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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.

April 06, 2003|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 bidding invites a waste of taxpayer dollars. Company and government officials 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.

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