Sunday, March 27, 2016

No Puppies Falling from the Heavens With Space Funding in this Federal Budget

          By Chuck Black

It's worth noting that puppies haven't begun falling from the heavens with new funding for the Canadian Space Agency (CSA) in the wake of last weeks Federal budget.

It's certainly not focused on growing  the "space class" as can be seen from the cover page of the 2016 Federal budget. For the full document along with the text of Finance Minister Bill Morneau’s budget speech, which he delivered on Tuesday in the House of Commons, check out the March 22nd, 2016 National Post article, "Federal budget 2016: The full document." For Federal government literature on the budget, check out the Budget 2016 website. Screenshot c/o Government of Canada

That budget, the first under the new Liberal government headed by Prime Minister Justin Trudeau, predicted large deficits over the next five years (beginning with $29.4Bln CDN in the first year), which will be used to finance a new tax-free monthly child benefit, more money for First Nations, infrastructure spending and extended employment insurance benefits to hard-hit regions.

But it didn't provide any real boost in Federal funding for space technology development or discuss any new attempt to create a "long term space plan."

As outlined in the October 13th, 2015 post on, "Part 2: Abandoning the Emerson Aerospace Review?," both of those campaign promises were made and promoted in the media, but evidently weren't taken terribly seriously by the Liberal party candidates who originated them in the last Federal election.

Overall CSA funding is an estimated $432Mln CDN in 2016, approximately $49Mln CDN more than 2015's projected budget of $383Mln CDN. That total is actually declining when the RADARSAT Constellation Mission (RCM) is removed from the totals. As outlined in the January 12th, 2013 post "a $706Mln Fixed Price Contract and Hard Launch Date for RADARSAT Constellation," the RCM program should be pretty much wound down except for maintenance and support costs within the next two years.

And the "big announcement," that the government has committed up to $379Mln CDN over eight years (beginning in 2017), in order to maintain Canada's commitment to its International Space Station (ISS) partners, is something the government always knew it had to do in order to preserve slots for Canadian astronauts David Saint-Jacques and Jeremy Hansen to visit the ISS in 2019 and 2021. Of course, those travel commitments were made well before the current government took office.

The Aerospace Industries Association of Canada (AIAC) rather liked the Federal budget, at least if you take the March 22nd, 2016 press release, "AIAC applauds budget commitments to space, innovation, defence strategy" at face value. The press release applauds the $379Mln CDN the budget commits over the next eight years to extend Canada’s participation in the ISS to 2024. According to the press release, the budget "also reaffirmed last year’s commitment to provide $30 million over four years for Canadian participation in the European Space Agency’s Advanced Research in Telecommunications Systems (ARTES) program." However, the press release failed to mention $8.7Mln CDN which was set aside to to upgrade the anechoic chamber at the David Florida Laboratory test facility at Shirleys Bay, Ontario. As outlined in the expansively titled March 22nd, 2016 post, "What You Need to Know About the Budget and Canada's Space Program," the funds will allow the CSA to "continue to support technology development in Canada's space sector through state-of-the-art assembly, integration and testing capabilities." Screenshot c/o AIAC.

Of course, some companies and institutions, although not likely firms focused around space activities, will absolutely benefit from the latest budget. As outlined in the March 25th, 2016 Motley Fool Canada post, "Get to Know 6 Companies Poised to Benefit From the Federal Budget," these firms are mostly focused around infrastructure, which is scheduled to receive $11.9Bln over five years. They include:
  • Etobicoke, ON. based Aecon Group - Canada's largest public construction and infrastructure development company.
  • Winnipeg, MB. based New Flyer Industries - The company manufactures transit buses and, with $3.4Bln CDN is tagged for transit spending. If new vehicles are part of the $3.4Bln tagged for transit spending in the budget, then New Flyer is very likely to get in on the action.
  • Mississauga, ON. based Pure Technologies - The Motley Fool article considers this company, with its focus on pipeline managements technologies, as being well placed to receive a large chunk of the $5Bln allocated in the budget for new water and waste water management technologies.
  • Montreal, PQ. based SNC-Lavalin - A "one stop shop when it comes to engineering and construction" according to the article. 
  • Edmonton, AB. based Stantec - A professional services company wrapped around design, energy, environmental and infrastructure projects.
More money (around $800Mln CDN over four years) is budgeted for incubators and accelerators to help grow new ideas and start small businesses. According to the Canadian Association of Business Incubation (CABI) there are currently 60+ business incubators and accelerators across Canada with a broad range of expertise. That total is sure to grow with this new funding.

A further $2Bln over three years is allocated for a new post-secondary institutions Strategic Investment Fund. This initiative will support up to 50 per cent of the eligible costs of infrastructure projects at post-secondary institutions and affiliated research and commercialization organizations, in collaboration with provinces and territories.

Taken together, it's not too shabby. But its also not directly related to the Canadian space industry, although space companies might certainly take advantage of many of the programs.  

It's worth noting that the Prospectors and Developers Association (PDAC) also came down in favor of the Federal budget. As outlined in the March 22nd, 2016 PDAC post "PDAC welcomes measures to support Canada’s mineral exploration and development sector," the organization was particularly happy with the renewal of the Mineral Exploration Tax Credit (METC) and the expansion of deductions allowed under the Canadian Exploration Expense (CEE)." As outlined in the June 30th, 2012 submission to the Emerson Aerospace Review under the title, "Using Tools from the Mining Industry to Spur Innovation and Grow the Canadian Space Industry," many of the legislative tools and regulations which currently support our domestic mining industry could also be used to support our space industry. Graphic c/o PDAC.

Although not mentioned in the budget, it's expected that Montreal, PQ based Bombardier Inc. will receive substantial Federal funding over the next little while. As outlined in the February 21st, 2016 post on "Saving Bombardier," the giant Canadian company requires the new funds in order to remain solvent and (perhaps) protect Canadian jobs.

Also not mentioned in the budget was funding for the upcoming (at least officially) Polar Communications and Weather (PCW) mission. As outlined in the February 14th, 2014 post, "'Team Canada' Solution for PCW Mission Competing Against US Bid," PCW development (estimated to cost upwards of $600Mln CDN in total) was expected to begin this year.

So where does that leave our space industry? Pretty much where we expected it to be.

As outlined in the September 16th, 2015 post, "Meanwhile, Back in the Real World: Seasoned Entrepreneurs are Jockeying for Position in the Fast Growing NewSpace Economy," the government isn't really in a position to drive space exploration and is not currently funding any large projects, except for those related to previously announced international initiatives.

Those hoping that military programs will require the purchase of space based assets might also be in for a disappointment. As outlined in the March 27th, 2016 CBC News post, "Canada's defence budget heads back to the future," the new Liberal government seems set to follow along the same path of inactivity as did its predecessor. For more on the intersection of Canadian space and the military, check out the four part series on "Canada's Military Space Policy." Graphic c/o CBC.

Companies like Telesat, MacDonald Dettwiler, UrtheCast (a space company which has taken advantage of legislation originally designed to support the mining industry) and exactEarth now drive our domestic space agenda irrespective of what Ottawa might want or wish simply because they have the money to do things and not just talk.

So the Federal government has moved on to other, less specific tools which the space industry may or may not decide to use. Innovation, incubators, infrastructure and accelerators are now the order of the day.

However, if someone could find an infrastructure project which required the use of space based assets (for example, the original mandate of Telesat Canada to improve communications in the far north, which required the development and use of communications satellites), then there might still be opportunities for a savvy space company.

Chuck Black.
But the CSA itself has become far less trendy. There are no puppies falling from the heavens with space funding for new programs in this Federal budget.

All that's really left for us to do is to wish our space companies the best of luck. They're in the driver seat now.

Chuck Black is the editor of the Commercial Space blog.

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