Case Study 10: Oak Ridge Reindustrialization InitiativeVision 2010

Background

The DOE Oak Ridge reservation in Oak Ridge, Tennessee, is one of the original Manhattan Project sites. Its mission has historically revolved around the production and use of enriched uranium in defense and commercial applications. The reservation is administratively divided into three sites. The Oak Ridge National Laboratory (ORNL), where much of the original uranium process research and development was performed, is now a multiprogram laboratory. The K–25 site is the location for the Oak Ridge Gaseous Diffusion Plant, an inactive uranium-enrichment facility. Currently, the primary mission at the K–25 site is environmental restoration and waste management. The Y–12 site is a production facility with specialized capabilities in such areas as precision machining and forging. The Lockheed-Martin Corporation is the current managementand operating contractor for all three sites.

The Effort

The DOE Oak Ridge Operations Office (ORO) has embarked on its plan to reduce the Federal presence in Oak Ridge and to create local employment opportunities through private enterprise. This initiative, called Vision 2010, makes excess Federal facilities and other assets available for private-sector use as a means of defederalizing and reindustrializing portions of the Oak Ridge reservation. Initially, the initiative focuses on excess facilities at the K96-25 site. However, it is envisioned to ultimately include eligible properties at ORNL and Y–12. Recently passed legislation (the Defense Authorization Act of 1994, Public Law 103-160, Section 3154), pertaining to facilities to be closed or reconfigured, authorized the Secretary of Energy to lease facilities and equipment for less than market value under appropriate terms and conditions. Under the legislation, ORO can lease such facilities to the Community Reuse Organization of East Tennessee (CROET) for industrial development. ORO envisions proposals that would bring private tenants to the facilities, in some cases leveraging proceeds from sales of very large inventories of scrap metal for necessary decommissioning and decontamination efforts to make the facilities more attractive to potential tenants.

Current Status

Three leases between ORO and CROET are currently in place or under development. One lease, for 1,000 acres for industrial development at the K–25 site, was executed on January 16, 1996. A second lease, for metal fabrication at a portion of Building 1401 at the K–25 site, was executed on April 5, 1996. A third lease, for the barge facility at K–25, was signed on April 26, 1996.

The ORO announced the availability of properties at the K–25 and Y–12 sites in the Wall Street Journal, on the Internet, and in the Commerce Business Daily. These properties were showcased to industry representatives at an information exchange workshop conducted on April 2–4, 1996. As a result of the workshop, there are a dozen serious proposals for use of specific facilities at the K–25 site.

Lessons Learned

A number of issues have surfaced that can pose significant obstacles to realizing the goals of Vision 2010. First, DOE currently lacks the authority to retain revenues gained from these activities to use in funding future activities. This ability is crucial to providing the necessary funds to maintain progress (see page 6–13 for discussion of proposed legislation). Again, in accordance with Congressional mandates in the fiscal year 1997 Energy and Water Conference Report, DOE will seek specific authority in the fiscal year 1998 appropriations process for specified pilot projects that will allow for reinvestment of proceeds into efforts designed to reduce the cost of maintaining DOE assets

Second, DOE accounting guidance is also of primary importance. The ability to plan for funding via revenues, determine the proper distribution of costs, and agree on accounting principles will facilitate actions to reuse or recycle assets. Efforts are under way to establish a DOE-wide accounting system for managing proceeds from asset sales.

The third issue is declassification of information pertaining to the manufacture and use of gaseous diffusion barrier technology. Declassification is necessary to make the assets attractive, and in some cases available, to commercial parties. DOE is studying whether the technology should be declassified and to what extent it can be made available to the private sector. DOE is continuing discussions with private industry regarding the possible leasing of gaseous diffusion technology for commercial use and establishing a private manufacturing capability at Oak Ridge.

Fourth, Vision 2010 has made it clear that DOE needs to be able to offer a contract or lease of Federal property for an extended period to interest businesses in investing in capital improvements on the property. An early exchange of draft “generic” lease terms and conditions can greatly speed up the process. DOE is examining the legal authorities required to permit longer term leasing arrangements at its facilities.

Finally, early identification of the environmental issues and involvement with the appropriate regulators is essential. Notification and approval for permit and other compliance purposes, as well as NEPA requirements, may take significant time. ORO found that environmental compliance requirements can pose some difficult challenges. This was particularly evident when the State of Tennessee determined that CROET would be considered an “operator” under applicable environmental laws, creating additional potential responsibilities and liabilities for the organization.