U.S. panel pitches public-private space taxis

* $5 billion eyed to seed commercial rocket ships

* Panel suggests scrapping NASA's Ares moon rocket

* Space station extension strongly endorsed

By Irene Klotz

CAPE CANAVERAL, Fla., Oct 22 (Reuters) - The United States could get astronauts back into space faster and spend less money by scrapping the Ares rocket designed to succeed the shuttle and turning instead to public-private space taxis, a presidential advisory panel said on Thursday.

The space shuttles are due to be retired next year and the replacement vehicle will not be ready until 2017 or 2018, the panel said.

But it added in a new report that with a government investment of about $5 billion in a public-private space taxi program, the country could resume launching astronauts into space in about 2016.

The Obama administration convened the panel of 10 aerospace executives, former astronauts, scientists and engineers to assess NASA's plan for human space exploration and to suggest alternatives to the moon-focused initiative championed but not fully funded by the previous president and Congress.

"I think there is argument that it was a sensible program to begin with. There is a real question as to whether it's a sensible program today," said space review panel chairman Norm Augustine, the former chief executive of Lockheed Martin (LMT.N).

The exploration initiative known as Constellation is roughly $3 billion a year short of budget projections, a gap NASA has attempted to bridge by delaying development work. The Ares rocket, topped by a crew capsule called Orion, would be used to carry astronauts to the International Space Station and to the moon, which would be used as base for missions farther into space.

NASA currently spends about half of its $18 billion annual budget on human space programs.

It has spent four years and $350 million so far developing a prototype Ares 1 rocket to succeed the shuttle, and its test flight is scheduled for Tuesday.

But the advisory panel projected the Ares 1 booster rocket would not be ready to serve as a launcher for space station crews until 2017 -- well after the outpost is scheduled to be removed from orbit. Even if the International Space Station is extended beyond 2015, as the panel strongly recommends, money diverted to continuing the station would delay the Ares rocket debut to 2018 or later, the panel said.

ROCKET MISMATCH

"The (schedule) slippage has caused a mismatch between what Ares 1 is needed for and what it's going to be able to do," Augustine told reporters.

Instead, the committee suggests the government invest $5 billion in space taxis created by private industry. NASA would have oversight on safety issues.