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A Site Selection Web Exclusive, June 2012
WEB Exclusive story


“Project Sandbox” promises to bring 350 jobs and $1 billion in investment to Hobbs, N.M.

The campus of the Center for Innovation, Testing and Evaluation near Hobbs will include offices, labs and conference facilities.
All images courtesy of The Center For Innovation, Testing And Evaluation


fter a selection process pitting one area of the Land of Enchantment against another, the Center for Innovation, Testing & Evaluation (CITE), a 20-sq.-mile (52-sq.-km.) project from Pegasus Global Holdings, is destined for the EnergyPlex near Hobbs, N.M.

Portrayed as a "ghost town" in many press accounts, the development, announced this spring, could truly be the ultimate science park, providing "the opportunity for end-to-end testing, evaluation and demonstration of new intelligent and green technologies and innovations emerging from the world's public laboratories, universities, and the private sector," said Pegasus in May. Pegasus is a technology development and consulting firm based in Washington, D.C.

The CITE site comprises approximately 14,000 acres (5,666 hectares, or a little over 17.5 sq. miles) with an additional six sq. miles for access control and utility space. Construction on phase one was expected to begin by July with a $400-million first phase, part of what Pegasus pegs as a total of $1 billion in investment eventually.

"Lea County, the Economic Development Corporation of Lea County and the

City of Hobbs worked closely together to attract the CITE project. We are very

pleased that our efforts were successful in attracting a project as innovative as

CITE," said Mike Gallagher, Lea County manager.

Hobbs beat out the border city of Las Cruces and 14 other New Mexico communities for the project, which had initially also considered sites in Texas, California, Montana and Virginia. The relative isolation and abundance of the acreage were widely viewed as chief determinants in the decision. There were no incentives involved, says Bob Brumley, co-founder and managing director of Pegasus Global Holdings. "Development, construction, and operating costs of CITE will be funded by the private sector," says the project's website. "CITE will create 350 new direct jobs and it is expected to create more than 3,500 new indirect jobs through construction of the facility, supporting industry, and contractors."

Brumley was formerly president and CEO of TerreStar Corp. He also served under President Ronald Reagan as Chief Legal Officer of the U.S. Department of Commerce and Senior Policy Advisor to the Secretary of Commerce, and chaired the Reagan Administration policy group that privatized commercial space transportation. He says the May decision was the culmination of three years of work, and was the upshot of an MOU signed with the State of New Mexico last year and a rather large advisory team.

"One thing we'd asked the state to consider was a board of advisors they'd help us put together that would consist of universities, science and technology labs, senior management of companies — essentially individuals who are well known in the state for their competency," says Brumley. "It was about a 60-person board. We had our first meeting in December to lay out goals, and one was site selection. They formed a working group, and that group worked with us through the New Mexico Department of Economic Development on a site selection process. We wanted a welcoming community for something like this. You can't just drop it in somebody's backyard."

Ground Work

But if any backyard was ready for it, New Mexico's certainly was, given its history of such high-concept, high-tech projects as the New Mexico SpacePort and Mesa del Sol, as well as assets such as White Sands Missile Range, Sandia and Los Alamos National Labs, and a legacy of cutting-edge energy research that stretches from the atomic bomb to the growing oil and gas and nuclear isotope industry activity in Hobbs, where such organizations as International Isotopes and URENCO have invested substantially.

Brumley says the working group was able to shrink its list of 16 sites to three by February, based on criteria such as proximity to federal labs and next-generation infrastructure such as high-speed fiberoptics; employment base; and the academic institutions to drive employment and research. Once the finalists were paid a visit, he says, "We then made our final decision based on two macro elements" — availability of privately owned land, and existing infrastructure. He says being able to own land removes the uncertain and time-consuming process of leasing, "plus land is an asset." The finalist acreage near Las Cruces in Dona Ana County was mostly state trust land.

As for infrastructure, "Hobbs is a community that is used to large infrastructure projects. There is a lot of infrastructure in place that I would otherwise have had to have built. They're used to big projects that have an energy or science and technology theme, and they're comfortable with it, not afraid of it. Their mayor [Sam Cobb] has said if companies want to plug and play, let's build the infrastructure to accommodate that. The mayor of Las Cruces estimated spending $35 million to $40 million on underlying infrastructure that was already in existence in Hobbs. Whether on my balance sheet or the community's, this was a situation where it didn't have to be spent by anybody."

Brumley says Lea County was "smart enough and secure enough" to put his team in direct contact with leaders at companies such as the multinational URENCO, who in turn gave the CITE team a "very candid, straightforward evaluation, all positive."

Every federal lab in the state is a member of the CITE board of advisors. That's crucial to the next stage, Brumley says, as the project's leaders start implementing customer segmentation requirements and "build connective tissue to as many labs as we can." The requirements are based in part on feedback — including from FORTUNE 50 companies, DoD, DHS and investment bankers — that CITE has received from focus groups in Palo Alto, Calif.; Pennsylvania and at SAIC headquarters in McLean, Va.

Brumley says the U.S. marketplace in what he calls the "innovator/inventor/entrepreneur space" for smart technology is estimated at $54 billion annually by 2014. On the federal R&D side, he says there's another $65 billion to go after. Providing the test bed for technology to cross "death valley" and get to commercialization is what CITE offers.

"CITE becomes an oasis in Death Valley," he says. "There are other oases — technology parks, hub zones, centers of excellence. But CITE provides more than a place to meet and talk. It's a place to also test, in a holistic way. You have a chance to see the ripple effect throughout a city environment, as opposed to a more pristine test you would do in a lab."

He cites an example of an inventor of a wifi system with multigigabyte capability that for some reason wasn't working in the local Starbucks. "He finally realized he was in a building covered with stucco, which smothers the wireless," he says. In another real-life example, a city that built a new fiberoptic network that didn't meet speed expectations because of infrastructure issues could have tested the system at a place like CITE before committing to the purchase.

Technology, after all, is only as good as the legacy infrastructure where it's deployed.

"We're not building a smart city," he says. "We're building a legacy city for smart technology. It's really a dumb city, and we want to see how it raises our IQ."

Brumley says a city is the most holistic thing we have in this country, and thus the perfect flexible footprint for the test bed, which will be based on a community of approximately 35,000 people, complete with infrastructure in transition, a downtown, light industrial, light retail, a suburban area, agriculture on the outskirts; highway onramps and off-ramps; and self-sustaining power, water and communications systems, "all run by researchers and IT personnel in the underground backbone," which includes a 50,000-sq.-ft. (4,645-sq.-m.) data center.

"Below ground is where the 350 employees would work, three shifts a day, 24/7, 365," says Brumley.

What's the business case for investors? It's not based on testing, says Brumley, who pegs the testing at only 20 percent of projected overall revenue. The rest will come from resource production.

"What I'm doing is running a city," he says, with a city-sized output. "We're selling the excess power, water and data services off the telecom network. It's common utility infrastructure you take for granted." One example is a planned 5-MW natural gas or fossil fuel plant. Since CITE only needs 2 MW, the excess capacity can be sold to the local utility, "which will get additional resource without the underlying capex," says Brumley, "and I'm getting additional revenue without customers, except one."

As a destination for grant-supported research, he says, CITE will be able to host, for instance, a 500-acre solar facility built to scale, and charge the grantee operations and maintenance fees to run it. "They'll gather their test data, their grant runs out, and we'll offer to take that entire facility," he says. "And I've just received additional power without capex." The model applies, he says, to any number of research areas, from water purification to algae farms to secure data centers.

Central to that business case is the backbone provided by national labs, whether based in New Mexico or not, says Brumley.

"There is a $1.3-trillion market worldwide for federal and private commercial R&D," he says. "That is not going away. During good and bad times, government and the private sector continue to invest in innovation. We've looked at the process of innovation as a market."

Mixed Reactions

One informed observer familiar with the scientific and economic development landscape in the Southwest says off the record that while innovation and growth are things New Mexicans embrace, some are wondering why resources, even without incentives on the table, would be devoted to this project at the same time the state faces issues with its border and with existing business retention. Others who see the ongoing oil and gas boom continuing in the southeastern quadrant of the state might wonder at the relative worth of such a visionary concept vs. the value of a few well-placed wells.

Tom Rand
Tom Rand

But others in the know see CITE as a situation worth pursuing. One is Tom Rand of the MaRS Discovery District in Toronto, who serves as managing partner of the MaRS Cleantech Fund I L.P. and senior advisor to MaRS Cleantech Venture Group. He's also the author of the book "Kick the Fossil Fuel Habit." Ontario is advanced in its own right as a smart grid test bed, but he sees CITE as the next chapter.

"I'd love to do the same thing in Ontario," he says by email. "I'm advocating for it as part of my role as a member of Ontario's Clean Energy Task Force (appointed by Premier Dalton McGuinty)." In Ontario's case, he says, it would be ideal for leveraging the province's forward-thinking Green Energy Act into action to address grid problems faced by utilities, for instance, such as large-scale storage.

"There are a lot of innovations required to green our grid," says Rand, who calls that process inevitable, fast and furious.

"There's a storm coming," he says. "Jurisdictions that figure it out in advance and are able to anticipate the technical problems that come with variable [energy] production will be the jurisdictions that develop the capacity to innovate. As much as you want to play with stuff in the lab, it can only simulate. With energy storage, control systems, automated demand response, unless you're on a real grid, you're not actually doing much. You can't really simulate that. The real world is more complicated than the theories that describe that world."

The CITE project pushes back against conservative engineering, he says. Utilities are taught as a group to keep the lights on and refrain from introducing instability into the grid.

"You have to say, 'Look, there is a larger economic interest at play here,' " says Rand, driven by what he sees as the global imperative to "de-carbon."

"There is no bigger market. There is no bigger problem to solve," says Rand. "This is like Silicon Valley back in the '60s, which has maintained its edge for 40 years because they took a first mover advantage in silicon, software and the Internet. This is a much bigger market than the Internet is."

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