"In Xanadu did Kubla Khan

A stately pleasure dome decree:

Where Alph, the sacred river, ran

Through caverns measureless to man

Down to a sunless sea.

So twice five miles of fertile ground

With walls and towers were girdled round."

-- Samuel Taylor Coleridge Substitute Northern Virginia for Xanadu, the intelligence community for Kubla Khan, and the Potomac for the Alph, and, in the imaginativemusings of Sen. Max Baucus, you have the "remarkable" new headquarters of the National Reconnaissance Office, the nation's most secretive and expensive spy agency.

The poetic Montana Democrat joined other senators on the Select Committee on Intelligence last week in wondering aloud and angrily how a Xanadu-like complex could be built on 68 acres near Dulles International Airport without any specific budget authorization by the intelligence oversight panel.

The estimated federal price tag for the development, which has been under construction for four years and will not be finished for two more years: $310 million. That sum is hidden somewhere in the Pentagon's overall spending.

Four concrete-and-glass office blocks, initially planned to have fountains outside and saunas inside, appeared in the Northern Virginia countryside behind a notice board in the name of Rockwell International Corp., a defense contractor.

By all outward appearances, the million-square-foot complex is just another private office development in the Westfields Corporate Center on Route 28 in Chantilly, Va.

Until two years ago, the existence of the NRO was a state secret, although its creation was approved by the National Security Act of 1947, and it has been operating for more than 30 years. Little wonder that the 1989 plan to build the agency a new lavish headquarters was masked in secrecy and subterfuge.

The NRO is a creation of the Cold War. It is charged with designing, buying and operating spy satellites, the United States' espionage weapon of choice after the Soviets shot down a U-2 spy plane in 1960.

The Russians also threatened to shoot down any spy satellites. So U.S. spymasters decided that the best way to avoid a superpower confrontation in space was to make the satellite intelligence program officially nonexistent. The NRO should be an agency that wasn't.

"The organization itself had to be kept under cover to protect it from foreign adversaries coming and understanding what we do, from efforts to defeat or counteract the measures we use on our space and air craft," said Maj. Pat Wilkerson, a spokeswoman for the NRO.

Jeffrey Richelson, author of "America's Secret Eyes in Space," a book on satellite intelligence, said the existence of the agency became known through an inadvertent mention in a 1973 congressional report.

"It was one of those secrets that wasn't really secret," he said. "With the end of the Cold War, with the fact that everybody knew this organization existed, and with the fact that there was a move to open some of its data for environmental and other uses, it became harder to justify the secrecy. Its declassification was long overdue -- about 20 years overdue -- when they finally acknowledged its existence."

The NRO's existence was declassified in September 1992.

The defense secretary has ultimate responsibility for the NRO; the CIA director establishes its collection and targeting priorities. The NRO does not decide what intelligence to collect. Nor does it analyze the data that streams into its tracking stations. It is in charge simply of the hardware end of satellite espionage.

"The NRO is just given an order that its satellites are to produce X, Y and Z," Mr. Richelson said.

It operates about 18 satellites -- the figure is secret and evolving as old satellites fade away or are dumped and more powerful ones are put in orbit. They include signal intelligence systems that can eavesdrop on telecommunications, even tapping into Russian car phones; photo reconnaissance systems for mapping and finding sites; and surveillance systems that use cloud-piercing radar to produce high definition images of targets, terrain or troop movements.

The NRO operation is part of the $18 billion National Foreign Intelligence Program, which includes the CIA, the National Security Administration, the Defense Airborne Reconnaissance Office, the Defense Intelligence Agency, the intelligence units of the individual military services, and several smaller espionage units.

According to an analysis by John Pike, director of space policy at the Federation of American Scientists, the NRO has the largest budget of any spy agency -- $6.5 billion. This compares with $3.5 billion for the NSA, $3 billion for the CIA, $2 billion for the DARO, and $500 million for the DIA.

"The reason the NRO gets such a large amount of money compared to the CIA is because it is involved in the development and acquisition of these extremely expensive orbiting systems we use for the collection of intelligence," said Loren B. Thompson, national security expert with the Alexis de Tocqueville Institution, a think tank.

The NRO is estimated to have about 3,000 permanent staff members. But it relies heavily on outside contractors from companies such as Martin Marietta, Hughes Aircraft, TRW, Lockheed and Boeing.

Noting that the $310 million for the new headquarters was less than 1 percent of the NRO's overall budget over the past four years, Mr. Pike said: "We have gotten this tiny little peek of this small corner of it, and this other 99 percent is sailing along merrily in its own way."

A central question raised by the Senate Select Committee on Intelligence last week was why the NRO needed such a large complex in the post-Cold War era, and whether it was absorbing its fair share of the $7 billion cut the Clinton administration is making in the $28 billion intelligence budget over five years.

CIA Director R. James Woolsey disputed the notion that the building was lavish. He told the committee that new investment in the NRO was vital to future savings.

According to intelligence experts, this is how the NRO operates:

The Army Intelligence Agency might decide it needs to understand the order of battle of Serbian forces in Bosnia. It puts the request to one of the interagency intelligence tasking committees.

If eavesdropping is involved, it goes to the Signal Intelligence Committee, chaired by an NSA official, at Fort Meade. If photos or images are needed, the request is forwarded to a committee presided over by the CIA, at the Central Imagery Office in Virginia.

The committee decides what intelligence the Army needs, and directs the NRO to program its satellites to acquire it. The satellite zeros in on the right area at the right time to collect the data.

If the intelligence involves signals, the NRO sends the raw data back to Fort Meade. If it involves imagery, it goes to the CIA or the Defense Intelligence Agency. Having separated the wheat from the chaff, the agency forwards the relevant data to Army intelligence for analysis.