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U.S. Air Force eyes private insurance as part of rocket contracts

By Andrea Shalal

WASHINGTON, April 28 (Reuters) - The U.S. Air Force on Tuesday said it may require private insurance as part of future contracts to ensure the companies that launch military satellites into orbit survive even if one of their rockets explodes and causes a long halt in launches.

General John Hyten, who heads Air Force Space Command, told reporters that he hoped to receive multiple responses to a draft request for proposals issued on Friday for a new program meant to end U.S. reliance on the Russian-built RD-180 rocket engine.

Hyten said the competition would fund initial work by launch providers and engine makers on prototypes for new rockets that could be used to launch the full range of U.S. military and intelligence satellites into orbit, followed by awards for competitive launches from fiscal 2018 to fiscal 2022.

United Launch Alliance, a joint venture of Lockheed Martin Corp and Boeing Co, is now the sole launcher of U.S. military and spy satellites, but one of its two rockets uses the Russian RD-180 engine which is banned for national security launches after 2019.

The Air Force expects to certify privately held SpaceX, or Space Exploration Technologies, by June to compete for at least some of those launches.

Hyten said the government needed a new approach to reflect the emergence of a commercial launch industry while still giving it assured access to space by at least two providers.

He said terms of future contracts would need to include some private insurance or public indemnification clause to ensure the survival of at least two launch providers, even in the event of an accident that halted launches for some time. Private insurance was the more likely option, he said.

He said the Air Force would also need to spell out how long a launch vehicle would be grounded after an accident, and which agency would have the authority to resume launch flights.

ULA, SpaceX and other companies like Orbital ATK Inc, which builds smaller launch vehicles, and Aerojet Rocketdyne , which builds engines, have been awaiting the terms of the new competition.

Responses to the draft request for proposals are due by May 11, with a final request to be posted 15 days later, according to the notice on a federal website late on Friday.

Hyten said it was unclear which firms would participate since both SpaceX and Blue Origin, a company owned by founder Jeff Bezos that is working closely with ULA, have said they do not want or need government money for their engine work.

The House Armed Services Committee's proposed 2016 defense bill would ban the Air Force from expanding its current launch contract and would require an end to a ULA contract that funds launch infrastructure, even if launches are delayed.

The legislation would also add $100 million to the Air Force's request of $84 million for development of a new rocket propulsion system, and would clarify existing law to allow ULA to use Russian rockets included in contracts before Russia's invasion of the Crimea region of Ukraine.

(Reporting by Andrea Shalal; Editing by Cynthia Osterman)