James Glanz / New York Times – 2006-04-25 23:28:05

http://www.chron.com/disp/story.mpl/world/3817030.html

(April 24, 2006) — When Robert Sanders was sent by the US Army to inspect construction work that an American company was doing on the banks of the Tigris River, 130 miles north of Baghdad, he expected to see workers drilling holes beneath the riverbed to restore a crucial set of oil pipelines, which had been bombed during the invasion of Iraq.

What he found instead that day in July 2004 looked like some gargantuan heart-bypass operation gone nightmarishly bad. A crew had bulldozed a 300-foot trench around a giant drill bit in their desperate attempt to yank it loose from the riverbed. A supervisor later told him that the project’s crews knew that drilling the holes was not possible, but that they had been instructed by the company in charge to continue anyway.

A few weeks later, after the project had burned up all of the $75.7 million allocated to it, the work came to a halt.

The project, called the Fatah pipeline crossing, had been a critical element of a $2.4 billion no-bid reconstruction contract that a Halliburton subsidiary had won from the Army in 2003. The spot where about 15 pipelines crossed the Tigris had been the main link between Iraq’s rich northern oil fields and the export terminals and refineries that could generate much-needed gasoline, heating fuel, and revenue for Iraqis.

For all those reasons, the project’s demise would seriously damage the American-led effort to restore Iraq’s oil system and enable the country to pay for its own reconstruction. Exactly what portion of Iraq’s lost oil revenue can be attributed to one failed project, no matter how critical, is impossible to calculate.

Problems obvious The Fatah project went ahead despite warnings from experts that it could not succeed because the underground terrain was shattered and unstable. It continued chewing up cash when the predicted problems bogged the work down, with a contract that allowed crews to charge as much as $100,000 a day as they waited on standby.

And until Sanders went to Al Fatah, the US Army Corps of Engineers, which administered the project, allowed the show to go on for months, even as individual corps officials said they repeatedly voiced doubts about its chances of success.

The Halliburton subsidiary, KBR, formerly Kellogg Brown & Root, had commissioned a geotechnical report that warned in August 2003 that it would be courting disaster to drill without extensive underground testing.

Through a spokesman, Melissa Norcross, KBR rejected the criticisms leveled at it in the Fatah pipeline case, saying that the company had responded properly to an urgent request by the US government to build the crossing quickly in a dangerous area.

Norcross asserted in a written response that the geotechnical report was too general to suggest any measures but extensive ground testing, which would have required sophisticated equipment. “Such equipment was not available in the region, and certainly not in Iraq,” she said.

Norcross said that when serious problems arose, “the corps directed KBR to continue” with the drilling.

Once the project started going bad, senior American officials said, an array of management failures by KBR and the corps allowed it to continue. First, some of those officials said, they seldom received status reports from the company, even when they suspected problems and made direct requests.

Some warnings did in fact make their way to senior officials who could have stopped the project, said Donna Street, a corps engineer who examined correspondence on the project after it failed. But neither the corps nor the company appeared to act on them, Street said.

Slap on the wrist for KBR The Special Inspector General for Iraq Reconstruction began an investigation of the project and issued a report earlier this year. It sharply criticized KBR for not relaying the problems, and concluded that “the geological complexities that caused the project to fail were not only foreseeable but predicted.”

The company received a slap on the wrist when it got only about 4 percent of its potential bonus fees on the job order that contained the contract; there was no other financial penalty.

Congressional Democrats have accused Halliburton of enjoying special privileges because Vice President Dick Cheney was its chief executive before he became vice president.

With the failed effort at Al Fatah, the United States was forced to issue a new $66 million job order that includes another attempt to run pipelines across the Tigris – this time using a different technique.

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