Meeting the Economic Imperative to Advance Technology Development

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Meeting the Economic Imperative to Advance Technology Development in West Virginia


An Assessment and Development Plan for the

West Virginia Education, Research and

Technology Park

Prepared by: Battelle Technology Partnership Practice

in collaboration with CH2M Hill

Prepared for: The West Virginia Higher Education

Policy Commission

November 17, 2010

Battelle does not engage in research for advertising, sales promotion, or endorsement of our clients’ interests including raising investment capital or recommending investments decisions, or other publicity purposes, or for any use in litigation.

Battelle endeavors at all times to produce work of the highest quality, consistent with our contract commitments. However, because of the research and/or experimental nature of this work the client undertakes the sole responsibility for the consequence of any use or misuse of, or inability to use, any information, apparatus, process or result obtained from Battelle, and Battelle, its

employees, officers, or Trustees have no legal liability for the accuracy, adequacy, or efficacy thereof.

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Creating a 21st Century Signature Center for Commercialization and Applied Research in Energy, Chemicals and Materials Technologies for West Virginia

On December 15, 2010, the West Virginia Education, Research and Technology Park begins formal operation under the auspices of the Higher Education Policy Commission. This is an unprecedented opportunity for advancing technology development and the creation of high paying, high quality jobs in West Virginia.

From day one, the West Virginia Education Research and Technology Park will pay critical dividends for economic development in the state. The state’s actions preserved 550 high paying, high quality jobs in West Virginia, which pay an average of $81,900 in salaries and wages. The economic multipliers of this retention are substantial, as detailed in this report—contributing an additional 1,096 jobs and generating a total of over $15 million in tax revenues for West Virginia.

Still, it is the long-term potential for creating an innovation and technology development driver for West Virginia that stands to offer the highest economic development pay-offs for the state. In the past, the Dow South Charleston Technology Center and its predecessor Union Carbide R&D Center was a key site in which industry research and development took place that fostered the rise of West Virginia’s leading industry clusters in energy, chemicals and materials. But the world has changed, and the days of the large corporate laboratories have passed.

To grow our economy, we need a new engine that promotes a broader culture of R&D collaborations across industry, universities and federal laboratories, and a focused program to promote commercialization of new products and the start-up of new companies.

Otherwise, the global competitiveness of our state’s energy, chemicals and materials industries in the years ahead is at risk. Today, the broad energy, chemical and materials industry complex in West Virginia, together with related engineering, commercial R&D and testing, comprises over 49,000 jobs or 8.6 percent of private employment in West Virginia, and pays an average salary of $69,481 compared to $35,189 for all private sector jobs in the state.

By advancing the West Virginia Education Research and Technology Park as part of the Higher Education Policy Commission’s statewide system of higher education facilities, there is a renewed opportunity to promote innovation and commercialization for West Virginia’s energy, chemicals and materials industries.

To realize the full potential of the West Virginia Education Research and Technology Park, the Higher Education Policy Commission recognized that it needed an objective assessment and game plan, which have been developed with the support of the US Department of Commerce’s Economic Development Administration. Part of a larger body of work, this report by Battelle and CH2M Hill offers a well-documented and strategic approach to moving forward, which the Commission will be utilizing in the years ahead.

Respectfully,

Brian Noland, PhD Chancellor, Higher Education Policy Commission

A recent update to the highly influential

2005 report by the National Academies

of Science, Rising Above the Gathering

Storm, makes clear: “…the great United

States corporate research laboratories

of the past are increasingly becoming a

thing of the past.”

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Key Recommendations

The vision for the West Virginia Education Research and Technology Park (WVERT) is to become a signature innovation and commercialization center for traditional and bio-based energy, chemicals and materials in the global economy. Its success in supporting the energy, chemical and materials sector will reach beyond the borders of the park itself to advance the commercialization of products in West Virginia, generate needed talent to sustain West Virginia’s competitiveness and establish new sources for innovation in West Virginia and beyond. In doing so, WVERT will catalyze and enable West Virginia to be among the national leaders on the global stage of commercialization and growing companies in these areas.

Program Development Recommendations for WVERT

Battelle is recommending four specific program initiatives for WVERT, which together can enable WVERT to achieve its potential as a catalyst and resource for technology development and innovation. It will also advance the overall value-chain of technology-based economic development driving industry cluster development in energy, chemicals and related materials and engineering and testing services.

One key element of the WVERT program needs to be focused on filling a critical gap in the commercialization process for pilot production. This is a specialized operation, and one that is tied to the technical expertise of a proven operator—and will likely include contract manufacturing (often referred to as “tolling” by industry), process and technical development as well as market development activities with a range of users, most of whom will likely be emerging growth companies for whom the park provides a preferred development path.

A pro-active focus on recruitment of innovative, emerging growth companies in niche areas of energy, chemicals/related materials and engineering and testing services is also needed with a support infrastructure for entrepreneurial development. To fulfill this recruitment mission, WVERT should have a certain amount of available multi-tenant space ready for opportunities to capture and accommodate growth. Given the Park’s position in the regional and state technology development and real estate landscape, this multi-tenant space should include a mix of chemistry and bioscience lab space tied to the target niches as well as associated office space. In addition to the provision of physical amenities that promote discovery and applied R&D, a set of business growth and financing services should also be provided.

Advancing talent generation of hands-on skill training from technician to engineering to scientist levels in processing technologies. With the establishment of the campus of Kanawha Valley Technical and Community College and the Advantage Valley Technology Training Center in the Park, WVERT has the opportunity to serve as a focal point for meeting the training and talent development needs of key industries in the state and beyond.

Establishing a world class chemical engineering research institute to deepen the capacity of West Virginia to be an innovation leader and grow their own in the industry clusters of energy, chemicals and engineering/R&D/testing labs. The role of the Park is to serve as a pilot and convener, who sets a course, catalyzes, assembles teams and implements focused activities that address strategic energy, chemicals and materials opportunities for West Virginia.

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Funding Mechanism

There is a need for a predictable and sustained source of funding to enable WVERT’s program activities to be put in place. Among the funding needs over the next 5 to 10 years to establish WVERT as a catalyst and resource for advancing West Virginia’s energy, chemicals and materials industries are:

Rehabilitation of the pilot plant facilities

Ensuring the availability of multi-tenant laboratory space

Core staffing for the research park

Pilot production equipment and working capital fund

Outreach marketing program

Business services program

Workforce development

Establishment of a world class applied research center in energy, chemicals and materials technologies

Battelle is recommending specific state authorization to be enacted to ensure the needed funding for WVERT. There are a variety of options for providing this funding mechanism. A traditional approach is to provide annual bond and general appropriations to the authority. Another traditional approach is to dedicate specific existing taxes or fees generated by the energy, chemicals and materials sector to this authority. A more novel approach is to advance a tax increment financing approach based on the additional total state revenues generated by the energy, chemicals and materials sector in support of the Authority. This novel approach is currently being used by Kansas for its Biosciences Authority.

Operations/Management Recommendations

Based upon the best practices in the Park community and the opportunities and programmatic requirements of developing a Park as a statewide, signature development for the future, Battelle is recommending that one entity be established to “steer” and provide funding for the WVERT programs and another entity be responsible to “row” and conduct the day-to-day activities of WVERT Park and carry out its pro-active business development efforts. More specifically, the activities for each entity would be as follows:

Statewide Funding Mechanism Entity would be responsible for: The WVERT Park Corporation would be responsible for:

Developing and overseeing the implementation of statewide strategy for ECM cluster advancement

Promoting the engagement and collaboration among industry, federal labs and higher education (community colleges, 4 year and research universities)

Grants making with a focus on accountability and due diligence

Funding pilot plant rehab and multi-tenant space

Funding program activities of WVERT Park Corporation beyond direct tenant services

Undertaking the RFP process to competitively select an operator for the shared use pilot plant facility to work collaboratively with WVERT Park Corporation

Awarding pilot production equipment and working capital loans

Conducting its affairs “at the speed of business”

Managing the property and campus wide services, supports tenants

Managing the delivery of commercialization services

Recruiting and selling the Park to attracts and grow tech based businesses

Marketing and developing customers for pilot plants in concert with operator and other organizations

Developing new facilities and structures financing

Undertaking strategic initiatives in collaboration with others to build and support applied research institutes in the Park as well as linkages beyond

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Governance and Staffing Options

The WVERT Park Corporation should be established as a 501 (c)( 3) entity under the auspices of the Higher Education Policy Commission. This can be accomplished by amending the existing language under Article 12 of Chapter 18B of the Laws of West Virginia pertaining to “Research and Development Agreements for State Institutions of Higher Education,” which allow for such research park corporations to be formed.

The Board of the WVERT Park Corporation should include both state level and Charleston regional representatives. An initial view towards the Board might be:

Representative from HEPC

Representative from West Virginia Department of Commerce

Representatives from WVU, Marshall and NETL

Charleston region economic development representation

Corporate level industry leaders from across the state

For establishing the Funding Mechanism Entity, Battelle sees several options. It could be a new authorization for the HEPC and so require no new organizational entity. Alternatively it could be a separate statewide authority with representation from HEPC, state economic development, industry and higher education institutions. A third option might be a subsidiary organization to HEPC with shared responsibility with the West Virginia Secretary of Commerce.

On staffing, to the extent feasible, it is recommended that the Funding Mechanism Entity and the WVERT Park Corporation have a shared staff. Of particular importance is having a shared CEO. It is recommended that Boards of the WVERT Park Corporation and the State Authority act in concert, in consultation with the HEPC to recruit and select from among qualified candidates for the chief executive officer. The CEO will in turn be responsible for hiring staff for each of the organizations, seeking to maximize efficiencies by having dual responsibilities in key functions that will be overlapping for the park and the statewide authority such as accounting and financial management. This is an approach that is similar to that by the Virginia Biotechnology Park, an independent 501 (c) (3) organization, and its supportive statewide Virginia Biotechnology Research Park Authority.

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CONTENTS

Introduction .............................................................................................................................. 1 The Importance of West Virginia Energy and Chemicals Industry Clusters to the State’s Technology Base ....................................................................................................................... 7 Assessing the Targeted Development Opportunities for WVERT ..........................................13 Development Program for WVERT .........................................................................................27 Recommended Governance, Funding, and Operating Approaches for WVERT ....................45 Appendix A: Case Studies .......................................................................................................58 Appendix B: Economic Impact Analysis ..................................................................................87

LIST OF FIGURES

Figure 1: Research Park Concept .......................................................................................... 4 Figure 2: Two-Phase Approach for WVERT Development .................................................... 5 Figure 3: Share of Tenants by Type of Organization—North American Research Parks .... 13 Figure 4: Establishments with Five or More Employees in Engineering, Commercial

R&D, and Testing Services Across the Charleston Region ................................... 19 Figure 5: Technology-Based Economic Development Chain .............................................. 28 Figure 6: Illinois Medical District and Chicago Technology Park ........................................ 58

LIST OF TABLES

Table 1: Advanced and Specialty Materials Employment Metrics, West Virginia and United States, 2008 ............................................................................................... 8

Table 2: Key Location Factors Needed to Attract Data Centers ........................................ 21 Table 3: University Research Funding in Selected Fields, 2004–2008 .............................. 23 Table 4: Forecast of Annual Job Openings From West Virginia, 2006–2016 .................... 24 Table 5: Commercial Real Estate Market Profile for the Charleston Region .................... 25 Table 6: Technology Segmentation Uses for WVERT Pilot Production Facilities .............. 31 Table 7: Benchmark Case Study Profiles ........................................................................... 47 Table 8: Governance Models and Powers of the Benchmark Set ..................................... 49 Table 9: Funding Mechanisms and Financial Models and Principles of the

Benchmark Set ..................................................................................................... 50 Table 10: Management and Operations of the Benchmark Set.......................................... 52 Table 11: Responsibilities of Funding Mechanism Entity and WVERT Park Corporation ... 56 Table 12: Virginia BioTechnology Research Park Facilities ................................................. 67 Table 13: Companies Retained at the Former Dow South Charleston Technical Center ... 87 Table 14: Annual Economic Impact of the 550 Jobs Retained at the WVERT Park ............. 89 Table 15: Breakout of Annual State and Local Taxes .......................................................... 90

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INTRODUCTION

The Economic Imperative for Advancing Technology

Development in West Virginia

Even before the outset of the economic recession in 2008, warning signs indicated the

potential decline in West Virginia’s economic competitiveness. During the economic

expansion years of 2001 to 2007, the average annual growth rate in economic output in

West Virginia reached only half of the national average, a mere 1.3 percent compared with

the nation’s 2.6 percent. During that same period, overall job growth in West Virginia was

also lower by 25 percent than the United States. Particularly troubling was the steep

18 percent decline in high-quality manufacturing jobs, which have been a key component of

West Virginia’s economy.

The ultimate economic development challenge facing West Virginia in the years ahead is

how to spur a more competitive, high-growth economy able to generate high-quality jobs.

This is no longer as simple as waiting for the national recovery to take hold and expecting

good-paying manufacturing jobs to return. In today’s global economy, the performance bar

has been raised. The foreign competition in lower-cost manufacturing that the United States

faced in the 1980s and 1990s is being intensified by a far more serious threat—competition

for skilled workers and technology know-how reaching nearly every industry and business

function.

West Virginia must embrace innovation and technology development in order to reverse

recent trends and grow its base of high-quality jobs. The National Center on Education and

the Economy explains this in straightforward terms in its

influential 2007 report, Tough Choices or Tough Times:

“Those countries that produce the most important new

products and services can capture a premium in world

markets that will enable them to pay high wages to their

citizens. In many industries, producing the most important

new products and services depends on maintaining the

worldwide technological lead, year in and year out, in that

industry and in the new industries that new technologies

generate.”1

Indeed, innovation and technology development have been cornerstones of growing

economies for decades. Various economic studies over the years reveal that half or more of

the economic growth in the United States has been attributable to progress in technological

1 National Center on Education and the Economy, Tough Choices or Tough Times, 2007, page 6.

The economic imperative for West

Virginia is clear: West Virginia must

foster and advance technology-based

development in order to generate high-

quality jobs and raise its capabilities to

remain competitive in an increasingly

global, knowledge-based economy

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innovation, including work that led to the Nobel Prize for economist Robert Solow.2 More

recently, a study by the Milken Institute, a private, nonprofit research organization, in

evaluating the economic growth across 315 regions in the United States over 1975 to 1998

found that the growth and presence of high-technology industries accounted for 65 percent

of the difference in economic success for regions.3

High-Value Physical Environments Matter in Driving

Globally Competitive Industries

In an interesting paradox, the more global and integrated the U.S. economy becomes, the

more local research and development (R&D) know-how, entrepreneurial culture, workforce

skills, and manufacturing competencies matter for economic success. In the emerging 21st

century global competition, a region’s competitiveness for technology-based growth

depends on its local asset base, including the presence of high value-added physical

environments that facilitate interactions between industry and research institutions.

A 2009 Harvard Business Review article by Harvard professors Gary Pisano and Willy Shih on

“Restoring American Competitiveness” suggests that geographic proximity is in fact critical to

the competitiveness of industries:

What about the popular notion that distance and location no longer matter, or, as

Thomas Friedman put it, “The world is flat”? … the evidence suggests that when it

comes to knowledge, distance does matter … An engineer in Silicon Valley, for

instance, is more likely to exchange ideas with other engineers in Silicon Valley than

with engineers in Boston. When you think about it, this is not surprising, given that

much technical knowledge, even in hard sciences, is highly tacit and therefore far

more effectively transmitted face-to-face. Other studies show that the main way

knowledge spreads from company to company is when people switch jobs. And even

in America’s relatively mobile society, it turns out that the vast majority of job

hopping is local.4

What is critical to restoring American competitiveness, according to Pisano and Shih, is

geographically based “industrial commons.” As they explain: “Once an industrial commons

has taken root in a region, a powerful virtuous cycle feeds its growth. Experts flock there

2 M.J. Boskin and L.J. Lau, “Capital, Technology and Economic Growth,” in Technology and the Wealth of Nations,

N. Rosenberg, R. Landau, and D.C. Mowery, eds. Stanford University Press, 1992; and R.M. Solow, “Technical Change and the Aggregate Production Function,” Review of Economics and Statistics, 39:312–320, 1957. 3 Milken Institute, America's High-Tech Economy: Growth, Development and Risks for Metropolitan Areas, 1999. 4 Gary P. Pisano and Willy C. Shih, “Restoring American Competitiveness,” Harvard Business Review, July 2009, page 3 of

reprint.

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because that’s where the jobs and knowledge networks are. Firms do the same to tap the

talent pool, stay abreast of advances, and be near suppliers and potential partners.”5

To create the vibrant industrial commons needed for economic development, regions across

the nation and the world are advancing research parks and other technology-oriented

development complexes as key components in creating the physical environments that can

generate, attract, and retain technology companies and talent. According the National

Research Council, in its study of research park best practices:

Research parks are seen increasingly around the world as a means to create dynamic

clusters that accelerate economic growth and international competitiveness. They are

widely considered to be a proven tool to encourage the formation of innovative high

technology companies. They are also seen as an effective means to generate

employment and to make existing companies more competitive.6

The value of research parks goes beyond their physical facilities to the role they can play as a

catalyst for development, bringing together the assets of a region’s industries, talent, and

research institutions. Research parks can create an environment that fosters collaboration

and innovation and promotes the development, transfer, and commercialization of

technology by providing a location in which companies, entrepreneurs, and research

institutions and their high-skilled talent base operate in close proximity.

The National Research Council found that research parks were particularly well suited to

advancing economic development by doing the following:

Facilitating the cooperation that generates higher returns on existing

investments in R&D

Meeting the special needs of high-tech industries for infrastructure and

associated services

Achieving critical mass in terms of co-located research facilities and staff.

Figure 1 depicts the value that research parks can bring. Research parks are seen as enablers

of idea flow between the technology generators (universities, public and private research

laboratories) and the companies located in the research park and in the surrounding region.

In addition, the innovations, technology, and knowledge generated by the companies and

research institutions lead to attracting research units of established companies and newly

emerging high-growth technology companies.

5 Ibid.

6 National Research Council, Understanding Research, Science and Technology Parks: Global Best Practices, 2009.

4

Figure 1: Research Park Concept

Adapted from: “Positioning Research Parks for Success,” Guy T. Mascari. Economic Development Commentary, Vol. 23, No. 4, Winter 2000, page 38.

A West Virginia Opportunity to Spur Innovation

and Technology Development

At the site of the former Dow (Union Carbide) South Charleston Technical Center, West

Virginia has an opportunity to establish a signature center for advancing energy and chemical

technologies that are instrumental for the future growth and success of the state’s long-

standing chemicals and energy industry clusters, along with creating a significant new

economic development initiative for the Charleston region.

The fact that the West Virginia state government took the initiative to own this former Dow

Center, under the management of the West Virginia Higher Education Policy Commission,

already has paid critical dividends for economic development for the state. More than

550 high-paying, high-quality jobs have been retained in West Virginia, with substantial

economic multipliers for the state of more than 1,096 additional jobs. Today, as the park

property transitions to the commission, the state has been able to retain these high-paying

jobs, which average $81,900 in salaries and wages. This represents a total direct payroll of

$45 million with estimated direct and indirect and induced output impacts of more than

$626 million annually. This activity translates into over $15 million in state and local taxes

collected each year. 7 Few recent state economic development deals have offered as high a

return on investment.

But, it is the long-term potential for creating an innovation and technology development

driver for reinvigorating the global competitiveness of the state’s long-standing chemicals

and energy sectors which could offer the highest economic development payoffs for the

state.

7 Appendix B: Economic Impact Analysis presents more detailed findings of these impacts which are generated by

the IMPLAN economic model.

Sources of Innovation- Universities- Private R&D- Federal Labs

Research Park Tenants

Business Incubator Growth

Job ResourcesJob Resources

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Study Objectives and Approach

To help West Virginia realize the long-term potential of what is now known as the West

Virginia Education, Research and Technology (WVERT) Park, the West Virginia Higher

Education Policy Commission retained the services of Battelle’s Technology Partnership

Practice (TPP) and CH2M Hill.

Battelle TPP is the economic development consulting arm of the world’s largest

independent, nonprofit R&D organization with more than $6.2 billion in annual revenues and

more than 22,000 employees. Battelle TPP is the national leader in advanced, technology-

based and cluster-driven economic development practice with an established track record in

developing and advising research park development, including an extensive understanding of

leading technology parks and best practices from its 2007 comprehensive benchmarking and

impact assessment study of North American research parks for the Association of University-

Related Research Parks.

CH2M Hill is an industry-leading program management, construction management, and

design firm, as ranked by Engineering News-Record (2009), with $6.3 billion in annual

revenue and 23,500 employees worldwide. CH2M Hill brings a strong expertise and proven

track record in facility assessment and reuse planning including projects with the University

of Pittsburgh, Carrier Corporation, Lockheed Martin, Ohio State University, and Pacific

Northwest National Laboratories.

The objective of this effort is to assess the opportunities for targeting growth at WVERT,

while at the same time creating a broader commercialization engine that can foster the

industry–university–national lab partnerships critical for advancing new product

development and new company formation for spurring the next generation of West

Virginia’s long-standing chemicals and energy sectors.

The Battelle–CH2M Hill team developed a rigorous two-

phased approach to help guide the development of

WVERT (Figure 2). In the first phase, the focus was on

conducting the detailed analysis to assess both the

development targets of opportunity for WVERT along

with the quality of its facilities. This first phase involved the

following:

Analyzing industry performance at both the

state and Charleston regional levels

Examining research and innovation activities

Undertaking an independent assessment of

the value of the mix of facilities at WVERT for

commercializing new energy and chemical products

AssessingEconomic

Development Targets of

Opportunity

AssessingBuildings

and Labs

ProgramDevelopment

BuildingRe-use

Planning

GovernanceBudgetingOperations

Planning

Phase I: Phase II:Assessment Development

Planning

Figure 2: Two-Phase Approach for

WVERT Development

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Conducting more than 50 interviews with industry executives of existing tenants

at WVERT, statewide chemical and energy companies, other regional technology

companies, and national companies needing pilot production facilities

Reviewing facility plans and reviewing on-site the condition of each of the

facilities at WVERT.

The Phase II effort focused on the development planning for WVERT. The Battelle–CH2M Hill

team has formulated recommended approaches for program development and

organizational structures for governance, funding mechanisms, and operations for WVERT

and its associated Eastern Energy Commercialization Center. This planning effort was

informed and guided by a benchmarking analysis of best practices and consultations with

subcommittees drawn from the WVERT Transition Steering Committee. Based on these

recommended program efforts, CH2M Hill is developing a separate facility re-use analysis for

WVERT.

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THE IMPORTANCE OF WEST VIRGINIA ENERGY AND CHEMICALS INDUSTRY CLUSTERS TO THE STATE’S TECHNOLOGY BASE

Industry clusters have become a mainstay for state economic development efforts across the

nation because it is increasingly recognized that individual industries do not stand alone

within state and regional economies, but compete and grow as part of a broader complex of

interrelated industries. Many state industry clusters share a common market that they serve,

while others such as the biosciences or information technology (IT) are based more on

shared “know-how.” As the National Governors Association explains, it is critical that each

state identify and focus on its specific industry clusters that can drive its broader economic

growth in the global economy: “U.S. economic strength depends on the ability of each state

to “compete” successfully in the world marketplace. Each state must exploit the unique

advantages it has relative to other states and build on the strengths found in its local

“clusters of innovation”—distinct groups of competing and cooperating companies,

suppliers, service providers and research institutions.”8

The presence of the energy industry cluster and the chemicals and materials industry cluster

stand out as West Virginia’s most developed technology-based industry clusters and a

leading source of high-wage, high-quality jobs in the state. Each cluster demonstrates a very

high level of competitive advantage in West Virginia by being significantly more

concentrated in the state in terms of industry jobs than found across the nation. The

chemicals and materials industry cluster in West Virginia stands slightly over 3 times as

concentrated in employment as the nation, and the energy industry cluster is over 8 times as

concentrated. This high level of relative concentration demonstrates how specialized these

two industry clusters are in West Virginia.9

Closely associated with both the energy and chemicals industries is the presence of a

growing engineering, commercial R&D and testing lab industry cluster. The presence of this

cluster provides the know-how and expertise to advance new technologies into product

ideas, prototype them, and test them in the field. While not yet a specialization in West

8 National Governors Association, “A Governor’s Guide to Trade and Global Competitiveness,” 2002. 9 The specific measurement of relative concentration is known as a location quotient (LQ). An LQ is the share of a

local area’s private employment found in a particular industry cluster divided by the share of total industry employment in that industry cluster for the nation. An LQ greater than 1.0 indicates a higher relative concentration, whereas an LQ of less than 1.0 signifies a relative underrepresentation. An LQ greater than or equal to 1.20 denotes employment concentration significantly above the national average, and so considered “specialized.”

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Virginia, this cluster is growing faster in West Virginia than across the nation and so over

time will become more specialized relative to the nation.

The broad industry complex of energy/chemicals and materials/engineering, commercial

R&D, and testing found in West Virginia altogether stands at 49,297 jobs in 2008, or

8.6 percent of private employment (Table 1). Combined, these three interrelated industry

clusters grew in employment in West Virginia by 5.2 percent from 2001 to 2007 and by an

additional 5.0 percent from 2007 to 2008. In addition, many of the individual industries in

these three industry clusters fall into the category of high technology due to the level of

high-skilled professions, and the high-technology industries found in these three clusters

combined make up more than 55 percent of total technology industry employment in West

Virginia.

Table 1: Advanced and Specialty Materials Employment Metrics, West Virginia and United States, 2008

Sources: Battelle analysis of Bureau of Labor Statistics, Quarterly Census of Employment and Wages (QCEW) data from IMPLAN.

This complex of industry clusters including the three leading and interrelated sectors is a

critical source of high-paying, high-quality jobs in West Virginia. Each industry cluster offers

an average wage well above the state’s overall private-sector wage levels. For all private-

sector industries in West Virginia, the average wage stands at $35,189. By comparison, the

average annual wage in the chemicals and materials industry stands at $70,400; in the

energy industry at $72,992; and in engineering, commercial R&D, and testing at $52,392. The

total cluster average wage is $69,481.

The energy and chemicals industry clusters, however, do not simply represent the past

economic strengths of West Virginia’s economy; in fact, they are deeply rooted core

technology competency areas that represent forward-looking technology platforms on which

West Virginia can build its competitiveness for future, global economic growth. The concept

of core competencies is now widely heralded by industry to advance competitive advantage.

Industry Sector 2001

Employment 2007

Employment 2008

Employment % Change 2001–07

% Change 2007–08

Location Quotient

2008 Avg. Wage

2008 West Virginia Chemicals & Materials 13,110 10,978 10,531 -16.3% -4.1% 3.04 70,400 $ Energy 25,916 29,249 31,690 12.9% 8.3% 8.17 72,992 $ Engineering, R&D, and Testing Services 5,591 6,718 7,076 20.2% 5.3% 0.69 52,392 $ Total Cluster 44,617 46,945 49,297 5.2% 5.0% 2.80 69,481 $ United States Chemicals & Materials 852,030 698,147 685,583 -18.1% -1.8% 1.00 78,642 $ Energy 757,090 738,801 768,030 -2.4% 4.0% 1.00 100,672 $ Engineering, R&D, and Testing Services 1,674,770 1,981,040 2,025,300 18.3% 2.2% 1.00 80,165 $ Total Cluster 3,283,890 3,417,988 3,478,913 4.1% 1.8% 1.00 84,392 $

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Gary Hamel and C.K. Prahalad in their landmark study, Competing for the Future, explain how

a focus on core competencies can improve competitiveness:

To successfully compete for the future a company must be capable of enlarging its

opportunity horizon. This requires top management to conceive of the company as a

portfolio of core competencies rather than a portfolio of individual business

units…Core competencies are the gateways to future opportunities. Leadership in a

core competence represents a potentiality that is released when imaginative new

ways of exploiting that core competence are envisioned.10

From an economic development perspective, it is from core competencies present in

industry, universities, or federal labs that a state can gain a position in existing and emerging

industries.

A detailed core competency assessment by Battelle for TechConnectWV in its 2007 West

Virginia Gap Analysis and Identification of Strategic Technology Platforms 11 identified both

the energy and chemicals areas as robust technology platforms for advancing technology-

based economic growth. As technology platforms, both the energy and chemicals areas

serve as a bridge between research core competencies and their use in commercial

applications and products. As such, these platforms are highly translational—working to

move ideas and innovations from basic science discoveries to applied technologies and

practices.

The energy and chemicals areas in West Virginia share the following common traits:

They provide an opportunity to build on existing industry strengths with an

established base of commercial activity.

They have cross linkages and strong, reinforcing core technology competencies as

measured by patent activities, competitive research grants, and peer-reviewed

publications.

They are engaged in significant product markets that can be exploited to grow jobs

and companies in West Virginia.

Industry clusters are dynamic, and many advance in ways that break from past trends. One

way to gain a more “forward-looking” assessment of how well positioned an industry cluster

is for future growth is to also consider the level of “know-how” or core competencies within

different industry clusters across industry, university, and national laboratories resident in

the state.

10 G. Hamel and C.K. Prahalad, Competing for the Future, Harvard Business Press, 1994, pages 90 and 217.

11 Gap Analysis and Identification of Strategic Technology Platform, a report by the West Virginia Coalition for

Technology Based Economic Development, with consultation and assistance from Battelle TPP, 2007.

10

The forward-looking approach of scanning core technology competencies or know-how in

the state involves identifying where a “critical mass” of activities exists across research and

innovation measures related to the primary industry clusters in the state.

OVERVIEW OF THE ADVANCED ENERGY TECHNOLOGY PLATFORM

In Battelle’s 2007 Gap Analysis and Identification of Strategic Technology Platforms prepared

for TechConnectWV,12 the advanced energy and energy-related technology was identified as

a significant and near-term technology platform for leading technology industry

development in West Virginia. In particular, the alignment of West Virginia fossil fuel

resources, with advanced energy R&D in the state and growing domestic and global demand

for energy provides West Virginia with an opportunity to stand out from other states in being

well positioned to increase the value-added economic activity based on energy resources—

developing high-value liquid fuels from carbon products, carbon-based chemicals, and

advanced technologies for high-efficiency combustion, fuel conversion, pollution control,

and energy transmission.

West Virginia is well positioned to play a significant part in advancing energy development.

For generations, the nation’s demand for energy has benefited West Virginia. Extraction of

the state’s fossil energy resources (most notably coal and natural gas) forms a basic industry

that drives a major component of West Virginia’s economy. The coal industry alone

generates more than $3.5 billion annually in West Virginia’s gross state product (GSP),

directly accounts for more than 40,000 jobs, and has a $2 billion annual payroll. Within West

Virginia, coal drives a vertically integrated energy industry, with 99 percent of West Virginia’s

electricity generated by coal-fired generating facilities. Taxes paid by this integrated coal-

based energy sector account for two-thirds of business taxes paid in the state. Currently, the

state produces far more coal than needed for in-state uses; it ranks as the leading state in

the nation in terms of coal exports, with more than 50 million tons shipped to 23 countries

annually. West Virginia oil and natural gas reserves are also significant. The state is the only

net exporter of natural gas east of the Mississippi and, according to the West Virginia

Geological and Economic Survey,13 the state contains approximately 40,500 natural gas wells

producing 191.6 billion cubic feet of gas annually and 7,500 oil wells producing 1.9 million

barrels of crude.

Against this background of fossil fuel extraction and utilization, it is not surprising that West

Virginia is also home to a substantial base of energy R&D activity. The state’s research

universities, especially West Virginia University (WVU), have major R&D programs focused

on the energy sector in terms of engineering, basic physical sciences, earth science, and

business and economic analysis. West Virginia is also home to a major U.S. Department of

Energy (DOE) laboratory dedicated to fossil fuel R&D—the National Energy Technology

Laboratory (NETL). Together, the NETL and university R&D base provides West Virginia with

12 Ibid.

13 West Virginia Geological and Economic Survey, available at http://www.wvgs.wvnet.edu/.

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the basic and applied R&D expertise required to drive the development of the next

generation of fossil fuel extraction, processing, utilization, transmission, and pollution

control technologies. These R&D organizations are, however, also looking beyond fossil fuels

into other advanced energy systems, such as fuel cells and renewable energy applications,

and are focused on the development of engines, combustion systems, and other

technologies for maximized efficiency in converting energy resources to power.

Assessing West Virginia’s energy and related technology R&D demonstrates that the

advanced energy platform presents development opportunities along multiple technology

paths, including the following:

Power Generation/Combustion Technology—Developing advanced combustion

systems, generators, engines, and related technologies.

Energy-Use Efficiency Technology—Producing technology that increases the fuel-use

efficiency of energy conversion and power generation equipment, engines, and

related devices (such as transmissions).

Carbon Materials and By-Product Materials—Advancing technology to convert fossil

carbon resources into value-added carbon products, chemicals, liquid fuels, and

gases.

Energy Pollution Prevention and Mitigation—Developing advanced technologies for

reducing or eliminating polluting emissions from energy production and

consumption activities.

Alternative Energy and Fuels—Producing advanced and alternative fuel and energy

generation technologies such as fuel cells.

Energy Recovery and Distribution Technology—Advancing R&D to enhance the

recovery of valuable fossil resources from reserves and tailings and technologies for

improving energy distribution efficiency, reliability, and security.

These categories represent key areas of opportunity for technology development from this

larger platform. It should be noted, however, that the R&D expertise contained within the

federal laboratory/university R&D complex in West Virginia is so broad that additional

opportunities for technology development will no doubt present themselves. The NETL has

deep expertise in computational modeling and simulation that may well lead to technology

development with high potential for commercialization. Likewise, WVU maintains programs

dedicated to servicing the research, training, and certification needs of industry in energy

and transportation that may be leveraged for further development gain.

12

OVERVIEW OF ADVANCED CHEMICALS AND

MATERIALS TECHNOLOGY PLATFORM

The advanced chemicals technology platform represents the largest focus area of industry

R&D in West Virginia. Chemicals represented 55 percent of industrial R&D in West Virginia in

2006, according to a survey of industry by the National Science Foundation (NSF). Moreover,

the top patent classes in West Virginia from 2000 to 2006 were found in synthetic resins or

natural rubbers, catalysts, and organic compounds, which together represented more than

one in five patents issued to inventors from West Virginia.

West Virginia has a strong track record in developing and producing chemicals and related

materials. The Kanawha Valley has been home to intensive chemicals industry operations for

more than a century, and the Ohio Valley in and around Parkersburg has a similar track

record in the chemicals sector. In materials, West Virginia has also enjoyed a strong presence

in primary metals production and manufacturing operations, notably in the steel sector, but

also in other metals and materials. Wood, a renewable biomaterial, also represents a

significant economic resource for the state.

Within the R&D sector in West Virginia, interviews identified multiple areas of strengths in

advanced chemicals and related materials technologies. R&D focus areas identified in the

state show that there is considerable attention being paid to advancing work in high-value

materials such as the following:

Electronics, semiconductor, and sensor materials

Advanced composite materials

Advanced polymers

Catalysts and catalytic materials

Products from West Virginia carbon, including carbon foams, anodes, and metal-casting materials

Value-added wood products

Nano and nanobio materials.

It is clear that the combination of West Virginia’s existing industry base in materials and

chemicals, with significant R&D expertise relevant to the next generation of advanced

chemicals and materials, provides the state with an opportunity for further development

through an advanced chemicals and materials technology platform.

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ASSESSING THE TARGETED DEVELOPMENT OPPORTUNITIES FOR WVERT

The assessment of targeted development opportunities needs to identify the market-driven

and institution-led drivers for the park. This analysis is critical for understanding the advance

of a realistic development program as well as the pace of absorption in the park. While the

long-term focus of WVERT is on identifying opportunities for advancing the state’s energy

and chemicals industries, the experience of other “targeted” parks in the biosciences—which

are very typical across the United States—is that research parks attract a variety of

technology-based tenants. In other words, it is the focus on technology that attracts tenants,

even when specialized commercialization and shared-use facilities target a specific area of

technology development.

A detailed benchmarking study14 by Battelle for the Association of University Research Parks

(AURP) involving survey responses from 134 of the 174 research parks in North America

revealed the diversity of research park tenants. Across research parks in the United States,

the overwhelming majority of tenants and jobs are found among private-sector firms, with

nearly half from IT, drugs and pharmaceuticals, and scientific and engineering services firms

(Figure 3). But, a significant portion of the tenants at research parks involve more

institutional research drivers, including 14 percent of tenants from university-related

operations and another 5.4 percent representing government facilities. In fact, the small

percentage of tenants from university and government activities, often specific research

centers or testing facilities, is deceiving. Often, these institutional tenants from universities

and government serve as anchors in the early stages of research park development and so

are critical to creating the momentum to move research parks forward.

Figure 3: Share of Tenants by Type of Organization—North American Research Parks

Source: 2007 AURP Study

14 “Characteristics and Trends in North American Research Parks: 21

st Century Directions,” prepared by Battelle

TPP for the Association of University Research Parks, October 2007.

71.8%

14.2%

5.4%

4.5%

1.1% 3.0%

Private-sector corporate

University

Government (state or federal)

Retail or service amenities

Park operations

Other

14

Potential Key Drivers for WVERT

To provide a broad and extensive assessment of likely drivers of development for WVERT,

Battelle examined the potential of the following:

Statewide chemicals industry cluster

Statewide energy industry cluster

Statewide engineering, commercial R&D, and testing labs industry cluster

(testing should include state agencies)

Existing tenants and other technology industries in the Charleston metropolitan area

(address data centers)

University and national lab research activities

Workforce development.

It is also important to consider the commercial real estate dynamics of the Charleston region

since regional real estate conditions directly impact the opportunities and development

pace. It is also important to consider possible comparable developments underway to

understand the competitive landscape among potential tenants.

STATEWIDE CHEMICALS INDUSTRY CLUSTER

The chemicals industry cluster has been hard hit in recent years, particularly in West Virginia.

From 2001 to 2007, employment in the chemicals industry cluster declined in the nation by

14 percent, but West Virginia more than doubled that rate of national decline, falling by

nearly 30 percent. The Charleston region comprises roughly 15 percent of the industry

employment, and it also recorded a significant decline of 22 percent from 2001 to 2007.

Examining more recent market forecasts for the chemicals sector, it is clear that the overall

chemicals industry will be a slow growth market in the United States. The U.S. chemicals

market is expected to reach $742 billion in 2013 with a 5-year compound annual growth rate

(CAGR) of only 1.4 percent. Many U.S. establishments have reduced operations or

permanently removed capacity, and few new major plants are being planned. The Middle

East and Asia are expected to emerge as U.S. competitors as the global economy recovers,

and employment is not expected to reach pre-recession levels.

Significant niche growth markets, however, do exist in chemicals. Despite increasing

overseas competition and slow economic recovery projections, the growth-oriented niches

in the chemicals sector include the following:

Specialty chemicals, which are projected to reach $892.1 billion by 2014 with a

CAGR of 6.9 percent, with cosmetic chemicals, food additives, and industrial cleaners

showing the most resilience during the global economic downturn

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Fertilizers and agricultural chemicals, which are expected to grow at a CAGR of

9.9 percent globally from 2009–2014 and reach $204 billion, with fertilizers

dominating the market

Renewable chemicals, which will grow from $45 billion in 2009 to nearly $60 billion

in 2014. Within this sector, the alcohols segment is the largest, but will show the

least growth. Platform chemicals, polymers, and catalyst technologies will show high

growth, with CAGRs of 12.6 percent, 11 percent, and 10.2 percent, respectively.

Recent trends show that West Virginia is making the shift away from more commodity-based

chemical production toward these more innovative, high-growth niches, but the pace is too

slow. In West Virginia, many of the traditional chemicals industries, such as the following, are

declining:

Plastics and resins: 4,216 jobs in 2001, fell to 2,605 jobs in 2008

Basic organic chemical manufacturing: 1,892 jobs in 2001, fell to 832 jobs in 2008

Basic inorganic chemical manufacturing: 1,188 jobs in 2001, fell to 512 jobs in 2008

Industrial gas manufacturing: 728 jobs in 2001, fell to 380 jobs in 2008

Petrochemical manufacturing: 814 jobs in 2001, fell to 546 jobs in 2008.

Meanwhile, emerging niche areas in the chemicals industry cluster are on the rise:

Pesticide and other agricultural chemical manufacturing: 629 jobs in 2008, up from

only 18 jobs in 2001

Photographic film, paper, plate, and chemical manufacturing: 250 jobs in 2008, up

from 34 jobs in 2001

Custom compounding of resins: 112 jobs in 2008, up from 55 jobs in 2001.

So, the question is how WVERT can play a role in spurring the transition from the low-

growth, traditional base of West Virginia’s chemicals industry cluster to the more high-

growth, innovative chemicals niches. The answer seems to fit with the legacy of WVERT

when it served first as a research and product development center for Union Carbide and

most recently for Dow Chemical—focusing on pilot plant activities to advance product

development and market introduction.

Pilot production is an often overlooked phase in commercialization and also is often a key

stumbling block. Key scientific discoveries often fail to make it to the marketplace because

demonstrated scale-up to make them commercially feasible is lacking. While large chemicals

companies have their own internal pilot production capabilities, emerging chemicals

companies targeting these high-growth niche areas often lack the resources and expertise to

16

construct their own pilot plant facilities. Therefore, the so-called valley of death applied to

the chemicals industry is largely an absence of pilot plant shared facilities. Unlike the

biotechnology industry in which an extensive contract research industry of biological scale-

up facilities has taken root, there is no equivalent for inorganic industrial chemicals. Given

the preceding structure and capital intensity of the chemicals business, such pilot plant

resources have tended to be internal to larger corporations, with the exception of contract

or toll manufacturing. However, as business strategies and sources of innovation have

changed, even larger firms are looking, on a selective basis, to external partners and sources

of new technologies. To test this trend, Battelle contacted emerging companies that might

be interested in accessing pilot facilities. More than 40 emerging technology companies

needing access to processing were identified from awardees of Phase II of the federal Small

Business Innovation Research Program, which supports product development for innovative

technologies that demonstrate a path to market. Battelle interviewed industry executives at

10 of these companies and learned that there was significant interest in having access to a

shared-use pilot plant facility. In particular, the interviews of these executives from emerging

chemical-related technology companies highlighted the following:

Companies based on the East Coast have significant interest.

The need for a pilot facility is often intertwined with the search for a

commercialization partner.

While efficiency in setup time and availability of a pilot scale-up building are

important, the real cost will be in the equipment, with a strong need to customize

for specific projects.

The physical and operational segregation to protect intellectual property (IP) is an

issue that will need to be managed.

In addition, through outreach to the existing chemicals industry in West Virginia, Battelle

identified two firms who expressed an interest in pilot plants—either for market/product

development and specialized tolling or contract manufacturing—where they have more

remote sources and/or limited on-site capacity.

Finally, MATRIC, one of the growing existing tenants at WVERT, expressed a strong interest

in making use of a pilot plant facility in its contract R&D work and perhaps serving as the

operator for a shared-use facility in collaboration with WVERT.

To further assess the value of the existing pilot production facilities at WVERT, Battelle

retained an expert consultant, Dr. Randall Powell. Dr. Powell, a former industry executive of

Eastman Chemical Company, possesses a chemical engineering Ph.D. and significant hands-

on experience in chemicals production and product development. His independent

assessment suggests that WVERT may be able to carve out a unique value proposition in

advancing niche chemical product development. To quote Dr. Powell: “In combination, the

assets represent an exceptional, if not unique, opportunity to provide domestic process

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technology development and implementation across the full range of process scale (bench

top to small commercial production) at a single location.”15

STATEWIDE ENERGY INDUSTRY CLUSTER

The energy industries in West Virginia have been faring well in recent years. As noted earlier,

these energy industries grew a robust 12.9 percent over the most recent national growth

period of 2001 to 2007, and a hefty 8.3 percent in the first year of the recent recession from

2007 to 2008.

The largest energy industry in West Virginia is, of course, coal mining. Coal mining grew from

16,534 jobs in 2001 to 20,454 in 2008. Support activities associated with coal mining also

made strong gains, from 563 jobs in 2001 to 1,862 jobs in 2008.

Another fast-growing energy industry in West Virginia has been crude petroleum and natural

gas extraction. That industry grew from 1,618 jobs in 2001 to 2,428 jobs in 2008, an

impressive 62 percent growth rate for West Virginia compared with 30 percent for the

nation. This industry continued to grow during the first year of the recession, adding

193 jobs.

The other industries comprising West Virginia’s energy industry cluster fared less well since

2001. All have declined slightly from their 2001 employment levels, including fossil-fuel

electric-power generation, the second-largest energy industry behind coal mining, as well as

pipeline transportation of natural gas and electric distribution power distribution.

The direct employment opportunities for WVERT in the energy industries are limited because

power plants and extraction activities need to be tied to dedicated sites and so cannot be co-

located at WVERT. What do stand out are the opportunities to advance engineering,

commercial R&D, and testing services in support of West Virginia’s thriving energy industries.

STATEWIDE ENGINEERING, COMMERCIAL R&D, AND

TESTING LABS INDUSTRY CLUSTER

A top-quality engineering, commercial R&D, and testing lab industry cluster will enable West

Virginia to reverse the fortunes of its chemicals and materials industries and to move its

energy industries into higher value-added activities and address looming threats from

climate change concerns.

The evidence suggests that this is taking place and that Charleston is a key hub of activity for

West Virginia. Employment in the engineering, commercial R&D, and testing services cluster

rose in West Virginia from 5,591 jobs in 2001 to 7,076 jobs in 2008, a gain of 27 percent. This

15 Randall Powell, Ph.D., “West Virginia Education, Research and Technology Park Assessment of Assets,”

unpublished report to Battelle, July 6, 2010, page 2.

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growth has outpaced the national rate of 21 percent, which is quite impressive since this is

one of the nation’s fastest-growing technology industry sectors.

Both engineering services and testing services have grown strongly, recording gains from

2001 to 2008 of 21.4 percent and 15.2 percent, respectively, with each making gains during

the 2001–2007 national economic expansion and the first year of the recession. Particularly

rapid growth has been experienced in the more niche industries involving geophysical

surveying and mapping services, which rose from 81 jobs in 2001 to 302 in 2008, and other

scientific and technical consulting services, which rose from 76 jobs in 2001 to 483 jobs in

2008.

The commercial R&D industries in West Virginia are also becoming sizable, but their longer-

term growth rates are unknown because these industries have only recently been defined.

Commercial R&D in physical, engineering, and non-biotech life sciences stood at 761 in 2008,

a gain of 79 jobs from 2007, while commercial R&D in biotechnology stood at 410 jobs in

2007 and remained constant in 2008.

The Charleston region is an important and growing hub of activity in engineering,

commercial R&D, and testing services. Slightly more than 27 percent of the statewide

employment in this sector is found in the Charleston region, including 39 percent of the

state’s engineering services.

Figure 4, a map of establishments with five or more employees in engineering, commercial

R&D, and testing services across the Charleston region, suggests that this industry cluster is

already highly concentrated around the WVERT site. Thus, targeting the growth of WVERT to

offer a high-value location for engineering, commercial R&D, and testing services is a natural

fit and can greatly benefit West Virginia.

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Figure 4: Establishments With Five or More Employees in Engineering, Commercial R&D,

and Testing Services Across the Charleston Region

Not as easily measured are the range of state activities that fall within \ engineering, R&D,

and testing services in the Charleston region as the home of West Virginia’s state

government. Many of these state activities require high-quality facilities and a supportive

business environment to ensure that they can be done cost effectively. Among these types

of state activities are forensics laboratories, food safety testing, environmental testing, and

public health testing. Other research parks around the nation have become homes to such

state and federal laboratories and testing facilities. For instance, the Virginia Biotechnology

Research Park in Richmond is home to that state’s forensics laboratory, while Research

Triangle Park is home to the federal Environmental Protection Agency (EPA) research

laboratories.

EXISTING TENANTS AND OTHER TECHNOLOGY INDUSTRIES

IN THE CHARLESTON METROPOLITAN AREA

The establishment of WVERT is, in part, the next generation of a well-established center of

technology-based industry activities in West Virginia, dating back to when Union Carbide

created the facility and continuing through to Dow Chemical’s ownership. Today, WVERT

houses the operations for 13 companies and organizations, including two operations groups

of Dow Chemical; Bayer MaterialScience; Mid-Atlantic Technology, Research and Innovation

Center (MATRIC); HP Data Center; Progenesis; Fiberworx Office; and the Chemical Alliance

Zone and its incubator. Altogether, the employment at WVERT equals 550 jobs.

Source: D&B Selectory Database

WV

20

Battelle interviewed the current tenants of WVERT. The overall growth outlook for space is

generally flat, with the notable exception of MATRIC and the opportunity for continued

incubator growth. In addition, MATRIC is spinning out companies based upon its R&D

activity, and while most of these are currently licensing plays, there is potential for additional

growth as one or more of these ventures reaches critical mass and takes root in the park.

Battelle’s assessment is that among existing tenants there is a potential demand for 10,000

to 15,000 square feet per year over the next 5 years.

There is also some interest among existing tenants for use of pilot facilities. Several tenants

currently make use of their own dedicated pilot plants, notably Bayer MaterialScience, Dow

Chemical’s Polyolefins Process R&D (PPR&D) plant, and Univation, which is a Dow joint

venture with ExxonMobil. MATRIC, in particular, is seeking to expand its own contract R&D

services to include more scaled-up pilot production that would call for use of one of the

existing shared-use pilot facilities. In addition, one of the incubator companies, Progenesis, is

moving toward pilot production that would require a more specialized biotechnology-related

scale-up laboratory.

Beyond the existing tenants, there are broader opportunities for WVERT to serve the

Charleston region as a high value-added site for expanding technology-based industry

activities. The most likely would be in engineering, commercial R&D, and testing

laboratories, as discussed above.

Two other technology-based industry clusters found in the Charleston region also stand out:

digital services and business management and services. The digital services cluster includes

data processing, computer programming and applications development, and

telecommunications services. In 2008, the digital services industry cluster stood at 2,073 jobs

and is among the largest technology-based industries in the Charleston region. Despite its

current size, this industry cluster declined significantly, from 3,111 jobs in 2001, in the

Charleston region. The largest declines have been in telecommunications services. A closer

look reveals that there were computer-related industries that grew in the Charleston region

over the last economic expansion from 2001 to 2007, including computer systems design

services and data processing, hosting, and related services.

Business management and services, another major technology-based industry cluster in the

Charleston region, includes headquarters and administrative corporate offices, and business

consulting services. This industry cluster stood at 1,972 jobs in 2008, up from 1,800 jobs in

2001. The largest and fastest-growing industry in this cluster is corporate, subsidiary, and

regional managing offices, which has grown from 472 jobs in 2001 to 1,392 jobs in 2008.

Marketing consulting services and logistics consulting services have also been making small

gains, in the handful of employees. But, there have been significant losses in administrative

management and general management consulting services, from 467 jobs in 2001 down to

305 jobs in 2008.

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The digital services and business management and services industry clusters share a demand

for data centers and continued integration of fast-moving, Internet-based IT. With the rise of

the Internet, the use of data centers for storage, data processing, and applications support is

becoming essential for business activities. In 2009, demand for data center space was three

times as great as the supply. It has been reported that more than a third of large corporate

data center users plan to increase their footprint in 2010. Looking to the future, a key driver

for data centers is expected to be cloud computing, which is provision of on-demand

network access services and software as service offerings. Gartner, Inc. estimates that

worldwide cloud services revenue will reach $68.3 billion in 2010 and could reach $148.8

billion in 2014.16 Other drivers are demands from digital medical records, continued growth

of Internet-related offerings, and outsourcing of in-house IT services. Of special importance

among data centers is the growing demand for “green data centers,” which are expected to

grow from $3.8 billion in 2010 to $13.8 billion in 2015.17

Already WVERT is home to one data center—the HP Data Center that is primarily supporting

data center needs for the U.S. Department of Housing and Urban Development. Adding one

or two data centers may be possible because the WVERT site addresses many key location

factors needed to attract data centers, including low-cost, reliable/redundant electricity,

high-bandwidth fiber-optics with multiple service providers, and a low risk of natural or man-

made disasters (Table 2). The State of West Virginia also has an incentive package directed

toward data center development. WVERT is limited by its lack of land, which may restrict the

number of additional data centers, along with limited workforce and air passenger service.

Table 2: Key Location Factors Needed to Attract Data Centers

Key Location Requirements for Data Centers Fit With WVERT

Primary Location Factors

Low-cost and reliable/redundant electricity Good fit

High-bandwidth fiber-optics Good fit

Availability of multiple service providers Good fit

Low risk of natural or man-made disasters Good fit

Sites with sufficient, inexpensive land Somewhat limited

Availability of skilled workforce Somewhat limited

16 Gartner, Inc. “Forecast: Public Cloud Services, Worldwide and Regions, Industry Sectors, 2009–2014,” June 2010. 17

Fast Company, “Green Data Center Market to More than Triple Over Next Five Years,” August 2010.

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Table 2: Key Location Factors Needed to Attract Data Centers (continued)

Key Location Requirements for Data Centers Fit With WVERT

Secondary Location Factors

On-site water service Available

Incentives Available

Passenger air service Limited

UNIVERSITY AND NATIONAL LAB RESEARCH ACTIVITIES

Closely linked to the opportunity for WVERT to enhance and continue to advance the

development of West Virginia’s industry clusters in energy/chemicals and

materials/engineering, commercial R&D, and testing services is the potential to advance

innovative research activities at its universities and federal laboratories. In this regard,

WVERT would be an important site to bridge the worlds of science and business and not

duplicate the more academic and federal laboratory campuses found across West Virginia.

One important research driver in West Virginia focused on the energy sector is the National

Technology Energy Laboratory, the only DOE national lab dedicated to fossil energy,

including coal research, clean coal/FutureGen, and oil and gas research. The focus of

research at NETL ranges from fundamental science through technology demonstration.

Among NETL’s core technology specializations are computational basic sciences, energy

system dynamics, geological and environmental systems, materials science, coals to liquids,

and carbon sequestration.

Unfortunately, fossil energy R&D is not a growth area of the DOE’s research program.

Beyond the one-time stimulus funding of $3.4 billion in fiscal year (FY) 2009, NETL is facing

continued cuts in its budget. In the normal federal budget, NETL actually declined in funding

from $863 million in FY 2009 to $672 million in FY 2010; based upon current budget

requests, it will fall to $587 million in FY 2011.

Meanwhile, across the universities in West Virginia, pockets of excellent research faculty and

projects exist. Battelle’s earlier 2007 core competency assessment for TechConnectWV

found university research strengths in the following:

Fossil fuels, especially coal (plus natural gas and petroleum)

Alternative fuels, non-petroleum–based liquid fuels

Pollution control

Advanced oil and gas recovery

Vehicle power plant efficiency and integrated vehicle power systems

Testing, validation, certification, and training

Energy efficiency for industry.

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In addition, a more recent review of major grant awards from federal agencies found

significant efforts in computational chemistry, composite materials, catalysts, nano-related

developments, and anaerobic digestion of waste streams into energy.

But, the fact is that West Virginia universities stand well behind in research activities

associated with energy, chemicals, and materials. Battelle analysis of the recent university

research expenditures across West Virginia in key fields associated with chemicals, energy,

and materials science found funding to be small and declining, even as these fields gained in

funding across the nation. Altogether, in the fields of chemical engineering, chemistry, and

metallurgical and materials engineering, funding in West Virginia declined slightly from

$12.7 million in 2004 to $12.1 million in 2008 (Table 3). Meanwhile, across the United States,

funding for these three fields rose from $2.375 billion to $2.787 billion, a gain of 17.3 percent.

Not only is West Virginia not growing in these key fields while the nation is, but it represents

not even one-half of 1 percent of total U.S. academic funding.

Table 3: University Research Funding in Selected Fields Related to Chemical Engineering, Chemistry,

and Metallurgical and Materials Engineering for West Virginia and the United States, 2004–2008

Source: National Science Foundation (NSF) Survey of Research and Development Expenditures at Universities and Colleges, 2004–2008.

So, due to spending cuts at the federal level for NETL and a small and declining university

research base in chemical engineering, chemistry, and materials science, there is no strong

likelihood for more basic research-related institutions locating at WVERT to bridge the

worlds of science and business. Battelle held extended discussions with leaders from NETL,

WVU, and Marshall University and found that all have individual and collective interests in

making the park successful and agree to continue to look for opportunities and programs

that might fit in the scheme for the park. However, these institutions also agreed that there

are no viable projects at this time that might be candidates for moving into the park.

The opportunity for WVERT is to become a partner with NETL, WVU, and Marshall in

identifying and pursuing research programs that bring high value for West Virginia in its

efforts to expand and pursue new innovations in energy, chemicals, and materials and that

complement its existing industry clusters in these areas, including engineering, commercial

R&D, and testing services. From Battelle’s discussions with NETL, WVU, and Marshall, this

opportunity to establish a research driver component is at minimum a 2-year process and

should be viewed as a long-term priority.

WORKFORCE DEVELOPMENT

Year

WV US WV Share

of US

WV US WV Share

of US

WV US WV Share

of US

2004 $4,977 $493,353 1.01% $2,366 $1,316,897 0.18% $5,379 $564,968 0.95%

2005 $4,381 $503,191 0.87% $3,541 $1,363,691 0.26% $8,072 $611,108 1.32%

2006 $4,109 $547,426 0.75% $3,367 $1,424,307 0.24% $5,082 $643,662 0.79%

2007 $4,112 $601,926 0.68% $3,087 $1,447,351 0.21% $5,235 $638,270 0.82%

2008 $3,961 $657,886 0.60% $1,690 $1,485,567 0.11% $6,400 $642,511 1.00%

West Virgina and US Academic R&D Expenditures, FY 2004–08 ($ Thousands)

Metallurgical & Materials EngineeringChemistryChemical Engineering

24

An immediate role that WVERT can play in collaboration with the colleges, universities and

research organizations in West Virginia is in addressing workforce needs found across the

industry clusters in energy/chemicals and materials/engineering, commercial R&D, and

testing services.

Battelle’s interviews with the key tenants at WVERT and among other leading companies in

the Charleston region pointed to a significant and immediate need for chemical and process

technicians to replace retiring workers. Battelle identified a demand for approximately 90

new chemical and process technicians needed per year for the next 4 to 5 years to replace

retirees among only the three largest chemical firms in the Kanawha Valley: Dow, DuPont,

and Bayer (MaterialScience and CropScience).

A more detailed look at the forecast of job openings of the West Virginia’s labor market

information office suggests little in new job growth, but much demand for replacement

workers (Table 4). This includes a significant level of openings for installation, maintenance

and repair workers; metal and plastic workers; and engineers.

WVERT can provide the hands-on skill training in process technologies that is in demand by

industry through the use of its pilot plants. Battelle, in discussions with industry, found a

significant need for replacement hires for chemical process technicians, positions that

require an associate’s degree. A stronger linkage with hands-on pilot plant operations

afforded by WVERT would increase the employability of the graduates of such programs.

Having Kanawha Valley Community and Technical College and the Advantage Valley

Technology Training Center co-located at WVERT provides an important educational

presence and asset. Beyond what the community college system can provide directly, firms

expressed other continuing education needs for postgraduate education and management

training.

Table 4: Forecast of Annual Job Openings From West Virginia, 2006–2016

Occupations WV Total Annual Openings (2006–2016)

WV Annual Replacement Openings (2006–2016)

Engineers 155 112

Physical Scientists 56 42

Chemical Plant and System Operators 31 31

Metal Workers and Plastic Workers 253 226

Manufacturing.-Related Installation, Maintenance and Repair

393 284

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The Uniqueness of WVERT: A Commercial Real Estate

Perspective

The market-driven opportunities for WVERT are substantial. One key question in assessing

the feasibility of WVERT is whether alternative sites in the Charleston region can easily

support the potential industry and institutional drivers.

Overall, the Charleston region’s commercial real estate market is small and not growing

significantly. The combination of being small and stagnant results in an overall vacancy rate

that is low, but with leasing rates that are quite reasonable, particularly compared with

larger metropolitan statistical areas (MSAs) such as Pittsburgh or Washington, D.C. (Table 5).

Table 5: Commercial Real Estate Market Profile for the Charleston Region

Classification Total Space in MSA

(Rentable Built Area)

Vacancy Rate

(Q2 2010)

Annual Absorption

(Q4 2007–Q2 2010)

Leasing Rate Quoted

Comments

Class A Office 742 ksf (thousand sf) 3.2% +3,082 sf $19.09/sf 8 bldgs; no deliveries

Class B Office 8,981 ksf 6.3% +50,381 sf $14.93/sf 551 bldgs; 28,766 sf new

Industrial Flex 428 ksf 6.4% - 4,755 sf $6.32/sf 55 bldgs; no deliveries

Industrial 12,968 ksf 3.9% - 39,068 sf $4.95/sf 421 bldgs; no deliveries

Source: CoStar.

Battelle held discussions with several experienced and well-regarded commercial real estate

brokers and developers in the Charleston region. They all viewed WVERT as a unique

development for the region, with no comparable development providing an “integrated

research and development environment” found in region.

The closest development is the NorthGate Business Park, which is more of an office complex.

It does include tenants involved in engineering, data and computer services, and business

and financial services, along with associations. Currently, NorthGate Business Park has 13

office buildings encompassing 280,923 square feet with 11 Class B office buildings and only

one Class A and one Class C building. Its quoted leasing rates are approximately $21 per

square foot, which is slightly higher than other comparable buildings across the region. In

keeping with the limited availability of commercial real estate in the Charleston region,

96.4 percent of the space at the existing NorthGate Business Park office buildings is leased.

The NorthGate Business Park also offers the amenities of a Marriott Residence Inn and a

fitness center. An assisted living and skilled nursing facility is also located at the site.

There are also a number of industry-targeted parks across the Charleston region, but they

are relatively small in size and not comparable in offering an integrated R&D environment.

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These include Peerless Industrial Park with 40 acres, Forks-Of-Coal Industrial Park with

90 acres, the South Charleston Technology Park with 110 acres, and the Washington Heights

Business Park with 175 acres.

The implications of this commercial real estate situation is that WVERT can stand apart from

other business locations in offering a more tailored setting for those businesses seeking

laboratory and pilot production sites. With the region’s low vacancy rates, the fact that

WVERT will have available multitenant facilities that can offer office space may also do well

in attracting a number of more digital services and IT-intensive back-office operations.

Summary of Targets of Opportunity for WVERT

This assessment of likely development targets for WVERT suggests that a focused approach

on the industry clusters of energy/chemicals and materials/engineering, commercial R&D,

and testing is a good fit for the market and institutional drivers in the Charleston region and

for West Virginia. While the chemicals and materials industry is in decline and the energy

industry is growing in more dedicated sites for production and extraction, WVERT is well

poised to be a critical site for tenants in the growing engineering, commercial R&D, and

testing services industry cluster. Through its unique pilot production facilities, WVERT can

also play a critical role in reversing the fortunes of West Virginia’s chemicals and materials

industry cluster by creating a commercialization bridge to entering high-growth niches and

offering a site for the research, engineering, and piloting of advanced energy solutions

related to coal.

WVERT may also help in supporting the continued presence of digital services and business

management and services in the Charleston region, particularly by offering a site that can

support data centers.

Of immediate importance is leveraging the assets of WVERT to address workforce issues.

WVERT can provide a unique setting for the much-sought-after hands-on skill training in

process technologies to serve the needs of energy, chemicals, and materials companies and

related engineering, commercial R&D, and testing services.

Longer term, WVERT’s potential is to be a part of West Virginia’s approach to raising its

broader research capabilities in the key fields related to advanced chemicals, materials, and

energy. With corporate R&D in decline, it is essential that West Virginia raise its institutional

capacities to be at the innovation edge of its mature industries in energy, chemicals, and

materials.

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DEVELOPMENT PROGRAM FOR WVERT

Based on the analysis of potential drivers for WVERT, there is great potential for WVERT to

be a signature center to spur innovation and technology development in West Virginia’s

industry cluster complex of energy/chemicals and materials/engineering, commercial R&D,

and testing labs as well as to serve as a much-needed site for advancing broader technology

and related talent development in the hard-hit Charleston region.

To realize this potential, WVERT needs to have an integrated and comprehensive program

that is balanced across its missions in education, research, and technology development.

Driving this programmatic effort is a vision of how WVERT can best be a catalyst and

resource in technology-based economic development.

Vision of WVERT

The West Virginia Education, Research and Technology Park will become a signature center

enabling West Virginia to be among the national leaders on the global stage of

commercialization and growing companies in innovative areas of traditional and biobased

energy, chemicals, and materials.

This development must be advanced not only to create the high-quality facilities that will

attract and retain companies involved in advanced energy technologies, but also to provide

targeted technology commercialization program efforts that address key market gaps as well

as fostering longer-term industry–university–national lab partnerships and, in doing so,

advance product development and new company formation as demand drivers across these

leading industry clusters in West Virginia.

The measure of success of WVERT is the global competitiveness of these three leading and

interrelated industry clusters that are critical to West Virginia’s economy. For WVERT to

serve as a national and global technology development and innovation driver for these more

mature industry clusters that are important to the state, it will require close attention to the

entire interconnected sequence of positive factors, or value-added chain, that connects and

strengthens the technology, talent, and innovation drivers of industry cluster development

across the expansion of existing businesses and the attraction and start-up of new

businesses. If any link in the value chain is inadequately addressed, then the competitiveness

and ability of a technology-based industry cluster to generate quality jobs will be hampered.

While this value chain forms naturally over time in some communities (such as Silicon

Valley), many communities have achieved success in promoting targeted industry clusters by

advancing economic development programs and initiatives to address this value chain.

Examples include Research Triangle Park in the biopharmaceutical industry cluster, Georgia

in logistics, and Wichita in aerospace.

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Figure 5: Technology-Based Economic Development Chain

RECOMMENDED PROGRAM DEVELOPMENT EFFORTS FOR WVERT

Battelle is recommending four specific program initiatives for WVERT, which together can

position WVERT as a catalyst and resource for technology development and innovation,

while also focusing on the overall value chain of technology-based economic development

driving industry cluster advancement in energy, chemicals and related materials, and

engineering and testing services (Figure 5).

Filling a critical gap in the commercialization process for pilot production. This is a

specialized operation, and one that is tied to the technical expertise of a proven operator—

and will likely include contract manufacturing (often referred to as “tolling” by the industry)

as well as market development activities with a range of users, most of whom will likely be

emerging growth companies for whom the park provides a preferred development path.

Proactively focusing on the recruitment of innovative, emerging growth companies in

niche areas of energy, chemicals and related materials, and engineering and testing

services. This focus is also needed, with a support infrastructure for entrepreneurial

development. To fulfill this recruitment mission, WVERT should have a certain amount of

multitenant space available for opportunities to capture and accommodate growth. Given

the park’s position in the regional and state technology development and real estate

landscape, this multitenant space should include a mix of chemistry and bioscience lab space

tied to the target niches, as well as associated office space. In addition to the provision of

physical amenities that promote discovery and applied R&D, a set of business growth and

financing services should also be provided.

Strong academicresearch communityable to attractcompetitiveexternal grantfunding

State and privatesector commitment tobuilding robustbase of high-qualityscience and technologyR&D and supportinginfrastructure

Academic researchcommunity and keypartners committed totranslating discoveryinto application and movingit towards commercialization

Investment in infrastructureand personnel forapplication testing, technologypiloting and scale-up activities

Financial and personnel commitment to intellectual propertyprotection, technologytransfer and in-state commercialization

Presence of entrepreneursand skilled humancapital for business start-ups

Public and privatesector risk capital forpre-seed, seed and venture funding rounds

Commitment to targeted recruitment(domestic and international)of cluster businessesand supportingbusinesses

Integration of existingbusinesses into the cluster,and support for additionalbusiness growth fromthese enterprises

Infrastructure andfacilities to housescience andtechnology-basednew and expandingbusiness enterprise

Facilitation andcoordination ofnetworking andcluster supportactivities

Long-term, sustained commitment to development of the cluster by all parties

Education andworkforcedevelopment tosupport clusterpersonnel needs

Generation of positivegovernment, regulatory and business climate to meet competitive cluster needs

Existing Industry

BusinessExpansion

Business Attraction

TechnologyBusiness Cluster

AppliedR&D

Piloting &Demonstration

BasicScience

TechnologyTransfer

New EnterpriseDevelopment

Technology-BasedEconomic DevelopmentRequires Attention to Every Link in the Development Chain

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Advancing talent generation through hands-on skill training in processing technologies.

With the establishment of the campus of Kanawha Valley Community and Technical College

in the park, along with the new industry-oriented Advantage Valley Technology Training

Center training and meeting facility, WVERT has the opportunity to serve as a focal point for

meeting the training and talent development needs of key industries in the state and beyond

for technicians, engineers, and scientists.

Establishing a world-class chemical engineering research institute. This collaborative,

strategically focused institute would deepen the capacity of West Virginia to be an

innovation leader and grow its own in the industry clusters of energy, chemicals, and

engineering/R&D/testing labs. The role of the park is to serve as a focal point that catalyzes,

forms teams, and implements focused activities that address strategic energy, chemicals,

and materials opportunities for West Virginia as well as national and global challenges.

The next more detailed subsections concerning each of these four program activities of

WVERT address the following:

The rationale for the program activity

Best practice examples

The program design setting out specific actions to be taken

The resources required to support the program activity on an annual basis.

Filling a Critical Gap in the Commercialization

Process of Pilot Production for Advanced Energy

and Chemicals and Related Materials

Rationale

Pilot production is a key step in addressing the commercial viability of a novel new energy,

chemical, or related material product by allowing customers to evaluate and qualify a new

product, as well as address initial product introduction into the market.

But, pilot production requirements for new energy, chemical, and related material products

are very specialized, calling for process engineering and development during what is broadly

termed “market development.” This involves optimizing a sequence of individual processes

to efficiently convert a raw material into a finished product. These processes can comprise

physical, chemical, or biological changes in the raw material as it becomes a product. Of

particular importance is the need to allow for separation processes, often under specific

conditions, and to isolate components. This separation process can involve a variety of

techniques from distillation through the use of different boiling points or column

chromatography that separates materials based on differences between stationary and

mobile phases, or crystallization based on differences in solubility or cell fractionation based

on differences in mass.

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It is particularly important for pilot production facilities to allow these process configurations

to be undertaken at increasing scales, from bench top to pilot scale with limited production

to eventually full-scale commercial production. Along with test data, pilot plants can provide

small production batches for analysis, test markets, or specialty markets. By offering these

different levels of magnitude, WVERT can be positioned to offer firms a critical resource in

demonstrating and advancing new products, through at the commercial development of a

new chemical or related material. Armed with data and proven economics obtained through

the park’s pilot plants, such firms will be in a stronger position to attract partners and capital

to go to full-scale production and achieve market growth. By partnering with WVERT, such

firms could strengthen their value before approaching larger firms, whom they might

otherwise have to approach earlier in order to access corporate or “captive” pilot plants.

As the Battelle team learned from its outreach efforts to existing and emerging companies

involved in processing for energy, chemical, and related material products, there is a clear

demand for and yet lack of available shared-use facilities. More typically, pilot production

facilities are “captured” within larger existing companies.

More importantly, the infrastructure found at WVERT, because it had been a “captive” pilot

production facility for Dow and previously Union Carbide, is well positioned to play this pilot

production role through repurposing. Based on the analysis of an expert chemical engineer

with extensive industry experience, Dr. Randall Powell, Battelle learned that WVERT has two

buildings that offer fully serviced, configurable infrastructure for process piloting, scale-up,

and small-scale manufacturing. Both facilities, according to Dr. Powell, incorporate multiple

reinforced-concrete production cells suitable for energetic processes, which also afford

physical separation of processing areas for multitenant use. The existing infrastructure and

ease of configuration of these facilities allow capital to be focused on process-specific

equipment installation and significantly shorten timelines to process start-up. These facilities

would typically allow scale-up in the range of one or two orders of magnitude (10x to 100x)

from benchtop R&D. The high bay cells are particularly well suited for scale-up of liquid

chemical processing such as distillation, reactive distillation, continuous packed column, and

plugged-flow or countercurrent reactions where vertical height within a process

containment cell is required. The high bay cells also lend themselves to processes where

vertical gravity feed is desirable for sequential unit operations. Solid product handling is also

possible in these cells.

Dr. Powell also determined that these facilities could offer a cost-effective alternative to

greenfield sites for permanent or long-duration, small-scale commercial manufacturing of

lower-volume products, especially for high-value, low-volume niche market products;

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products with very low growth rates or extended market penetration timelines; and

products produced in multiple locations.18

The WVERT pilot plants are best suited for the following specific technology uses:

Reactive chemistry processing and liquid handling

Biochemical processing and liquid handling

Purification technology liquid handling.

Table 6 presents a detailed evaluation of the processes that best fit pilot plant capabilities.

Table 6: Technology Segmentation Uses for WVERT Pilot Production Capabilities

Technology Batch/Continuous Processing

Liquid Handling Solids Handling Other Asset Issues

Feedstock Synergies

Reactive chemistries

HA. Segregated cells suited for custom fit-out; B-707 vertical design provides installation efficiency

HA. Facilities well-suited for liquid material handling and processing

N. B-707 cell footprint may limit solids equipment installation

A. Cells designed for energetic reactions, but not desirable for multi-clients

N. Local co-product streams could be feedstocks

Biochemical processes

HA. Segregated cells suited for fermenter installation; B-707 vertical design & utilities well suited

HA. Aqueous processing; B-707 vertical design & utilities well suited

N. May require solid/liquid separations and solid product handling

A. Process isolation provided by cells, which may require enclosure

A. Proximity to woody biomass feedstocks as sugar source

Thermo-chemical processes

A. Cells suitable for small gasifiers and continuous reactor installation; utilities well-suited

A. Liquid products; some requiring purification

N. Mostly solids feedstocks; material handling appropriate for facilities size

A. Vertical cells allow fixed bed reactors and distillation of product mixtures

A. Proximity to coal and lignocellulosic biomass as gasification feedstocks

Purification technologies

A. Cells suitable for both batch and continuous purification equipment installation

HA. Facilities well-suited for liquid material handling and processing

N. May require solid/liquid separations and solid product handling

A. B-707 cell design advantaged for liquids; footprint may limit solids equipment installation

A. Lignocellulosic feedstocks for fractionation; local co-product streams for purification

Physical processing

D. Continuous processing equipment can be bulky

N. Mostly solids processing

D. Solids handling for industrial processing could be limited by cell footprint

D. Facilities not well-suited for clean rooms or controlled environment processing

N. None apparent

KEY: HA = Highly Advantaged A = Advantaged N = Neutral D = Disadvantaged

18 Dr. Randall Powell, Ph.D., in Assessment Memo of Pilot Production Facilities at WVERT, July and September

2010.

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Best Practice Models

An example of a state initiative that advanced pilot production facilities in process

engineering as a commercialization resource is the Michigan Biotechnology Institute (MBI).

Originally formed in 1980s, MBI targeted technology commercialization in the areas of

agricultural and industrial biotechnology, which utilizes bioprocessing scale-up

manufacturing. Among its focus areas have been green chemicals, biobased materials,

animal feeds, specialty enzymes, and bioactive compounds.

MBI invested in a fully equipped, 25,000-square-foot technology development and scale-up

center, which integrates activities in microbiology, molecular biology, chemistry,

fermentation, and bioprocess engineering. The facility includes bench-scale laboratories, a

three-story, multibay fermentation and recovery pilot plant, as well as a state-of-the-art,

computer-controlled utilities system for air, steam, waste, and water handling. In addition to

the laboratories and pilot plant, support services, computer systems, collaborative software

and administrative services are integrated into the facility to efficiently manage project

development. Office and networking facilities are available for extended-stay on-site

collaborators. In addition, the chemistry laboratories contain a broad range of contemporary

analytical instrumentation to fully support pilot plant and research activities in microbiology,

molecular biology, chemistry, and materials science.

To fulfill its commercialization mission, MBI has focused on activities such as the following:

Establishing a for-profit subsidiary, Grand River Technologies Inc., to commercialize

MBI technologies by creating new businesses, securing joint ventures, or out-

licensing technologies. Through Grand River Technologies, MBI developed expertise

in business plan development, management of emerging companies, and accessing

seed and venture capital. Altogether, 10 companies were launched by MBI through

the early 2000s, including Auxein Corporation that provides compounds for plant

growth, Synthon Corporation that provides high-value chiral intermediates to the

pharmaceutical industry, Natura involved in natural food flavoring, and BioPlastics,

Inc. focused on biodegradable films from agricultural waste and by-products.

Forming the BioBusiness Incubator of Michigan (operating out of the MBI

International building in Lansing), a nonprofit organization providing incubator

tenant services to MBI-sponsored and other biotechnology companies.

More recently, MBI is focused more on collaborations with industry addressing process

development and scale-up needs to determine commercial viability. It terms these activities

“de-risking” by focusing on the transformation of an early-stage discovery into a validated,

robust technology package at a meaningful pilot scale. MBI also consolidates the IP position

during this de-risking process. The result is a technology package that meets performance,

cost, and quality criteria. Among its recent clients have been DuPont (biobased material),

Cargill (biopolymer), and Gene-TRAK (RNA probe).

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Program Design

To advance WVERT’s role in pilot production for advanced energy, chemicals, and related

materials, it will be critical to update the existing pilot plant facilities and to identify an

operator to work with it in offering shared-use services to existing and emerging companies

requiring chemical-related biological scale-up and pilot production facilities.

Battelle is recommending pursuing a relationship with an operator given the significant

technical expertise required to carry out the operations of a shared-use facility. In

discussions with emerging companies needing process pilot production from across the

nation, the Battelle team found that they viewed having an experienced operator who can

add value and offer process improvement guidance as a key feature for making the pilot

plant facilities of interest and value to them.

Battelle is proposing that WVERT enter into a relationship with an operator based on the

following parameters:

WVERT would finance the renovation of the physical plant and initial equipment

costs for basic operations and measurement.

The operator would lease the facility from WVERT and be responsible for costs of

staffing. The leasing period is open for negotiation but should allow for milestones to

be reached. It should not bind WVERT for too long a period of time without clear

performance being met.

Marketing of the facility would be done jointly by the operator and WVERT.

The selection of users would involve collaboration between the operator and

WVERT. The operator would be responsible for all the terms and conditions in line

with its profit and loss responsibilities in managing the pilot production plants.

WVERT would reserve the right to approve or disapprove a user before a final

agreement is reached.

WVERT would seek to negotiate a profit-sharing relationship with the operator over

time.

At the end of the lease period, the facility would remain under WVERT ownership

and lease renewals could be negotiated.

It is suggested that a competitive request for proposal (RFP) process be undertaken to select

and formalize a relationship with an operator. This competitive RFP process will ensure

transparency and accountability. Battelle recognizes that there may be qualified local

organizations interested in serving as the operator, and these local organizations should be

encouraged to apply. Under this approach, the specific terms and conditions can be

addressed in the competitive bid process guided by the general parameters set out above.

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Resources

Renovations and basic equipping of the pilot plant facilities are expected to be one-time

costs over the next 5 years. These costs can possibly be phased in between the two

recommended pilot plant facilities to be renovated at WVERT, starting with Building 707 and

then proceeding to Building 706 as demand warrants.19

Proactively Focusing on Recruitment of Innovative,

Emerging Growth Companies in Niche Areas of

Energy, Chemicals and Related Materials, and

Engineering and Testing Services

Rationale

Critical for the success of WVERT will be a proactive marketing outreach program. This

program should help generate significant demand for expansion space in R&D, product

development, engineering, or testing from the existing companies in the energy and

chemicals and related materials industry clusters or companies servicing those industry

clusters and increase the level of start-ups from the research drivers in West Virginia.

Moreover, it should help increase the demand from existing tenants at WVERT for additional

space.

By establishing this proactive marketing outreach program, WVERT can provide a targeted

business development function for the state, which can work collaboratively with the state’s

Department of Commerce to identify and qualify prospects. WVERT can add high value to

packaging deals for innovative emerging growth companies by providing access to its pilot

production facilities. Additional development tools and incentives will be needed to move

this forward.

Of particular importance is having speculative, high-quality multitenant space for R&D of all

types—including chemistry, biological, and dry labs able to manage air handling

requirements, weight loads, and height needs. The availability of this space at all times is

crucial for realizing the results of an aggressive outreach marketing program. Without such

available multitenant space, WVERT’s recruitment efforts would be compromised,

particularly given the lack of excess inventory and low quality of much of the commercial real

estate found in the Charleston metropolitan area.

19A detailed approach to making basic infrastructure and cosmetic improvements for the pilot plants

has been developed separately by Dr. Randall Powell, “WVERT Park Prioritization of Infrastructure Improvements: Buildings 707 and 706,” October 2010.

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An excellent example of a research park, driven by state initiative, which established a

proactive marketing strategy that emphasized innovative, emerging companies, is the

Massachusetts Biotechnology Research Park. Today, it stands as a mature, million-square-

foot research park on 105 acres that has carved out an identity for Central Massachusetts as

a low-cost alternative in the biosciences to Cambridge and the inner Boston suburbs.

The park traces its history from the efforts of then-Governor Michael Dukakis who

campaigned in 1982 on a platform of “bring back the cities.” Worcester, the state’s second-

largest city situated about 40 miles west of Boston, suffered a period of alarmingly rapid

industrial disinvestment in the 1970s. Strong community leadership to advance new

economic drivers for Worcester, combined with the Governor’s commitment, led to the

state conveying the grounds of the former Worcester State Hospital for the development of

a research park by the Worcester Business Development Corporation (WBDC), a nonprofit

development company that handled city economic-development business and was closely

affiliated with the Worcester Chamber of Commerce.

After a false start trying to sell land to end-users, and a turnkey arrangement with Hines

Industrial Properties, WBDC began speculative development of its first building “not knowing

what was going to happen,”20 but backed by the financial resources of the Worcester

Chamber and its leading member companies. For the first building, WBDC borrowed from a

consortium of local banks and, for subsequent projects, was able to cross-collateralize by

pledging equity on the earlier buildings. In one case, it used a Community Development

Block Grant (CDBG) guarantee to leverage long-term financing from the AFL-CIO Building

Investment Trust. At the outset, three major multitenant buildings were built in rapid

succession, followed by recruitment of BASF, which had been looking for laboratory space in

the Boston suburbs and was directed to Worcester by the state government in the late

1980s. Thirty-two more acres were acquired, and three additional multitenant units

constructed have been sold to Alexandria Real Estate Investment Trust, a publicly traded

REIT that specializes in laboratory space. While there has been considerable tenant turnover

since the start, the mix remains robust: some university space, some start-ups, and some

branch operations of larger entities.

The Massachusetts Biotechnology Research Park could probably not have thrived in its early

years without the parallel effort of the state-supported Massachusetts Biotechnology

Research Institute (MBRI) to develop entrepreneurial companies, based on proactive

identification and funding for technologies found at research institutions in Massachusetts,

particularly at Massachusetts Institute of Technology (MIT) and Harvard. MBRI maintained a

below-market incubator inside the park and also put together Commonwealth BioVentures,

a $5 million investment fund capitalized by local sources, which provided initial funding for

20 Marc Goldberg, as quoted in: Kim Ciottone, “Buying into Biomed,” Worcester Business Journal, February 26,

2002. Available online at http://www.massbiomed.org/news_mbi/?action=view&id=54.

http://www.massbiomed.org/news_mbi/?action=view&id=54

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the proof-of-concept, formation, and development of management teams for promising

university research discoveries.

Another more recent example is the effort underway at The Philadelphia Navy Yard, which

involves a consortium team with Penn State, a technology development and

commercialization driver (Ben Franklin Technology Partners of Southeastern Pennsylvania),

and a business development organization (Philadelphia Industrial Development Corporation

[PIDC]). Penn State is the lead research driver, establishing a new applied research,

education, and demonstration campus 200 miles from its main campus in State College.

Other partners include the regional manufacturing extension center, the Wharton Small

Business Development Center, a regional workforce and talent development consortium of

educational institutions as well as industry partners. The Collegiate Consortium for

Workforce and Economic Development, located at The Navy Yard, assists businesses with

customized workforce training, retraining, retention, and skill development programs.

The Philadelphia Navy Yard includes an 81-acre “Clean Energy Campus,” which is the new

home of a DOE-designated and -funded Innovation Hub for Energy Efficient Building

Systems.21 This Greater Philadelphia Innovation Cluster (GPIC) is a first-of-its-kind national

energy hub devoted to increasing the energy efficiency of buildings through research,

commercialization, and manufacturing technologies. GPIC will stimulate private investment

and quality job creation, bringing momentum to the Mid-Atlantic energy hub.

Designated as one of the state’s Keystone Innovation Zone program sites, The Navy Yard KIZ

promotes collaborative technology innovation among academic institutions, economic

developers, and private industry that supports the growth of technology companies focused

on power and energy, advanced manufacturing, communications and IT, nanotechnology,

homeland security, and life sciences.

This new campus provides the following:

Commercial, industrial, and institutional buildings that can be utilized as key

research elements in developing and validating models, materials, processes, and

designs—both new and retrofit construction

Location of existing Penn State’s energy and research centers

DOE’s Mid-Atlantic Clean Energy Application Center

DOE’s Mid-Atlantic Solar Resource and Training Center

DOE’s Smart Grid Workforce Development Program

21 Earlier this year, the region celebrated the award of nearly $130 million in federal funds, including $122 million

from DOE to create the Greater Philadelphia Innovation Cluster (GPIC) for Energy-Efficient Buildings (EEB) at The Navy Yard.

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A new research building to be built with PIDC funds specifically for the Energy-

Efficient Building Systems Hub.22

Program Design

The proactive marketing outreach effort requires facilities, capital, marketing program, and

business services to accomplish its aims.

For facilities, WVERT can create different types of multitenant space for R&D purposes by

collaborating with anchor tenants, who can provide needed occupancy to make multitenant

buildings feasible. One important anchor tenant in place is the Kanawha Valley Community

and Technical College, which will allow one of the larger buildings at WVERT to be

operational and provide additional space for other tenants. Other potential anchor tenants

that are in discussions with WVERT include the consolidation into updated facilities at

WVERT for state government testing operations, for the Department of Agriculture in food

safety testing and the State Police for forensics analysis. State government played a similar

anchor role for the first multitenant building at the Virginia BioTechnology Research Park in

Richmond, Virginia.

There may be opportunities to help some of the existing WVERT tenants expand and also

serve as anchor tenants in multitenant facilities at WVERT. For capital, in order to provide a

meaningful recruitment tool for emerging national and international companies with

processing needs, there is a need for a pilot production equipment and working capital

financing program. From Battelle’s interviews with prospective users of the pilot plant

facility, simply having an experienced, expert operator may not be sufficient to ensure the

success of the pilot production activities and engage these companies to co-locate business

operations at WVERT or other locations in West Virginia. In particular, there are significant

needs for customized equipment, often specialized to the specific product being advanced.

For many companies, particularly more emerging ones, the cost of this equipment can be

prohibitive. It is recommended that a pilot production equipment and working capital

financing program be developed and operated by WVERT.

This pilot production equipment and working capital financing program could be contingent

upon negotiation of co-location of business operations in West Virginia. It also could be

structured as a debt equity instrument in which WVERT would take a security interest in the

equipment financed and have warrants issued so there is an upside if the product

development efforts succeed. It might also be useful to have the working capital portion of

the loan be converted to a grant upon reaching certain milestones related to the relocation

of business operations of the out-of-state company to West Virginia.

22 Funded for an initial 5 year period at $122 million, the new DOE Energy Innovation Hub’s mission is to research, develop, and demonstrate highly efficient building components, systems, and models that are applicable to both retrofit and new construction. The Hub team will pursue a research, development, and demonstration (RD&D) program targeting technologies for single buildings and district-wide systems.

38

For marketing activities, WVERT should hire a lead marketing staff person responsible for

developing strategies focused on proactive outreach marketing and collaborating with

existing industry, economic development, and higher education representatives in

identifying potential industry targets and serving as ambassadors for recruitment. The

WVERT lead marketing staff person would be responsible for generating leads based on

specific monthly actions focused on targeted business attraction and recruitment focused on

targeted domestic and international opportunities where the state and the park have a

strong value proposition. This WVERT lead marketing staff person would also be charged

with staying abreast of emerging business issues impacting the industry clusters of energy,

chemicals and related materials, and engineering and testing, such as federal regulatory

changes, legislative issues, international trade issues and opportunities, etc. Initially, an

administrative assistant would support this lead staff person in proactive marketing. A

marketing outreach budget for travel, direct mail, attendance at selected trade shows, and

earned media of $200,000 in year one and $150,000 annually thereafter should be allocated.

For business services, WVERT should consider ways to create a business environment

attuned to the needs of emerging energy, chemicals and related materials, and engineering

and testing services companies. This should include access to professional services,

mentoring services, connecting with higher education resources and expertise, and accessing

capital sources. To staff this function, a business services coordinator should be put in place

and up to $50,000 of funding be made available for services.

Resources

Several key costs will drive this program activity:

Multitenant Space: In addition to covering the cost of speculative, multitenant R&D

space, WVERT should have a tenant improvement allowance of up to $100 per

square foot to help in fitting out the labs to meet the needs of tenants. This tenant

improvement allowance should be recaptured over the life of the leases, if possible.

Pilot Production Equipment and Working Capital Financing Program: A revolving loan

fund should be capitalized at $5 million. In addition, recurring annual costs for due

diligence analysis and legal costs are required, estimated at $10,000 per transaction

or about $100,000 each year.

Marketing Services: A recurring annual cost involving dedicated marketing staff

capacity at WVERT should include at least $200,000 for the salaries and benefits of

the lead marketing staff and an administrative assistant, along with $150,000 for

marketing activities.

Business Services: A recurring annual cost involved in the business services staff

capacity should include $100,000 for salaries and benefits and $50,000 for program

activities.

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Advancing Talent Generation Through Hands-On

Skill Training in Processing Technologies

Rationale

Ensuring a pool of talent in processing technologies from technician to engineering to

scientist levels is essential for the long-term future of West Virginia in its energy, chemicals

and related materials, and engineering and testing services industry clusters. In today’s

knowledge-based economy, businesses go where the talent resides.

From interviews with existing companies involved in processing technology, Battelle learned

of a strong need for technicians given the expected retirement of an aging workforce in the

chemicals, materials, and energy industries in West Virginia.

While academic programs are the starting point, a strong hands-on skill training and

experiential learning component is also necessary. Knowing theory and facts is simply not

sufficient for industry; students need to be able to work with the equipment and problem

solve in a real-world context.

According to the National Governors Association Cluster Strategies report,23 advancing

targeted skill centers for specific industry clusters can offer a resource to industry that can

understand a cluster’s particular needs and interests, solve problems, ensure a continued

flow of qualified workers, and serve as a source of skill upgrading for the incumbent

workforce. It also allows students access to better and deeper programs (“know what”),

better employment information and more rungs on career ladders (“know who”), deeper

understanding of industry context (“know why”), and more informal learning opportunities

(“know how”). Community colleges are often the site for such industry-driven technology

and workforce development centers, but 4-year colleges and universities can also be key

sites or partners. Examples include Indian Hills Community College in Iowa focusing on

fermentation pilot facilities for the bioscience-based agriculture industry; the Lamar Institute

of Technology in Texas focused on process technologies for the chemicals industry; or

Catawba Valley Community College in North Carolina focused on the testing, design, and

technology used in the hosiery industry.


Innovation Park at Penn State is a 118-acre university-led business and research park and

home to the Penn State Nanofabrication Laboratory, part of the National Nanotechnology

Infrastructure Network that allows companies access to high-end nanotechnology

equipment to develop new concepts, prototypes, and production processes. Incorporated

into the Penn State Nanofabrication Laboratory is one the nation’s first and foremost

programs for nanotechnology manufacturing technician training, which has led Penn State to

23 National Governors Association, Cluster-Based Strategies for Growing State Economies, 2007.

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support the efforts of Pennsylvania community colleges to offer an associate’s degree in

nanofabrication.

Penn State’s efforts in nanotechnology education date back to 1998. In that year, the

Pennsylvania Department of Community and Economic Development established the

Nanofabrication Manufacturing Technology (NMT) Partnership, headquartered at Penn State

to meet Pennsylvania industry needs for skilled micro- and nanofabrication workers. Rather

than simply focusing on Penn State students, this partnership effort includes the

Pennsylvania Commission for Community Colleges, the Pennsylvania State System of Higher

Education, the Pennsylvania College of Technology, other postsecondary and secondary

schools, private industry, and others. The nation’s first associate’s degrees in nanofabrication

were awarded in Pennsylvania through this partnership. A 2007 survey of 508 students who

completed the center’s capstone semester in nanofabrication at Penn State, most of whom

while students at community college, found that 75 percent were working in industry and

the other 25 percent were full-time students seeking higher degrees. Graduates from the

NMT training program now work in 75 Pennsylvania companies at all levels from technicians

to engineers to scientists.

The NMT was designed to use the Penn State Fabrication Laboratory facilities to offer a one-

semester, six-course, 18-credit academic capstone.24 These courses, which focus on safe

materials handling and an introduction to basic fabrication operations, are integrated by

partnering institutions into a newly created associate’s degree in fabrication or used to

satisfy requirements for a fabrication concentration or minor within existing baccalaureate

programs in chemistry, physics, or biology. There is also a noncredit certificate offered to

continuing education students by the Penn State School of Engineering.

These activities have also been recognized by the NSF, which awarded Penn State a Regional

Advanced Technology Education Center from 2001 to 2008. In 2009, that center became a

national advanced technology education center, receiving $5 million over 4 years from the

NSF for establishing and running a National Center for Nanotechnology Applications and

Career Knowledge (NACK).

A more recent example is at the new research park within Oak Ridge National Lab, where

Roane State Community College is starting up a new advanced materials technician-level

training program. This effort was recently awarded a Community-Based Job Training Grant

from the U.S. Department of Labor providing $2.86 million over the next 3 years. Among the

industry partners seeking access to these new advanced materials technician graduates were

Babcock & Wilcox, Toho Tenax America, CoorsTek, Protomet, USEC, Confluence Solar, and

the Oak Ridge National Lab. These partners identified the need to train and hire more than

1,200 new advanced materials technicians during the next 3 years. The grant includes funds

for tuition and other costs for more than 600 unemployed individuals to complete their

24 For the course list, see http://www.cneu.psu.edu/edAcademicCap.html.

http://www.cneu.psu.edu/edAcademicCap.html

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training. A new Advanced Materials Training and Education Center will be housed at the

research park in Oak Ridge National Lab and will offer a 4-month curriculum focused on

carbon fiber and solar energy.

Program Design

WVERT has a unique opportunity to facilitate experiential learning for chemical process

technicians and engineers through the use of pilot plant operations, where there is already a

documented need for technician training to address retention and growth needs for the

state’s base of chemicals firms.

It is proposed that the state fund at WVERT an industry consortium for chemical process

capstone projects in a manner similar to the establishment of the NMT Partnership at Penn

State for nanotechnology fabrication by the Pennsylvania Department of Community and

Economic Development. This will require funding for development of curriculum, staffing,

and outreach activities.

It is also proposed that a strong outreach to the K-12 system be considered. This effort could

involve teacher training and perhaps the development of a chemical process bus, similar to

what many states have done in the biotech arena that can travel around the state and offer a

hands-on experience to K-12 students.

It is recommended that federal agency funding from NSF, the Department of Labor, or DOE

be strongly pursued for the industry training consortium and the K-12 teacher training and

student engagement.

An additional step for connecting more advanced engineering students with employers

would be to establish and promote internships with industry in chemical process engineering

and technology development. This could be advanced through tax credits to employers,

waiving of payroll taxes on interns, or direct matching funds for internships.

Resources

It is recommended that $1 million for the start-up of the chemical process training program

be funded and that ongoing costs be provided by industry and students.

Establishing a World-Class Chemical Engineering

Research Institute in West Virginia

Rationale

Despite the historical presence of energy and chemicals and materials industries in West

Virginia, with strong requirements for chemical engineering competencies, the university

research base in West Virginia is not among the nation’s leaders in chemical engineering in

size and scope. The NETL clearly has many chemical engineering competencies, but its R&D

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funding is declining and much of it goes for extramural activities at universities and other

research organizations, including WVU, Marshall, and MATRIC.

In the past, much of the chemical engineering R&D taking place in West Virginia was industry

driven. But, there has been a critical shift in industry thinking about internal R&D activities.

As the recent report of the National Academies, Rising Above the Gathering Storm, Revisited,

points out: “…the great United States corporate research laboratories of the past are

increasingly becoming a thing of the past.”25 Henry Chesbrough, a noted business professor

who tracks the shift of R&D activities and helped coin the phrase Open Innovation, explains:

Not long ago, internal R&D was viewed as a strategic asset and even a barrier to

competitive entry in many industries…Rivals who sought to unseat these firms had to

ante up their own resources and create their own labs, if they were to have any

chance against these leaders. These days, the former industrial enterprises are

finding remarkably strong competition from many newer companies. These

newcomers—Intel, Microsoft, Sun, Oracle, Cisco, Genentech, Amgen, Genzyme—

conduct little or no basic research on their own. Although they have been very

innovative, these companies have innovated with the research discoveries of

others.26

West Virginia has been a victim of this shift away from relying on corporate internal R&D

labs, as the state’s takeover of the Dow/Union Carbide research center demonstrates. But,

this does not mean that R&D is any less important for advancing West Virginia’s energy and

chemicals and materials industries. It simply means that the state and its research

universities must help in filling the void, or West Virginia risks falling behind fast-moving

global competitor nations that are making these investments in R&D.


There are best practice models on collaboration across universities through the use of an

“institute” model. One of the most successful institutes associated with a research park is

the Research Triangle Institute (RTI). The goal of RTI was to bring to Research Triangle Park in

North Carolina a world-class innovation driver that would help shape the research park’s

image as a technology center, even though it was miles away from any university center. RTI

is governed with the active involvement of the University of North Carolina System and Duke

University. It has grown from a handful of scientists hired in 1959 to a staff of more than

2,800. Today, RTI is well known as one of the world’s leading independent, nonprofit R&D

organizations.

25 National Academy of Sciences, National Academy of Engineering, and Institute of Medicine of the National

Academies, Rising Above the Gathering Storm, Revisited, 2010, page 45. 26

Henry Chesbrough, Open Innovation, Harvard University Press, 2003.

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Another best practice institute model is that of the Fraunhofer Centers in the United States,

operated through Fraunhofer USA, the American subsidiary of a German applied research

organization. In the United States, the Fraunhofer Centers partner with major research

universities in focused areas of technology development. These major research universities

include the University of Maryland, Boston University, University of Michigan, Michigan State

University, MIT, and the University of Delaware. The Fraunhofer Center at the University of

Delaware is located at the Delaware Technology Park.

The focus of these partnerships is to serve as a bridge between academic research and

industry needs. The technology focus areas include sustainable energy, molecular

biotechnology, coatings and laser applications, manufacturing innovation, software

engineering, and digital media. The basis of these Fraunhofer Centers is to conduct contract

research in the United States with government and industry, as well as advance technology

commercialization with tailored efforts in each center based on the industry and technology

opportunities.

What is common between the RTI and the Fraunhofer Centers in the United States is that

they are viewed as world-class applied research institutes that are connected to the strength

of universities and that raise the profile of those universities and their associated research

parks.

Program Design

WVERT needs to advance a center of research excellence in chemical engineering that

connects the strengths of the state’s universities and national labs to addressing significant

challenges facing the energy and chemicals and materials industries in chemical process

technologies.

The starting point for this program activity should be a 12-month planning study for a West

Virginia Center of Excellence in Chemical Engineering to identify the focus, required facilities,

partners, and programs, along with likely research leaders. Such a Center should be designed

to focus on areas of strategic importance to the state, while building upon and

supplementing the current capabilities of the existing organizations. In addition, this Institute

should have an explicit focus on applied research with strong linkages and co-investment by

industry and others on both firm specific and industry-wide needs and opportunities. The

following are among the key questions to be addressed in the planning study:

What are the major technological challenges facing the energy and chemicals and

materials industries, informed by active outreach to industry chief technology

officers?

What would be the design of a research center to address these needs and position

West Virginia for the next generation of innovation leadership in chemical process

engineering and technology development?

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Who will West Virginia work with as likely research leaders and partner

organizations?

However, for this planning effort to be taken seriously, a major endowment should be

created at the West Virginia Higher Education Policy Commission at the outset of the

planning process to demonstrate the state’s seriousness in this effort.

Resources

An allocation of $300,000 to $500,000 should be made for the planning study to be

conducted by a top-tier R&D consulting organization.

Bonding of up to $10 million toward the initial endowment for the West Virginia Center of

Excellence should be made, with a commitment of $10 million annually for the next 10 years,

drawing as much as possible from a combination of state, federal, and private resources in a

predictable and sustained fashion.

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RECOMMENDED GOVERNANCE, FUNDING, AND OPERATING

APPROACHES FOR WVERT

Introduction

A critical component of the success of WVERT is to put in place the organizational structures

and leadership that can allow it to carry out its program development with quality and

timeliness. It also needs stakeholder engagement to ensure that it can play a catalytic role in

fulfilling the WVERT vision. These are key ingredients for WVERT to become a signature

center that enables West Virginia to be a national leader on the global stage of

commercialization and growing companies in innovative areas of traditional and biobased

energy, chemicals, and materials.

Having WVERT under the auspices of the West Virginia Higher Education Policy Commission

was an important first step. The commission has experience in overseeing large campus

developments, is a key driver of innovation and talent policies for West Virginia, and has a

broad-based board that represents and understands the needs of West Virginia. But, the

commission is a policy organization, not an operations organization. So, it is essential that

new organizational structures be put in place for the day-to-day governance, funding, and

operations of WVERT. This is no different than any of the institutions under the commission’s

jurisdiction—each has its own organizational structure.

To better inform the governance, funding, and operating and management plan for WVERT,

Battelle undertook a benchmarking analysis focused on the following issues:

Governance plan for WVERT and its associated Eastern Energy Commercialization

Center (E2C2) involving how best to engage the state, universities, NETL, industry,

and others

Development structures needed to ensure the financing to support the growth of

the park, including how to ensure that facilities can be modernized and constructed

Management approach for WVERT, touching on who will be responsible for the

property and facility management as well as for business development, including

operation of the pilot plants.

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Benchmark Analysis

Benchmarking, which is commonly undertaken in the corporate and financial communities as

a way of improving efficiency and calibrating performance, is just as important in planning

for technology-led economic development. Benchmarking allows one to identify, analyze,

and draw useful lessons from the practices and experience of regions and institutions that

are generally comparable along relevant strategic dimensions. Benchmarking can help in the

following:

Isolating the strategic issues. To design a strategy for technology-led economic

development, any region or institution must understand what its key choices are and

how various potential uses of resources trade against each other. Examining how

competing entities have positioned themselves can give insight into what strategic

choices must be made in view of the home region’s/institution’s strengths and

weaknesses, and the opportunities and threats posed by the broader marketplace

for business engagement.

Figuring out what works. There is no point in reinventing the wheel. Strategies and

initiatives that have worked in other regions/organizations facing similar challenges

can often be adapted to local conditions, avoiding the risks of investing in entirely

untried approaches unless the situation explicitly requires that.

SELECTION OF THE BENCHMARKING CASES

In selecting benchmarks among successful research parks across the United States, Battelle

focused on those that have one or more of the following characteristics:

Involve some form of special authority, powers, and or support provided by state

government

Have been a single-user site transitioning to multitenant functionality

Have a site located away from major research institutions or university drivers

Have a signature status and strategic role in transitioning a region or state to a

new economy

Involve commercialization and/or pilot plant and scale-up services.

Using these criteria, the following five research park cases were selected for the benchmark

set:

The Illinois Medical District Commission and Chicago Technology Park in Chicago,

Illinois

Centennial Campus of North Carolina State in Raleigh, North Carolina

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Virginia BioTechnology Research Park and Virginia BioTechnology Research Park

Authority in Richmond, Virginia

Delaware Technology Park in Newark, Delaware

University of Arizona Science and Technology Park in Tucson, Arizona.

Table 7 summarizes the selected benchmarks along the strategic dimensions identified

above.

Table 7: Benchmark Case Study Profiles

Research Park—Program Entity(s)

Special Authority, Powers, and/or Support Provided by State Government

Preceding Use and Property Profile

Proximity of Site to Major Research University Drivers

Regional Setting; State Capital

Commercialization and/or Pilot Plant and Scale-Up Services

Illinois Medical District Commission and Chicago Technology Park

State funding provided for initial land purchase

Urban redevelopment area within 560-acre medical district with 100-acre core; CTP consists of 600 ksf of wet-lab and office space

Hospital complex and University of Chicago linkages

Major metro Yes—enterprise centers have successful track record, with 25+ graduates, including Amgen

Centennial Campus at North Carolina State

NA—new development

New campus Mid-sized metro

Being further developed

Virginia BioTechnology Research Park and Virginia BioTechnology Research Park Authority

Two linked entities; statewide program authority and park development organization

NA—new development

Limited R&D base nearby

Small metro; state capital

Extensive linkage with partners, university and statewide program

Delaware Technology Park

No special powers per se, but the park effort; 501(c)(3) corporation originated from Governor’s Task Force

NA—40 acres under long-term lease from the University of Delaware

Adjacent to University of Delaware campus

Small metro within major metro

Commercialization program linked to regional and university resources, as well as Delaware Biotechnology Institute and Fraunhofer Center

University of Arizona Science and Technology Park

Arizona Board of Regents involved in negotiations and issuance of bonds for acquiring the property

Yes—1,345 acres of land transferred from IBM to the university, with IBM continuing to stay on as anchor tenant as well as managing property, including a central steam loop.

Direct link to University of Arizona but not adjacent

Mid-sized metro

Incubation program and facility

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LESSONS LEARNED AND IMPLICATIONS FOR WVERT

The relevant, crosscutting implications and lessons learned were drawn to inform WVERT

approaches and requirements, specific to the opportunities and development context

identified through the preceding analysis.

In particular, the following critical functions were examined and analyzed for the purpose of

designing the best approach and potential options for WVERT:

Governance models and powers

Funding mechanisms and financial models and principles

Management and operations.

Other areas examined, but with less immediate implications for recommendations regarding

the organizational design and resources, were the following:

Early anchors and state government tenancy

Business development and commercialization services

Regional linkages

Fiscal impact for state and local government.

These latter findings can and should be incorporated into the management approaches and

planning for the park.

Governance Models and Powers

A number of examples in the appendix include two interrelated levels of organization:

In general, there is a broader, mission-driven, and programmatic entity that reaches

beyond the confines of the research park, either into a larger district or

programmatically and financially on a statewide basis. In some cases, including

Virginia and Chicago/Illinois, the linkages extend to overlapping board members and

shared staffing and support.

As a complement to this broader entity, there is a focused corporation, sometimes a

501(c) (3) corporation, a limited liability corporation (LLC) or other form, which is

specifically focused on the successful staging and development of a research park

with defined physical assets, a developing competitive position, and value

proposition for a mix of government, university, and industry tenants, based on its

geographic context.

Also, as exhibited by the interplay between the Virginia BioTechnology Research Park

Authority and the Virginia BioTechnology Research Park, there is a need to provide robust

financing powers and tools to sustain the development of a park, particularly in the early

phases of development. Table 8 summarizes the governance models and powers of the

benchmark set.

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Table 8: Governance Models and Powers of the Benchmark Set


Mission and Role of Organizations

Composition of Board(s) Appointing Authority and Accountability


IMDC’s state charter enables it to serve as land acquisition, management, and development organization for special development district in city of Chicago

Park corp. is being dissolved and functions absorbed by IMDC with board of seven

Four state appointees; two city and one county appointee with staggered 5-year terms


Development of industry-oriented research park within larger campus to advance mission of the university through a “campus of the future”

Co-terminus with university board

No separate governance in this case—park integrated with larger campus and university functions


Authority has state industry cluster mandate; park is both signature site and regional driver-joint initiative of Virginia Commonwealth University, state, and city

Different roles for boards, but shared staff; three common ex officio’s on both boards

Authority has 9–15 members for Authority with three ex officio; balance governor appointed; park board self-renewing

Delaware Technology Park Development of 40-acre park adjacent to main campus of University of Delaware

Ex officio seats for State Director of Development and University President; Governor appoints six directors from the private sector

Blend of ex officio and Governor-appointed slots


Following initial support through IBM financing and land transfer, focus on job creation and economic impact for region while advancing industry collaboration with university

Park corp. has 3- to 15-member board with strong links to University of Arizona

University controlled with further staffing by university

Funding Mechanisms and Financial Models and Principles

The ability to finance facilities and infrastructure is critical to the successful development of a

research park. It is particularly difficult to get multitenant and shared-use facilities financed

without a structured funding mechanism in place. Also, unique developments such as

WVERT are considered risky, simply because there is no comparable development locally.

Revenue bonds are often a primary funding mechanism, as the various tenant entities can

support the lease payments, which may also need to be subsidized or creatively financed

until the market is proven. State appropriations when available have been used to support

land acquisition, as well as to support special initiatives and programs, including business

incubation and pilot plant operations, which are often “loss leaders.” Table 9 presents the

funding mechanisms and financial models and principles of the benchmark set.

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Table 9: Funding Mechanisms and Financial Models and Principles of the Benchmark Set


Financial Models Operational Scope and Budget Range

Financing Powers and Sources

Other Special Powers


Revenue bonds supported by tenants’ organization income; recent use of general obligation bonds

Apart from capital expenditures, annual operating budget is $200,000

Development now principally done at the individual institution and project level


Originally by the university itself, starting with academic and multifunction buildings, and recently moving to single-use commercial buildings (either wet-lab or office space)

Part of an integrated campus development

Not separate from the university


Created a specialized state financing authority as a political subdivision of the state; park corp. is a 501(c)(3) corporation

Targeted to the development of the park(s); board and staff of the authority manage daily operations of the park annual operating budget of $3 million to $3.7 million

Finances the development and construction of buildings through bonding and other debt instruments

Ability to receive resources from all levels of government including land; assembles and sells land with the park; partnerships with adjacent counties

Delaware Technology Park

Buildings are generally financed as individual LLCs with private investors

All operating costs are supported by lease and rental income

University City Science Center (Philadelphia partner) guaranteed early developments until track record established

–


Although park development entity is a 501(c)(3), it is indirectly supported by the university

Except for subsidized incubator, operating costs are supported by lease and rental income

Cash flow from anchor tenant (IBM) bond payments generate cash flow to support additional operations

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Management and Operations

While park management needs to be focused on the successful, phased development of the

park, lean organizations often outsource certain functions, particularly in the property

management and leasing areas, while maintaining executive leadership to ensure the overall

performance and accountability to the governing board and plan. In cases where there is a

related program entity, there can be opportunities to share staffing, as in the cases of

Chicago and Richmond.

In Richmond, the Virginia BioTechnology Research Park Authority shares the same staff as

the Virginia BioTechnology Research Park Corporation. So, the executive director of the

authority is the president and CEO of the research park corporation. Similarly, the treasurer

is the same for both organizations. This combined staff is responsible as developer and

manager of the park, including land acquisition, site improvements, building or contracting

construction of the facilities, day-to-day incubator and park operations, marketing, and

space leasing. Table 10 shows the management and operations of the benchmark set.

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Table 10: Management and Operations of the Benchmark Set


Mission and Role of Organizations

Composition of Board(s)

Appointing Authority and Accountability

Organizational Links and Subsidiaries


IMDC’s state charter enables it to serve as land acquisition, management, and development organization for special development district in city of Chicago

Park corp. is being dissolved and functions absorbed by IMDC with board of seven

Four state appointees; two city and one county appointee with staggered 5-year terms

CTP originally subsidiary to IMDC, now a “brand”

Centennial Campus at

North Carolina State

Development of industry-oriented research park within larger campus to advance mission of the university through a “campus of the future”

Co-terminus with university board

No separate governance in this case—park integrated with larger campus and university functions

NA

Virginia BioTechnology

Research Park and

Virginia BioTechnology

Research Park

Authority

Authority has state industry cluster mandate; park is both signature site and regional driver-joint initiative of Virginia Commonwealth University, state, and city

Different roles for boards, but shared staff; three common ex officio’s on both boards

Authority has 9–15 members with three ex officio; balance Governor appointed; park board self-renewing

Park corp. has strong city, multicounty, and university links

Delaware Technology

Park

Development of 40-acre park adjacent to main campus of University of Delaware

Ex officio seats for State Director of Development, and University President; Governor appoints six directors from the private sector

Blend of ex officio and Governor-appointed slots

NA—501(c)(3) corp., but with strong partnering relationships

University of Arizona

Science and

Technology Park

Following initial support through IBM financing and land transfer, focus on job creation and economic impact for region while advancing industry collaboration with university

Park corp. has 3- to 15-member board with strong links to University of Arizona

University controlled with further staffing by university

Campus research corp.—a 501(c)(3)—is essentially a subsidiary of the University of Arizona’s Research Parks and Economic Development Office with links to the foundation

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Recommendations

FUNDING MECHANISM

Sustained funding is required for WVERT to become a signature center. This will enable West

Virginia to be among the national leaders on the global stage of commercialization and

growing companies in innovative areas of traditional and biobased energy, chemicals, and

materials. The success of WVERT in supporting the energy and chemicals and materials

sectors will reach beyond the borders of the park itself to advance the commercialization of

products in West Virginia, generate needed talent to sustain West Virginia’s

competitiveness, and establish new sources for innovation in West Virginia.

To establish WVERT as a catalyst and resource for advancing West Virginia’s energy and

chemicals and materials industries over the next 5 to 10 years, the funding needs identified

in the proposed program activities are as follows:

Rehabilitation of the pilot plant facilities

Ensuring the availability of multitenant laboratory space

Core staffing for the research park

Pilot production equipment and working capital fund

Outreach marketing program

Business services program

Workforce development

Establishment of a world-class applied research center in energy and chemicals and

materials technologies.

Battelle is recommending specific state authorization be enacted to ensure the needed

funding for WVERT. There are a variety of options for providing this funding mechanism. A

traditional approach is to provide annual bond and general appropriations to the authority.

Another traditional approach is to dedicate specific existing taxes or fees generated by the

energy and chemicals and materials sectors to this authority. A more novel approach is to

advance a tax increment financing approach based on the additional total state revenues

generated by the energy and chemicals and materials sectors in support of the authority.

This novel approach is currently being used by Kansas for the Kansas Bioscience Authority.

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Example of the Kansas Bioscience Authority

Based upon a review of a range of state-related technology development programs and

initiatives with linkages to research park development and industry cluster advancement, the

best example of such a structure and program is the Kansas Bioscience Authority. This

authority was created in 2004 by legislation that was designed to see in advance the

emerging bioscience cluster in the state of Kansas through a structure that tied the growth of

the sector to increased state revenues from that sector, which were in turn reinvested in the

authority for the accomplishment of its mission.

In 2004, the Kansas Economic Growth Act led to the creation of the Kansas Bioscience

Authority, a statewide bioscience initiative that guides the state’s investment in the

biosciences. The act provided an innovative funding mechanism for the KBA based on the

growth of state income-tax withholdings from employees of bioscience-related companies.

State taxes that exceed the base-year measurement accrue to the authority for investment

in additional bioscience growth. Funding is estimated to reach more than $580 million over

15 years. The funding formula is based on the increase in state payroll tax withholding for

employees in specific bioscience industries, defined by certain North American Industry

Classification System (NAICS) codes in the legislation.

An independent entity of the state, the KBA is governed by an 11-person board of directors

composed of local and national leaders in industry and academia. By law, one member of the

board is an agricultural expert recognized for outstanding knowledge and leadership in the

field of bioscience. Eight members of the board are representatives of the public who are

recognized for outstanding knowledge and leadership in the fields of finance, business,

bioscience research, plant biotechnology, basic research, healthcare, legal affairs, bioscience

manufacturing or product commercialization, education, or government. Two members of

the board are nonvoting members with research expertise representing state universities.

KBA board appointments are made by the Governor, the Senate president and minority

leader, the House speaker and minority leader, and the Kansas Technology Enterprise

Corporation. The two nonvoting directors are appointed by the Kansas Board of Regents.

In September 2007, the KBA board of directors adopted the following vision and strategies

for the authority:

Kansas is the preeminent bioscience center, serving healthcare, energy, agricultural,

animal health, biomaterial, and national security needs throughout the nation and

around the world by virtue of its excellent research, education, and vibrant industry

clusters.

The KBA is focused on expanding Kansas’ research and industry strengths to:

o Increase the quantity of high-quality research that has commercial relevance

for Kansas;

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o Expand the availability of investment capital needed to form and grow new

companies;

o Grow and nurture an increasingly experienced pool of entrepreneurial

management talent supported by organized systems of services and

networking;

o Expand the availability of capital and assistance to support product

innovation in established companies; and

o Facilitate bioscience corporate expansion and attract new-to-Kansas

bioscience corporate activity that grows and strengthens specific clusters of

excellence.

Through the KBA and related initiatives, Kansas offers comprehensive support for world-class

research, commercialization, and business expansion to accelerate company growth and job

creation in the state.

OPERATIONS AND MANAGEMENT APPROACH

Based upon the best practices in the U.S. research park community and the opportunities and

programmatic requirements of developing a park as a statewide, signature development for

the future, Battelle is recommending two different entities. These entities will need to

collaborate on advancing the WVERT and its statewide focus on the energy and chemicals

and materials industries. One entity would be established to “steer” and provide funding for

the WVERT programs, while the other entity would “row” and conduct the day-to-day

activities of WVERT and carry out its proactive business development efforts.

The statewide Funding Mechanism Entity will advance the development and transition of the

advanced energy and chemicals and materials industries, which will have a statewide and

programmatic focus. The WVERT Park Corporation, meanwhile, will be responsible for the

growth and development of the WVERT Park in a manner that advances the long-term,

strategic economic development and diversification of the West Virginia and Charleston

regional economy and is consistent with statewide interests and priorities. To avoid

confusion, the Funding Mechanism Entity should abstain from operating programs directly,

but be charged with strategic investments and support for the advancement of the industry

cluster and WVERT. Table 11 lists the specific activities for each entity.

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Table 11: Responsibilities of Funding Mechanism Entity and WVERT Park Corporation

Statewide Funding Mechanism Entity would be responsible for:

The WVERT Park Corporation would be responsible for:

Developing and overseeing the implementation of statewide strategy for energy and chemicals and materials cluster advancement

Promoting the engagement and collaboration among industry, federal labs, and higher education (community colleges, 4-year and research universities)

Grants with a focus on accountability and due diligence: – Funding pilot plant rehab and multitenant

space – Funding program activities of WVERT Park

Corporation beyond direct tenant services – Undertaking the RFP process to select

operator for the shared-use pilot plant facility to work collaboratively with WVERT Park Corporation

– Awarding pilot production equipment and working capital loans

Conducting its affairs “at the speed of business”

Managing the property and campus-wide services that support tenants

Managing the delivery of commercialization services

Recruiting and selling the park to attract and grow tech-based businesses

Marketing and developing customers for pilot plants in concert with operator and other organizations

Developing new facilities and structures financing

Undertaking strategic initiatives in collaboration with others to build and support applied research institutes in the park as well as linkages beyond

GOVERNANCE AND STAFFING APPROACH

The WVERT Park Corporation should be established as a 501(c)(3) entity under the auspices

of the West Virginia Higher Education Policy Commission. This can be accomplished by

amending the existing language under Article 12 of Chapter 18B of the Laws of West Virginia

pertaining to “Research and Development Agreements for State Institutions of Higher

Education,” which allow for such research park corporations to be formed.

Given the set of challenges and opportunities that WVERT will face, it is also recommended

that a corporate-level set of executive leaders with key skills in marketing, technology

development, and finance serve on the board and enable park management to leverage

these critical areas of expertise for the long-term growth of the park and its mission.

This board of the WVERT Park Corporation should include both state-level and Charleston

regional representatives. Suggested composition of the board might be as follows:

Representative from the West Virginia Higher Education Policy Commission

Representative from the West Virginia Department of Commerce

Representatives from WVU, Marshall, and NETL

Representatives from Charleston regional economic development organizations

Top-level industry executives from the energy and chemicals and materials industries

and other key technology sectors found in the Charleston region

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For establishing the Funding Mechanism Entity, Battelle sees several possible options. It

could be a new authorization for the West Virginia Higher Education Policy Commission and

so require no new organizational entity. Alternatively, it could be a separate statewide

authority with representatives from the commission, state economic development

organizations, industry, and higher education institutions. A third option might be a

subsidiary organization to the commission with shared responsibility with the West Virginia

Secretary of Commerce. Even if the commission serves as the funding entity, it will require

special authorization for funding so as not to compete with its other responsibilities.

To ensure that WVERT is managed with a view toward its broader responsibilities for

advancing West Virginia, it is recommended that, to the extent feasible, staffing be done in a

joint and shared manner. In this way, economies of scale could be achieved through

common administrative and financial management staff.

One option could extend to the hiring of a joint chief executive officer for both the WVERT

Park Corporation and the Statewide Funding Mechanism Entity. This is similar to the

approach used by the Virginia BioTechnology Research Park and its closely related Virginia

BioTechnology Research Park Authority. Under this option, it is recommended that boards of

the WVERT Park Corporation and the statewide authority act in concert to hire the CEO upon

consultation with the commission. The CEO will in turn be responsible for developing and

growing the park, consistent with its focus and mission in the larger statewide economic

development context. This CEO will hire staff for each of the organizations, seeking to

maximize efficiencies by having dual responsibilities in key functions that will be overlapping

for the park and the statewide authority such as accounting and financial management.

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Appendix A: Case STUDIES

Illinois Medical District Commission and

Chicago Technology Park, Chicago, IL

OVERVIEW

The 560-acre Illinois Medical District (IMD) is on the city’s Near West Side, about 2½ miles

west of the Loop along Eisenhower Expressway. It is the nation’s largest hospital district, and

three of its four current medical centers27 can trace their or their antecedents’ history on the

site to decades following the Great Chicago Fire of 1871.

IMD encompasses a large institutional core, and a 100-acre District Development area that is slowly being cleared for commercial development and which does not necessarily Figure 6: Illinois Medical District & Chicago

require close connection to the Technology Park

research and clinical buildings. Within the District, the Chicago Technology Park (CTP) was created in 1984 at a time when there was great interest on the part of public officials and economic developers in seeing new companies developed from local research. The mission of the CTP, to assist in the growth

of companies, is accomplished by supplying

fully equipped infrastructure, university

resources, internship programs and custom

designed business development services.

The Chicago Technology Park today consists

of more than 600,000 square feet of lab and

office space, designed to help technology

companies in early development as well as

providing expansion facilities for companies

growing their operations. Park tenants and graduates cover fields ranging from drug

discovery and delivery, pharmaceutical production, medical devices and testing,

biotechnology, genomics, bioinformatics and nanotechnology, to others who collaborate

with the IMD’s premier medical institutions.

27 Cook County Medical Center, Rush-Presbyterian-St. Luke’s Medical Center, University of Illinois at Chicago

Medical Center, and the Jesse Brown VA Medical Center.

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The Chicago Technology Park offers a wide range of facilities, including laboratory spaces,

office suites and labs in graduate facilities and even build-to-suit opportunities for larger

facility needs.

In 1985, the Illinois Medical District Commission established the Research Center, a 56,000

square foot state-run incubator facility. It is currently home to approximately 30 successful

biotech firms, which have their origins in the IMD’s major medical centers and regional

institutions of higher education. For more than two decades the CTP Research Center has

been home to spinouts from the University of Chicago, Northwestern University, University

of Illinois, Argonne National Labs, and other major research institutions.

Firms located in the CTP Research Center have taken advantage of the infrastructure and

custom-designed business support services provided to them in an effort to help them grow

and further develop into successful stand-alone businesses. In addition, the Research Center

also creates a collaborative environment to help start-up firms to apply for government

funding and attract venture capitalists to support their business development.

More than 150 people work for companies in the incubator and another 125 work for

companies that have moved to other locations within the CTP. The CTP has successfully

graduated more than 25 firms, including biotechnology giant Amgen.

For many years, the Chicago Technology Park carried the burden of being the only wet-lab

incubation and post-incubation space serving the complex of research institutions of greater

Chicago region. More recently, there has been recent private investment in a research park

at a former Pfizer campus in suburban Skokie, and on the Chicago South Side, the Illinois

Institute of Technology is developing its own research park.

The research park itself, while an important asset for the development and attraction of

companies to the IMD, has undergone several transformations as the focus of policy

attention has shifted. Currently, it is viewed as ancillary to the main mission of the IMDC,

which by its charter is oriented toward land ownership and development financing to

support the provision of healthcare and medical-related services, as well as to spur

redevelopment of a once-deteriorating area of Chicago.

GOVERNANCE AND MANAGEMENT

Fundamentally, the Illinois Medical District Commission (IMDC) operates as a land

acquisition, development and management entity.

By 1917 the state began acquiring land in this area for what became the University of Illinois

at Chicago. Since 1941 the IMD—then known as the Illinois Medical Center—has been a

special development district in the City of Chicago, governed by a state-chartered

Commission with explicit legal powers to acquire land (including by eminent domain), to

bank it as long as necessary, and then to finance and develop or otherwise convey it.

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In 1995 the organization’s name was changed from the Illinois Medical Center—which

referred mainly to the UIC School of Medicine—to the Illinois Medical District, which

recognized its connection to several other institutions both inside and outside IMD

boundaries.

Under its state charter the IMD is governed by a Commission or board of seven members:

four state appointees, two city appointees and one county appointee. Appointments are

staggered 5-year terms. The balance of power among the varying interests is cited as one of

the organization’s principal strengths in maintaining its vision and commitment to its mission

over the long-term.

Land in the IMD is variously owned by the IMDC itself, or by the individual tenant

institutions, or by those to whom the IMDC has sold or conveyed property.

The Chicago Technology Park’s land was purchased through funding initially provided by the

State legislature and was owned by the IMDC. However, governance of the park itself was by

a separate nonprofit board, which was reorganized in 1991 to give IMDC full responsibility

for managing the Park. The reorganization removed representatives of the medical

institutions, which owned none of the land in the CTP and provided no support for its

operation. The CTP board was then comprised five of the IMD Commissioners.

In recent years, it was determined that as the CTP had no assets of its own (the IMD owned

its land and the University of Illinois owned its principal building) and was required to follow

the same procurement guidelines and the IMDC, there was little justification for keeping the

CTP corporate entity separate for the parent Illinois Medical District Commission.

Accordingly, in 2009 steps were initiated to dissolve the Chicago Technology Park which was

a 501 (c) 3 corporation as a separate operated entity and to revert to direct management of

the Park’s land development and marketing functions by the Illinois Medical District.

FINANCING FACILITIES AND OPERATIONS

The IMDC is able to finance facilities and infrastructure on behalf of all the tenant entities in

the District. Revenue bonds are the primary financing mechanism, as the various tenant

entities can support the lease payments to the IMDC to retire bonds. The IMD Commission

uses state appropriations when available to support land acquisition but otherwise lives

within an operating appropriation of less than $200,000 supplemented by self-financing

most activities. Apart from capital projects, the typical annual operating budget for

operations is less than $250,000

The IMDC has incentives that can be used to attract new companies / development,

including Federal Empowerment Zone designation (helps to get low interest bonds) and

State Enterprise Zone status (allows forgiveness of sales tax on constructions, can reduce

cost by 10 percent). The IMDC also has the ability to do TIF financing, to apply for a County

government freeze on taxes, and other incentives.

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The original strategy of IMDC was to give away land it had banked, in order to encourage its

use by research institutions or private developers. Reversionary deeds were often used,

although when it came time to reclaim property that was being inappropriately used or not

developed, the IMD Commission found that it had to offer fair-market value in any case.

More recently, the development strategy has re-oriented to long-term (60 to 90-year) land

leasing, which is intended to generate cash flow necessary for further growth.

During the 1980s and through the 1990s, the IMDC served as real estate financing vehicle for

the goals and objectives of the University of Illinois Chicago Medical Center’s technology

commercialization interests. The Chicago Technology Park was one result and experienced

rapid growth in its first three years, with the founding of Amgen and the initial facilities taking

place there with support of an $8.6 million line item grant from the State. The IMDC originally

financed the Research Center in 1985 and recently gifted it to the University of Illinois.

The IMDC also financed and operates Enterprise Center I, which consists of 20,000 square

feet of combined laboratory, CGMP manufacturing, and office space, and Enterprise Center II

which has 15,000-square-feet. Enterprise Center II opened in 2003, was built as part of the

Illinois Venture TECH program at a cost of $3.3 million. Both facilities are fully leased at this

time. In 1987 IMDC facilitated the financing of a 70,000 sq. ft. research building that now is

owned by the University of Illinois and houses both university and private industry tenants.

After some years of stagnation in the Park’s development, the IMDC floated a $40 million

General Obligation bond issue in 2008 through the Illinois Finance Corporation that would

allow it to invest speculatively in ways that revenue bonding would not support. This is

described as the largest general obligation bond issue authorized by the governor to any

entity other than the state government itself. It allows IMD to reclaim and redevelop

properties currently underutilized or in inappropriate use.

The IMDC’s original intent had been to continue build out of the Technology Park, with plans

to develop a new specialized facility devoted to plant sciences and drug development as well

as expansion space for Research Center graduates. The intended project was thwarted by a

local political conflict over land use within the District, and the project has been shelved.

Instead, the funding will be used to develop a Medical Mart project and a Verti-port (medical

heliport) as well as ancillary retail functions.

As a result, the IMDC’s current philosophy is to remain as a steward to the land within the

Technology Park, to provide the supporting environment, but to look for private investment

(from developers or companies) to initiate future real estate projects within the Park.

The IMDC’s CEO notes that the Commission was never intended to be the sustaining

management entity for the Technology Park—only to jumpstart it 20 years ago. The IMDC

currently looks to the University of Illinois Chicago as the primary force in directing the

Technology Park’s commercialization mission, noting that the IMDC’s core mission since 1941 has

been real estate management for the major district entities. It does not operate with an

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economic development focus, nor has it taken on the mission of growing the Life Science

industry for the State. The Commission is unlikely to make further investments in the park except

for shared facilities, such as parking. However, as owner of the land remaining in the Technology

Park, the IMDC continues to encourage the attraction of new tenants and the growth of existing

tenants, and all of its real estate development incentives are available to companies wishing to

locate within the park or to developers wishing to construct facilities there.

While no longer a legal entity, the Chicago Technology Park brand and location still exist. 28

However, organizationally, the Park does not have any dedicated staff separately from the

staff of the Illinois Medical District Commission. The IMD staff are focused principally on the

organization’s core real estate financing, development and management functions for the

district as a whole.

An IMD District Security Group combines the public-safety operations of the several institutions.

BUSINESS DEVELOPMENT & COMMERCIALIZATION SERVICES

Initially, the IMDC financed construction of the 56,000 square foot Research Center

incubator building for the University of Illinois Chicago Medical Center (1985), and operated

it from a real estate standpoint until a year ago. The University allowed tenant companies

access to University research and services, including animal testing and the library. However,

the IMDC incurred ongoing losses in a range of $300,000 to $500,000 per year and could not

sustain this, so has turned the building ownership over to the University.

The University of Chicago Illinois now serves as the main source for commercialization

expertise and capabilities within the Chicago Technology Park. Since 2004 the University of

Illinois has restructured its approach to managing all of its research parks and

commercialization activities under the System, creating a Vice President for Economic

Development to whom the Vice Presidents of Research at the various campuses report.

During the 1990s the IMDC became fiscal agent for ITEC-Chicago, one of a network of state-

supported Illinois Technology Enterprise Commercialization Centers. ITEC is life-science

focused and is intended to support creation of spin-offs from UIC and other resident

institutions in the district.

ITEC-Chicago is managed in partnership with University of Illinois Ventures, a commercialization

company wholly owned by the University of Illinois system. The ITECs are generally equipped

with limited budgets to make pre-seed investments in university spin-offs. The ITEC will also

provide commercialization support to startups other than spin-offs.

University of Illinois Ventures also acts as managing general partner of a privately financed

pre-seed investment fund with this same purpose.

28 See: http://www.techpark.com/about

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Virginia Biotechnology Park, Richmond, VA

OVERVIEW

The Virginia Biotechnology Research Park is located in downtown Richmond on 34 acres,

adjacent to the Virginia Commonwealth University Medical Center. The research park was

incorporated in May 1992 as a joint initiative of Virginia Commonwealth University (VCU),

the City of Richmond and the Commonwealth of Virginia. The genesis of the research park

was to anchor a broader biomedical development strategy for Richmond based on the

presence of the Medical College of Virginia in downtown Richmond and involving a highly

active public/private partnership.

The Research Park was developed largely on surface parking lots to the northwest of the VCU

Medical Center. The initial land to start the Research Park was provided by the City and VCU,

but interestingly, a substantial amount of land within the established Research Park area is

still in private ownership—and the state has been assisting in funding the acquisition of land

as needed.

This site is also close to the major financial, utility and other institutions which remain

downtown. The Medical College of Virginia Medical Center is vertical and compact and

located at the north east edge of the Downtown. Hospital construction has continued in the

Medical Center, but the tendency has been for it to remain very concentrated. Because of

the compact nature, the key buildings of the research park remain a convenient walk from

the key research and clinical buildings in the Medical center.

With more than 1.1 million square feet of space in nine buildings, the companies in the Park

now employ more than 2,000 scientists, researchers, engineers and technicians,

representing a capital investment of more than $525 million. Ultimately, the Park will

contain more than 1.5 million square feet of space and will be an employment center for

more than 3,000 life science professionals. Currently, the Park is home to more than 57 life

science organizations, including research institutes of VCU, state and federal laboratories,

more than a dozen early and mid-stage ventures, and multinational companies including a

number of international bioscience companies from the U.K., France, Germany, Scandinavia

and Israel. The Park offers educational programs, scientific speaker series, social events and

community outreach initiatives to bring companies together, promote innovation and create

an exciting and collaborative work environment.

The Park also has two bioscience business centers designed to support life science

companies at various stages of their development. The Virginia Biosciences Development

Center works with start-up and early-stage companies and has worked with more than 63

biotechnology start-ups since inception. The Virginia Biosciences Commercialization Center

can assist companies with market entry of their products and services.

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Richmond’s biomedical strategy brought together a number of public and private entities

who remain involved in the governance of the research park. 29

The key partners included:

Virginia Commonwealth University’s Medical College of Virginia—VCU/MCV has provided

land, financial and staff resources. The University made possible the development of a

100,000 square foot spec building by signing a master lease guaranteeing occupancy. This

master lease provided the Authority with the needed security for the sale of the bonds. The

University currently occupies 30,000 square feet in that building. VCU/MCV also provides

access to its numerous medical and scientific faculty as a resource and potential tenant pool

for the incubator.

City of Richmond—The City of Richmond has provided land for the park, designated the land

upon which the park resides as an Enterprise Zone and offers tax abatements and tax credits.

The City also constructed the Park’s main parking garage.

State of Virginia—Perhaps the single most important input of the State of Virginia was the

creation of the Virginia Bio-Technology Research Park Authority. The State has also played

the key role of authorizing the issuance of bonds as well as providing a R&D tax credit.

Richmond Renaissance—This private business leadership group played an active role in

bringing together the key institutions and ensuring broad political support for the initiative.

Richmond Renaissance was a key funder of much of the early operating expenses, sharing

that responsibility with the suburban counties. Perhaps and even more important role of the

business leadership was the leverage they exerted on the state administration and the state

legislature to create the research park building authority and include the biotechnology

center in the state bond issue

Surrounding Suburban Counties—The surrounding counties embraced the project in its

early stages and were another key funding source for early operating expenses, even though

they would receive no direct tax revenue from development in the park. There have been a

number of biomedical company locations and expansions in the counties related to the park

effort.

29 Supporting documents to obtain where available and applicable:

Articles of Organization/Incorporation showing powers and authorities

Bylaws show how the Board is organized, and officer roles

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Greater Richmond Partnership—A business marketing and recruiting organization led by a

public-private partnership of business leaders and local government that is involved in

business attraction for the Richmond region. They are the outreach marketing and incentive

packaging guys, with a large budget and a close working relationship with the Virginia

Economic Partnership, their state counterpart.

The result of these key organizations coming together was the creation of two ongoing

development entities for supporting the development of the Research Park and biomedical

industry in Richmond.

Virginia Bio-Technology Research Park Authority. The Authority is a political sub-division of

the State and is responsible for the issuance bonds for the purchase of land and building

construction, the acquisition of real estate and the development of real estate including

building speculative space. Under statute, the Board of Directors consists of not less than

nine or more than 15 members of which three are the President of VCU, the Mayor of the

City of Richmond and the Secretary of Commerce and Trade for Virginia. The Governor is

responsible for appointing the remaining members of the Board of Directors.

Virginia Bio-Technology Research Park Corporation. A 501(c) 3 corporation organized and

operated exclusively for scientific, educational, and charitable purposes. Its Board includes

county administrators of surrounding jurisdictions, business leaders from the Richmond

region and bioscience representatives.

There are common members of both Boards including the President of VCU, the Secretary of

Commerce and Trade for Virginia and the Mayor of the City of Richmond. Currently, the

President of VCU serves as Chairman of both Boards.

The Authority shares the same staff as the Virginia Bio-Technology Research Park

Corporation. So, the Executive Director of the Authority is the President and CEO of the

Research Park Corporation. Similarly, the Treasurer is the same for both organizations.

This combined staff then is responsible as developer and manager of the Park including:

acquisition of land, site improvements, building or contracting construction of the facilities,

day-to-day incubator and park operations, marketing, and leasing the space.

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FINANCING FACILITIES AND OPERATIONS30

The Virginia BioTechnology Research Partnership Authority (Authority), which began

operations effective July 1, 1993, provides a mechanism for financing construction of the

BioTechnology Research Park through bond issuances and other approved means. Virginia

Bio-Technology Research Park Authority has issued bonds for construction of each of the

Parks buildings including $5,000,000 to build Biotech Center with the incubator, conference

facility and park offices, $15,000,000 to build the 100,000 square foot Biotech One and $34

million to develop Biotech Two, a 137,000 square foot facility built to house the State

Division of Forensic Science and Office of the Chief Medical Examiner on a long-term lease

with the Park.

The University has provided approximately $13 million to $15 million in development

funding and land donation support. The University also secured the development the Virginia

Bio-Technology Research Park Corporation first building of 100,000 square foot spec with a

University master lease which enabled the Authority to raise the bond financing.

Early operational funding support came from the surrounding counties and the Richmond

Renaissance, who together committed to covering up to $300,000 a year in operating

expenses.

The City of Richmond’s funding support has included land donation and Enterprise Zone

benefits and construction of parking structure.

From the most recently available audited financial statements of the combined activities of

the Authority and the Corporation, the Virginia BioTechnology Research Park and its

Authority have earned sizable net operating incomes in both 2007 and 2008 of $958,521 and

$1,033,025, respectively. The operating expenses were $2.6 million in 2007 and $2.7 million

in 2008.

PERFORMANCE METRICS

Following its incorporation in 1992, the Park officially opened in December 1995 with the

opening of its first building, the Virginia Biotechnology Center, which was the state’s first

incubator dedicated exclusively to bioscience companies.

Today the Park is home to more than 55 bioscience organizations, including several with

international ties; employment exceeds 2,000 scientists, engineers and technicians in the

Park’s organizations.

30 Supporting documents to obtain where available and applicable: 990 Returns; annual reports

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Investments in the Park’s facilities exceed $525 Million in a nine facilities totaling 1.1 MSF,

listed below. At full build out, 1.5MSF are projected with 3,000 employees.

Table 12: Virginia BioTechnology Research Park Facilities

Facility Size and Functions Occupancy

Virginia BioTechnology Center

27,000 sf incubator and administrative facility Space Available—Wet Lab Suites and Offices

BioTech One 100,000 sf multi-tenant wet lab and office facility

Space Available—Wet Lab Suites and Offices

BioTech Two 131,000 sf facility for Commonwealth of VA Fully Occupied

BioTech Three 35,200 sf office facility for VCU Health Systems Fully Occupied

BioTech Five 13,500 sf research and office facility Fully Occupied

BioTech Six 191,000 sf facility for Commonwealth of VA Fully Occupied

BioTech Seven 80,000 sf office facility and data center for UNOS Fully Occupied

BioTech Eight 76,000 sf multi tenant wet lab and office facility Fully Occupied

BioTech Nine 450,000 sf research center Fully Occupied

BUSINESS DEVELOPMENT AND COMMERCIALIZATION SERVICES

The Virginia Biotechnology Research Park has formed two bioscience centers for the specific

purpose of helping companies navigate these business challenges, from the earliest stages of

formation through JVs, mergers and acquisition or even IPO. Recognized for their capabilities

and innovative approach, the VBDC and VBCC are designed to complement the Park’s

facilities and strong scientific community.

These two bioscience business centers support life science companies at different stages of

their development.

The Virginia Biosciences Development Center works with start-up and early-stage

companies and has worked with more than 63 biotechnology start-ups since inception. The

Park’s business incubation program, the VBDC, was designed to assist start-up and early-

stage companies located in its 27,000 square foot incubator facility. Since late 1995 when it

opened, 63 companies have started at the Park, including three publicly traded graduates:

Allos Therapeutics, Commonwealth Biotechnologies and Insmed Pharmaceuticals.

Functioning as a business accelerator within the Park’s incubator, the VBDC offers bioscience

startups access to a range of services, including: discounted professional services, tailored

business mentoring boards, and entrepreneurial education programs, one-on-one consulting

services, networking opportunities, support services and access to Executive MBA teams

from Virginia Commonwealth University (VCU) and area business schools are also available

and designed to significantly reduce risks for new companies. Companies apply for space in

the incubator, and if accepted, participate in a formal incubation program. The Center uses a

web portal to solicit and screen applicants for its programs.

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The Virginia Biosciences Commercialization Center assists companies with market entry of

their products and services. Incubation is a crucial step in growing a successful bioscience

company; however, after incubation companies still require assistance to continue reaching

critical milestones. The VBCC, created to satisfy this need, provides considerable

commercialization expertise in bringing later-stage companies through commercialization to

joint venture, M&A or IPO exits. The VBCC staff can develop a tailored business and

commercialization strategy including reimbursements, market validation through national

clinical leadership, clinical product launch, and strategic partnerships with industry leaders.

Bioscience companies working with the Commercialization Center benefit from the local

scientific and clinical community and pro-active Fortune 500 business partners who have

significant market access and penetration in U.S. and global healthcare products and

services.

On a regional basis, the programs and impact of the Park are designed to extend beyond the

confines of the Park. This is accomplished through formal agreements and nearby

Chesterfield County and Henrico County for the joint development and marketing of

alternative sites to the main campus located next to the VCU Medical Center. The satellite

parks give bioscience companies a suburban site option while maintaining affiliations with

the Biotech Park and Virginia Commonwealth University. In addition, the Virginia

Biotechnology Research Park works with the Greater Richmond Partnership and its regional

partners, including the city of Richmond and the counties of Chesterfield, Hanover and

Henrico, to attract life science companies to the region and promote greater Richmond as

“the New East Coast Center for Biosciences.”

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Centennial Campus of North Carolina State University,

Raleigh, NC

OVERVIEW

The Centennial Campus of North Carolina State University31 is a green field development less

than 2 miles from downtown Raleigh. It is sited on the grounds of a former state mental-

health campus (comprising a hospital and therapeutic farm) centered on Lake Raleigh, quite

close to the main campus of NCSU. Assembled in phases with an additional purchase of land

owned by the Diocese of Raleigh, Centennial now totals 1,334 acres including a separate,

non-contiguous parcel of 214 acres at the veterinary school campus being developed as

“Centennial Biomedical.” NC State has no medical school.

The development of Centennial Campus dates to 1984, when Gov. Hunt conveyed 355 acres

of the former Dorothea Dix Hospital to the UNC system. The second 450 acres was added by

Gov. Martin in 1985. In addition, the NCSU Foundation bought 200 additional acres from the

Diocese of Raleigh. In 2002, 214 non-contiguous acres already owned by the UNC system on

behalf of the NC State College of Veterinary Medicine were renamed “Centennial

Biomedical” and integrated into the Centennial project.

Centennial was envisioned from its earliest days as a master-planned, live-work environment

that would embrace a “campus of the future” concept that co-locates both university

facilities and corporate “partners.” Therefore, from the beginning, the campus development

framework has been strongly aligned with the university’s mission and goals. Centennial

Campus—as its name suggests—is much more a mixed use setting designed to integrate

private partnerships with the University versus standing as a narrowly focused research park

enterprise.

NCSU has always insisted that non-university tenants at Centennial—whether in university-

owned or privately developed structures—identify ways in which they will partner with the

university, such as by sponsoring research, hiring students or faculty, commercialization

university IP, or sharing laboratory facilities.

NC State’s strategic research initiatives fall into four main areas: Health & Well-Being; Energy

& Environment; Educational Innovation; and Safety & Security. While partner companies and

organizations on the Centennial Campus run the gamut of scientific and technological

diversity, several areas of research and development stand out, including green energy and

smart grid technology, biotechnology and biomedical research, nanotechnology and

advanced materials, environmental health, smart systems and IT and innovative education.

31 See http://centennial.ncsu.edu.

http://centennial.ncsu.edu/

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The campus currently includes 32 buildings totaling approximately 3 million square feet of

constructed space. Of this, approximately 2 million square feet are directly occupied by

university functions and 1 million are home to external entities (businesses, government,

non-profit organizations). The latter set of buildings that comprise the 1 million square feet

can further be divided into approximately 350,000–375,000 square feet that are directly

controlled by the university with the balance being controlled by private developers.

Together, these facilities house some 60 corporate, government or non-profit partners and

more than 75 NC State research centers, institutes, laboratories and departmental units. The

entire College of Engineering will be eventually located at Centennial. The Centennial

campus currently includes 2,470 employees of corporate and institutional partners; 1,350

university faculty, staff and post-docs, 3,400 university students.

The campus also includes recreational, retail, and residential components, as well as a public

middle school, transit infrastructure and an 18-hole golf course. Other facilities currently

under construction include the James B. Hunt, Jr. Library, a 200,000Library to support

multidisciplinary research and teaching activities on Centennial Campus in the areas such as

science, engineering, information and communication technologies, textiles, advanced

materials and biotechnology. Also an executive conference center and hotel is planned as a

privately developed complex that will sit across from the Lonnie Poole Golf Course and

adjacent to Lake Raleigh.


The original vision and conception for the Campus has been as an extension of the University

environment, designed to strengthen its interface with the business sector and with the

surrounding community. Centennial is also fully integrated with the University through its

governance structure and approach to management and operations.

The entire site is on land now owned by the state on behalf of the University of North

Carolina System, and designated for special use as the Centennial Campus by state law,

which also authorizes issuance of revenue bonds to finance development costs. Therefore all

governance is by NC State University itself through its Board of Trustees, subject to oversight

by the UNC System Board of Governors.

Following from the Governance powers and mechanisms that are imbedded within the

University itself, the day-to-day operations of Centennial Campus likewise are directly

administered by the University. In contrast to most research parks, there is no unified “park

management” or “park CEO”. Rather, Centennial is operated under a bi-furcated structure

that consists of:

A Centennial Campus Partnership Office reporting to the Vice Chancellor for

Research and Graduate Studies; and

A Centennial Campus Development Office reporting to the Vice Chancellor for

Finance and Business.

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These two parallel operations have been described by university personnel as being similar

to a “stereo” versus “monaural” audio system: the Partnership Office handles all corporate

partnering, faculty research, marketing, and communications inquiries; while the

Development Office handles all private development, leasing, construction, real estate,

building maintenance, and architectural functions, as well as community event inquiries. This

university-driven corporate structure would not be well-suited for traditional research parks

operated under a narrower and more focused economic development agenda, Nonetheless,

through effective internal coordination of missions—NC State has used this approach

successfully to propel the development of the Campus to its present time—with notable

achievements including the attraction of major national and international companies to the

establish partnership operations at Centennial.

FACILITIES FINANCING AND OPERATIONS

A special purpose 501 (c) (3) corporation has been created named “NC State University

Partnership Corp.” This entity serves as a holding company for five or six special purpose

LLC’s that were established over the years for specific development projects that stand apart

from the main missions of the Campus or which are located at satellite properties that are

owned by the non-profit entity. These include for example the golf course development, the

conference center hotel and the new Chancellor’s residence.

In one instance, the University foundation purchased an additional 70 acres that are held in

separate ownership from the Centennial Campus. These are considered “private” lands that

can be developed outside the requirements of State procurement rules, and that also can

allow construction projects to be permitted under a municipal permitting process that is

more efficient and user-friendly.

While the Partnership Corporation entity is not utilized frequently or for the bulk of the

Centennial Campus development, it has also served as a mechanism for parcels to be

swapped between the main 1000+ acre Centennial Campus land holdings and the 70 acre

land holdings—thereby allowing the privately developed conference center hotel to be

developed on a lakefront site that originally stood within the State’s land holdings.

Relative to the central thrust of the Centennial Campus, development and financing

mechanisms have varied widely by class of building constructed:

State Funding through Appropriations or State General Obligation Bonds32

Academic buildings designed for the relocation or expansion of NC State colleges

Infrastructure

32 Voters approved a $3.1 billion bond in 2000 for improvements throughout the UNC system.

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Certain state agencies and other miscellaneous public uses

University Funding through Revenue Bonding capacity

Research Buildings I-IV designed to house both rent-paying institutes and centers and some

non-profit or government tenants, to avoid breaking private-use restrictions.

Partners I and II designed to house rent-paying private-sector partners. These buildings were

segregated by use—laboratories in I and offices in II.

One of the two single-tenant “corporate” buildings was developed by the University for

certain North American Operations of ABB, a partner of the engineering school

Privately financed by developers on 99-year land leases

Venture Buildings I-IV and Venture Center, a cluster of five office buildings developed by

Craig Davis Properties33 and subsequently sold to GE Pension Trust

A wet-lab analogue being developed by Keystone.

A second single-tenant building was developed for Lucent but is now occupied by Red Hat,

also a partner of the engineering school

Housing—market rate condos by private developers.

Other

One major facility, a biotechnology manufacturing training and education center, is being

funded by a grant from Golden Leaf Foundation, the state’s fund to assist communities

adjusting away from dependence on tobacco.

Aside from the state authority for revenue bonding, Centennial in its current model is highly

dependent on the flow of state resources for academic and government-agency buildings

that serve as anchors for commercial tenancy, and all state appropriations must compete

with other potential uses, particularly the rehabilitation of older buildings on the main

campus.


Centennial Campus is home to the NCSU Technology Incubator, operated through the

University’s Industrial Extension Service. Its stated goals are to focus on economic

development for the state of North Carolina by supporting and stimulating entrepreneurship

and new technologies. Tenants are presented with opportunities for give-and-take among

private sector, students, and faculty and research centers with industry and government

counterparts. They receive services and benefits such as the following:

33 See http://www.pearyhs.org/text/cdavis.htm.

http://www.pearyhs.org/text/cdavis.htm

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NC State University Affiliate status and privileges, including

Access to campus-wide conference room facilities, teleconferencing rooms,

and TV studios

Access to gymnasium, libraries and campus mass transit services

Publicity in campus publications

Access to University researchers, students, and staff

Access to business planning and financial advice

Access to resident corporate and patent attorneys

Relationship with NC State Industrial Extension Service

Technical, engineering and management resources

Access to resources of NC State University

Technology development and commercialization support

Management counseling

Funding recommendations

Assistance with publicity.

The 14,000 square foot Incubator is housed in the Corporate Research I Building on the

Centennial Campus (its second home since the Campus was developed). Its facilities include

18 individual Class A offices plus 10 wet chemistry laboratories and the following features:

Office rents between $400–$1100

Laboratory spaces range between $1470–$2210

Rent includes:

Shared administrative services

High speed internet connection, local phone service

Water, electricity, heat, A/C

Shared conference rooms & business center

Shared lounge area with kitchen facilities and coffee service

Additional fees are charged for services such as fax (confidential incoming faxes);

copiers; additional administrative/meeting planning services and parking.

Additionally a business incubator for student entrepreneurs called “The Garage” has opened

on Centennial Campus. Outfitted by Red Hat and run by the Entrepreneur Initiative, the

former office space in the Research II building is designed to help students live, breath and

think new ideas. The location is designed to be open 24/7.

While this incubator model has been in operation for years—working in tandem with the

University’s Office of Technology Transfer—the University Chancellor recently launched an

initiative designed by 2012 to double the number of startup companies launched each year,

thereby also creating much-needed jobs for workers statewide.

NC State’s new innovation “hub,” called the Springboard Innovation Partnership Portal, will

play a key role in achieving this goal by facilitating business partnerships and speeding up the

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pipeline through which research becomes reality. Springboard is co-located in the Research I

building along with the Technology Incubator, and where it is forming an integrated services

delivery capability with the Incubator and the Office of Technology Transfer along with other

university units, such as the Entrepreneurship Initiative, Industrial Extension Service, Center

for Innovation Management Studies, and others.

In its web site, the University openly acknowledges that current silos and fragmentation of

service delivery are holding the university back from meeting its full potential for

commercialization, and an obstacle they are seeking to overcome through this initiative. The

intent is to increase the impact of these programs and services through increased

coordination.

The aim of the Springboard portal is to create a “one-stop shop” for researchers who want to

find collaborators or market their inventions, businesses looking for creative solutions, and

faculty, staff, and students who want entrepreneurial training.

In addition to the goal for doubling the number of startup companies launched by 2012, the

University also is seeking to increase its sponsored research by 50 percent by 2015, and to

transform the ‘innovation experience’ at NC State. As a further way to enhance innovation

and speed the pipeline, the Chancellor has pledged $2.5 million over 5 years in a special

Chancellor’s Innovation Fund designed to help researchers bridge the monetary gap that

may prevent them from getting their ideas to market.

Additional details on the Springboard initiative taken from the program’s web site follow

below.

Springboard

Springboard is a network and engagement center that will:

Provide a single, comprehensive point-of-entry for internal and external engagement

and collaboration—in support of this goal, manage the Concierge Office to increase

access and facilitate relationship management.

Serve as a strategic, structured framework for innovation and entrepreneurship

services, training, and facilities for existing firms and new ventures.

Catalyze full integration, collaboration, and cross-linking of innovation and

entrepreneurship components.

Streamline processes and points of contact to allow successful and efficient

completion of research and innovation objectives and create repeat business.

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It is also an academy that will:

Develop entrepreneurship boot camps for areas aligned with

NCSU strategic research areas.

Develop “pitch review” teams to prep student/faculty pitches.

Manage the Innovation Training and Outreach Office to advance

innovation and entrepreneurial skills of the driving force behind

innovation—our faculty, postdoctoral fellows, and graduate students.

And an innovation resource center that will:

Develop funding model to seed student ventures.

Develop funding model to seed faculty ventures.

Administer the Chancellor's Innovation Fund: established in September 2010,

this recurring fund provides proof-of-concept and early seed funding to bring

discoveries to the disclosure, licensing, and/or start-up company stage. First call for

submissions will occur in spring 2011.

And a Concierge Service provides help with…

Subject matter experts

Research sponsorship opportunities

Access to our IP portfolio

Executive education and training

Innovation events and networking

Patentability of IP

Business plan development support

Prototyping and scale-up

Startup company support

Venture capital opportunities

Seed funding

Recruiting grad students

Student opportunities

Innovation partners on Centennial Campus

Research center information.

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Delaware Technology Park, Newark, DE

OVERVIEW

Delaware Technology Park (DTP) is recognized as a model for a self-sustaining research park

that has achieved research excellence, contributed significantly to the regional economy and

attained global attention despite its relatively small size of 40 acres and without benefit of a

“big bang” investment. In 2005, DTP was awarded the Research Park of the Year for North

America by the Association of University Research Parks.

Adjacent to the University of Delaware on former farmland owned by the University of

Delaware, the Delaware Technology Park is part of Delaware’s commitment to attracting

both established and promising high-tech companies. Its combination of government,

academic and industry partners provides a showcase for the area’s commitment to fostering

new and emerging business. Through the clustering these businesses, Park management can

more readily provide shared services and resources while taking advantage of the benefits of

a nearby academic community.

The major categories of focus for DTP are in life sciences, IT, advanced materials and

energy/environment. These are built upon the historical strengths of the regional industry

and academic institutions. Technology based businesses fit well with Delaware’s desire for

controlled growth, high income jobs and a sustaining quality of life for a small state.

DTP is supported by State and Congressional government representatives who provide

critical continuity by taking a long-term view of economic development. Likewise, DTP’s

approach to technology-led economic development has consistently linked the public,

private and academic sectors. This stable environment and collaborative approach has

permitted Delaware to develop new technology opportunities, while assisting technology

businesses to transition from incubation to mature growth stages. As the only research park

in Delaware, DTP has evolved as the “hub” for technology related issues for all the State—

education, research, policy discussion, economic development and networking.

DTP is the preferred choice for the location of spinout companies from the University of

Delaware or the private sector (such as DuPont) due to its proximity to transportation

infrastructure, investment capital and access to 80 percent of the U.S. pharmaceutical and

biotechnology industry. DTP has been particularly attractive to companies with international

ties.

Financial investment in, and recruitment of research excellence by the State, the private

sector and the University of Delaware have added a high growth, knowledge intensive

dimension to the Delaware economy. Mature ‘smoke-stack’, oil based industries such as

polymers, fibers, chemical processing are being gradually supplanted. The new, knowledge-

based businesses in Delaware are focused on the understanding, cure and prevention of

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disease, improved pharmaceutical services, enhanced agriculture opportunities, biomaterials

and biofuels, intelligent decision software and renewable energy initiatives.

One of the premier features in DTP is the University of Delaware’s Delaware Biotechnology

Institute (DBI). It is situated close enough for faculty to have dual roles as teaching professors

on campus and while also performing interdisciplinary collaborative research all within DBI.

At the core of DTP’s success is a cadre of well-trained, creative and productive scientists and

business managers, who excel in an interdisciplinary environment of stimulating colleagues,

high quality facilities, and a pro-business government infrastructure. Such an environment

helps produce an entrepreneurial culture: success is evident in federal funding, generation of

valuable IP and product commercialization. These results encourage partnerships with more

established companies.

Since the founding of DTP, starting with the Task Force in 1986 and its first building in 1993,

DTP/DBI has enabled about 16,000 new jobs in the park and surrounding community with 54

companies as tenants in DTP and 20 companies spun out. More than $275 million has been

invested in five buildings and equipment in DTP and a sixth is in the planning stage. More

than $310 million of federal/state grants have been won by DTP companies and DBI.


The Delaware Technology Park grew out of a High-Technology Task Force created by the

administration of then-Gov. Michael N. Castle in 1986. The Delaware Technology Park, Inc., a

501 (c) 3 corporation, was established as the singular vehicle for governing, directing and

managing all aspects of the park’s operations.

The organization represents a strong partnership between the State Government, the State’s

flagship university, and the private sector. Bylaws call for regular seats to be held by the

head of the Delaware Department of Development; the University (currently the University

President) and the Chairman / CEO. Additionally, the Governor appoints six representatives

from the private sector, based on recommendations by the Chairman.

The Board meets quarterly to address high-level policy and major transactional issues.

However, the Board delegates considerable authority to the Chairman/CEO—who runs park

operations with assistance from a small staff and outside contractors.

The park entity works closely with the State and University on individual issues ranging from

business recruitment and financing of facilities, to establishment of academic research

relationships and commercialization opportunities.

The Technology Park Corporation manages all functions of the research park. This includes all

aspects of the land development process, management of infrastructure and facilities,

business development and marketing, and the various technology commercialization

activities that take place at the park (see below).

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The Delaware Technology Park has embraced a wide range of partnerships with universities,

companies and technology-based economic development organizations across the region.

The park’s management strongly embraces a regional view of its assets and opportunities in

representing the park nationally and internationally for business recruitment. The park is

directly tied to the State’s economic development efforts through the Director of the

Delaware Economic Development Office serving ex officio on the Park’s Board of Directors.

The Technology Park’s CEO attributes much of the park’s success to the care taken to screen

companies and organizations that are prospective tenants, a process that he personally

leads. Criteria noted in the vetting process include the caliber of the science, the outlook and

strengths of the management, and the intent of prospective tenants to work with the

University and with companies in the park or in the region.34


Following the report by Governor Castle’s 1986 task force, the University of Delaware set

aside 40 acres of property it owned on the eastern edge of its Newark campus for the

creation of the park. The University entered into a long-term land lease with the Delaware

Technology Park, Inc., in exchange for ground rent.

The Park Corporation structures financing for development using a variety of mechanisms

that have varied with the circumstances for each facility. It has leveraged its land holdings

effectively, such that overall financing since the park’s inception is described as roughly

25 percent based on the value of the land and internal investments (state or university); and

75 percent from borrowed funds. However, neither the State nor the University holds any

debt—all financing has been structured through the 501(c)(3) entity.

The Park has not used outside developers for any of its facilities, instead self-developing and

owning each of its buildings. After 50 years the buildings will revert to the University, unless

an exception is created (as has been done for the Fraunhofer Institute, a private research

organization that has located in the park—see below). Five buildings have been developed to

date, and the park is close to full occupancy. A sixth building is planned that will add

additional incubation capacity and also will provide expansion space for the Fraunhofer

Institute for vaccine production.

Once the park was established, the state contributed $6.5 million for construction of its first

building, a 48,000 square foot facility that opened in 1993 and was leased to the

34 The current Chairman & CEO of the Delaware Technology Park, Michael Bowman, was at the time the unit

leader of the DuPont tenant. DuPont, under Bowman’s leadership, later spun the business out in an IPO joint venture with another multi-national corporation and eventually ceased operations at the park. Bowman had also asked by the Governor to become Chairman of the 501 (c) (3) corporation board of directors, and in 1998 he assumed the CEO role in as well. In this regard Mr. Bowman has an exceptional institutional knowledge of the park’s early development, as well as close ties to the regional industry base and hands-on knowledge of many of the technologies that have been the park’s focus. In addition to his corporate experience he also had experience with start-ups, having established two on his own after the IPO of his former DuPont business.

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DuPont Co.’s Advanced Materials business unit. Cash-flow from this transaction has

propelled the financing process since that time and the park entity currently maintains a

reserve fund of $2.5 to 3 million.

Because the next buildings were designed for multi-tenant occupancy they posed greater

challenges in securing financing, which led to an unusual and creative partnership with the

nearby University City Science Center in Philadelphia.35 Lenders were seeking a guarantee for

the loans, which neither the State of Delaware nor the University was legally able to provide.

The Science Center organization, already well-established and with a substantial existing real

estate portfolio, was willing to provide the needed loan guarantee in return for taking an

equity position in the transactions.

Following a model applied successfully at the University City Science Center, three special

purpose LLCs have been established in conjunction with each of the next buildings built in

the park. The LLCs are joint investment/equity plays, with the loans to build guaranteed by

the Science Center. (Recently the LLCs refinanced those loans.) The buildings produce

revenue appropriated according to the established equity split. The original cash equity

position for the Science Center was supported by an interest-only loan from DTP to the

Science Center. The loan was backed by cash flow from DTP’s first wholly-owned building

and is being repaid to DTP over 10 years.

In addition to providing the key to financing these facilities, the partnership underscores the

strong regional orientation of the Delaware Technology Park, which is committed to

capitalizing on the full range of scientific and technology assets of the bi-state area of

Southeastern Pennsylvania and Northern Delaware and not functioning in isolation as a

captive of a single university or locale.

A fifth major facility (and programmatic anchor) resulted from the establishment of the

Delaware Biotechnology Institute (DBI)—a joint venture of the University, the State and

several private corporations. The $15 million, 72,000 square foot building focuses on science

in the areas of Agriculture, Human Health, Environment and Biology, and includes core

facilities that can be shared by faculty or used by outside companies that enter into research

relationships with the University.

To finance the DBI facility, revenue bonds were issued by the Technology Park, backed by a

24-year lease/buy-back agreement with the University. In turn, the University pays rent to

the Technology Park.

Additionally, the University, state and private industry raised $60 million to underwrite the

Institute programmatically, with which they established 4 endowed chairs. To date, faculty

associated with the Institute have brought in some $275 million in federal grants and they

35 The University of Delaware is in fact one of 28 “shareholder” institutions that have invested in the University

City Science Center, which is itself a 510 c 3 corporation.

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continue to pursue new grants. Through this mechanism faculty users are able to pay for fit-

out of individual laboratories and to pay rent, as well as purchase equipment.

Under terms of the bond financing, 20 percent of the building can be used for for-profit

activities; this portion of the space is used for incubating new companies that are spun out of

the university or that come from the nearby region. The incubator operations have been

highly successful and the space is fully occupied.

In recent years, the Technology Park recruited the Fraunhofer Institute, an international R&D

organization based in Germany. Fraunhofer initially occupied space in the Delaware

Biotechnology Institute as they developed their operations. Subsequently Fraunhofer bought

one of the buildings developed through the LLC entity (joint with University City Science

Center). It currently houses some 110 researchers and staff.

All operating costs of the Delaware Technology Park Inc. are paid for out of internally

generated revenues from leases and rents. Overhead costs are kept to a minimum, as the

formal staff of the 501 (c)(3) entity includes only the Chairman/CEO, supported by an

administrative assistant who is a University employee. A total staff complement of eight FTEs

is provided through independent contractors, plus outside consultants or service providers

as needed. Recent annual operating expenses for the Park are in the range of $1.8 million to

$2 million, including 450,000 for general management and the balance for program and

facility related services.

The Park leverages additional technical support or loaned staff assistance on a case-by-case

basis, e.g., PR assistance from the University for the development of marketing tools. The

Park is also able to leverage its relationships with key tenants that have been attracted to the

park over the years, such as the Delaware BioSciences Association, which has collaborated

with the Park on co-branding.


Facilities within the Park are able to accommodate companies in need of wet labs, dry labs,

clean rooms and light manufacturing, in addition to the park-wide fiber optic network and

office space. Delaware Technology Park is also able to accommodate early stage, start-up

companies in need of incubation.

The Delaware Biotechnology Institute acts as a link between academic and private interests

bringing together in one location faculty, graduate students, interns and private

entrepreneurs. Located across the street from the University campus, it promotes close

contact with University faculty for collaboration, encouraging faculty access to basic research

underway at the Institute and to the Institute’s specialized equipment and core facilities. At

the same time, faculty conducting work within DBI promotes a focus on commercialization

and entrepreneurship.

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Within the Institute’s 72,000 square foot facility some 20,000 square feet of space has been

reserved as incubation facilities for companies that may spring from the University or from

within the Institute. The park’s first building, originally leased to a unit of the DuPont

Company, now also functions as an incubator facility; other buildings provide multi-tenant

space in a range of suite sizes.

The University of Delaware’s Office of Economic Innovation and Partnerships (OEIP) enables

outside entities to access the University’s knowledge-based assets and provides UD

personnel support to form partnerships outside the University. OEIP's goal is to establish the

University as a recognized center of invention, innovation, entrepreneurship, partnering and

economic development. It acts as a gateway to the University’s knowledge-based assets in

several areas:

Innovation and Entrepreneurship

OEIP stimulates entrepreneurial thinking among students, faculty and staff across campus.

OEIP supports innovation and entrepreneurship through initiatives such as the Entrepreneur

in Residence program and a lecture series that features nationally and internationally

recognized entrepreneurs and business leaders. OEIP provides University entrepreneurs with

business, marketing, financial & legal expertise to enable commercialization of University

inventions.

Partnerships

OEIP develops a network of partnerships that creates value for the University and results in

economic development in the state and region. Current partnerships include the U.S. Army

and units at Aberdeen Proving Ground, Strategic Diagnostics Inc. and Christiana Care Health

System's Helen F. Graham Cancer Center, the National Science Foundation through its

Experimental Program to Stimulate Competitive Research (EPSCoR) program, the National

Institutes of strategic planning group, and the Coalition of INBRE (IDeA Network of

Biomedical Research Excellence) States, among others.

Intellectual Property and Asset Development

OEIP develops, leverages and markets the university's portfolio of IP to efficiently capture

value from the IP through new start-up businesses, license agreements, and equity positions.

The Intellectual Property Center within OEIP provides advice and counsel to UD faculty, staff

and students regarding the disclosure of innovations, patents, copyrights, trademarks,

contracts, and other research-related agreements. The Intellectual Property Asset

Development Group is responsible for the commercialization of all IP developed at the

University of Delaware.

Small Business Development Center

OEIP is home to the Delaware Small Business Development Center, which provides readily

available, broad-based resources to the small business and entrepreneur.

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On-site support to the Park’s start-ups is provided through Inflection Point Ventures, which

provides venture capital and business support for early-stage telecommunications, IT, and

electronic commerce companies with the potential to generate rapid growth in revenue,

profitability, and shareholder value. Inflection Point focuses on companies in the

Northeastern and Mid-Atlantic United States that are seeking their first round of equity

financing.

The Delaware Technology Park also is partnered with the commercialization resources of

First State Innovation (FSI). Launched in 2006, FSI is a privately led initiative that focuses on

increasing Delaware's entrepreneurial capacity. FSI has accomplished this by helping

technology-based and early stage businesses find traditional seed capital, alternative

funding, skilled human capital, commercialization assistance, intellectual capital, and other

entrepreneurial resources.

The Park takes an active stance toward involving other State educational and workforce

development institutions in its initiatives, for example, in grant proposals. The relationships

include notably the Delaware State University and the Delaware Technical and Community

College.

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University of Arizona Science and Technology Park, Tucson, AZ

OVERVIEW

The University of Arizona Science and Technology Park sits on 1,345 acres in Southeast

Tucson, Arizona. Almost 2 million square feet of space has been developed featuring high

tech office, R&D and laboratory facilities on 345 acres.

Home to several high technology companies, the Park houses 4 Fortune 500 companies: IBM,

Raytheon, Canon USA and Citigroup, as well as several emerging technology companies

including NP Photonics, and DILAS Diode Laser. The Arizona Center for Innovation,

a technology business incubator, and the UA South, a branch campus of The University of

Arizona, are also located at the Park.

The UA Tech Park contributes nearly $3 billion annually to Pima County's economy and is one

of the region's largest employment centers.

The Park was purchased from IBM in 1994 and has grown from 2 tenants and 1,200

employees to 40 companies and business organizations with more than 7,000 employees.


The mission of The University of Arizona Office of University Research Parks is to create

environments that support and promote research and education, technology innovation and

commercialization and high technology business development and attraction.

The Office of University Research Parks (OURP) has responsibility for the management and

operation of the UA Science and Technology Park (Tech Park), Arizona Bioscience Park (Bio

Park) and the Arizona Center for Innovation (AzCI).

While there is overall management by a University office that has responsibility for multiple

parks, this park is actually operated by the Campus Research Corporation, a 501(c) (3)

corporation with links to the University of Arizona Foundation. The corporation is governed

by a board of, but is essentially controlled by the University and its Foundation.

Associate Vice President for University Research Parks

The University’s Associate VP for University Research Parks serves as the CEO of the UA

Science and Technology Park (Tech Park) and Arizona Bioscience Park (Bio Park) and

president of the Arizona Center for Innovation (AzCI). He is also president of the Campus

Research Corporation (CRC), which assists the University of Arizona in the development,

operation, marketing and leasing of the Tech Park and Bio Park.

The Director of the UA Science and Technology Park also serves as the chief financial officer

of the Campus Research Corporation. He oversees daily operations, tenant services, lease

negotiations, risk management and compliance activities.

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Other staff positions include program, IT financial and administrative positions, which are

generally supported by park revenues; with the exception of the business incubator, which

receives a state subsidy.


The Park contains a sophisticated infrastructure system that includes: steam, de-ionized

water, chilled water and compressed air. The Park also features its own water treatment

plant and a central utility plant that distributes all utilities to tenants on-site. Other services

include on-site emergency management and fire and rescue services, 24/7 security, a full-

service cafeteria and catering, Starbucks and an outdoor recreational center. The transfer

and subsequent management of an infrastructure system from a prior user—which at the

time was already 15-20 years old—has presented both financial and management challenges

for the park corporation over the past 15 years

The initial mechanism for the acquisition of the 1,345 acre property from IBM was a two

phased $98 Million transaction, in which the U of A Foundation issued bonds which were

underwritten by a 30 year stream of lease payments from IBM. With this revenue stream

and the land, the Park then proceeded to develop additional facilities over time.

Subsequent facilities have been developed using traditional development and debt financing

mechanisms, which were challenging in the early stages, until a market could be

demonstrated and established to the satisfaction of area banks and other lenders.


The Arizona Center for Innovation (AzCI) is a business incubator designed to meet the needs

of developing technology companies, particularly in the areas of: aerospace, advanced

composites and materials, IT, environmental technology, life sciences and optics/photonics.

The AzCI’s incubation model is intended to provide companies with practical, hands-on

assistance early in the innovation process, beginning in the research phase, and continuing

through product development to commercialization. This structured approach helps

companies to bridge the many gaps between discovery and commercialization, and to meet

the primary goal of AzCI, which is to increase the likelihood of success for a start-up

company, and achieve it in a shorter amount of time.

AzCI provides a structured program of business development that includes access to first-

class facilities plus coaching, networking and other services. Each company receives

assistance in preparing a business plan, developing products and services, securing financing,

and executing a marketing program. AzCI also has an extensive mentor program available for

active support.

Findings in the report, “Economic Impacts of the University of Arizona Science and

Technology Park Calendar Year 2008,” include the following.

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UA Tech Park tenants paid $593.3 million in direct wages to their employees. The

average wage for a park worker was $85,500 in 2008, more than twice the Pima

County average of $39,900.

Employment at the park has steadily increased since 1997. On average, the UA Tech

Park has added 250 new jobs every year over the past 11 years.

Most of the park's annual growth is the result of additional high-wage jobs for skilled

workers. UA Tech Park employment growth has outperformed the Tucson metro

region, the state of Arizona and the United States.

The park has significantly contributed to the tax revenue base. Ongoing operation

park tenants generated $14.3 million in tax revenue. The park was responsible for an

additional $63.5 million of induced tax revenue. An additional $67,600 in tax revenue

was generated from construction and visitor-related activities. In total, an estimated

$77.9 million in tax revenue from the UA Tech Park tenant and related activities was

distributed to state, county and city governments.

The park is a major regional employment center with approximately 7,000 employees. The

employee base is drawn from the entire metropolitan region, including the towns of Marana and

Sahuarita, with a high concentration in the southeastern region of Tucson. The park is also part of

the Tucson Tech Corridor, which is home to more than 70 businesses including Raytheon, IBM,

Citi, Target.com, Offshore, Arizona Canning Company and Global Solar.

The UA Tech Park is almost fully occupied with 40 businesses and educational tenants. The

park is 98 percent leased and outperformed the Tucson metropolitan market during fiscal

year 2007–2008.The report states, “Facing the current economic recession, vacancy rates of

Tucson Metro and the United States had increased rapidly since the second half of 2007;

however, the vacancy rate at the UA Tech Park had been stabilized in the 2–3 percent range.”

Beyond the measurable economic impacts, the UA Tech Park works as a center for innovation

and technology commercialization, workforce development and community engagement.

The UA Tech Park is moving forward with several new developments identified in its recently

adopted 10 year business and financial plan. The park’s next big ideas include: the

development of a 200-acre Solar Zone to bring aspects of the solar industry together in a

supportive environment for generation, manufacturing/assembly, R&D, education, and

public demonstration, and the development of a hotel and conference center.

The UA Tech Park contributes nearly $3 billion annually to Pima County’s economy and is

one of the region's largest employment centers.

For 15 years, the park has contributed to regional economic development by advancing the

UA’s research mission and its efforts at technology development and technology

commercialization. The park is also home to the Arizona Center for Innovation, a high

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technology business incubator, and three educational institutions UA South, Pima

Community College and Vail High School.

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Appendix B: Economic Impact Analysis

Measuring the Economic Impact of the State of West Virginia

Acting to Retain Ongoing Industry Activities at the Former Dow

(Union Carbide) South Charleston Technical Center

On December 15, 2010, the State of West Virginia will take ownership of the former Dow

(Union Carbide) South Charleston Technical Center and transform it into the West Virginia

Education Research and Technology (WVERT) Park, under the management of the West

Virginia Higher Education Policy Commission. In the long term this initiative by the State of

West Virginia provides an opportunity to establish a signature center for advancing the

state’s long-standing energy, chemicals and materials industries, along with creating a

significant new economic development initiative for the Charleston region.

But from day one, the state’s actions will pay critical dividends for economic development

for the state by retaining 550 high paying jobs, which are located on the site and required

the state ownership in order to keep the site’s highly specialized facilities in operation. These

550 jobs pay an average of $81,900 in wages along with benefits, or a total of $45 million in

wages. Among the industry operations that were retained in the Park by the State of West

Virginia were those of Dow Chemical, Bayer MaterialScience, MATRIC, the HP Data Center

and other tenants (see Table 13 below).

Table 13: Companies Retained at the Former Dow South Charleston Technical Center

Company Employees in Park (FTE)

Line of Business

Univation 10 Specialty polyethylene components sold to end producing customers

Dow PPR&D 90 Poleolefins Process R&D

Bayer MaterialScience 35 Polyurethane product development for memory foam (sold to customers who make products for furniture and automotive applications)

Dow - Site, Tech Support 188 Chemical production, engineering R&D support and licensing

Mid-Atlantic Technology Research and Innovation Center (MATRIC)

100 Contract R&D, spinoffs (in chemicals, energy, environment & life sciences)

WV State University 5 University bioscience lab

Chemical Alliance Zone WV 1 Industry Association w/ business incubator (4 tenants listed below)

Progenesis Technology LLC 3 Providing natural, biodegradable polymers for industrial and medical applications through genetic engineering of bacteria

Gas Analytic Services 2 Analytic services

Kaiser Optical 1 Supplier of scientific instruments

INNO VA 0 TBED organization - satellite office

Fiberworx Office LLC 5 Computer networking & services

HP Data Center 110 Single customer data center (HUD)

Total 550

Source: HEPC and Charleston Area Alliance

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METHODOLOGY FOR MEASURING THE ECONOMIC IMPACT OF RETAINING

JOBS AT WVERT

The 550 jobs that have been retained at the new WVERT Park have broader economic

impacts or multiplier effects on West Virginia’s economy and the generation of state taxes.

Multipliers measure the effects on an economy from a source of economic activity—in this

case, the jobs from the companies able to continue operating at the WVERT Park. The

economic activity generated in the state is greater than the total of direct workers employed

and wages paid by the companies retained at the WVERT Park because of the successive

cycles of spending, earning, and re-spending associated with these jobs.

Battelle measured the economic impact of retaining the 550 jobs at the WVERT Park using

the IMPLAN model. IMPLAN is one of the most widely used models in the nation to analyze

the impacts of companies, projects, or entire industries. The IMPLAN model uses input-

output analysis to measure the impact of money spent on a specific economic activity on the

economy through its linkages to other industries. Input-output analysis measures the flow of

commodities to industries from producers and institutional consumers for any given state or

region. The data also show consumption activities by workers, owners of capital, and imports

from outside the state or region. These trade flows built into the model permit estimating

the impacts of one sector on all other sectors with which it interacts. So, for instance, a

portion of contract research activity of MATRIC goes toward purchasing supplies from other

companies, services from patent and contract lawyers, cleaning services, etc.

Each IMPLAN model uses detailed sector- and region-specific information to estimate

outcomes and gauge potential impacts. The model incorporates detail of more than 420

individual industry sectors that cover the entire regional, state, or national economy.

RESULTS FROM THE ECONOMIC IMPACT ANALYSIS

The IMPLAN model generates several measures of economic impact:

Employment includes both direct employment at the WVERT Park and the jobs within the economy supported by WVERT Park-related business volume (indirect employment).

Income is the total amount of income received by labor in the economy because of the presence and operations of the companies at the WVERT Park, both direct and induced through the multiplier effect within the economy.

Economic Output is the total value of goods and services produced in an economy, and represents the typical measure expressed as “economic impact” in a standard economic impact study.

State and Local Taxes, based on the full multipliers from successive rounds cycles of spending, earning, and re-spending associated with the jobs retained at the WVERT Park.

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These impacts consist of four types:

Direct Effects. The changes in economic activity being analyzed—in this case, the jobs, wages and companies activities at the WVERT Park;

Indirect Effects. The changes in inter-industry purchases, e.g., the purchase of raw materials by a WVERT-based company, in response to the change in demand from the directly affected industries.

Induced Effects. The changes in spending from households as income and population increase because of changes in production.

Total Effects. The combined total of direct, indirect, and induced effects.

The aggregate of the direct, indirect, and induced impacts from the 550 jobs retained at the WVERT Park generate an annual total of 1,646 jobs, $627 million in total economic activity and $15.6 million in state and local taxes (see Table 14 below).

Of the $15.6 million in annual state and local taxes generated from the retention of the 550 jobs, $13 million are state taxes, including personal income taxes, corporate profits tax, payroll taxes, and sales taxes (see Table 15 below). 36

Table 14: Annual Economic Impact of the 550 Jobs Retained at the WVERT Park ($Millions)

Impact Employment Output State/Local Tax

Revenue

Direct Effect 550 $426.6 m $6.5 m

Indirect Impacts 477 $135.7 m $4.5 m

Induced Impacts 619 $64.3 m $4.6 m

Total Impact 1,646 $626.6 m $15.6 m

Source: WVERT employment data provided in consultation with HEPC and Charleston Area Alliance and Battelle calculations using West Virginia IMPLAN I/O tables.

36 These impacts are generated by IMPLAN’s input-output model, which is structured to capture

interrelationships of different sectors in the state’s economy.

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Table 15: Breakout of Annual State and Local Taxes as Part of Total Economic Impact of 550 Jobs

Retained at the WVERT Park

Taxes State Local

Sales Tax $5.495 m

Personal Income Tax $2.160 m

Dividends $0.460 m

Payroll Tax $0.114 m

Corporate Profits Tax $1.378 m

Other Business Taxes $2.929 m

Property Taxes from Business and Households

$2.627 m

Other Personal Taxes and Fees $0.430 m

Total Impact $12.966 m $2.627 m

Source: IMPLAN Model

Documents

Meeting the Economic Imperative to Advance Technology Development