Once the space-shuttle program ends this year, the only way to get people into orbit and to the International Space Station will be to buy seats on Russia’s three-person Soyuz capsules. So NASA, through its Commercial Crew Development program, has given $50 million in grants to companies developing new spacecraft capable of carrying people and supplies into orbit and to the space station.

The recipient of the biggest chunk of this money was the Sierra Nevada Corporation, which received $20 million to develop the Dream Chaser. This spacecraft, the size of a business jet, will take cargo and up to eight people into low Earth orbit, where the space station is located, and then return and land on commercial airport runways.

The company reached all its development milestones for the Dream Chaser last year and is now finishing a battery of tests on the craft’s carbon-composite frame. The shell of the spacecraft must be able to endure heavy loads and intense vibrations. So the Dream Chaser frame has been mounted on an earthquake simulator in a lab at the University of Colorado in Boulder. So far, the design has performed as expected, says Mark Sirangelo, head of Sierra Nevada’s Space Systems division. At facilities in San Diego, the company has been testing the craft’s hybrid rocket motors. In the coming months, the company will put the two together to complete a full prototype, carry it into the air, and drop it to see how it flies.

Other orbital spacecraft under development by companies including SpaceX and Boeing are capsules that will use parachutes to descend on land or in the sea. The Dream Chaser has a lifting body design; it looks something like an airplane without the large wings on the side. Another private company, Orbital Sciences, is also working on a space-shuttle-like lifting body craft. The Dream Chaser’s shape, in combination with extensible wheels and motors, will enable it to make a controlled landing on a runway. Sirangelo says that the craft will therefore be able to land on the ground in more places than other vehicles can, and that the gravitational forces to which it will expose passengers—and sensitive cargo and scientific instruments—will be less intense.

If the company continues to achieve its testing and development milestones, the Dream Chaser will be launched into orbit in 2014 on the nose of a powerful launch booster, the Atlas V, made by United Launch Alliance. After it reaches orbit, the craft will be dropped, and its hybrid motors will be used to adjust its orbit or dock it to a space station. These motors will also be used to guide it to its gentle landings.

Sierra Nevada, which also makes satellites, sensors, and other components, did not design the Dream Chaser from the ground up. In the 1970s, the Soviets tested a vehicle like it, known as the Bor-4. The crew of an Australian ship photographed it, and NASA used the image to reverse-engineer a similar craft. The resulting design, NASA’s HL-20, underwent significant development and testing and was intended to be a lifeboat for astronauts aboard the space station. But the HL-20 program lapsed.

Six years ago, a small aerospace company that Sirangelo headed, called SpaceDev, licensed the design from NASA and began to modify it, for instance adding the hybrid motors. The motors burn an unusual fuel: a combination of recycled rubber and nitrous oxide. This has almost the same energy density as conventional fuel but can be burned in a more controlled way and thus might be safer, though only multiple flights can prove whether it is. Sirangelo compares the system to a burner on a gas stove that can be turned to a lower or higher flame. The same hybrid motor was used in SpaceShipOne, which won the X Prize in 2004, and will also be incorporated in Virgin Galactic’s SpaceShipTwo, intended to fly tourists into suborbital space.

Sierra Nevada, which acquired SpaceDev when it formed its space division two years ago, hopes NASA will be one of its major customers. The company will also go after space tourists and this winter signed an agreement with Virgin to market and pilot the tourist flights. If other companies, such as Bigelow Airspace, succeed in developing nongovernmental space stations, they’ll need transportation to get people there, and Sierra Nevada is eyeing this potential market as well. What’s more, Sirangelo expects that universities and other research institutes will be interested in buying space on the Dream Chaser to send experiments into orbit for a week or so.

Everything on the Dream Chaser except the initial launch booster and the fuel cartridges is designed to be reused. Still, turning a profit will require flying multiple Dream Chasers 50 to 100 times each, and Sirangelo admits that he doesn’t know when that will occur. “We’re entering an unknown world,” he says. The company isn’t disclosing exact figures, but Sierra Nevada, a profitable company founded in 1963, has invested tens of millions of dollars in the project—more than the company received from NASA this year. Sirangelo says Sierra Nevada plans to continue to invest its own money in the project. “If we don’t get to our milestones, we don’t get paid,” says Sirangelo. The company has applied for a second round of funding from NASA that will be given out later this year.

In addition to the business risks inherent in developing an orbital vehicle, there are technological and policy uncertainties, too, says Scott Pace, director of the Space Policy Institute at George Washington University in Washington, D.C. A vehicle like the Dream Chaser doesn’t have the Soyuz’s flight history; though engineers have been working on the designs for a long time, the technologies don’t have a history of safety and reliability. Safety problems were part of the reason for discontinuing the shuttle program. “There is potential for the new vehicles to be safer than the space shuttle, but the only way you really know is by flying,” says Pace. If the regulatory burden under which NASA labors were applied to commercial efforts to make crew vehicles, it would crush them—but what kind of compromise regulations will be written is still unclear.