SpaceX’s Regulatory Evasion Has Consequences
Paris Marx is joined by Eric Roesch to discuss the aftermath of the SpaceX Starship launch that caused so much environmental damage in April 2023 and the broader consequences of Elon Musk’s consistent regulatory evasion.
Eric Roesch is an expert in environmental compliance and risk assessment who writes about intersection of capitalism, markets and greenwashing as ESG Hound. You can follow Eric’s newsletter on Substack.
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Paris Marx: Eric, welcome to Tech Won’t Save Us.
Eric Roesch: Thanks for having me on, Paris.
PM: Absolutely. We’ve been talking about having you on for a little while, because I’ve been reading your work on SpaceX and its abuse of the regulatory system, and in particular since the Starship explosion in April of this year. So I want to dig into that with you further. But just to start off, when the Starship exploded on April 20th, what was your immediate thought when you saw those photos of what happened at that launch site?
ER: I guess, a couple things. The thing that people really focused on in the immediate aftermath — people who were not super steeped in the story — they noticed the mid-air explosion. And that ended up being a bigger issue because the self-termination system for the vehicle didn’t go off as intended. But for the rocket itself, there was always a good chance it was going to explode in mid-air, and so people really focused on the explosion. I saw a lot in social media people were dunking on the company, and I actually think they did a pretty good job of caveating that a failure shortly after launch, in air was a very real possibility.
PM: When you see those images, though, it’s hard not to have a little dunk on SpaceX [laughs].
ER: Oh, absolutely. I’m certainly not going to fault anyone for doing that, given the narratives that go around about them, and the nature of who owns and runs SpaceX. Certainly, I’m not going to begrudge anyone from it. But I’d spent so much time — maybe an unhealthy amount of time — reading and writing about the site. And so my focus was less on that, and obviously, more on the images that came out. I guess, in retrospect, I had written that it was going to be a lot worse on the impact than people had thought. Even I was taken aback. Everyone has seen the imagery of how much that rocket just tore up foundation and flung massive boulders of concrete and debris into the ocean, basically, a mile or two away. As someone who had spent so much time about it and maybe sometimes suffers from Chicken Little syndrome, myself, freaking out about stuff that you spent a lot of time researching on, I was still surprised, actually, at how far out the physical impacts were to the surrounding areas.
It’s funny, because people were like: Well, you were right about this. And I said: Well, the actual mode of failure, I didn’t pick up specifically. So I wasn’t surprised, but in a way, just the imagery — and I think this is a really important issue when you’re talking about environmental regulations, and when the public cares about environmental protection, that there’s this really emotional, visceral component of it, that is really effective for making environmental change. You see just giant pieces of concrete with rebar jutting out of them in the middle of a flat next to some scorched bird eggs. And it’s got this really visceral component that is effective on the public. And then I’ve been in the field for a long time, and part of being in the field is mitigating and preparing people for impacts. But even that visceral, emotional response still works on me to be like: Oh, wow, this is a direct impact of industry on environment as they butt-up against each other.
PM: It was really notable to see those images and really shocking. And for people who haven’t seen those images, I’ll include some links in the show notes, so you can go check that out if you haven’t already. But as you say, these massive pieces of concrete on the beach next to this launch pad, and the video showing the the big piece of concrete flinging into the water beyond that, which was quite a distance from the launch pad itself. And then of course, seeing how the launch pad was destroyed by this massive explosion to get the rockets and to get the ship into the air. And even then, when you saw the debris being dropped on a community that was quite a distance away from the launch sit, it was like: These are major things, and it felt like this had not been disclosed or messaged to the people around the site that the impact would be this great beforehand.
ER: Right. I think that’s the key. As I was writing about this as early as September of 2021, hat’s the core issue here is that a lot of people who don’t understand how policy and how law and how some of these environmental review processes go, they come to me and they say: Well, Kennedy Space Center in Florida is surrounded by wildlife, they light off rockets. And so like, what’s the difference? And I think that’s the whole story, so you talk about Port Isabel, which is about five miles as the crow flies, is that the closest actual suburban area, where people live from these big launch pads, which are nestled back in Kennedy Space Center in Florida. They’re something like 15 to 20 miles away. And so that part is one thing. And the second part is really just the way the site itself is situated. If the media hasn’t done a great job of really focusing on that, is that Kennedy Space Center itself is just thousands of acres. And then the individual launch pads — where you see the whole area cleared out, they’ve got the infrastructure in there — the area of those pads is something like four to five times bigger, by area, than what SpaceX is working on there, which is this postage stamp of land.
PM: I guess it’s notable to say there, as well, that at Kennedy Space Center, at least for the moment, the rockets being launched there are smaller than what this Starship is, which is kind of breaking the record for the largest rocket that has been launched from planet Earth, which was previously held by the Soviets back in the 60s or 70s, or something, right?
ER: To be clear, the Artemis rocket is 75-80% of that size. And so, that is certainly interesting point too. But the land that’s directly surrounding Starbase is owned by the state, it’s owned by a few federal agencies, there’s a war memorial there that’s owned by the Department of Interior, the National Park Service, and then a large chunk of the land is owned by the federal government and exist as basically a protected wildlife habitat. And so Kennedy Space Center was allocated back in the 60s, obviously, and they were given a lot of land here. But SpaceX basically bought a tiny spot of land and instead of developing that land, working with locals, and maybe purchasing more land and planning for it over a long period of time, they basically just put all their stuff in this super cramped area. Then they’re like: Well, these consequences are outside out of our launchpad, the public just has to suck it up. I think that’s where this is a totally different situation. They’re simply just not the same thing.
And the fact that NASA is a federal agency run by very smart people, and they have this history of pretty good environmental protection, especially in the last few decades, having them coordinate all the different activities that occur at Kennedy Space Center is just such a stark contrast from this down in Texas. Where basically, SpaceX is responsible for all components of it. And the FAA is okay with rubber stamping stuff that NASA does, because NASA does the right thing. That same approach does not work with a lot of private companies, and especially does not work with Musk-run companies. He has a long record of this, and this isn’t the first time he’s done similar things, where basically you forge your externalities — your very obvious and destructive externalities on your neighbors — and you say: I’m not going to pay for this land; I’m not going to follow the rules, and you just have to deal with the consequences. It’s just weird eminent domain, almost situation. But SpaceX doesn’t actually even have to compensate. They’re just like: Well, we’re gonna do it, and I dare you to stop us.
PM: Move fast and break things, basically.
ER: I think that’s really interesting because Musk comes from that tech culture that’s really, especially, relevant in Silicon Valley. And, look, I worked for oil companies — I’m not going to downplay externalities they’ve had and certainly don’t want to excuse any behavior by that industry, because there’s plenty of problems. But on the surface, they’ve learned over the years to, at least nominally on the surface, say or act like we’re going to comply with the rules. Because the consequences of not doing so have been more painful as time goes on. I think the tech analog is really interesting, because we saw it first happen with software. You look at Facebook, and basically helping to normalize or cause large genocides in Southeast Asia. So you see those consequences and it took us a while to realize the connection between those two things. That was more of a software, human engineering, human networking type of thing. Not that it’s not dangerous, because it certainly is, it’s less obvious, and we haven’t seen it in the past before.
I think the middle step is if you look at basically what Uber did. So Uber and Lyft, to maybe a slightly lesser extent. But they walked into jurisdictions that had very clear rules about what a taxi could be, and they said: Too bad. We’re just going to do our thing, and I dare you to stop us. And obviously, you saw the consequences of that. What’s interesting is that Musk is doing this with hard industry that has had regulations for a long time. And people have kind of understood these consequences, but it’s just wild because it’s like we’re inventing some of the stuff that the Koch brothers were trying back in the 1980s. He’s just rediscovering this 1980s Ayn Rand-inspired, paying the fine after the fact is a lot easier than actually complying with the law. It’s kind of like what’s old is new again. I find it really interesting that it took us, almost the tech industry, just getting all this money, where they took it from software, to then things like ride sharing and taxis. Now they’re doing it with these very hard industries that use a lot of chemicals, that have a lot of very obvious impacts in the environment. It’s like he’s trying to do that again, and it’s kind of working. It’s very strange to watch as someone who’s spent a lot of time and has degrees in studying things like environmental law and policy. It’s really interesting to watch.
PM: I completely agree with that. It’s really fascinating to think about how these tech companies, as they have increased the power wealth that they have, have been able to kind of replicate things that we have seen other industries doing to ensure that they can make their profits and they can do what they want. And they’ll just ignore the regulatory state. And if they need to pay some fines later, that’s not a big deal, because the amount of money that they’re actually making compared with the fines that are often levied at them, is so infinitesimal. They make crazy money and the fines are just so small, that it really doesn’t matter. This is why you see Amazon — they’re happy to pay fines for worker abuse, and not providing good conditions in their warehouses. We see them pay OSHA fines and things like that, and it’s nothing to them.
We’ve seen this with tech more generally, where time and again, like you say, the Uber example, they move into these industries, they claim that they are different or distinct from what has existed there in the past. And so they feel like they’re able to just run roughshod over the rules and regulations that apply. And unfortunately, regulators seem to be just totally okay with allowing them to do that, as is the case, or as seems to be the case, with SpaceX and this Starship launch. Where it almost seems like NASA is public sector. So they are forced to abide by a particular regulatory framework. And they kind of have to do that, because they are a public agency at the end of the day. Whereas because SpaceX is a private company, and SpaceX is trying to do this in a more “entrepreneurial” way, and use this tech mindset, that is happy to just run roughshod over these regulations, and dare the regulators to come after them. And in many cases, they’re just not willing to do it.
ER: A really fascinating part of Musk himself, and I’ve brought this up a few times before — and this is maybe early to mid-stage, straight up running an oligarchy — is that his currency, so his wealth is kind of a ephemeral. So we talk about him having to pick through the couch cushions to pay a few hundred million dollars for Twitter. And then we keep in mind that this man is worth somewhere between $100 and $250 billion. And it’s like: Well, where’s the disconnect there. And the disconnect is that so much of his wealth is tied into equity markets. And I think you can go back to basically, corporate — and actually government pension plans in the 1980s were transitioned over to the IRA to this 401k-type format, and that made me Americans in particular, really sensitive to equity markets.
So now you’ve got basically, Tesla, the actual operation itself is not too big to fail. There probably aren’t enough jobs; they don’t make enough cars for it to be this too big to fail, similar to what GM was in 2009. But if you look at the S&P 500, or the NASDAQ index, which is a huge portion of so many people’s retirement funds, you’re talking about Tesla being 4% of it. It’s just really interesting dynamic, and I think there’s some small part of it that is, like: If we stop this guy, then we’re going to nuke the markets, and we’re going to lose reelection. And I mean, I don’t want to claim that’s all of it. But that’s certainly a large component of it. So that’s kind of the financial incentive to not do it, and that bleeds over to government policy.
But on a more specific front, people really talk about fines for individual bad actions on a regulatory front — like you talk about OSHA or EPA — and even going back to that Koch brothers example, I’ve brought it up a few times before, is that they basically came out and said, one of the Koch brothers it was, I think it was David, actually, back in the 1980s, the refinery in Minnesota was discharging a bunch of ammonia into the groundwater. The cost to add a refinery unit that would prevent this was in the hundreds of millions of dollars, and their maximum fine per year was capped at $5-10 million. And they said: Look, if I do a calculation on return on invested capital, and then the cost of financing, it’s cheaper for me to just pay this fine. And that was a large fine back then, but even the Koch companies finally realized that there were other costs, reputational risks.
And then the DOJ started getting more aggressive with the EPA about doing things like having consent decrees, where if you are a bad enough actor, they would put you into a debarment, or a consent decree permit. And I’ve worked with companies that have been undergoing this, and what the federal government says is: Forget the fines. If you don’t comply with this program and fix stuff structurally, like with how you comply with the law and have internal whistleblowers and all this stuff, then we’re going to take away your license to do business in the US. For pipeline companies it’s a really strong tool, because the Commerce Clause allows the DOJ to say: We regulate interstate commerce and if you want to run a pipeline company, we’re going to put you through this exercise. And so the risks are less on the actual fines for the individual bad behavior. And they should be more focused on reputational risks, and then again, stuff like the government saying: We can take away your license to do business.
And it’s been a tool that the DOJ used a lot, and then has used less and less by year, and really starting actually, ironically enough, with the Obama administration. And then obviously, Trump supercharged that. It was something where, actually funny enough, and is that the George W. Bush era administration was pretty strong on going out against corporate crime. And part of it was just Enron was this visceral and obvious thing, and they had no choice. If you want to talk about going against bad corporate behavior, the George W. Bush administration was miles ahead of what the Obama administration did, after the fact. It’s just wild to look at that, in retrospect.
PM: Absolutely wild. But as you say it, I’m also not super surprised, unfortunately, seeing the Obama administration more generally. I do want to use that to pivot back to what we were talking about with SpaceX, though, because you were talking about how one of the tools that these regulatory agencies have, whether it’s the DOJ or other ones, is to actually stop these companies from being able to do business. And of course, one of the issues that SpaceX faces is that it needs these licenses to be able to launch, And that depends on meeting certain conditions. One of the things now is that the Federal Aviation Administration, the FAA, is saying that as a result of this launch, that caused a lot of environmental damage, it needs to meet certain conditions if it wants to launch again. To work our way up to talking about that. I want to ask you, before this launch happened, as you said, you were writing about how the impact of this was going to be much greater than what the agencies and what SpaceX was saying. So how did you identify that when the agencies were saying otherwise? And what do you make of kind of what has happened post-launch and after all of this damage was caused with the various regulators and agencies having to respond to what happened at the SpaceX site?
ER: That’s a great question. Sometimes I’m guilty of being a little too wonky, but on a real simple basis, that approval that FAA did — and it’s not the only approval that exists, but it was kind of the big one, and the holdup — was under NEPA, which was the original, national environmental law. It was the foundational one, basically, in the 1960s. These federal departments, and also state departments, were just running highways and interstates just all over the place. And there were some bad impacts, and people realize that there needs to be a framework to kind of disclose these risks to the public at the very minimum. And so NEPA exists — that’s the National Environmental Policy Act, signed into law in 1970 — and that law exists primarily as a way to basically disclose to the public what the risks would be.
So I’ve used this example before, and it’s a little bit silly, but bear with me here. If I wanted to go into the middle of the Everglades in Florida, and I wanted to open a open pit tire burning operation, for whatever reason, I just want to light some tires on fire in the middle of the Everglades. You would obviously run into a lot of other laws, but from a NEPA standpoint, NEPA says: You have to disclose the impact. So if I’m using federal land for that, and I want to do that, then NEPA doesn’t care what the impacts are, in a way. If you go through this full NEPA review process for what we call a significant environmental impact, and you’ve disclosed it, then NEPA doesn’t care after that point, as long as you’ve disclosed it. So I start with that example, because it’s based on environmental significance and the full blown NEPA review process, your environmental impact study, or EIS is going is going to be based on crossing that significance threshold, so it has to have a significant impact on the environment. Sometimes that term is really well defined and sometimes it’s open to interpretation.
In SpaceX is example and this is why it’s actually really patently absurd is that this Starship project, above what they had approved before, which was for four or five, much smaller Falcon 9 launches. The Falcon rocket has turned into a very reliable launch vehicle. They turned it into what they have now, which is construction in launch of test vehicles with explosions expected on a fairly regular basis. The argument starting back in September of 2021, when the original draft statement came out, was that they were using a lower process below the EIS process, and that’s only available if the net environmental impact is going to be below significant. So just on its face, if you look at the rocket itself — as you mentioned, it’s the biggest rocket in history — and being able to light that off, and for that to have been approved under a pretext that it was not significant environmental impact is just simply laughable on its face. And that’s just from a what words mean standpoint — like what does significant mean?
PM:Am I right that other rockets are not approved under this framework and are generally held to a higher standard?
ER: It’s a little more complicated than that because, for example, the Kennedy Space Center has an overarching EIS, that they update on some frequency. So, for individual projects within NASA, they will use this lower environmental assessment program to authorize them. But yes, generally speaking, if you were to be building a launch site from scratch, yes. For people who weren’t paying attention back then, the reason I actually got interested in Starbase in the first place, I come originally, from an oil and gas background, I moved to Texas in 2015. I worked in oil, and so I have maybe a little bit more nuanced of a view than a lot of other people who are as progressive as I am. But I spent a lot of time basically — this is while I was working in industry — writing anonymous comments to different federal approvals of LNG terminals and somebody’s condensate production. Because Texas has this just beautiful coast, that’s kind of really just wild land.
So I was really concerned with oil and gas encroaching on our last virgin coastlands, that are just wonderful and really underrated. I got involved with SpaceX because part of this assessment was not only the rocket launches, but they actually were like: We’re going to build a 250 megawatt power plant; we’re going to build a LNG processing unit; we’re going to build a gas plant. And this was on top of the rocket stuff. So I made the observation that a power plant of that size stand alone would itself, by itself, be an EIS project. It would be a significant environmental impact. They ended up dropping the natural gas production type stuff, eventually, but that’s the reason I started writing about it. People want to ‘rules lawyer,’ especially people who don’t understand how environmental programs work, they try to do gotchas on things I’ve written.
But at the end of the day, I guess what I’m getting at is that this launch site was obviously a significant environmental impact from the get-go. And that’s kind of where all these failures came from. So, we talked about things like the impacts and the surrounding area not being disclosed properly, that is as a consequence of them doing this review. And when you do the review, you’re supposed to say what are the impacts going to be and then we discuss them realistically. But it was pretty obvious from looking at all the different communications and documents I’ve looked at, was that they were gaming, to write the impacts in a way that they would come just below this environmental significance threshold. And what it does is it creates a situation for you to outline in your maps less area that would be impacted by debris. You minimize these impacts, because you want to pass it through.
Then when you launch and those impacts are visceral, and immediate, and obviously, outside of the bounds, that even the FAA, who’s been kind of a rubber stamp organization for not only space, but for a lot of other industries, you see that failure, and they have to do some of these reassessments. Because even they, they’ve got lawyers that are working for them that are very smart. And are saying: We can get away with a lot, but we can’t get away with this much. And so I think that’s what you’re seeing right now, is that they are doing the paperwork needed to be able to re approve it. And kind of a disaster scenario for SpaceX, which would be for them to come back and say: Oops, this is actually a significant project, and we need to start an EIS again. Because you’d be talking about years of review before you’d ever be able to test or launch a rocket again.
PM: When we look at what is going to be necessary for SpaceX to launch Starship again. Obviously, you’ve talked about the FAA. Are there other agencies that will need to give approval for this as well, like environmental agencies and things like that, or is it really just up to the FAA at the end of the day?
ER: So, the FAA make a lot of the decisions, but NEPA and then their own policies require them to coordinate with state and federal agencies. I have had no shortage of very not nice words about the FAA being cronies. I was actually shocked because what they did is they wrote and requested the Fish and Wildlife Service — who does on-land reviews and approvals, under Section Seven of the Endangered Species Act — they actually requested that Fish and Wildlife Service reopen the biological opinion and review they had finished in June of last year. That was at FAA’s discretion. So, that was really interesting, because that is something that on its own is going to take months and months. And it’s really fascinating that Musk was tweeting up a storm saying: We’re ready to launch any day, we’re waiting for the FAA. But but they had known well beforehand that the Fish and Wildlife Service was going to have to redo this approval.
The Fish and Wildlife Service does a lot of really great work. But in some of these Endangered Species Act reviews, they tend to not deny requests that have gone through agencies just as a matter of course. In the last decade, it’s been under half a percent of formal ESA reviews have been basically rejected for jeopardizing a species. So, I don’t think it’s going to be a showstopper by itself, but it will delay this for many multiple months. Even more so because this ESA evaluation, and because their decision to do a programmatic review of their NEPA approval, it’s a tacit admission by the FAA, that: I was right. There basically saying: The impacts have to be re-reviewed. And that was a consequence of them, not doing a very good review in the first place. My guess would be that this delays it several months. I think it’ll proceed, but there’s certainly a real risk, especially now post-Ronan Farrow interview, that there’s all the sudden this skepticism, I’m like: Wait, why is Musk being able to tell federal agencies what to do? I don’t think that’s a great time for the Starship launch for all these questions to start being asked, because then you will have to ask the question: Why is SpaceX able to bully the FAA around?
PM: I want to circle back to that point in a little while, before we end off our conversation. But when you talk about the timeline that we’re looking at here for another Starship launch, there was a story, I believe it was last week, after the FAA had put out that SpaceX needs to do 63 corrective measures before it will be able to launch again. There was a story suggesting that in the next month or two, the FAA could approve a further launch. And so when we’re actually looking at a launch window, does it sound realistic that it will be in the next month or two, just based on the FAA approval? Or will this take longer based on an environmental species review or things like that, before another Starship is going to be able to get into the air?
ER: Well, this is this is where the FAA does disservice — and I think this is the area where Musk really excels in — is that when they were talking about next month, they were talking about the safety review. So, for your flight systems to make sure that there’s not the failures with the launch itself. Based on the reporting and the commentary we saw, that it’s certainly reasonable to think that that safety review component would be done by then. But because the license itself, by statute is predicated on making sure that all those environmental requirements that were listed in that NEPA document. That SpaceX seems to have not read several times, which is funny, because there’s things that they were basically committed to do that they have not done. But, the fact of the matter is that Endangered Species Act review, I brought up, the FAA didn’t say this as explicitly as they should. But they put out a statement last week that is like: No, we have to do these other environmental actions beforehand.
I will eat my hat if a formal re-review by the Fish and Wildlife Service, who has not been pleased with SpaceX behaviors, historically and recently. There was a great piece in Bloomberg, they got a great FOIA dump from officials who were just aghast at it. The idea that the Fish and Wildlife Service would even have the resources to speed through a compliant and correct Endangered Species Act review, is ludicrous. So, technically that next month was correct on the safety front, but a lot of things goes into them issuing a license and there are going to be environmental holdups. That one is maybe even smaller than the one I’ve brought up recently, which I’ve actually been talking about as a potential risk for a while, which is that they installed a water sound and heat suppression system, and that water is going directly off of cooling the rocket and is being directly discharged into a wetland, water United States, which is pretty obviously a violation of the Clean Water Act, and they’re not allowed to do it.
It’s not just like: We’ll apply for a permit and just do what we’re doing in the interim. The Clean Water Act, which the state of Texas is responsible for day-to-day compliance with. The Clean Water Act says: You can’t do that. And they’re doing it, so I don’t know what’s going to happen with that. But if someone takes a serious review, and actually looks at case law and actually looks at the basics of the the Clean Water Act, that activity, that water runoff from cooling the engine is an industrial wastewater, and it can’t be discharged into waters of the United States. This isn’t a new law! This is straight up from the 1970s Clean Water Act. If they actually do a serious review of that, there’s no way they can greenlight it. Best case scenario for SpaceX is that TCEQ, that’s Texas’s environmental regulator, and the EPA just doesn’t say anything. Because if they do a serious review of it, what they’re doing with this water discharge is patently illegal, and everyone knows it. But TCEQ is taking their sweet time on it.
PM: Of course, and to explain what you’re talking about there. One of the things that was really notable about the SpaceX launch site there in Texas, is that it didn’t have a water suppression system and it didn’t have a flame trench, which are features that are very common on launch platforms, not just in the United States, but in Russia and China and other places as well. They at least have one but they often have both, and SpaceX launch site had neither of those things, which is part of the reason that you saw the launch pad get utterly destroyed when this rocket launched. And of course, then was fleeing concrete everywhere and things like that. So SpaceX is adding this water deluge system to try to suppress the impacts of a future launch. But as you say, they haven’t received the approval to actually have that water be drained off, especially in this natural wildlife area that that is protected. And I believe you wrote that earlier this year, the Texas Commission on Environmental Quality already found that SpaceX was in violation of the Clean Water Act in February 2023. Is that right?
ER: That’s super fascinating to me, because that approval, so what they got dinged for in February of this year was for non-compliance with stormwater requirements. So that’s different than a direct wastewater treatment plant or industrial discharge. If you have a bunch of industrial equipment outside and rainwater washes over it, it can incidentally contact chemicals on the process — stuff like oil drips from cars parked, all that stuff — that is covered under a separate but parallel portion of the Clean Water Act for stormwater prevention. And what’s fascinating is that the NEPA approval noted that they needed to get it and they should have had it years ago, and they just didn’t. The thing about this is, I talked about the Deluge System, and that’s a complicated permitting process.
The permitting process for getting the stormwater approved, it’s a general permit. Once you submit via electronic record system to the state you reside in, you’re authorized almost immediately. You can get stormwater permits that are authorized immediately in every state, because it’s this general permit that everyone has to do. I understand in a way, them not going for the Deluge permanent and just saying like: Well, I dare you to stop us, but not getting a stormwater permit is just, it’s incompetence, and just really dumb incompetence. I found that really super fascinating because the state of Texas has requirements that if you’re out of compliance with certain laws, that future investigations and future concessions for expedited permitting and stuff like that have to be impacted.
So, you’re shooting yourself in the foot. I think that’s what’s just so maddening about Musk-run companies. The amount of man hours and time to get that simple stormwater permit is so simple, and they’re just like: We’re not going to do it. For a company this big, I’ve never seen anything like it. You take the worst behaved major oil company or chemical company or any other manufacturer and one of the first things they do after they build their site is if it’s subject to stormwater permitting, they’re going to get a permit because it’s easy. That whole dynamic is just super, I don’t even know how to describe it, because I’ve been in industry and I’ve been a regulator and I just I almost can’t believe that they are, I want to say they’re foolish, but it’s almost like it’s just stubbornness that permeates the entire Musk ink across all those companies.
PM: It’s almost a dare, to try to come after us. This obvious thing that we should be getting, that we’re just not going to bother with, and if you really have a problem with it, try to stop us, basically. I want to ask you about a couple other things before we pivot back to the wider questions here. And that’s the FAA was sued by environmental groups in May. SpaceX join that lawsuit later, as a result of what happened at this launch site, and the environmental impacts that came of it. And when you analyzed the earlier environmental submissions for this launch site, you found that they were based on thrust that was 20% lower than the rocket that was actually launched. And it was known ahead of time that this rocket that they were launching was going to be greater than the models that they were using and had submitted environmental impacts based on. And so what do you make of what’s going to happen there? Will this lawsuit mean anything, and why were they not forced to update their models, when it was very clear that they were not using ones that were accurate for what they were actually launching?
ER: That’s a really good question. And I don’t know, it feels like stubbornness. On the lawsuit itself, I think there’s two ways to look at it. And one is that I think FAA is decision to be a little bit more aggressive than they could have gotten away with, in terms of requiring additional review this past week, the statement they put out. There’s probably some influence that the existence of that lawsuit is having on that. They want to make sure: Before this goes to litigation, we want to show we’re being good actors. So I think that probably played a role. It is important that even though I think the case itself has strong technical merits, the federal judiciary has historically — and this isn’t just a liberal versus conservative court, this is fairly true, even with the so-called woke Ninth Circuit — is that the federal judiciary tends to differ by default, for better or for worse with agency discretion.
So if you’re a jurist, I know with being a federal jurist, that the territory is like you know a lot about everything. But I think even there, they’re a little bit humbler in that they say: I’m not the EPA; I haven’t studied these laws. And so they say: Well, if EPA gave the blessing, or the state agency gave the blessing. Or shoot, the FAA, your job, your function, for existence, is to comply with these regulations. Jurisprudence here has been almost overwhelmingly to defer to the agencies. So that’s a big handicap going in. So I think if you have something that’s just hilariously wrong, especially after you’ve seen the impacts that we saw, would be just really great fodder for a judge to say: Okay, this is actually an example of us tending to side with agencies because that’s just what we do. But I think that may be one example, where if it’s so absurd, that the judge would actually say: No, you need to go back and do an EIS, something like that.
PM: It’s no surprise to hear that the judiciary isn’t very hard on these agencies. I talked earlier about how the FAA has expected 63 corrective actions of SpaceX in order to allow it to launch again. Is there anything that really stands out in those 63 actions that might be major, or is it pretty standard stuff?
ER: I would be going way over my skis in terms of expertise, there are a lot of very silly and not knowledgeable SpaceX fans, but there are lots of very smart ones. So I think I’d be probably getting too in over my skis, because those corrective actions mostly had to do with protecting the public from the rocket launch itself, instead of those externalities. I mean, just looking at it, the length of time it took them to do the review, and the fact that they had gotten to the weeds of these control systems, nothing really stands out to me. When we talk about audits and corrective actions for things that go wrong. You know, I’ve I have a background in process safety as well, one action item can be more difficult than the other 62, combined. So unless I have more detail, it looks pretty comprehensive in scope. I think Musk posted an Excel screenshot of them and it doesn’t look entirely unreasonable to me. I guess I’ll leave it at that.
PM: That’s fair. So zooming out again, we’ve talked specifically about the SpaceX case. One of the things that has really stood out in the comments that you’ve been making is how Elon Musk and his companies in particular tend to avoid these regulations, tend to not care about the regulations that governments and agencies are expected to apply and that these companies are really expected to follow. And of course, that does have consequences. But it seems like in many cases, judges and agencies are not holding these companies to account when they do breach these rules. And so what is the consequence of not actually enforcing these rules on these companies, and consistently allowing them to skirt these regulations and get away with it?
ER: My concern is — and this is actually going to be hopping entirely away from the regulatory sector — is that I don’t know if you’ve seen, but there’s been a bunch of really smart pieces where people have noticed that other tech CEOs are starting to talk like Elon Musk.
ER: So given that, it’s not surprising if you look at how much market capitalization, the share price performance of Tesla, it’s not surprising, you would see people try to ape him. I look at that, and my concern is that — well, we could talk about Uber, we could talk about Amazon, we could talk about some of the union busting by Starbucks, in particular, has just been silly. And so it’s not like it hasn’t happened before. But still, if an agency comes in and yells at Starbucks, they’ll still go through their legal department. And they’ll try to make a argument why this wasn’t a problem, but at least they try to comply with the rule. Now, I don’t want to say that because Starbucks, in particular, absolutely has not. So I don’t know if it’s the best example, but at least most companies, try to at least pretend like they’re in compliance. And my concern is that if we’re talking about aping Musk, that it rolls over into the regulatory sphere, that instead of having these conversations that are at least polite and discussing the actual topics and laws at hand, and you just have a CEO that memes himself into popularity on social media, and then says it’s a conspiracy against their companies.
So Musk has already gone down that road. And my concern when it comes to that is that there are others who will follow in his footsteps, which is a different kind of risk to people’s faith and regulatory systems, which is already kind of fractured. And not to go back to Obama too much, but I would point to the breakups of those Occupy Wall Street events following the great financial crisis, and then the lack of enforcement for the head honchos of companies that destroyed our economy. I think you can kind of point back to that as maybe a turning point in that, and then Musk is kind of leading the charge on taking it to a new level of absurdity. When it comes to just: I don’t care what the rules say.
PM: Then you also have the difficulty, I guess, where people like Elon Musk, and many of these tech companies are fabulously wealthy, have a ton of capital that they can use to push back on any attempts to make them follow these rules. Whereas the regulatory state and these agencies have been consistently cut over time, do not have the necessary staff to really go through even what they were supposed to be dealing with, let alone any additional requirements that would be placed on them. So if you do have this corporate sector, that is increasingly learning from someone like Elon Musk, and trying to further challenge rules and regulations that exist to protect the public, then all of a sudden, already, the regulatory system is not properly resourced to be able to deal with that. But then that becomes even more difficult and it’s easier to get away with it because the government and the regulators and the agencies have been slashed over the past number of decades.
ER: It’s not just a headcount situation. I mean, that’s certainly part of it, but it’s really just this fear, and this is not exclusive to Musk. I think he’s unique in how much attention he’s brought to it, and him, as I mentioned, trailblazing. There’s actually a pretty good case to be made by the libertarian-right, and I hate to say it, but a lot of these regulations in practice, and California is a perfect example, because people always complain about the regulatory state. And there’s absolutely some truth, the actual enforcement of regulations exist as this tax. It’s not just the companies treating it this way — it’s that the regulators treat it that way. They’re like: Well, here’s your fine, we’ll move on, we’re writing you a check, this is your tax.
So there’s a really good case that this is what we’ve moved towards and I would rather see less of that, and more of putting executives in jail who actually blatantly disregard the rules and actually punishing companies by doing things like threatening to debar them from doing business in the United States. I would rather see less nitty gritty paperwork violations, not to say that those rules aren’t important in some ways, but I would rather see less of that. And more of going after the people that have systematic regulatory failures that are actually causing significant impacts to human health and the environment, and you go after them hard. I would rather see that, that kind of type of enforcement well predates Musk, so it’s not just him, but that’s something that I would, as someone who’s been in industry and who’s been a regulator, I would rather see more of that action than this taxing scheme, which is how it actually works out in practice a lot of the times.
PM: Even as someone who is not in industry, I would prefer to see that as well, for these people to actually have consequences for the actions that they take. Instead of just having to pay a little fine and get away with whatever, because they have more money than they could ever know what to do with. You talked earlier about the Ronan Farrow piece, and also how governments look at the fact that Elon Musk’s companies and Tesla, in particular, is incredibly large. It’s worth much more than it should realistically be worth for cars that it makes and things like that, because of the message that it has sold, and that has made it really important to the financial markets and people’s investments to the degree that if it was the collapse, it wouldn’t just take down Elon Musk, but there will be a lot more people affected by that.
So, I wonder what you think about the different aspects of what keeps Elon Musk from feeling this regulatory scrutiny, and the power that he has accumulated to be able to push these things off. Like when you have a private company that is solely responsible for American launches to the International Space Station, he’s one of the main providers of launches for satellites. And now Starlink is essential for military campaigns for the Pentagon and things like that, which we’ve seen in recent reporting on what was going on in Ukraine. What do you make of how much more difficult that makes it to hold someone like him to account?
ER: I mean, it obviously makes it a lot more difficult. My concern is, I talked about oligarchy, and this is really the end game of capitalism. It’s been discussed, and so people who are cheerleaders for unfettered capitalism will be like: Well, this is crony capitalism. But really the end game of capitalism, as people amass resources, and as companies merge, and we have this huge focus on a small number of companies being responsible for so much of our economy, as a consequence, you have explicit capture of the state. And I would say, that’s a natural consequence of amassing capital in an increasingly small number of people’s hands. On a basic level, that’s super important. But I think when it comes to government action, the Ronan Farrow piece was so important — there were really no bombshell revelations, there were a few of really surprising quotes is that the consequence of that is — is that he put it together in a way where people are like: Holy shit, this guy controls so much and has so much power, not just soft power, but hard power.
I think when it comes to regulators deciding to actually do something and put a stop to something, I think it’s best to discuss it in terms of what I call bureaucratic inertia. Which is that it’s easier — this is not just true for bureaucracies, this is a human behavior — where it’s easier to allow the status quo to go on, until the easier decision is to put a stop to it. So if you keep rubber stamping stuff, and rubber stamping stuff, because it’s easier. If shit ain’t broke, we’re not going to fix it. But then when it becomes so personally embarrassing, or you’re the person making that decision at the regulatory agency, you say: Oh, shit, if I sign off on this, I’m going to get called in front of Congress if something goes wrong. And so I don’t know where that inflection point is, but it exists, and I truly believe that Musk will keep pushing it until he crosses that line.
I don’t think it will be obvious in retrospect. But it would not surprise me if this Farrow piece, tying together how much influence he has, all of a sudden, people in the DoD and NASA and FAA and the EPA, say: If we allow this and something bad happens, not only am I going to get called in front of Congress, but then they’ll be able to point out to say: Hey, look, everyone was saying this beforehand, how could you have not know? If I’m going to speculate, that’s where I think the importance of that comes in, and you see it, this is like the whole history of regulatory action. The Clean Water Act only exists because people have been noting, obviously, water pollution for years. And in fact, funny enough TECQ was a spinoff of the Texas Railroad Commission and they were actually one of the most aggressive environmental regulators. In the state of Texas because there was so much dumping of oil in basically waterways.
Texas was actually probably the the most progressive and innovative regulator of all time, when they first started up and this is in the early 1900s. But it’s really funny to think about how you have these cases. And going back to the Clean Water Act, the inciting incident people talk about is that the Cuyahoga River that runs through Cleveland was catching on fire on a regular bases. And so when I talk about the visceral impact — so I talked about the concrete and then the scorched bird eggs, and whatever — regulatory action happens when there’s good coverage by the media, there’s a visceral, emotional connection to it, and there’s an obvious person or cause you can point out. So I think that Musk, for himself, will at some point cross that Rubicon. I don’t know if we’re there yet, but it certainly feels close. But I’ve been wrong before.
PM: I completely agree with what you’re saying. I’ve been feeling that for a while. What is the moment? What finally pushes this over the edge, where it becomes untenable to keep allowing Musk to get away with these thing? Especially as the reality of who he is becomes much more apparent. And I agree that the Ronan Farrow piece was important for that, even though there wasn’t a whole ton of new things in there for people who follow us closely. It’s still presented in a way that is very revelatory for a lot of people who haven’t been following him in that way. So I want to close with one more question, because we’ve been talking a lot about environmental regulations throughout this conversation related to Elon Musk, but also much more broadly. Before we started recording, you were talking about the importance of considering climate change in light of all of these things. Because it’s not just that we have this static environment that is staying the same, but we’re seeing these kind of rapid changes in weather systems and what we can expect from our environment as climate change accelerates, basically. So how do you see that is playing into this larger conversation around environmental regulations in this moment?
ER: You know, it’s actually funny because I enjoy giving myself brain worms. I’ve been watching, just on occasion, some content on Rumble, just to get how people are talking about climate. And you see it happening a little bit, in that it’s this recognition that something is wrong. Obviously, these right-wing crank conspiracy types have not correctly identified the issue. It’s boring, and we’ve known it forever, which is that we have to decrease carbon emissions. But I think it’s going back to that exact same thing we talked about with the river catching on fire, is that climate is super nuanced, yes. Weather patterns from year to year change. But I think it’s that point where something happens, and it’s undeniable. And sadly, with climate in particular, that once it becomes obvious, we’ve maybe gone too far down that road. A lot of these other systems, you talk about things like lead emissions, within a few decades, it was really obvious that lead was causing developmental difficulties, was causing death, was causing all sorts of horrible things.
We’ve done a tremendous job in cleaning up our air in the United States in particular, even as car ownership has gone up, even as refining capacity has gone up. But a lot of these ambient conditions were systems that could be healed over a relatively short timespan. It feels like that’s not possible with climate, and I guess I don’t know what we do about it. And as a closing thought, going back to market capitalism, I think the thing that freaks me out more than anything, is that a couple of years ago, in particular, you had a lot of these oil companies that they would say: Well, net emissions globally are going to go down, But if you talk to each individual company, and you look at them, each of them would say: Well, but our production is going up. So they’re talking about both sides of their mouth, because they’re saying: If your production is going up, and this was even before considering things like carbon capture, you’re saying we’re just going to capture more of the market. And that’s the fundamental problem with how markets are structured globally, and then in the United States, is that if you’re a public company, you either grow or you die.
So the reason that Tesla has such an extremely high valuation is some of it is a fantasy thinking, bubble thinking whatever. But part of it is that Ford and GM stopped growing, and so that’s why they trade at such low valuations. And Tesla is well behind them. I don’t think they’ll ever catch up, but they have this huge multiple put on them, because they see growth. So going back to the oil companies, and this is what really frustrates me about climate is that the people that act like it’s fake, or just against any sort of action whatsoever. They’re like: We shouldn’t do anything because it’s fake. And then a lot of the advocates are like: Well, we need to shut all oil down tomorrow. And that’s just not possible.
This has to be a 10-20 year process where we get to maybe 10% or 20%, a few decades down the line, and we’ll be ahead of our targets. But that is impossible with how markets are structured. So my fear is the only way, really, to slowly wind down oil companies without, for example, stopping pharmaceutical production or people being able to fly or things will be untenable to the public, it’s only possible if you nationalized oil companies, which I just can’t see that happening. That’s the part where, I’m not like a strict anti-capitalist across the board. But I think that shows a real failure is that companies either grow or they die. And what we need is for oil companies to slowly wind down operations in our market and our economy is simply not set up to do it.
PM: I very much agree with that. I feel a lot of frustration, I’m in Canada and seeing how the government’s policy on climate change — and this is the case in many Western countries, of course — is basically like: How can we put in the right set of incentives to try to nudge the market to do the right thing? But it’s like: That we’ll never get it done fast enough, if we’re actually going to meet the emissions reductions targets that we need to meet in order to address and minimize the worst of climate change. But, it’s a huge challenge. And Eric, I really appreciate you coming on the show to talk to us about all of these issues, the SpaceX launch in particular, but also the bigger picture of what this regulatory capture and also regulatory evasion by these major companies actually means for us. So thanks so much for taking the time.
ER: Well, thanks for having me and anytime.