Halliburton, Kellog Brown & Root...and Our Dilemma

Army demotes senior official who exposed Halliburton cronyism

WASHINGTON, Aug. 29 (HalliburtonWatch.org) -- The top civilian contracting official at the US Army Corps of Engineers (USACE) was demoted after exposing cronyism between Halliburton and the Army, the New York Times reported today.

Bunnatine H. Greenhouse, a civil servant with 20 years of contracting experience, had complained to Army officials on numerous occasions that Halliburton's KBR subsidiary had been unlawfully receiving special treatment for work in Iraq, Kuwait and the Balkans. The seriousness of her allegations prompted the U.S. Justice Department, the Federal Bureau of Investigation (FBI) and the Pentagon's inspector general to open criminal investigations that continue today.

The USACE oversees many aspects of Iraq's reconstruction, including reconstruction of the country's oil industry. It awarded KBR the largest troop logistics contract in history, worth over $11 billion in revenues for the company so far, mostly from Iraq.

"I can unequivocally state that the abuse related to contracts awarded to KBR represents the most blatant and improper contract abuse I have witnessed during the course of my professional career," Greenhouse told a congressional hearing last June.

In one of the many examples of abuse, Greenhouse said military auditors caught KBR overcharging the Pentagon by $61 million for fuel deliveries into Iraq. (Those overcharges eventually totalled $212 million. In one case, the overcharges exceeded 47% of the total value of the work order.) But, says Greenhouse, the USACE "took the unusual step" of issuing an illegal waiver to excuse KBR from explaining why its oil transport prices were much higher than competitor prices. She said USACE "simply asserted that the price charged for the fuel was 'fair and reasonable', thereby relieving KBR of the contract requirement that cost and pricing data be provided."

By issuing the waiver, said Greenhouse, USACE officials "knowingly violated" the law by "intentionally failing" to obtain her approval. That's because they knew she would have refused to approve the waiver request. "The evidence suggests that the reasons why I was intentionally kept from seeing the waiver request were politically motivated," she said.

USACE had also concealed from the public a number of audits by the Defense Contract Audit Agency which were critical of Hallburton's work in Iraq and Kuwait.

Amid the controversy -- on December 30, 2003 -- the Pentagon fired Halliburton from the gasoline importation contract and assigned it to an internal office known as the Defense Energy Support Center. The result was a 50 percent reduction in gasoline prices charged to US taxpayers.

Greenhouse said USACE officials repeatedly violated regulations designed to shield contract awards from unethical outside influences. At one point, KBR executives were present in a meeting of USACE officials who were deliberating whether KBR should be awarded a contract. The executives left the meeting only after Ms. Greenhouse urged them to leave.

"[T]he line between government officials and KBR had become so blurred that a perception of conflict of interest existed," Greenhouse's attorney, Michael Kohn, said in a letter to the acting Secretary of the Army. "Employees of the U.S. government have taken improper action that favored KBR's interests," he said. "This conduct has violated specific regulations and calls into question the independence" of the contracting process.

Greenhouse also complained when Defense Secretary Donald Rumsfeld's office took control of "every aspect" of KBR's $7 billion no-bid Iraqi oil infrastructure contract. "In reality, the OSD [Office of Secretary of Defense] ultimately controlled the award of the [oil] contract to KBR," she said. This arrangement was illegal since the law requires career civil servants, not temporary political appointees like the folks in Rumsfeld's office, to determine the winners of government contracts. The purpose of the law is to prevent political appointees from awarding contracts only to their friends in the private sector. Rumsfeld's office violated this rule by involving itself in awarding the Iraqi oil contract to KBR.

"She is being demoted because of her strict adherence to procurement requirements and the Army's preference to sidestep them when it suits their needs," Greenhouse's attorney, Mr. Kohn, told the New York Times. He also said the Army had violated a commitment to delay Ms. Greenhouse's dismissal until the completion of an inquiry by the Pentagon's inspector general.

USACE officials say Greenhouse, who has received excellent performance ratings in the past, was demoted for her performance and not in retaliation for any disclosures of alleged improprieties.

More Information: http://www.halliburtonwatch.org/news/greenhouse_demoted.html

LNG Plans Unsafe: Richard Clarke

05/10/2005
Clarke: LNG plans unsafe
Daniel Fowler , Herald News Staff Reporter

PROVIDENCE -- After weeks of research and analysis, Richard Clarke and his team of counter-terrorism experts concluded Monday what many in the region have been saying for months: Liquefied natural gas facilities do not belong in Providence or Fall River.
"Going into this analysis, we had no preconceived outcome in mind," Clarke said. "We hoped there would be a way of defending the LNG facility."

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It turned out, however, that there wasn’t.

"We asked ourselves, ‘Could we develop a defense against these kinds of attacks that terrorists could not penetrate?’ " said Clarke, a former anti-terrorism adviser for several presidents. "Unfortunately, the answer to that was no."

Clarke, and his Virginia-based company, Good Harbor Consulting, have been working on a threat analysis of proposals by KeySpan and Hess LNG to build LNG import terminals in Providence and Fall River. Attorney General Patrick Lynch hired him to conduct the study in January.

On Monday, Clarke released his 159-page document, entitled "LNG facilities in Urban Areas," at a forum at Brown University.

The "simplest defense mechanism" in fighting terrorism as it relates to LNG, Clarke said, is to place LNG facilities where people aren’t.

"There’s much less terrorist interest in remoter areas," Clarke said. "Even if a disaster never happens, we know the risk is much higher if it’s in an urban area."

Clarke said his threat analysis went beyond simply looking at actual terrorist attacks to determine the likelihood of an incident at an LNG facility or on an LNG tanker.

"When it comes to terrorism in this day and age, we can no longer say, ‘Show me the numbers,’ " Clarke said. "It’s a foreseeable risk, but not one we can quantify."

Clarke said the Federal Energy Regulatory Commission is "pretending to be able to quantify" the likelihood of an attack, which is a mistake in the wake of the Sept. 11, 2001, terrorist attacks. FERC is ultimately responsible for deciding whether to approve proposed LNG facilities.

If asked prior to the Sept. 11 attacks what the statistical probability is of terrorists hijacking four jets and crashing two of them into the World Trade Center, "We would have said, ‘It hasn’t happened,’" Clarke told the dozens of people in the audience.

But to say "because something never happened, it will never happen ..is illogical," Clarke said.

Instead of using the "old risk management paradigms," which rely on statistics, Clarke’s study looks at five issues: intent, capability, vulnerability, consequence and recovery.

Clarke said U.S. intelligence operatives know that a group like al-Qaida wants to attack something like an LNG facility or tanker, has the capability to carry out such an attack, and that LNG facilities and tankers are vulnerable to attack from land, water and air.

Such an attack, Clarke said, would cause widespread destruction and death, and "there is no way the New England (area) trauma and burn unit ..could deal with a disaster of that capacity."

In terms of the recovery phase, Clarke said, the region likely lacks the ability to cope fully with such a disaster.

While he produced the analysis, Clarke said, he had "no idea" what impact, if any, it will have on FERC’s decision to approve or reject LNG facilities in this area.

Lynch said Clarke’s report was filed with the U.S. Coast Guard Monday and will be filed with FERC today.

Fall River Mayor Edward M. Lambert Jr., who attended the forum, said Clarke’s analysis "is another very important step in our fight."

"He clearly said that, in a populated area, (siting an LNG facility) is a very unwise thing to do," Lambert said. "I think his report validates what we’ve said from the start. He pointed out very specific ways that an attack can be carried out -- air, water and land."

Though a valuable resource, Lambert said, it will take more than a report to prevent LNG facilities from being sited in Fall River and Providence.

"I think Richard Clarke and his report alone won’t (convince) FERC, but I think this is very important in our public call to get FERC to change its policies," Lambert said. "Today it’s Fall River and Providence. Tomorrow it will be other communities."

Lambert said it’s important to ensure Clarke’s report reaches a wider audience.

"I think the only way to pressure FERC is to get this into the hands of the public and the media so Americans start asking questions of FERC and the White House," Lambert said. "Why would you do this when you have alternatives?"

Coast Guard officials have been waiting for the results of Clarke’s study before deciding whether to act on a November request by Fall River leaders to issue regulations establishing thermal vapor dispersion exclusion zones for LNG marine spills.

FERC has also said it will not make a ruling on the two proposals until it receives Clarke’s report.

E-mail Daniel Fowler at dfowler@heraldnews.com.

When Terrorists Attack, What Then?

Study: LNG - Not in my backyard

In recent years America's gas market has been primed for volatility largely because of declining domestic supplies. To keep prices in check and limit the global influence of the oil cartel, many have advocated increasing imports of liquefied natural gas (LNG), natural gas cooled at extremely low temperature and high pressure until it contracts into a liquid which then can be transported worldwide by tankers. The liquid is unloaded at regasification terminals which turn it back into gas fed into pipelines for distribution. The U.S. Department of Energy expects LNG to account for 15% of U.S. gas consumption by 2025, compared to 1% today. Consequently, LNG imports into the U.S. are expected to grow by about 8.2% a year over the coming decade. U.S. Federal Reserve Bank chairman Alan Greenspan testified repeatedly before Congress that LNG was the only solution on the horizon for the projected chronic natural gas shortage.

However, LNG is highly volatile and in the era of terrorism may offer more opportunities for terrorist strikes on vulnerable energy infrastructure targets located near residential neighborhoods. One such disaster scenario was developed by James Fay, a professor emeritus of mechanical engineering at Massachusetts Institute of Technology, a former chairman of the Massachusetts Port Authority and a member of the Union of Concerned Scientists. Fay is indeed concerned. He predicts parts of Rhode Island and Massachusetts could be devastated by an attack on LNG tankers regularly passing through navigation canals close to residential areas in Boston and the Rhode Island shoreline on their way to the terminal in Everett, Mass.

In an interview with Energy Security Fay said a terrorist attack by a boat bomb - such as the one used against the USS Cole in 2000 or the French tanker Limburg off the coast of Yemen in 2002 - could cause at least half a cargo hold's worth of LNG to seep out of the ship and ignite. "In just over three minutes, the fire could spread two-thirds of a mile from the ship," Fay said. "There is nothing safety officials can do in such a case. They would have no time to evacuate people or to put out the fire." Fay also predicts damaging thermal radiation within a mile radius of the tanker which could set fire to thousands of homes and cause significant losses of blood and treasure. "Like the attack on the World Trade Center in New York City, there exists no relevant industrial experience with fires of this scale from which to project measures for securing public safety," he says. Fay insists the methodology of his modeling is sound.

Fay's analysis, as well as that of other experts, has sparked a debate in New England as well as in other states where LNG terminals operate or are under consideration. In addition to the Everett facility there are operational plants at Cove Point in the Chesapeake Bay, Maryland, in Savannah, Georgia, and in Lake Charles, Louisiana. LNG tankers are very conspicuous. Their distinctive storage tanks jut like humps on the decks; their identity cannot be mistaken. Terrorists attempting to target such a ship will have no problem identifying it. Furthermore LNG installations can be attacked onshore by truck bombs with similarly damaging consequences.

Alabama Governor Bob Riley sent letters to the Federal Energy Regulatory Commission and the Alabama Port Authority saying he will block sale of state-owned land to ExxonMobile for use as an LNG terminal "until an independent safety study has been completed and evaluated," specifying it should be "a study that considers the most credible worst-case scenario." Gov. Riley's letter states that “Only in this way can [..] all parties concerned by apprised of the actual possible outcomes of an accident or terrorist attack.”

Boston Mayor Thomas Menino recently decided to rid Boston Harbor of its long-standing LNG facility over safety concerns. "Everyone should be concerned about it because the Coast Guard, Boston fire department and other agencies do not have the equipment if something did happen with an LNG tanker. Everyone says there is no problems, but what happens when something does happen?" Menino said this past December when the national threat level was elevated to orange. Menino and other representatives of Boston-area communities had mounted an unsuccessful lawsuit to halt the LNG operations after Sept. 11, 2001. Professor Fay agrees. "Federal officials are at a state of denial right now. They ignore the scenario of tanker spill as a problem they have to deal with." Menino has no jurisdiction in the harbor so the tankers are still coming.

The Coast Guard however is not ignoring the threat. It has taken some precautions to minimize the risk of attack against LNG tankers. Fast escort boats shepherd each gas tanker as it travels to the terminal. A security zone extending 500 yards on each side, two miles ahead and a mile behind the tanker is imposed and other vessels are instructed to give the tanker a wide berth during its passage and 12-hour unloading process. Violators face arrest, fines of up to $25,000 and prison terms of up to 10 years. But these penalties are unlikely to deter suicide terrorists such as those who flew planes into the World Trade Center and the Pentagon. It is not clear what procedures the Coast Guard would be willing to use once a terrorist boat penetrates into the security zone. Nor it is clear how rapidly security officials could respond to the threat. After all, well armed and vigilant military targets like the USS Cole could not prevent such an attack.


LNG tanker

The safety concerns surrounding LNG installations pose difficulties for energy companies attempting to build new terminals. No such terminals have been built in the U.S. for two decades, but applications to construct 30 more have been made in recent years. Only half a dozen are likely to materialize in the next decade. ExxonMobil has announced plans to build a $600 million plant on the Texas coast and wants to build three more in other states. ChevronTexaco announced plans to construct an off the coast of Baja California, Mexico and Royal Dutch/Shell and BP are among other companies driving to build new terminals in California, Texas, Alabama, Florida, Mexico, Nova Scotia and other locations. In most of these places opposition by local communities is mounting and it is not yet clear which consideration will prevail: public safety or economic need.

Keep LNG Out of Quoddy Bay

After the rally and meeting at St. Andrew's, NB, I'm feeling energized and delighted. Delighted that the government of New Brunswick recognizes something that our own elected representatives do not: that LNG when brought to this area will consume and corrupt any of the things we all hold dear.