan. 16 email to the New Mexico Spaceport Authority, Virgin Galactic said it does not believe the state has finished the work necessary to trigger activation of its $1 million annual rent obligation, and said if the work is not complete to its satisfaction by March 31, it “may either stop paying rent, pay reduced rent or give notice to terminate” its lease.
Virgin Galactic has publicly expressed concerns about the state’s inability to attract more businesses to the project and has hinted it could leave if lawmakers refuse for a third year in a row to expand liability exemptions for the commercial space industry.
The dispute also comes as questions mount about whether the company will be able to start flying later this year or early next year, or whether it expects further delays in getting its $200,000 per head spaceflights off the ground.
Spaceport America was developed with much fanfare under an agreement between former Gov. Bill Richardson and Branson. The deal called for taxpayers to build the spaceport and Virgin Galactic to develop the spacecraft.
The rent dispute comes after the state in November received from the architect a certificate of “base building standard completion,” which under the agreement signed by the state and Virgin Galactic in 2008 is supposed to trigger rent and user fees from Virgin Galactic, the project’s anchor tenant. At that time, Virgin is also supposed to give the state a $2 million letter of credit to serve as a deposit.
In the Jan. 16 email to NMSA Executive Director Christine Anderson, Jonathan Firth, Virgin Galactic’s director of projects and operations, said that while the company does not believe the state has finished the work required, it is agreeing to start paying under protest, “being mindful that NMSA has agreed not to charge VG any user fees until VG starts flying.”
In a response dated Thursday, Anderson said the statement that New Mexico has agreed to waive user fees “is not quite correct” and states that “NMSA confirms its current right to demand User Fees for a minimum number of missions or terminate the lease if VG fails to fly at least 25 missions in a calendar year.”
“While the starting date is ill-defined in the lease,” she continued, “I think this highlights the need to for VG to provide NMSA accurate flight projections with frequent updates as appropriate.”
Anderson was also adamant that the rent is due under terms of the lease and development agreements, and said the state “is working to swiftly complete” the issues identified as incomplete.
“Frankly, whether NMSA completes the punch list by March 31st or not, does not change the fact that Base Building Standard was achieved on November 14 and thus rent was to commence on Jan. 15 per the lease,” she wrote.
The first rent payment is due on Feb. 1.
Asked if she thought Virgin was stalling, Anderson said, “I can’t really know motive.”
Virgin Galactic President and CEO George Whitesides did not return a phone call seeking comment.
Branson and company officials have been vague in recent estimates about when flights —which Branson originally estimated would start in 2011 —might begin. The last estimate was for flights to begin in early 2014.
In selling the $209 million project to lawmakers and the taxpayers footing the bill for development, tourism and spaceport officials estimated that as many as 200,000 people a year would visit the first-of-its kind center. 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 Galactic will ever move into the spaceport.
Whitesides late last year said the company remained committed to New Mexico, but 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.
He and Anderson both have blamed the Legislature’s refusal over the past few years to even the playing field with others states competing for commercial business by expanding liability protections. Lawmakers this month reached a tentative compromise with Virgin Galactic to expand protections for spacecraft suppliers from lawsuits by passengers, but no action has been taken on the bill. The Legislature is in session until mid-March.
Photo credit: In this Oct. 17, 2011 file photo, guests stand outside the new Spaceport America hangar in Upham, N.M. Matt York / Associated Press