Where will Insitu land?

Gorge communities on edge as maker of unmanned aircraft takes time in choosing HQ site

By Cami Joner, Columbian retail & real estate reporter



BINGEN — It’s intriguing to wonder whether technology made by Insitu Inc. led U.S. Navy SEALs to Osama bin Laden.

Insitu timeline

1994 — Garage inventor Tad McGeer and his business partner Andy von Flotow founded The Insitu Group Inc. in Bingen to build one product: an unmanned plane designed to gather data for weather and fishing fleets.

1998 — The first Atlantic crossing by an unmanned aircraft was accomplished by Insitu’s commercial model, called the Aerosonde Laima.

2002 — Soon after the Sept. 11, 2001, attacks, Insitu and Boeing partnered to develop the ScanEagle, which proved extremely useful in sending ground troops live video feeds of enemy movement and surveillance.

2005 — Insitu ranked among Washington’s fastest-growing technology companies, expanding from a handful of employees to nearly 400 workers.

2007 — The company wins a $20 million contract to provide ScanEagle services to the Australian Army in Afghanistan and becomes the first to operate an unmanned airplane from a U.S. Navy destroyer.

2008 — Boeing completes its acquisition of Insitu in a $400 million deal. The company wins a $65 million U.S. Navy contract.

2009 — Boeing wins a $250 million special operations contract for its ScanEagle services.

2010 — Insitu explores non-military uses for ScanEagle technology, including taking part in a Murdoch University study to survey the dugongs and humpback whales off the coast of Western Australia.

SOURCE: Insitu Inc.

Insitu’s unmanned aircraft may look different from the drones that monitored bin Laden’s Pakistan hideout. But the Boeing Co. subsidiary does manufacture surveillance drones equipped with cameras that can film and transmit real-time video without being detected in war zones — and they are being used in Afghanistan and Iraq.

So were Insitu’s drones, perhaps the ScanEagle or its night-flying counterpart NightEagle, used in the covert operation to kill bin Laden?

“I don’t know, but I don’t think so,” said Steve Morrow, Bingen-based Insitu’s new chief executive officer and president.

Regardless, the U.S. military is spending big on drones. It plans to spend much more because of the successful missions by the tiny unmanned aircraft.

The U.S. Defense Department’s Aircraft Procurement Plan, released in March, outlines the Pentagon’s $259 billion spending plan that will triple drone purchases over 10 years while cutting spending on manned aircraft, doubling the size of U.S. drone fleets.

That creates big opportunities for Insitu, which employs about 800 people in the Columbia River Gorge. The company has operations in the Washington cities of Bingen, White Salmon, Stevenson and Vancouver, and the Oregon cities of Hood River and The Dalles.

Morrow, a retired Navy veteran who has worked for Boeing defense programs since 2002, has already demonstrated his ability to capture some of the defense-spending windfall for Insitu. Just one month after Morrow’s April installment, Insitu landed an $83 million Defense Department contract to provide operation and maintenance services to the department’s ScanEagle program through 2012.

“Right now, the Department of Defense is clearly our largest customer,” Morrow said in Bingen.

Nervous residents in the township of roughly 729 people only hope Insitu’s new Boeing-based leadership chooses to keep the company firmly rooted there. Insitu generated about $400 million in revenue in 2010. Its presence is crucial to the community’s economy, said Avery Pickard, director of the 250-member Mt. Adams Chamber of Commerce that represents Bingen and neighboring White Salmon.

“Having Insitu is a serious priority for us,” said Pickard. “Every time the leadership changes, it’s a waiting game.”

Holding pattern

According to Morrow, the company will remain in the Gorge and plans to resume its search for a 25- to 30-acre site to develop a consolidated headquarters.

“It’s safe to say we’re not going to leave the Gorge,” Morrow said, admitting, “We’ve taken our time on campus selection.”

Area real estate brokers say Insitu still seems in no hurry to follow through with those plans, announced eight months ago. Before Morrow’s installment, the company had reportedly narrowed down its headquarters search to two sites out of a field of 30 proposals from hamlets up and down the Gorge.

Penetrating the discussion behind the secretive site search might take a reconnaissance mission of Insitu drones.

“Right now, they’re in a holding pattern,” said commercial real estate broker Greg Colt, owner of Colt Listing Service LLC in Hood River, a five-minute bridge trip across the Columbia River from Bingen.

The site search is out of the hands of Insitu’s local personnel and now rests with the real estate division of Chicago-based Boeing, Colt said. That shift has stifled enthusiasm on both sides of the border between Washington and Oregon.

“At first, there was a big flurry of activity. Now people are saying, ‘Don’t hold your breath.’ We’ve already shown them everything that’s available,” he said.

Others speculate Boeing will pick up where Insitu left off, choosing between two possible Gorge sites in Washington. They are: the waterfront Bingen Point at the Bingen-based Port of Klickitat, where the company already houses some operations; and a site 21 miles upriver in Dallesport at the Columbia Gorge Airport jointly owned by Washington’s Klickitat County and the city of The Dalles in Oregon.

Some say it makes no difference whether Insitu consolidates to one location or remains in a smattering of leased sites in the Gorge, including its 42,000-square-foot manufacturing space on Stevenson’s waterfront and an office for 80 employees in Vancouver’s Columbia Tech Center development.

In Hood River, the company already holds a commanding presence in one of the town’s largest office structures, the four-story former Sprint telephone building, off Interstate 84, overlooking the Columbia River. Beyond that site, the area is largely zoned for exclusive farm use, said Paul Sokol, a residential real estate agent in the area since 1994.

“Wanting a 20- to 25-acre site in this area is going to be difficult,” he said.

Economic engine

Although Sokol said Insitu’s presence barely affects home sales in Hood River, he acknowledged the company’s work force has helped boost the area’s rental market. Once Insitu selects a headquarters site, it’s investment should be a boon to the housing market, said Sokol, an agent with Windermere Glenn Taylor Real Estate.

“Insitu’s primary influence is bringing in the skilled, educated people that make a very decent wage, as opposed to tourist-related workers,” Sokol said.

The drone-maker’s high-paying jobs are also attractive to The Dalles, said Nolan Young, city manager of the Oregon town, which also houses Insitu offices. Young said his community stands to benefit most if Insitu chooses the airport site in Dallesport, accessible via The Dalles Bridge and just across the Columbia River from the Oregon city of about 14,500 people.

“There would be benefits to the airport from having a good solid tenant paying rent and it also could attract other industrial development to the airport,” Young said.

Despite the nearby airport, Insitu would not be allowed to test fly its drones there. Instead, the company would likely continue using its test site in Boardman, Ore., about two hours east of The Dalles.

“There are only a few areas where they can test these things in U.S. airspace,” said Colt, the commercial real estate broker in Hood River.

Future growth

Whatever decision Insitu makes about its company headquarters, the state of Washington is also courting the company with business tax exemptions, tax credits and other incentives, according to Penny Thomas of Washington’s Department of Commerce.

“State officials from the agency level all the way up through Gov. Chris Gregoire and her staff have been actively engaged” in keeping Insitu’s headquarters in Washington, Thomas said.

Meanwhile, Boeing’s appointment of Morrow severs Insitu’s final tie to its founding inventors, Tad McGeer and Andy von Flotow. Morrow joined the company following the April retirement of Steve Sliwa, who the founders brought in to steer the company toward its union with Boeing, according to an article in the June issue of The Smithsonian magazine.

In 2002, Boeing and Insitu formed a partnership to develop the ScanEagle. By 2008, the drones were regularly supporting U.S. Navy and Marine Corps troops in Iraq while Boeing completed its acquisition of Insitu.

Aside from military markets, questions still loom about Insitu’s long-term status at a time when the U.S. State Department restricts drone makers from selling their technology to some foreign countries. Adding to the uncertainty, domestic markets are hampered by new rules the Federal Aviation Administration is considering for operators of drones, which can be used for everything from monitoring the weather to surveying marine life.

Despite the challenges, Morrow foresees growth and profitability for Insitu, which he expects to continue to draw the bulk of its revenue from military customers in the U.S., Canada and Australia. Morrow said Insitu and Boeing’s profitability will be his priority.

“When we make money with an invention or an idea, (Boeing) makes money,” he said.

For residents of the picturesque Gorge, questions remain about how this Boeing company is going to find its way among people who know Insitu and are just getting to know the drone-maker’s new parent.

“First they fall in love with the area,” Pickard said. “Then, they become attached to the human resources here, so that’s the plan.”