United States Government
Department of Energy
memorandum
 
 
 
 
         DATE: January 8, 1997
 
 REPLY TO
   ATTN TO:    IG-1
 
  SUBJECT:     INFORMATION:  Report on "Audit of the U.S. Department 
               of Energy's Identification and Disposal of Nonessential 
               Land"
 
 
             TO:    The Secretary
 
 
 BACKGROUND
 
 The Department and its predecessor agencies acquired control of
 about 2.4 million acres of land to carry out wide-ranging
 programs.  However, recent changes in the world's political
 climate have had a profound impact on the Department's mission
 and its need for this land.  The Department's mission is now
 focused on weapons dismantlement, environmental clean-up,
 technology development, and scientific research.  Because of
 these mission changes, the Office of Inspector General
 initiated an audit to determine whether the Department has any
 land holdings which are excess to current and anticipated
 future needs.
 
 
 DISCUSSION
 
 The Department retained about 309,000 acres of land (483 square
 miles) at the Hanford Site, Oak Ridge Reservation, and Idaho
 National Engineering Laboratory which, in our opinion, are not
 essential to carrying out current and foreseeable mission
 requirements.  Rather than dispose of nonessential land, the
 Department issued a land use policy expanding land management
 activities and began developing new land uses by seeking public
 and private ideas.  If the Department disposed of all
 nonessential land holdings at the three sites, land valued at
 approximately $126 million could be transferred to other
 Federal or state agencies, or a portion sold for private uses.
 Further, the Department's liability for payments in lieu of
 taxes on purchased land could be reduced by $1.7 million
 annually.  Finally, the disposal of unneeded property could
 reduce landlord costs for such activities as periodic security
 force patrols and the maintenance of roads, fences, etc. and,
 it would limit the Department's liability in the event of
 accidents and similar actions on the lands in question.
 
 We recommended that the Department dispose of nonessential land
 holdings at Hanford, Oak Ridge, and Idaho; reevaluate
 requirements for all remaining Departmental land holdings
 against current and foreseeable requirements, and dispose of
 nonessential land; and reevaluate the policy of defining
 ecosystem management as a valid new use for and a basis for
 retaining Department owned or controlled real property.
                                
                                
                               -2-
 
 
 The Office of the Associate Deputy Secretary for Field
 Management did not concur with the audit finding or
 recommendations, stating that the Department should finish
 realigning itself to new missions before identifying and
 disposing of excess properties.  Also, management stated
 that the recommendations appeared to be contrary to the
 Administration's ecosystem management policies.
 
 The desire to defer property disposal until completion of
 the Department's realignment is understandable.  However,
 the general viewpoint encountered during the audit
 indicated a predisposition to retain real property
 acquired over the years for Departmental functions,
 including those which are no longer in operation.  Given
 the practical realities of the budget restrictions facing
 the Department, the stated policy objective to realign and
 streamline operations and the Secretarial initiative to
 dispose of unneeded Departmental assets, we concluded that
 the Department's policy toward real property retention
 should be revised.
 
 
 
 
                                       (Signed)
 
                                   John C. Layton
                                   Inspector General
 
 Attachment
 
 cc:Deputy Secretary
    Under Secretary
          Associate Deputy Secretary for Field Management
          Manager, Richland Operations Office
          Manager, Oak Ridge Operations Office
          Manager, Idaho Operations Office
          Manager, Brookhaven Area Office
                    
                    
                    U.S. DEPARTMENT OF ENERGY
                   OFFICE OF INSPECTOR GENERAL
 
 
 
 
 
     AUDIT OF THE U.S. DEPARTMENT OF ENERGY'S IDENTIFICATION
                AND DISPOSAL OF NONESSENTIAL LAND
 
 
 
 
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              This report can be obtained from the
                    U.S. Department of Energy
         Office of Scientific and Technical Information
                           P.O. Box 62
                   Oak Ridge, Tennessee  37831
 
 
 
 
Report Number:  DOE/IG-0399                  Eastern Regional
Audit Office
Date of Issue:  January 1997                 Oak Ridge, TN 37830
     
     
     AUDIT OF THE U.S. DEPARTMENT OF ENERGY'S IDENTIFICATION
                AND DISPOSAL OF NONESSENTIAL LAND
                                
                                
                        TABLE OF CONTENTS
 
 
 
                                                          Page
 
               SUMMARY  ..................................  1
 
 
PART  I  -     APPROACH AND OVERVIEW .....................  3
 
               Introduction ..............................  3
 
               Scope and Methodology .....................  3
 
               Background ................................  4
 
 
PART II  -     FINDING AND RECOMMENDATIONS ...............  7
 
               Nonessential Land .........................  7
 
 
PART III  -    MANAGEMENT AND AUDITOR COMMENTS ........... 18
 
PART IV  -     OTHER MATTERS ............................. 24
 
APPENDICES
 
  Appendix A - Map of the Hanford Site ................... 26
  Appendix B - Map of the Oak Ridge Reservation .......... 27
  Appendix C - Map of the Idaho National
                Engineering Laboratory  .................. 28
  Appendix D - Management Comments on Official 
  Draft Report ........................................... 29
                       
                       
                       U.S. DEPARTMENT OF ENERGY
                      OFFICE OF INSPECTOR GENERAL
                       OFFICE OF AUDIT SERVICES
 
        AUDIT OF THE U.S. DEPARTMENT OF ENERGY'S IDENTIFICATION
                   AND DISPOSAL OF NONESSENTIAL LAND
 
 
Audit Report Number:  DOE/IG-0399
 
                                SUMMARY
 
     The Department of Energy (Department) and its predecessor
agencies acquired control of about 2.4 million acres of land to carry
out programs ranging from the design, production, and underground
testing of nuclear weapons to electrical power marketing, energy
conservation, and scientific research.  The majority of this land has
served as buffer zones for nuclear weapons production and research
activities, and has remained relatively untouched for the last 50
years.  However, recent changes in the world's political climate, such
as the ending of the Cold War, have had a profound impact on the
mission of the Department and its need for this land.  For example,
the Department has halted production and underground testing of
nuclear weapons.  Today, the Department's mission is focused on
weapons dismantlement, environmental clean-up, technology development,
and scientific research.  Because of these mission changes, the Office
of Inspector General initiated an audit to determine whether the
Department has any land holdings which are excess to current and
anticipated future needs.
 
     The Richland, Oak Ridge and Idaho Operations Offices have
retained about 309,000 acres  (483 square miles) which, in our
opinion, are not essential to carrying out the Department's current
and foreseeable mission requirements.  Rather than dispose of the
land, the Department issued a land use policy expanding land
management activities, and attempted to develop new land uses by
seeking public and private ideas regarding future uses.  If the
Department disposed of all nonessential properties at the three sites,
land valued at approximately $126 million could be transferred for use
by other Federal or state agencies, or a portion could be sold for
private uses.  Additionally, the Department could reduce its liability
for payments in lieu of taxes on purchased property by about $1.7
million annually.  Further, the prompt disposal of unneeded property
would reduce landlord costs for such activities as periodic security
force patrols, maintenance of roads, fences and would limit the
Department's liability in the event of accidents and similar actions
on the property in question.
 
     Management disagreed with the audit finding and recommendations.
Management stated that the Department should finish realigning itself
to new missions before identifying and disposing of excess properties.
The Department plans to identify and dispose of excess land in
accordance with Federal regulations after the realignment is
concluded.  Management stated that the audit did not consider non-
monetary benefits from the Department's land uses.  Also, management
stated that the recommendations appeared to be contrary to the
Administration's ecosystem management policies.
 
     The general viewpoint encountered during the audit led to the
conclusion that there was a predisposition to retain real property
acquired over the years for Departmental functions, including those
which were no longer in operation.  Given the practical realities of
the budget situation facing the Department, the policy to realign and
streamline operations and the Secretarial initiative to dispose of
unneeded Departmental assets, we concluded that the Department's
policy toward real property retention should be revised.
Specifically, the Department should:
 
         aggressively identify and dispose of land which it no 
          longer needs;
 
         emphasize its core missions in making real property 
          retention decisions; and,
 
         ensure that the "burden of proof" in property retention 
          decisions is placed on why the Department should retain 
          rather than why the Department should dispose of real 
          property.
 
 
(Signed)
 
                                          Office of Inspector General
                                PART I
 
                         APPROACH AND OVERVIEW
                                   
 
INTRODUCTION
 
     Changes in the world's political climate have had a profound
impact on the Department. The end of the Cold War has allowed the
Department to significantly reduce operations related to the design,
production, and underground testing of nuclear weapons and reorient
its mission toward developing new energy sources, environmental
cleanup and scientific research while still contributing to national
defense.  In addition, overall Governmental reform programs such as
the National Performance Review and internal operational reviews like
the Department's Strategic Alignment Initiative have resulted in the
Department's commitment to work better and cost less.  To that end,
the Office of Inspector General (OIG) initiated this audit with the
objective of determining whether the Department has any land holdings
which are excess to current and anticipated future needs.
 
SCOPE AND METHODOLOGY
 
     The audit was performed from September 19, 1995, through May 14,
1996, at the Office of the Associate Deputy Secretary for Field
Management in Washington, D.C.; Richland Operations Office in
Richland, Washington; Oak Ridge Operations Office in Oak Ridge,
Tennessee; Idaho Operations Office in Idaho Falls, Idaho; and
Brookhaven Area Office in Brookhaven, New York.  We judgmentally
selected four facilities with production, environmental cleanup and
scientific research missions for review.  The Department's power
marketing administrations and petroleum reserves were excluded from
the scope of the audit due to congressional action regarding the sale
of some of these assets.  To accomplish the audit objective, we:
 
         Reviewed Federal and Departmental requirements related to 
          land management;
     
         Interviewed Departmental officials at headquarters and 
          field offices regarding land management;
     
         Reviewed and analyzed land use and site development plans;
 
         Reviewed documentation related to past disposal actions; and
 
         Reviewed information related to the Department's overall 
          mission and site specific missions at the facilities visited.
 
     The audit was performed in accordance with generally accepted
Government auditing standards for performance audits.  It included
tests of internal controls and compliance with laws and regulations to
the extent necessary to satisfy the audit objective.  Accordingly, we
assessed significant internal controls related to the Department's
real property management and disposal activities.  Because our review
was limited, it would not necessarily have identified all internal
control deficiencies that may have existed.  Also, we did not conduct
a reliability assessment of computer-processed data because only a
very limited amount of computer-processed data was used during the
audit.
 
     The audit results were discussed with the Deputy Associate Deputy
Secretary for Field Management and the Director, Office of Projects
and Fixed Asset Management, Office of Field Management, on November 4,
1996.
 
BACKGROUND
 
     The Department owns or otherwise controls almost 2.4 million
acres of land, making it the fourth largest Federal land owner after
the Departments of Interior, Agriculture, and Defense.  The
Department's land holdings are dispersed across 34 states and include
30 major operational facilities.  The buffer zones surrounding many of
these facilities consist of forests, grass prairies and shrub-steppe
type lands.
 
     The Department was reorganized along four programmatic lines
(science and technology, environment, energy, and national security)
and various supporting staff functions.  The programmatic functions
use real property to carry out the Department's current mission of:
 
     Contributing to the welfare of the Nation by providing the
     technical information and the scientific and educational
     foundation for the technology, policy, and institutional
     leadership necessary to achieve efficiency in energy use,
     diversity in energy sources, a more productive and competitive
     economy, improved environmental quality and a secure national
     defense.
 
     The Department and predecessor agencies acquired ownership and
control of mission related real property through a variety of methods.
For example, land was withdrawn from the public domain, purchased on
the open market, and in some instances, condemned.  Also, if land was
needed for only a limited time or a special purpose, property rights
were obtained through the acquisition of easements, permits and other
similar measures.  Table 1 categorizes the Department's land holdings
by acquisition method as of the end of Fiscal Year 1994.
 
                                   
                                Table 1
                      Departmental Land Holdings
                                   
     Acquisition                      Number           Percent
        Method                        of Acres        of Total
 
     Withdrawn from Public Domain     1,477,686           62
     Purchased                          651,042           27
     Easement                           187,836            8
     Permit, License and Other           67,140            3
                                        -------        -----                                   -----
     TOTAL                            2,383,704          100
                                                         
As shown, about 62 percent of the Department's real property holdings
consisted of lands withdrawn from the public domain.  Unless withdrawn
for use by a Federal agency, public domain lands are administered by
the Department of Interior's Bureau of Land Management and are open to
entry and use by the general public.
 
     Since 1972, the Department has internally designated about 2
million acres at seven sites as national environmental research parks.
These parks are intended to be outdoor laboratories that provide
opportunities for environmental studies on protected lands that act as
buffers around Departmental facilities.
 
     The method by which the Department acquired land affects any
subsequent disposal.  For example, land originally withdrawn from the
public domain, but no longer needed, must be returned to the public
domain.  Most agencies dispose of purchased land through the General
Services Administration.  However, unlike other Federal agencies, the
Atomic Energy Act gave the Atomic Energy Commission and its successor
agencies limited authority to sell, lease, grant and dispose of real
property acquired in furtherance of the purpose of the Atomic Energy
Act.  The Secretary of Energy has delegated the authority to dispose
of real property to field elements.
 
     For real estate that was purchased by the Department and
previously subject to property taxes, the Department is authorized,
but not required, to make payments in lieu of taxes.  These payments
provide financial assistance to state and local governments for
property taxes that were lost when the Department purchased the land.
 
     The Office of Field Management has the overall responsibility for
establishing Departmental policy for the management of real property.
In order to fulfill this responsibility, the Office of Field
Management established a headquarters real estate team.  The real
estate team formulates policies used by field elements, maintains a
comprehensive database of the Department's real property holdings, and
advises field offices in the acquisition, use and disposal of real
property.  However, the actual authority to determine how much real
property is needed by the Department and to declare real property
excess to current and foreseeable needs rests with program secretarial
officers and managers in the field.
 
     Our audit disclosed material internal control weaknesses that
management should consider when preparing its yearend assurance
memorandum on internal controls.
                                
                                PART II
 
                      FINDING AND RECOMMENDATIONS
 
 
Nonessential Land
 
     Federal regulations require that executive agencies hold only
that land necessary to economically and efficiently support mission
related activities.  However, the Department's Richland, Oak Ridge and
Idaho Operations Offices retained about 309,000 acres which, in our
opinion, were not essential to carrying out the Department's mission.
Rather than dispose of land, the Department issued a land use policy
expanding land management activities and sought public input regarding
future uses.  As a result, the Department is holding land valued at
about  $126 million that could be used by other Federal or state
agencies, or a portion could be sold for private use.  Also, by
disposing of land, the Department could reduce its liability for
payments in lieu of taxes by about $1.7 million annually.
 
RECOMMENDATIONS
 
     We recommend that the Associate Deputy Secretary for Field
Management, responsible program secretarial officers and field office
managers:
     
  1.   Dispose of nonessential land identified in this report;
  
  2.   Reevaluate requirements for all remaining Departmental owned 
       or controlled land against current and foreseeable requirements 
       and dispose of nonessential land; and,
  
  3.   Reevaluate the policy of defining ecosystem management as a 
       valid new use for and basis for retaining Department owned 
       or controlled real property.
 
MANAGEMENT REACTION
 
     Management disagreed with the audit finding and recommendations.
Management stated that the Department is realigning itself to new
missions, and it would be premature to dispose of land identified as
nonessential in the report before the realignment is concluded.  The
Department will identify and dispose of excess land in accordance with
Federal regulations after the realignment.  Management stated that the
audit did not consider non-monetary benefits from the Department's
land uses.  Also, management stated that the recommendations appeared
to be contrary to the Administration's ecosystem management policies.
 
     Comments received from the Office of the Associate Deputy
Secretary for Field Management and the Richland, Oak Ridge, and Idaho
Operations Offices are summarized and addressed in Part III of this
report.  Additionally, as requested, we have included the complete
text of the Office of the Associate Deputy Secretary for Field
Management's comments as Appendix D to the report.
                                   
                                   
                          DETAILS OF FINDING
 
 
REQUIREMENTS FOR IDENTIFYING AND DISPOSING OF EXCESS LAND
 
     Federal regulations require that executive agencies hold only
that land necessary to economically and efficiently support agency
missions.  Specifically, Executive Order 12512, "Federal Real Property
Management," requires executive agencies to ensure the effective use
of real property in support of mission-related activities.  Also, to
stimulate the identification and reporting of excess real property and
achieve maximum utilization, the Federal Property and Administrative
Services Act of 1949, as amended, requires all executive agencies to
periodically review their real property holdings.  These reviews
identify property which is "not needed," "underutilized," or "not
being put to optimum use."  Property determined to be excess should be
promptly reported to the General Services Administration (GSA).
Following are some of the questions the GSA developed for executive
agencies to consider in identifying valid real property needs:
 
         Is all of the property essential for program requirements?
     
         Are buffer zones kept to a minimum?
     
         Can the land be disposed of and program requirements 
          satisfied through reserving rights and interests in 
          the property?
     
         Is the land being retained merely because it is landlocked?
     
         Is the land being retained merely because it is considered
          undesirable due to topographical features or believed to be 
          not disposable?
     
         Is any portion of the property being retained primarily 
          because the present boundaries are marked by existing 
          fences, roads, and utility systems?
 
     These questions are specifically applicable to purchased land.
However, in the absence of other guidance, we believe it is reasonable
to apply these same factors when assessing the need for land withdrawn
from the public domain.
 
     Departmental policy requires field activities to identify long-
term mission needs and rationally plan for future site development.
More specifically, policy requires that comprehensive land use plans
be developed based on mission needs, site and regional conditions,
strategic goals, and other technical information such as the need for
buffer zones.  Also, disposals are to be made through the Department's
certified realty specialists at field sites in accordance with
statutory and regulatory requirements.
 
     Finally, the Secretary of Energy's Fiscal Year 1996 Performance
Agreement with the President calls for the development of
comprehensive plans at 40 of the Department's 50 major sites.  These
comprehensive plans are intended to be the link between property
planning, acquisition, use, and disposal.  The Department issued a new
order in August 1995 requiring field sites to initiate the
comprehensive planning process for managing needed property, and
identifying and disposing of excess land and facilities.  The new
order also requires that site-specific performance measures, based on
best industry practices, be implemented to evaluate the effectiveness
of the program.  The Department is in the process of completing these
plans.
 
NONESSENTIAL LAND HOLDINGS
 
     The Richland, Oak Ridge, and Idaho Operations Offices retained
about 309,000 acres of land which, in our opinion, were not essential
to carrying out the Department's mission.  About 138,000 acres at the
Hanford Site, 16,000 acres at the Oak Ridge Reservation and 155,000
acres at the Idaho National Engineering Laboratory could potentially
be disposed of without adversely impacting current and planned
operations at these sites.  Based on current and planned operations,
Brookhaven National Laboratory did not appear to have any nonessential
land.  The three sites with nonessential land are discussed below.
 
Hanford Site
 
     The Hanford Site (Hanford), located in southeastern Washington
along the banks of the Columbia River, encompasses about 560 square
miles (358,000 acres).  The Government purchased about 73 percent
(261,000 acres) of the site from individual landowners.  The remaining
27 percent (97,000 acres) of the site was obtained via land
withdrawals and transfers from the Department of Interior.  The North
Slope and the Fitzner-Eberhardt Arid Lands Ecological Reserve (ALE)
were both acquired in the 1940s to support the site's original defense
production mission.  Today, these two tracts are being maintained to
support the Richland Operations Office's three pronged mission of site
clean-up, science and technology, and economic diversification.
 
     North Slope
 
     About 78,000 acres of the North Slope appeared to be nonessential
for mission requirements.  In total, the North Slope consists of about
89,000 acres that have remained undeveloped since Hanford was
established in 1943.  About 52,000 acres were purchased from
individual landowners and the remaining 37,000 acres were withdrawn or
transferred from the Department of Interior.  This tract initially
served as a buffer zone for the Department's plutonium production
reactors along the Columbia River.  However, Hanford's last operating
reactor was shut down in 1991.  In 1971, the Atomic Energy Commission
granted a use permit for the North Slope tract to the U.S. Fish and
Wildlife Service and the Washington State Department of Fish and
Wildlife.  Today, these two agencies manage the Department's North
Slope property as the Saddle Mountain National Wildlife Refuge and the
Wahluke Slope Wildlife Recreation Area.  Future land use maps and
planning documents for Hanford did not identify or project any
Departmental development of the North Slope property.
 
     A small amount of the North Slope was contaminated in the past.
This nonradioactive contamination occurred primarily from old NIKE
missile test sites and pre-Hanford Site homestead debris.  The
contaminated areas were remediated and revegetated during 1994 and
1995.
 
     In November 1988, Congress enacted legislation directing the
Department of Interior to study the North Slope tract for potential
designation as a National Wild and Scenic River.  The legislation also
directed that for an 8-year period, any projects or activities on this
tract should be designed to minimize adverse impacts to the property's
potential for future designation as a National Wild and Scenic River.
As a result of  this legislation, the Department of Interior prepared
a Comprehensive River Conservation Study and Environmental Impact
Statement for the Hanford Reach of the Columbia River.  The study
proposed designating 49.5 miles of the Columbia River as a National
Wild and Scenic River and approximately 102,000 acres of adjacent
lands as a National Wildlife Refuge, managed by the U.S. Fish and
Wildlife Service.  The Richland Operations Office considered the
legislation to prohibit disposal of the Department's North Slope land
holdings during the effective term of the legislation.  The land use
restrictions Congress placed on the North Slope expired in November
1996.
 
     Fitzner-Eberhardt Arid Lands Ecological Reserve
 
     About 60,000 acres of the ALE appeared to be nonessential.  In
total, the ALE consists of about 77,000 acres that have remained
virtually undeveloped since acquired in 1943 as a security buffer
zone.  The small portion of the ALE that was contaminated from prior
activities was cleaned up and revegetated in 1994 and 1995.  About
62,000 acres of this tract were purchased from individual land owners
and the remaining 15,000 acres were withdrawn from the public domain.
As one of seven environmental research parks, the ALE is managed by
Battelle Pacific Northwest National Laboratory.  Hanford land use
planning documents do not identify any future development for the ALE.
 
     The Department contemplated for several years what to do with the
ALE tract.  In 1993, the Department announced that environmental
remediation work on the ALE would be completed within one year.  After
that, the ALE could potentially have been declared excess to the
Department's needs.  However, the Bureau of Land Management
subsequently expressed an interest in pursuing a land exchange with
the Department whereby the Bureau of Land Management would have
acquired management authority over the ALE.  The Yakima Indian Nation
then proposed that the ALE be placed under its authority.  As a result
of these proposals, the Department co-hosted a public meeting in May
1995 to gauge public sentiment regarding potential future uses for the
ALE.  The Department's representative at the meeting explained that a
decision would be made in approximately 90 days as to what course of
action would be taken regarding the ALE.
 
     On July 31, 1996, the Department announced that it would not
dispose of the ALE or transfer ownership to another agency.  Instead,
the Department planned to enter into an agreement with the U.S. Fish
and Wildlife Service to manage the area to protect its natural
resources and cultural values and allow increased access for
appropriate activities.  The Department concluded that it needed to
retain ownership of the ALE because of its function as a buffer zone.
In addition, the Department believed that changing Hanford's
boundaries would create a requirement for costly studies and analyses
to ensure compliance with environmental and safety standards.
Finally, the Department  believed that retaining ownership of the ALE
best recognized the shared values of most of the interested parties
and afforded full protection of the Yakima Indian Nation's rights and
interests.
 
     Retention of the North Slope and ALE
 
     The Department concluded that it needed to retain ownership of
the North Slope and the ALE as a buffer zone to protect public health
and safety, and the area's environmental integrity.  After completion
of our audit field work, the Department issued its draft Hanford
Remedial Action Environmental Impact Statement and Comprehensive Land
Use Plan, stating that a portion of the North Slope and the ALE would
be retained as a buffer zone.  About 11,000 acres (12 percent) of the
North Slope and 17,000 acres (22 percent) of the ALE were determined
to be within exclusive use zones (EUZs).  An EUZ is defined by the
Department as the area around each facility that extends from the
facility fence line to a point where the threat posed to the public
from routine and accidental releases diminishes to the extent that
routine public access can be allowed.  The size and shape of an EUZ is
determined by the most restrictive safety analysis report or hazard
assessment and is based on the facility's inventory of contaminants,
potential release mechanisms, and atmospheric transport parameters.
The sitems EUZs were established using boundaries calculated for
individual facilities whose postulated accidents had the maximum
impact on public health.
 
     Surrounding each EUZ is a larger area called an emergency
planning zone (EPZ).  EPZs are defined as the areas surrounding each
facility for which planning and preparedness efforts are carried out
to ensure that prompt and effective actions can be taken to minimize
the impact to onsite workers' and the public's health and safety in
the event of an operational emergency.  The boundary of an EPZ extends
from the facility to the distance where special planning and
preparedness efforts are no longer required.  Although access
restrictions are not required within an EPZ, the Department would be
responsible for ensuring adequate planning and preparedness
requirements for every person within the EPZ.
 
     Based on criteria concerning the need for EUZs, we agreed that
all portions of the North Slope and ALE within existing  EUZs should
be retained.  However, there appears to be no basis to retain the
larger acreage that falls within the EPZs.  The Department does not
now own or control all land within the EPZs at this site, and does not
plan to acquire the land where the EPZs extend beyond the site's
boundary onto privately owned land.  This demonstrates that the
Department does not need to maintain ownership or control of all land
within an EPZ.
 
     As previously noted, for the past 25 years the North Slope has
been operated under a use permit by the U. S. Fish and Wildlife
Service and the Washington State Department of Fish and Wildlife.
More recently, the Department announced that it would enter into an
agreement with the U. S. Fish and Wildlife Service to assume
management of the ALE.  Since management and use of these areas have
been or will be delegated to other agencies with missions which are
aligned with those activities, the continuing need for the Department
to retain ownership of this land is questionable.  This conclusion was
confirmed by our review of local Departmental land use maps and
planning documents for both the North Slope and ALE which did not
identify or project any future development of the property.
 
Oak Ridge Reservation
 
     The Oak Ridge Reservation (Oak Ridge) is comprised of about 54
square miles (34,500 acres) in East Tennessee along the Clinch River.
The Government purchased this property from individual landowners in
1942 for nuclear weapons production activities and buffer zones.  The
Department estimated that 10 to 20 percent of the site had been
developed for Departmental facilities and that only 5 to 10 percent of
the site's land area has been earmarked for environmental cleanup.
 
     The audit concluded that nearly one-half of the Oak Ridge site,
or 16,000 acres, is not essential to carrying out the site's current
missions of environmental restoration and waste management, energy
research and development, weapons dismantlement, and storage of
nuclear material.  Most of these 16,000 acres lie within the
Department's local environmental research park and have remained
undeveloped.
 
     An environmental research park can be a valuable resource for
protecting a region's various species of plants and wildlife and
providing a laboratory for scientific research and environmental
monitoring.  However, the need for the Department to retain ownership
of such a large area is questionable.  As of November 29, 1995, the
Department had a total of 30 active environmental research projects in
the park which used about 17 percent of the park's acreage.  In
addition, the Department had installed several biological monitoring
stations in the park.  If all this land is truly needed for a research
park, we believe it would be more appropriate if the land were owned
and controlled by an agency whose mission was more closely aligned to
the management of forests and the conservation of fish, wildlife,
natural resources, and historical sites.  The Department's ongoing
research projects could continue regardless of who owned or controlled
the property.
 
     The Oak Ridge Operations Office did not believe that any of its
current land holdings were underutilized or that they should be
released.  Management maintained in its official 1988 site development
plan and in its draft 1994 site development plan that all current land
holdings were being used for one or more purposes, including the
environmental research park.
 
     However, a series of past real estate transactions by the Oak
Ridge Operations Office was not consistent with its contention that
all land holdings were essential to its mission.  It appeared as
though the Oak Ridge Operations Office held land until local entities
expressed an interest in acquiring or using the property.  For
example, in 1988 the Oak Ridge Operations Office declared
approximately 734 acres excess to Departmental needs after the City of
Oak Ridge (City) expressed an interest in acquiring the property.  The
City eventually purchased 756 acres in  3 separate transactions for
about $2 million.  In 1995, the Oak Ridge Operations Office planned to
sell another 100-acre parcel to the City, which in turn, planned to
sell the land to an Oak Ridge company looking for additional space to
expand its operations.  To accommodate the sale, the Oak Ridge
Operations Office requested that the Office of Field Management
declare the land excess to Departmental needs and available for
disposal.  In February 1996, the Office of Field Management officially
declared the 100-acre parcel excess to Departmental needs.
 
     Also, in January 1996, the Oak Ridge Operations Office leased 957
acres to the East Tennessee Economic Council for development of an
industrial park.  This no-cost lease was for 10 years with a 30-year
renewal option.  The Department anticipated that the industrial park
would partially offset the local economic consequences of downsizing
the Oak Ridge work force.  During negotiations for the lease, the Oak
Ridge Operations Office requested that the Office of Field Management
approve a lease term of 99 years.  Although the request was denied, it
clearly suggests that the land was not needed by the Oak Ridge
Operations Office and that the parcel was suitable for permanent
disposal via transfer to another agency or sale.
 
     These examples suggest that large portions of the Oak Ridge site
may not be needed for current and foreseeable mission requirements.
They also suggest that the Oak Ridge Operations Office retained
nonessential land until the City or some other entity expressed an
interest in acquiring or using the land.
 
Idaho National Engineering Laboratory
 
     The Idaho National Engineering Laboratory (INEL) consists of
about 890 square miles (570,000 acres) in southeastern Idaho.  The
Department acquired about 90 percent of the INEL site through land
withdrawals from the Bureau of Land Management in the 1940s and 1950s.
The remaining acreage was purchased from the State of Idaho and
individual land owners.  Today, much of INEL consists of undeveloped
land used as buffer zones for reactor areas, waste management,
research activities, and open space.
 
     In our opinion, about 27 percent of the INEL site, or 155,000
acres, is not essential to carrying out the sitems current missions of
infrastructure testing, environmental management, nuclear materials
disposition, applied engineering and systems integration, and
technology demonstration and transfer.  Future land use maps and
planning documents showed that the Department intended to continue
developing the INEL site within a shrinking centralized area over the
next 100 years.  Additionally, no development was planned in the
buffer zones surrounding the site's centralized facilities.
Nonetheless, the Idaho Operations Office maintained that the site was
properly sized for current and future programs, and did not anticipate
changing present site boundaries over the next 100 years.
 
     The Department has designated the entire INEL site to be an
environmental research park.  The park has been used to study the
movement of radionuclides through the environment, the effects of
habitat alteration on vegetation and wildlife, and biological
indicators of pollutants.  The park has also been used to establish
ecological baseline data for future impact comparisons.  In addition,
the entire INEL site was described as being culturally significant.
For example, the Shoshone-Bannock Tribes (Tribes) consider the site to
lie within their aboriginal homeland.  The Tribes consider many of the
site's caves and buttes to be sacred and important in preserving their
history and heritage.  Agreements between the Department and the
Tribes allow tribal members free access to certain areas of the site.
Furthermore, according to the 1868 Treaty of Fort Bridger, the Tribes'
rights to subsistence and traditional activities are protected on
unoccupied Federal lands; therefore, if the site eventually becomes
excess to the Federal Government's needs, the Tribes could exercise
their full treaty rights to the site.
 
     Current land uses suggest that major portions of the site may not
be essential to the Department's mission.  For example, between
300,000 and 350,000 acres of INEL's buffer zones are permitted out by
the Bureau of Land Management for sheep and cattle grazing to local
ranchers with the following restrictions: grazing is not allowed
within two miles of any nuclear facility; and, dairy cattle are not
permitted.  In addition to the grazing permits, the U.S. Sheep
Experiment Station uses a 900-acre portion of the site as a winter
feedlot for about 5,000 sheep.
 
     Like the Oak Ridge Operations Office, the Idaho Operations Office
determined that a parcel of land was no longer needed to carry out the
site's mission after local communities expressed an interest in
obtaining it.  In January 1994, the Department returned 1,120 acres of
withdrawn land to the Bureau of Land Management so that title for the
land could be transferred from the Federal Government to the local
counties for use as a multi-county landfill.
 
 
REASONS FOR RETAINING LAND
 
     In recent years, the Department acknowledged that its mission had
changed significantly and that some of its land may no longer be
needed.  As a result, the Department began seeking ideas from all
interested parties regarding new uses for real property.  This
approach was evidenced in a December 1994 Secretarial policy
initiative and its accompanying booklet, Stewards of a National
Resource.  The Department's new land management policy was to manage
land and facilities as valuable national resources based on principles
of ecosystem management and sustainable development.  Mission,
economic, ecological, social and cultural factors were to be
integrated into comprehensive site plans to be developed with
stakeholder participation.  The booklet accompanying the new policy
initiative  made the following statements regarding the future of
Department-owned or controlled real property across the United States.
 
     Events of the past several years have had a profound impact on
     the mission of the Department of Energy.  Most notably, the end
     of the Cold War has made it possible for us to reorient our
     mission ...
     
      A relatively small proportion of our sites were actually used
     for production and research activities and therefore require
     clean-up.  The majority of our 2.4 million acres were used as
     buffer lands and have been relatively untouched for 50 years.  It
     is these lands in particular where we are exploring new uses.
     
     These new uses will reach beyond beating swords into plowshares
     and cleaning up production facilities.  They will include
     ecosystem protection, economic development and industrial
     competitiveness.
     
     To be successful we need your ideas.  Please let us know if you,
     or your city, company, county, organization, state, tribe or
     neighbors have ideas regarding: business proposals, research and
     development partnerships, historic or cultural resources, parks
     and recreation, or anything else that involves public or private
     sector use of our land and facilities.
     
     Although the Department publicly acknowledged that it may have
vast amounts of unneeded land, it has not initiated many disposal
activities.  In the instances where disposals have occurred, they
appear to have occurred primarily after outside entities expressed an
interest in acquiring or using the Department's real property.  Thus,
it appears the Department's initiative of expanding land management
roles and seeking public ideas regarding new land uses will result in
the Department continuing to retain land until outside entities
express an interest in obtaining land rights or until new programmatic
uses evolve or can be developed.
 
POTENTIAL BENEFITS OF DISPOSAL
 
     The audit disclosed that the Department is holding about 309,000
acres, valued at about $126 million, that could be transferred for use
by other Federal or state agencies, or a portion potentially sold for
private uses.  About 180,000 acres, valued at about $46 million, were
obtained from the Department of Interior and should be returned to
that agency.  The remaining 129,000 acres, valued at about $80
million, were originally purchased by the Department and could
potentially be sold if not transferred to other agencies for their
use.  In addition, disposing of the 129,000 acres of purchased
property would reduce the Department's annual liability for payments
in lieu of taxes by about $1.7 million.
 
     Land values at Hanford, Oak Ridge and INEL were estimated at
$370, $2,550 and $220 per acre, respectively, based on prior sales
values or recent property tax assessments.  At Hanford, for example,
the Department sold 640 acres of the site to the State of Washington
for $370 per acre in 1980.  In 1992 and 1993, the Department sold 704
acres to the City of Oak Ridge at an average price of $2,550 per acre.
Since we were unable to identify any Departmental land sales at INEL,
land values were based on the sitems lowest property tax assessment
value of $220 per acre.  Management, in responding to drafts of this
report, expressed disagreement with these estimates.  While we believe
the value estimates are conservative, actual land values could vary
widely.  Factors such as location, topography and soil type, access to
roads and water, current development of adjoining property and demand
rates for land could significantly affect the value of land at all
three locations.
 
     Furthermore, prompt disposal of unneeded property could
significantly reduce the Department's liability for payments in lieu
of taxes.  The potential savings (detailed at Table 2) would result
from eliminating the Department's annual liability for making payments
in lieu of taxes to local county and city governments on purchased
property.
 
 
 
                                Table 2
   Potential Reduction In Annual Payments In Lieu Of Taxes Liability
 
                            Purchased                Reduced Annual
             Site           Acreage                   Tax Liability
 
          Hanford:
             North Slope      43,000                  $   700,000
             ALE              51,000                      230,000
          Oak Ridge           16,000                      710,000
          INEL                19,000                       30,000
                              ----------               ----------
          TOTALS             129,000                   $1,670,000
 
 
The annual savings from payments in lieu of taxes were based on
property tax data supplied by local counties in Washington, Tennessee,
and Idaho.  The disposal of unneeded property would also reduce
landlord costs for such activities as periodic security force patrols,
maintenance of roads, fences, etc. and would limit the Department's
liability in the event of accidents and similar actions on the
property in question.
 
     The Department could incur significant costs in disposing of
nonessential land.  The costs of returning land to the public domain,
transferring land to other agencies or actual sale could not be
accurately quantified during the audit.  These costs could include
preparing the minimum required environmental, archeological and
cultural certifications to show compliance with laws such as: the
National Environmental Policy Act; the Comprehensive Environmental
Response, Compensation and Liability Act; the National Historic
Preservation Act; and the Archeological Resources Protection Act.
 
     Finally, based on the condition identified at the Hanford Site,
Oak Ridge Reservation, and Idaho National Engineering Laboratory, it
is probable that other Departmental field sites are also retaining
more land than necessary to meet current and foreseeable mission
requirements.
                               PART III
 
                    MANAGEMENT AND AUDITOR COMMENTS
 
     Management disagreed with the audit finding and recommendations.
Management stated that the Department is realigning itself to new
missions, and it would be premature to dispose of land identified as
nonessential in the report before the realignment is concluded.  The
Department plans to identify and dispose of excess land in accordance
with Federal regulations after the realignment.  Management stated
that the audit did not consider non-monetary benefits from the
Department's wise and diverse use of land holdings.  Also, management
stated that the audit recommendations appeared to be contrary to the
Administration's ecosystem management policies.
 
     Management's main points were that:  (1) the original need for
the land still exists; (2) the Department's policy is to identify
compatible uses for land while supporting current mission
requirements; (3) ongoing processes are adequate to identify and
dispose of excess land; (4) even if the land were not needed, disposal
would be costly; and (5) the audit estimates of fair market values
were inaccurate.  We received extensive comments from the Office of
the Associate Deputy Secretary for Field Management and the Richland,
Oak Ridge, and Idaho Operations Offices in response to previous drafts
of this report.  Their comments are summarized and addressed below.
Additionally, as requested, we have included the complete text of the
Office of the Associate Deputy Secretary for Field Management's
comments as Appendix D to the report.
 
CONTINUING MISSION NEED
 
     Management Comments.  The original need for the land still
exists. The need for buffers to capture the chemical and radiological
contaminates from scientifically postulated accidents should be
emphasized.
 
     Auditor Comments.  We agree the Department should retain
ownership or exclusive control of land within exclusive use zones,
where severely limited access is warranted.  However, the Department
does not need to own or control all land within wider ranging
emergency planning zones, where public access restrictions are not
required.  Our estimates of nonessential land take these factors into
account.  For example, no land within a Hanford facility's exclusive
use zone was considered nonessential.
 
LAND USE POLICY
 
     Management Comments.  The Department's policy is to support its
missions with the appropriate amount of land while searching for
additional compatible uses.  Mission requirements for land change over
time as new projects are born in Congress and when the landlord
program changes.  The Department believes that ecosystem
sustainability and management to further compliance with environmental
laws and ongoing missions is a valid new use or approach.  Also,
public input is needed for future decisions.  The public's involvement
in the cleanup and other decisions involving ecosystem protection and
management could save tremendous amounts of money and resolve issues.
 
     Auditor Comments.  Other compatible uses may be sought for land
that the Department must retain to support its core missions.  This
includes buffer zones for reasonable, likely, and scientifically
postulated accidents.  While the Department must attempt to protect
ecological and cultural resources on land required for its core
missions, we do not believe that such protection should justify
retaining uncontaminated land outside facilities and their required
minimum buffer zones.  The Department of Interior is the nation's
principal conservation agency.  Its mission includes fostering the
sound use of land; protecting fish, wildlife, and biological
diversity; preserving the environmental and cultural values of
national parks and historical places; and helping Native Americans
manage their own affairs under the trust relationship to the Federal
Government.  These specific activities are carried out by the
Department of Interior's U.S. Fish and Wildlife Service, National Park
Service, National Biological Service, and Bureau of Indian Affairs.
 
     With regard to changing land needs and new projects, where
documentation existed, preferred development areas and projected land
uses as far out as 100 years were considered in making our
determinations of nonessential land.  Also, we agree the public's
involvement could result in significant reductions in clean-up costs.
 
ONGOING ASSET MANAGEMENT PROCESS
 
     Management Comments.  The Department's ongoing processes are
adequate to identify and dispose of excess land.  Each site is
required to identify long-term programmatic mission needs and
rationally plan for future development.  When excess property is
identified, disposals are made through the Department's certified
realty specialists in the field.  Every year, land and facilities are
routinely determined to be excess to the Department's needs and
disposed of through appropriate means.  The Department sold the
Pinellas Site to the local county in 1995.  Additionally, the
Department commenced negotiations to sell the Mound Site to the City
of Miamisburg in August 1996.  Small areas at Hanford and INEL are
also being disposed of through the existing process.
 
     The Oak Ridge Operations Office did not agree that it held excess
land until local entities expressed an interest in acquiring it.
Management stated while land has been sold to the City of Oak Ridge
(City) under the self-sufficiency program, requests by the City for
other parcels were denied on the basis that those parcels were not
excess to the needs of the Department.  The determination of excess
may emerge as a result of an inquiry from the City, but it does not
follow that the land was already deemed excess by the Department and
being held for the City.  The Oak Ridge Operations Office reviews its
land holdings on a continual basis rather than the previously required
5-year basis.
 
     The Oak Ridge Operations Office agreed that the 957-acre lease to
the East Tennessee Economic Council clearly suggests the land was not
needed.  However, it does not mean that it should have been
transferred to GSA for disposal.  The Defense Authorization Act for
Fiscal Year 1994 provides authority to use land under the control of
the Department that is not needed to further the goal of economic
development.
 
     Auditor Comments.  At the four sites reviewed, the Department
determined that only a few small tracts of vacant land were excess in
recent years.  Also, the properties were not determined to be excess
until after the local communities expressed an interest in acquiring
them.  Therefore, we do not consider the ongoing processes to be
adequate.
 
DISPOSAL COST
 
     Management Comments.  Even if the land were not required to
support missions and were truly excess, disposal is not cheap and
cannot be done overnight.  Before the land could be disposed of, the
Department would have to assess fair market values, verify and certify
that the land meets Environmental Protection Agency standards, and in
some cases clean up the site, develop institutional controls, perform
long-term monitoring, develop security systems, and make
infrastructure modifications.
 
     The Richland Operations Office stated that the Hanford lands
proposed for transfer have extensive groundwater contamination that
must be addressed before the land could be transferred.  Current
technology does not allow easy or early remediation of the
groundwater. Transfer of the lands and implementation of new or
alternative land uses could worsen the contamination and accelerate
the migration of contamination.
 
     The Oak Ridge Operations Office stated that the preparation of
environmental analysis and documentation to support the disposal as
required under the National Environmental Policy Act is a time-
consuming and costly endeavor.  Additional costs would be incurred for
documentation related to the protection of cultural and archeological
resources.  These requirements would not be eliminated by the transfer
of land to GSA.  Finally, elimination of buffer zones would require
additional modeling and analysis, and possibly changes to Oak Ridge
operations and waste management activities to ensure continued
compliance with various laws and regulations.
 
     The Idaho Operations Office stated that some of INEL's lands
proposed for transfer may be contaminated with hazardous substances.
Current work schedules indicate the evaluations required to remove the
site from the National Priorities List will be completed in 2000.
Additionally, the potential exists for unexploded ordinance to reside
on some of the land considered as candidate for transfer.  This may
necessitate land transfer deed restrictions to minimize Departmental
liability.
 
     The Idaho Operations Office also stated that a reduction of the
INEL borders would require new or revised safety analyses, a more
aggressive public information and public warning system, and increases
in security staffing and equipment.  Management estimated that
updating safety analysis reports would cost well in excess of $1
million and revising emergency planning documents would cost over
$100,000.  In addition, management provided an estimate of $1.3
million annually for increases in security staffing and a one-time
cost of $100,000 for additional security equipment.   A reduction in
the borders could also affect current and future INEL missions.
Further, agreements between the Idaho Operations Office and the
Shoshone-Bannock Tribes regarding the management of cultural resources
would have to be renegotiated.  A recent Presidential memorandum
commits the Department to consulting with tribal governments to
address tribal rights and concerns prior to making decisions or
implementing programs that may affect tribes.
 
     Finally, the Idaho Operations Office estimated that downsizing
the INEL site would require the Department to spend about $3 million
to conduct an archeological survey of 256,000 acres.  This does not
include preparation of the requisite reports on all historic
properties, required consultation with the Idaho State Historic
Preservation Office and the Advisory Council on Historic Preservation
to assess the effect on any historic properties located in the area,
preparation of mitigation plans to address any adverse impact to those
properties, or implementation of those mitigation plans prior to
actual disposal, all of which are required by Federal law.
 
     Auditor Comments.  We agree that the Department could incur
significant costs in disposing of nonessential lands.  As stated in
Part II, we could not quantify the potential costs because sufficient
data were not available during our review.  Also, while costs will be
incurred to prepare land for disposal, many of these costs will likely
be incurred in order for the Department to meet its environmental
restoration goals.
 
     With respect to potential groundwater contamination at Hanford,
according to data provided, the areas of the North Slope and ALE
identified as nonessential do not have groundwater contamination.
Even if the areas were affected by groundwater contamination, the land
could be transferred with deed covenants that preclude drilling for
groundwater, excavating minerals, and restricting development.
 
     With respect to the potential contamination of nonessential lands
at INEL, none of the land identified as nonessential lies within the
areas identified by the Department as contaminated with hazardous
substances or unexploded ordinance.  Also, even though the site is on
the National Priorities List, it is possible to dispose of unneeded
portions of the site without costly site-wide environmental
assessments.  For example, the Department returned 1,120 acres to the
Bureau of Land Management in 1994 for use as a multi-county landfill
without completing an extensive site-wide assessment.  The Department
spent approximately $2,400 in certifying that the 1,120 acres were
suitable for return to the public domain.  The counties assumed the
cost for conducting any required archeological review of the property.
 
     Based on the Department's prior experience in disposing of excess
land at INEL and Oak Ridge, it is questionable whether the Department
would be required to spend millions of dollars to perform
environmental and cultural assessments; upgrade public information and
warning systems; increase its security resources; and conduct other
activities associated with downsizing the site in order to dispose of
nonessential, uncontaminated portions of the site.
 
ESTIMATE OF FAIR MARKET VALUE
 
     Management Comments.  Management stated that the report is
inaccurate in its calculation of a $73 million potential gain for the
Treasury.  Fair market appraisals are needed to establish land value
estimates.  The report's use of prior sales and tax assessments are
gross simplifications of fair market value.  Several factors were
cited that may affect land value, but no adjustments were made.  The
report also failed to consider other important valuation factors such
as:  (1) lands at Hanford and INEL require irrigation and are subject
to "no new irrigation" restrictions, (2) extensive parts of Richland
and Oak Ridge cannot be farmed or developed due to topology and
geology, (3) the presence of endangered species at all sites depresses
the economic value while adding to other uncosted liabilities, and (4)
major sales at the volume contemplated in the report could create an
oversupply which would depress the value of property within the
economic region.
 
     Based on the factors cited in the report and above, buyers and
appraisers would deeply discount the report's estimate to a fraction
of the $73 million.
 
     The Oak Ridge Operations Office stated that the report appears
predicated on the assumption that all 16,000 acres would be
transferred to other agencies at fair market value or sold to the
public under competitive bidding procedures.  If the acreage were
reported to GSA as excess, the land would almost certainly be acquired
by a state or local public agency (the University of Tennessee is a
likely candidate) at no cost or much less than fair market value.
Under state or local ownership, the land would continue its tax exempt
status.
 
     Auditor Comments.  The report does not conclude or recommend that
all nonessential land be sold.  We simply estimated the value of
nonessential land holdings at the three sites.  We agree that the best
way to obtain an accurate estimate of land values is to obtain fair
market appraisals.  However, it would not have been prudent for the
auditors to acquire precise appraisals for the estimates used in this
report.  Instead, the auditors used the best information available at
the sites.  Also, we agree that some of the land identified at each of
the sites has limited value for various reasons.  Nevertheless, we
believe the overall estimate is conservative for the reasons explained
in Part II.  Finally, we agree that neither the Department nor any
other Federal agency should attempt to sell major volumes of land at
any one time in a limited market area.
 
     With regard to the Oak Ridge Operations Office's comments, the
land we identified as nonessential has a certain inherent value
regardless of whether it is sold via competitive bid, transferred to
another agency at no cost, or retained by the Department.  The
estimate of $2,550 per acre was based on two recent land sales by the
Department.  After completion of our audit field work, the Department
agreed that the entire Oak Ridge Reservation was fairly valued at
$4,000 per acre for payments in lieu of taxes to the City of Oak Ridge
and two local counties.  Compared to the payments in lieu of taxes
valuation the Department agreed to, our estimate appears very
conservative.  Also, the Department would benefit even if the land
were transferred, at no cost, to a state agency like the University of
Tennessee by reducing its annual liability for payments in lieu of
taxes.
                                PART IV
                                   
                             OTHER MATTERS
 
     We noted that the Oak Ridge Operations Office sold small parcels
of land to the City of Oak Ridge (City) for resale to local
businesses.  For example, the Department sold 53 acres to the City for
$210,800 in June 1988.  The City resold the land on the same day to a
local developer for $280,782, or $69,982 more.  The Department knew in
advance that the City had agreed to sell the land to the developer for
about one-third more than it paid the Government.
 
     The Department plans to continue selling land to the City for
resale to local businesses.  In September 1995, the City requested
that the Department sell it another 100 acres so the City could resell
the property to a local waste management company.  Since the company
was unable to buy land directly from the Department, it arranged to
acquire the land through the City.  As of February 1996, the
Department declared the land excess and sold it to the City.
 
     We concluded that the Department should exercise great care in
disposing of Government-owned land.  Specifically, all interested
parties should be given the opportunity to acquire such property.  In
so doing, the Department would ensure that it receives fair market
value for the property and any potential revenues to the U.S. Treasury
would be maximized.  By implementing the recommendations in Part II of
this report, the Department would avoid retaining nonessential land
until the City has identified a buyer.  Finally, we believe the
Department should discontinue the practice of selling land to the City
when it knows in advance that the City plans to resell the land
without competition.
 
     Management Comments.  The Oak Ridge Operations Office disagreed
with the audit conclusion.  The property previously sold to the City
of Oak Ridge was in furtherance of a 1979 Secretarial initiative to
assist in making the City and Roane and Anderson Counties financially
self-sufficient so that community assistance payments could cease.  In
addition to 3 parcels already sold to the City under the self-
sufficiency program, the City identified 19 additional parcels it
wanted to acquire.  The City was notified that except for the 19
parcels, the Department's authority to sell land directly to the City
under the self-sufficiency program had lapsed.  From the outset of the
self-sufficiency program, the Department knew that the City intended
to resell any land it bought in order for it to be developed and
brought onto the property tax roles.  The Department assured that
taxpayers received fair market value for the land by obtaining
appraisals prior to the sales.  Even if the City did resell the land
at a higher price, it did not negate the fairness of the price the
Department received.
 
     Auditor Comments.  Under the Department's self-sufficiency
agreement with the City, the Department may offer the 8,000 acres
contained in the 19 self-sufficiency parcels to the City at fair
market value.  However, if the City declines to purchase any of the
land at its fair market value, then the land should be disposed of by
the Department according to standard Federal practices.  Furthermore,
we agree that the use of appraisals is a good starting point in
assuring the fairness of land prices.  However, other factors, such as
knowledge of an advance agreement to sell the property for one-third
more than the appraised value, must also be considered in determining
the fair market value.  Of course, the best way to determine fair
market value is to solicit bids from all potential buyers.
                                       IG Report No.  DOE/IG-0399
                                                                 
                                                                 
                                   
                                   
                        CUSTOMER RESPONSE FORM
                                   
The Office of Inspector General has a continuing interest in
improving the usefulness of its products.  We wish to make our
reports as responsive as possible to our customers' requirements,
and therefore ask that you consider sharing your thoughts with
us.  On the back of this form, you may suggest improvements to
enhance the effectiveness of future reports.  Please include
answers to the following questions if they are applicable to you:
 
     1.   What additional background information about the
          selection, scheduling, scope, or procedures of the
          audit or inspection would have been helpful to the
          reader in understanding this report?
 
     2.   What additional information related to findings
          and recommendations could have been included in
          this report to assist management in implementing
          corrective actions?
 
     3.   What format, stylistic, or organizational changes might
          have made this report's overall message more clear to
          the reader?
 
     4.   What additional actions could the Office of Inspector
          General have taken on the issues discussed in this
          report which would have been helpful?
 
Please include your name and telephone number so that we may
contact you should we have any questions about your comments.
 
Name ____________________________  Date_____________________
 
Telephone _______________________  Organization_____________
 
When you have completed this form, you may telefax it to the
Office of Inspector General at (202) 586-0948, or you may mail it
to:
 
     Office of Inspector General (IG-1)
     U.S. Department of Energy
     Washington, D.C. 20585
     ATTN:  Customer Relations
 
If you wish to discuss this report or your comments with a staff
member of the Office of Inspector General, please contact Wilma
Slaughter at (202) 586-1924.



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