Orbital Sciences Corp. was chosen to develop NASA’s future space cargo, capable of commercial orbital transportation to the International Space Station after the shuttle is retired in 2010, officials announced on Tuesday. The Virginia-based company will be granted approximately $170 million from federal funding to develop and launch the cargo, under the Space Act Agreement.

The project is called Commercial Orbital Transportation Services Project or COTS, and will rely on both federal and private funding. The main purpose of COTS is to stimulate private investors to offer ferrying crew and cargo alternatives for both private and governmental customers. The program is worth $500 million and currently supports two companies, Orbital Sciences Corp. and Space Exploration Technologies from El Segundo, California.

“NASA plans to get out of low Earth orbit and focus on going back to the moon to prepare explorers for a future voyage to Mars,” said Rick Gilbrech, associate administrator for NASA’s Exploration Systems Mission Directorate, Washington, according to a NASA press release. “Being able to buy safe, reliable and economical service to low Earth orbit will help us achieve our national goals.

Besides Orbital and SpaceX, NASA closed agreements with other five partners, but through unfunded agreements. The COTS initiative started in 2006, when NASA chose the two winners to be Rocketplane Kistler and Space Exploration Technologies. Unfortunately, Rocketplane was unable to raise the necessary private funds, and the agreement fell apart.

“Our investment in the space transportation industry holds just as much promise for the future as government’s investment in the railroads and airlines produced in the past,” Alan Lindenmoyer, manager of the Commercial Crew and Cargo Program Office at NASA’s Johnson Space Center in Houston said in the same press release.

NASA is currently depending on Russia’s spacecrafts to reach the space station, and it is very likely for the situation to continue until 2015, when the private initiatives might come in, if they prove to be successful. For the time being, the two companies chosen to be part of the project will have to demonstrate one of the following: external, unpressurized cargo delivery and disposal; internal, pressurized cargo delivery and disposal; internal, pressurized cargo delivery and return, and an option for crew transportation.