An unmanned spaceship funded by Internet billionaire Jeff Bezos suffered
a major failure during a recent test flight, according to U.S.
government and industry officials, highlighting the dramatic risks of
private space ventures.

The vertical takeoff and landing spacecraft, developed by closely held
Blue Origin LLC, was on a suborbital flight from the company's West
Texas spaceport last week, these officials said, when ground personnel
lost contact and control of the vehicle. The exact nature and cause of
the failure were unclear, but remnants of the spacecraft could provide
clues for investigators.

Parts of the vehicle were recovered on the ground and are now being
analyzed by company experts, according to government and industry
officials.

The mishap dealt a potentially major blow to the ambitions of Mr. Bezos,
the founder and chief executive of Amazon.com Inc., to develop a
reliable system for blasting tourists and astronauts out of the
atmosphere.

The serious malfunctions, which haven't been disclosed by the company or
reported previously, also could set back White House plans to promote a
range of commercially developed spacecraft to transport crews to the
International Space Station by the second half of this decade.

Championed by President Barack Obama's administration, the goal is to
support a number of rival projects, including Blue Origin, to ensure
that in the end the U.S. will have alternatives to reach the orbiting
station, following last month's permanent retirement of the National
Aeronautics and Space Administration's space shuttle fleet.

A spokesman for Blue Origin, based in Kent, Wash., declined to comment.
Officials at both NASA and the Federal Aviation Administration were told
in advance about the launch and are aware of the failure, according to
people familiar with the matter. But spokesmen for the agencies also
declined to comment.

Mr. Bezos has been secretive about Blue Origin's plans and even details
of its isolated spaceport, about 25 miles north of tiny Van Horn, Texas.
The company, among other things, has been working on a cone-shaped
vehicle, dubbed New Shepard, that is believed to include a reusable crew
module that will descend vertically back to Earth.

The company's website describes it as a "rocket-propelled vehicle
designed to routinely fly multiple astronauts" out of the atmosphere at
"competitive prices," with manned flights commencing as early as 2012.
In the past, Blue Origin has predicted that once commercial tourist
flights begin, it could launch as often as once a week.

NASA in recent years has doled out hundreds of millions in seed money-
including more than $25 million earmarked for Blue Origin-to promote
development of various private rockets and spacecraft. They are intended
to serve as the next generation of simpler, less-expensive space taxis
and trucks to go back and forth to the space station

According to NASA, the most recent award to Blue Origin is for work on a
vehicle able to transfer up to seven astronauts to the orbiting
station-first riding on top of a conventional Atlas V rocket and later
powered by the company's reusable booster system intended to
"dramatically lower the cost of space access." The federal money is
targeted to speed development of a liquid-fueled engine and a novel
crew-escape system.

The latest event, however, isn't expected to have a direct impact on
Blue Origin's access to federal dollars, government officials said,
because the test didn't rely on federal funds and wasn't part of the
company's development agreement with NASA. It isn't clear whether Blue
Origin hopes to use some of the same hardware in its official
NASA-funded work and testing.

The accident comes at a critical time for the NASA, with lawmakers and
the White House locked in an increasingly bitter debate over how much
federal effort and funding should be invested in commercial space
systems. A strong bipartisan group of lawmakers is balking at White
House proposals to beef up NASA support for commercial crew taxis.

The debate over assuring reliable follow-on systems to the space
shuttles has intensified as a result of the recent failure of a Russian
Soyuz cargo rocket to deliver goods to the space station. Unless
Moscow's experts resolve the problem quickly and then verify the safety
of Soyuz boosters by successfully sending a pair of unmanned missions to
the station before mid-November, Russian and U.S. officials have said
they may have to leave the orbiting laboratory temporarily without a
full-time crew.

During an appearance at the National Press Club in Washington D.C. in
July, NASA chief Charles Bolden said the agency's primary focus is to
create "a viable domestic space industry, so that we don't have to rely
on international partners" to reach the space station.

Blue Origin is one of three commercial space ventures backed by
superrich entrepreneurs, which have become the most recognized
international symbols of privately funded spacecraft. The other two are
Sir Richard Branson's space-travel company Virgin Galactic and Elon
Musk's Space Exploration Technologies Corp.

The trio of projects, all started within the past decade, roughly
coincided with the success of SpaceShipOne, a rocketship designed by
legendary aerospace engineer Burt Rutan, which won international acclaim
as the first privately funded craft to reach space. That prompted
widespread predictions that space tourism, along with a host of other
start-up companies seeking to operate at the edges of the atmosphere,
would replicate the excitement and boisterous growth of the era that
followed early exploits of the Wright Brothers.

Despite the deep pockets of their backers, all three projects have
suffered substantial delays.

Virgin Galactic, which is using Mr. Rutan's rocketship design,
originally suggested it could begin taking passengers up for thrill
rides at the edge of space as early as 2008. Now, the company isn't
expected to complete flight tests for at least another year, and it has
stopped publicly predicting the start of regular service.

Peter Diamandis, who ran the international competition that awarded a
$10-million prize for Mr. Rutan's pioneering flight, likes to say that
in order "to have a really robust space industry," proponents need to
find ways "to develop an actual mass market."

SpaceX, as Mr. Musk's company is known, is years behind in testing its
Falcon 9 rocket and Dragon space capsule. But if all goes well, the
Hawthorne, Calif., start-up could initiate regular cargo deliveries to
the station next year. SpaceX also is competing with Blue Origin and
other rivals to get the nod for the next round of NASA funding for
commercially-developed crew vehicles.

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