From LA Times over weekend
APRIL 6th
WAR WITH IRAQ
Dealing With Fire
Months before the first bomb fell, a firm tied to Halliburton quietly locked in a pact with the U.S. to fight oil well fires. Now that contract is drawing heat.
By Mark Fineman and Dana Calvo, Special to The Times
HOUSTON -- For weeks, Les Skinner waited for a phone call. For an e-mail. For any sign from the Pentagon that it was interested in Cudd Pressure Control's offer to send its crack teams of oil well firefighters to the Iraqi border.
War was looming. Iraq's oil wells were considered to be among Saddam Hussein's weapons. Skinner's company already had a contract to fight oil well fires with Kuwaiti Oil Co., and his team had its equipment ready and bags packed.
"All we need is somebody to say, 'Get on the plane,' " said Skinner, director of well control engineering for Cudd. But no one ever did.
The Pentagon didn't call Mike Miller, either. The chief executive of Canada's Safety Boss! Inc., which helped to cap the Kuwait oil well fires that Iraq set in 1991, was sitting in Calgary, thinking that "someone should have someone there before the war starts," Miller recalled.
What neither executive knew was that someone already was there.
On the morning of March 1, as Iraq lobbied the world to avert an invasion, 11 Texans quietly landed in Kuwait City on a secret mission: to prepare to fight oil well fires yet to be set in a war yet to be declared under a classified Defense Department contract yet to be awarded.
And only a select group knew at the time that their company, Houston-based Boots & Coots International Well Control Inc., would get the job. The company had been locked in months before because of an alliance with well-connected Halliburton Co.
Critics now are attacking the deal, questioning whether the financially troubled Boots & Coots was a good choice for the job and contending that the lack of competitive biddi! ng invites a waste of taxpayer dollars. Company and government officia ls defend the arrangement, saying the firm is qualified and the secrecy was necessary as the United States headed toward war.
The principals of what became Boots & Coots had signed a strategic alliance with Halliburton in 1995, soon after Dick Cheney became the energy giant's CEO, the job he left to run for vice president. That alliance guaranteed Boots & Coots a big piece of work whenever Houston-based Halliburton had a contract that included capping oil well fires.
The U.S. Army Materiel Command, under a broad existing contract, asked Halliburton subsidiary Kellogg Brown & Root in November to prepare a classified study on supplying emergency oil services during an expected U.S. invasion of Iraq.
A Classified Contract
On March 8, citing Kellogg Brown & Root's work on the study, the Army Corps of Engineers handed the job to the Halliburton subsidiary and to Boots & Coots, in a no-bid contract that remains classified.
But today, as the Boots & Coots "hellfire" fighters in their bright red overalls and hard hats are battling half a dozen of what could become scores of oil fires in Iraq, the process that brought them and Halliburton into the war zone has set off a firestorm at home.
Led by U.S. Rep. Henry A. Waxman (D-Los Angeles), critics say the lack of competition could cost taxpayers dearly. And the secrecy shrouding a contract that ended up in the hands of a company that Cheney ran for! five years raises suspicions of conflicts of interest, they say.
The "cost-plus" contract Kellogg Brown & Root won, Waxman said in a March 26 letter to Lt. Gen. Robert Flowers, the Corps of Engineers commander, "is apparently structured in such a way as to encourage the contract to increase its costs and, consequently, the costs to the taxpayer." It permits Kellogg Brown & Root and Boots & Coots to recover all their costs, plus a fee ranging from 2% to 5% of those costs.
The contract, Waxman said, is "potentially worth tens of millions of dollars or more." Boots & Coots said the contract currently pays about $50,000 a day.
Lt. Col. Gene Pawlik, a Corps of Engineers spokesman, insisted that the arrangement was "a limited-duration, limited-scope emergency services contract" that would balloon into the tens of millions of dollars only if all of Iraq's vast oilfields were on fire. It had to be structured as a cost-plus contract, Pawlik said! , because no one could estimate the damage from a war that had yet to begin.
And it had to be awarded and implemented in secret, he said, because "the pre-positioning of equipment and people in locations where they were going to be operating militarily made it necessary to make it classified."
The contract came at a crucial time for Boots & Coots. On Nov. 14, in a quarterly filing with the Securities and Exchange Commission, the American Stock Exchange-traded company said it no longer could pay its debt. "The company is actively exploring its options, including filing for bankruptcy protection," the filing stated. In its annual report, filed Monday, Boots & Coots noted that it "continues to consider its restructuring alternatives," including bankruptcy reorganization. Shares rose 1 cent Friday to close at 75 cents.
No one has questioned Boots & Coots in terms of experience. Like most hellfighting outfits, the company includes seasoned veterans of the campaign to extinguish oil well fires in the 1991 Persian Gul! f War.
Critics' Questions
Still, some competitors and critics privately question whether Boots & Coots has a big-enough payroll and enough capital to fulfill the hellfire subcontract. Already, Kellogg Brown & Root has subcontracted with another Texas company, Wild Well Control Inc., to provide additional firefighters in southern Iraq, according to the Corps of Engineers. That company also is getting $50,000 a day.
Jerry L. Winchester, Boots & Coots' CEO, insists that his company has more than enough muscle to manage.
"This contract certainly doesn't hurt, especially coming out of 2002, where business was not good," Winchester, 44, said in an interview. "But we weren't betting the company on this one thing happening."
Winchester, a former Oklahoma State University defensive tackle who stands 6-foot-6 in his socks, grew up in the oil industry, working his way up at Halliburton for 14 years before joining Boots & Coots as chie! f operating officer in 1998.
Winchester, a former Oklahoma State University defensive tackle who stands 6-foot-6 in his socks, grew up in the oil industry, working his way up at Halliburton for 14 years before joining Boots & Coots as chief operating officer in 1998.
He said the firm laid off 25 of its 150 employees last year, and in January it moved its headquarters from the glass-and-steel luxury of Houston's Galleria district to an industrial park where factories make building products and a luncheonette advertises "freedom fries."
Winchester said the company recently won work in Venezuela and Ohio and that the 35 hellfighters it has on staff are more than ample for what is needed in Iraq at the moment. He declined to speculate why Kellogg Brown & Root had hired subcontractors from Wild Well.
Wild Well's marketing manager, Bill Mahler, said his company was happy to send nine firefighters to Kuwait City but annoyed that it was not consulted early on.
"We would ha! ve liked to have participated in the pre-planning," Mahler noted. "It was frustrating that we weren't included."
It wasn't until the Corps of Engineers and Halliburton simultaneously disclosed the classified contract March 24 that any of the competitors knew that Halliburton had won the award.
The alliance between the two companies was signed in October 1995 by Halliburton and Boots & Coots' predecessor company, IWC Services Inc. Both Boots & Coots and IWC have ties to the most famous hellfighter of them all, Paul N. "Red" Adair.
'Boots' and 'Coots'
Adair, whose work putting out oil well fires in Kuwait capped his five-decade hellfighting career, formed his company in the 1950s with a group that included firefighters Asger "Boots" Hansen and Edward "Coots" Matthews. The two men split from Adair to form their own firm, Boots & Coots, in 1978.
After Adair sold his company and retired, six other former employees resigned and found! ed IWC in 1995.
Cheney, who as then-Defense secretary oversaw A dair's operations to put out more than 700 wells that Iraq set ablaze as it fled Kuwait, joined Halliburton as CEO shortly before the company signed the 1995 alliance with IWC. There is no evidence that he was involved in the deal.
Two years later, IWC and Boots & Coots combined as what is now Boots & Coots International Well Control. The new company inherited the Halliburton alliance. And it was that alliance -- not political influence -- that gave Boots & Coots the advantage, Winchester, Halliburton and the Corps of Engineers say.
"Even thinking that we have the ability to get Dick Cheney on the phone is ridiculous," Winchester said.
Halliburton spokeswoman Cathy Gist said the Corps of Engineers "came to us based on the fact that we're the only contractor that could start implementing this plan on such short notice because we developed the plan at the [Defense Department's] request."
And the Corps of Engineers insists that Halliburto! n was the obvious choice: "For our purposes, to get this thing done as quickly as possible, this thing made sense," Pawlik said.
At the site of the burning wells in the desolate Rumaila oil field, Boots & Coots firefighter Larry Flak told a Times reporter last weekend that it appeared the company's work in Iraq would, in fact, be limited. "We expected to see more fires," he said.
But Boots & Coots President Brian Krause was thinking about vaster, richer fields in northern Iraq, where future fires could exponentially increase Halliburton's and Boots & Coots' workload -- and profit.
As Krause worked on the burning well, he said: "We have a long way to go north."
Times staff writer Fineman reported from Washington, Calvo from Houston. Staff writer David Wharton contributed from Iraq. |
