Bulldozers Inc.

For nearly 30 years, every major energy project in this country, from the trans-Canada pipeline to James Bay, has been engineered by a company called Bechtel

Walter Stewart June 28 1976

Bulldozers Inc.

For nearly 30 years, every major energy project in this country, from the trans-Canada pipeline to James Bay, has been engineered by a company called Bechtel

Walter Stewart June 28 1976

Bulldozers Inc.

For nearly 30 years, every major energy project in this country, from the trans-Canada pipeline to James Bay, has been engineered by a company called Bechtel

Walter Stewart

Robert Paul is a tall man, grey-haired, handsome in a rugged way, brisk, businesslike and, occasionally, troubled. This was one of his troubled moments. Looking out the window of his sleek new office 16 floors above Bloor Street in Toronto, he drummed thoughtfully on the arm of his chair, cleared his throat and spoke hesitantly. “You wonder if some of the things being built that are so big are necessary. Sometimes you wonder.” He paused again. “I’m glad we talked about this. This is the first time I’ve ever talked about this.”

Bob Paul is the president of Canadian Bechtel Limited, subsidiary of the giant Bechtel Corporation of San Francisco. His company is finishing up the $240 million Montreal-Sarnia pipeline while managing work on the two-billion-dollar Syncrude project in Alberta and the $ 14-billion (to date) James Bay Hydro project in Quebec. Bechtel has been in on the building of virtually every major pipeline in Canada since 1949. It helped build the one-billiondollar Churchill Falls hydro scheme and has managed giant projects from coast to coast, including pulp mills, iron ore mines, oil refineries, copper mills and nickel concentrators. The American parent corporation, through its gang of subsidiaries, handles billion-dollar construction and engineering contracts around the world. Every hour of every day a Bechtel company somewhere is damming a river, smashing down a forest, gouging out a mine, laying down a pipeline or otherwise rearranging the earth’s surface.

Paul is the second Bechtel employee I know of in the company’s 78-year history to voice—however mildly—some doubt about whether all this ripping, tearing, smashing, digging and laying is building a better world. The first, Bruce Willson, quit as president of Canadian Bechtel in 1969 on nationalist grounds. “I resigned partly out of frustration at the lack of Canadian control of projects built in this country. One of the things that bothered me was that in certain areas of technical expertise foreign-owned engineering companies predominated. Some of Bechtel’s clients were to a considerable degree interested in the further exportation of Canada’s resources. I was concerned that Canada

didn’t have Sufficient reserves to justify these further exports. The power of U.S. controlled corporations to obtain government approvals was very substantial and I didn’t want to go along with this. I found conflict between my duties as an officer of Bechtel and my feelings as a Canadian nationalist.” He also said: “Bechtel worked within the rules of the game, but the game was not in Canada’s long-term best interests.” Paul doesn’t agree. He thinks Syncrude and James Bay, for example, are “absolutely essential for Canada’s future energy needs.” But after 22 years with Bechtel he is open, for the first time, to a suggestion that not everything big is good, that not every billion-dollar construction job brings happiness in its wake. The smooth surface of his belief in engineering is beginning to develop some wrinkles.

There are many troubling questions about Canadian Bechtel and its sprawling, thrusting, parent company. There is the philosophic question: Are all these giant projects necessary? There is the nationalist question: Why shouldn’t a Canadian company do the job, if the job must be done? There is the business question: What kind of company is Bechtel, anyway? Its activities affect every one of us: they help to determine the taxes we pay, the resources we use, the kind of world we live in. It is a company worth knowing.

The world headquarters of Bechtel Corporation, 50 Beale Street, in the heart of San Francisco’s financial district, house the nerve centre of what is probably the largest construction company on earth. (No one compiles worldwide figures on construction firms, but Bechtel has headed the list of contracts recorded by dollar volume in Engineering News-Record magazine for five of the past 11 years.) The company is working today at more than 100 “major” projects—major means over $25 million; in fact, many are over one billion dollars—in a score of nations, from an iron slurry pipeline in Tasmania to a pet food plant in Missouri, from a copper complex in South Africa to a nuclear power plant in India, from the new Washington, DC, subway to an oil pipeline linking northern Italy to West Germany. The company was founded in 1898 by Warren A. Bechtel, a

railway builder, expanded by his son, Stephen D., who helped build the Hoover Dam and got into refinery construction, and expanded still further by his son, Stephen D. Jr., the current chairman. The firm is privately owned, secretive—you can’t get past the lobby entrance of the 23storey headquarters without a clearance and a badge—and highly political. Bechtel denies this last. A company official told Newsweek: “We are not political. Sometimes I think we are political incompetents.” But the company’s roster includes two former cabinet members, it played a major role in the June 8 California primary, helping to defeat a proposition calling for a moratorium on nuclear plants, and it has mounted two other lobbies, one to push a coal pipeline, another to grab off a lucrative contract to build a uranium enrichment plant, in legislation currently before Congress. Competent or not, Bechtel is in politics up to its well-padded hips.

In short, Bechtel is a giant, aggressive, private concern with enormous public impact and a mixed reputation. Its activities in Canada, where its sense of privacy has kept it largely from public scrutiny, are merely an extension of its behavior elsewhere. An examination of five Bechtel projects casts some light on how the company operates.

A Slight Case of Bribery.

Bechtel was building a $90-million oil pipeline for Colonial Pipeline Company in New Jersey when the project hit a snag. The line was headed for a tank farm at Woodbridge, N.J.,and two members of the Woodbridge Council demanded a $50,000 bribe in return for building permits. Colonial—a consortium of oil companies—paid the bribe through a local construction company. Then the two men demanded another $100,000— later bargained down to $60,000—for easements to let the pipeline cross townowned land. The construction company couldn’t bury any more bribes in its books,

so Colonial turned to Bechtel, and Bechtel made the payoffs (although not without some difficulty: a Bechtel official flew out from San Francisco with a cheque, but a local Bechtel man refused to have anything to do with it and another cross-country trip was necessary). The tank farm was built.

The payoffs came to light by accident during a labor-rackets investigation, and Bechtel, Colonial, the construction company and the municipal officials were charged and convicted. Bechtel was convicted of bribery and conspiracy but appealed, and won, on the novel grounds that the panel from which the grand jury that handed down the original indictments was chosen didn’t have enough women on it and was therefore discriminatory. The company was promptly charged again, pleaded guilty to bribery and conspiracy, and was fined $1,000 on June 7, 1972. (Before I had tracked down these details 1 asked for help from Thomas Campion, the Newark lawyer who acted for Bechtel. He said he couldn’t remember exactly what happened, but “we pleaded guilty to something a little bit worse than a traffic offense.” He promised to call me back. That was in March. I’m still waiting.)

When Stephen D. Bechtel heard about the bribery, he was reportedly “very upset,” but none of the four Bechtel employees directly involved was fired. Does this mean that the company approves of bribery and conspiracy? I put the question to Bechtel vice-president Paul Kane in San Francisco, and he replied that at a recent company meeting Stephen Bechtel, in a speech, “devoted three or four minutes to this very issue, and he said that we’re not going to become involved in anything of a shady nature in order to become involved in a project or make a dollar.” The sentiment was laudable, but if the men weren’t acting with Bechtel’s okay, why weren’t they fired when they were caught breaking the law? Kane said none of the men is with the company now, but, as to why they weren’t discharged, “I can’t answer you.” (The company had written notice of the question three weeks before the interview.) What if Bechtel became involved in crooked dealings in Canada, in the mammoth projects so vital to our future? Could we look forward to a speech, some years hence,, denouncing the damage done? “Well,” said Kane, “all you can say is that you have a policy, you communicate your policy, you monitor . . . and when things come to light, you take action.” The company had taken action in a couple of other cases, he said, but he wasn’t anxious to discuss them.

Why did Bechtel do it? The prosecution claimed the company was about to lose $1.7 million on the pipeline contract and got the contract rewritten to make a profit of $500,000 in return for carrying the bribe. Kane said this was not so. “Rewriting contracts is not unusual where conditions change.”

The Battle of James Bay

The James Bay project is one of the most dubious, as well as the most massive, undertakings in Canadian history. It was first projected, in 1967, as a scheme to harness nine rivers flowing into James Bay to produce 10,000 megawatts of power at a cost of $1.5 billion. Later, it became a plan to harness five rivers to generate 14,000 megawatts for six billion dollars. Then it was divided into phases, and the first phase, to be completed in 1983, would produce 8,000 megawatts and cost $5.8 billion. Then it was stepped up to 11,300 megawatts, and current estimates put the price tag at anywhere from $14 billion to $20 billion. The power will be sold to the United States or used either in Quebec’s industrial heartland or in the north. Premier Robert Bourassa at one point proposed the building of uranium enrichment plants, which use enormous quantities of power, to provide a market for James Bay Hydro. That drew the trifling objection that Canadian nuclear reactors have no use for enriched uranium.

Environmentalists and economists have agonized over James Bay, which former federal cabinet minister Eric Kierans has called “madness,” and the fact is that nobody really knows what it will cost or what it will do to us. It will, however, make a lot of money for Bechtel. The project was originally seen as one that would be managed entirely by Quebeckers, through two Crown corporations, the James Bay Development Corporation and James Bay Energy Corporation, subsidiaries of Quebec Hydro. However, in September, 1972, a contract was signed between the Quebec corporations and Bechtel Quebec, a subsidiary established for the purpose, a contract that gave Bechtel a huge slice of the action without having to compete for it. No other bids were considered.

Pierre Nadeau, president of JBDC and JBEC, resigned 25 days before the signing of the contract, which he claimed was “precooked, signed, sealed and delivered” as a result of a secret meeting in New York between provincial officials and Bechtel officials. (Bechtel denies the “pre-cooking” but not the meeting.) Nadeau said he had been a “stumbling block” to the deal and took his complaint to the Montreal Gazette. Linda Diebel, a Gazette reporter, managed to obtain a copy of the contract, until then sheltered from the rude public gaze, and the newspaper printed it. It showed, contrary to the province’s public statements, that Bechtel wields enormous power in the development and, again contrary to the province’s claims, that the company has a sliding-scale arrangement under which the more the development costs, the more Bechtel stands to make. Since the company is also charged with cost control

for the project, this arrangement looks strange, but it is not unusual in large construction contracts. The percentage Bechtel gets goes down as costs rise, but its absolute fee continues to climb.

The development is managed under six headings—Engineering, Construction,

Provision, Administration, Cost Control and Planning, and Labor Relations. Bechtel has direct control over three of these— Construction, Administration and Cost Control and Planning. Why should an outside firm be handed such power in the teeth of opposition from Quebec nationalists, Canadian nationalists and Quebec engineering firms, who complained bitterly that they should have had the contract? Energy writer Philip Sykes, in his book Sellout, suggested that Bechtel’s most important role had to do with raising capital for the job. I put this to the company, and received an oblique reply in writing: “Bechtel has a financing services department which assists clients secure (sic) financing vital to the viability of large, expensive facilities . . . This service would apply as an adjunct to the total technical and professional resources Bechtel might bring to most large projects. On the James Bay contract, Hydro-Quebec handled all matters of financing directly.”

Bechtel says that it was brought in “as a result of our experience, expertise and reputation for handling large projects.” But to date James Bay has been marked by corruption, riot, strikes, delays, patronage, cost escalation and increasing concern over its long-term effects. If Bechtel’s experience and expertise have helped any, it doesn’t show. The company was one of the multinationals cited by the Cliche Commission for going along with the “insatiable demands” of union racketeers.

Sing a Song of Syncrude.

About 1,350 miles straight west of the James Bay construction site, Bechtel crews are hard at work on another mammoth resource development—the second tar sands plant near Fort McMurray, Alberta. Bechtel’s employer in this case is Syncrude Canada, Ltd., a consortium of major oil companies and the governments of Canada, Ontario and Alberta. The plant will cost two billion dollars and will produce 52,000 barrels of oil daily in 1978, rising to 125,000 barrels after what Syncrude calls “process debottlenecking.” Most of the concerns about Syncrude parallel those about James Bay. There is, however, less mystery about how Bechtel became involved in the first place. Bechtel built the first tar sands plant for Great Canadian Oil Sands; it seemed a natural for the second one.

Syncrude has been attacked as an economic and ecological disaster area. The

project’s supporters, including Syncrude, Bechtel and Premier Peter Lougheed of Alberta, argue that the ecology will be protected, within reason, that the economic returns will be great and that there really is no alternative. We have to have oil; ergo, we have to have Syncrude, if for no other reason, as Lougheed told me, “than to keep the oil sands option open.” But do we have to have Bechtel? Lougheed is not so sure. “I worry a good deal about that,” he said. “When we took office, Bechtel was already firmly entrenched ... my hope is that when you get to a third plant you won’t be in a position where the only people who can build it are a Bechtel . . . we’re told you’ve got to have them because nobody else has ever done it. Well, that can go on forever.”

The irony of Syncrude is that the basic technology for tar sands exploitation was developed in the 1920s by the Alberta Research Council, and after long, complex and sometimes nefarious dealings, landed in the hands of foreign oil companies. Some of Bechtel’s expertise is a Canadian export, now re-imported for handsome fees.

More Than Uranium Gets Enriched.

American nuclear reactors use enriched uranium for fuel (Canadian ones use ordinary uranium and a heavy water moderator), and the rapid expansion of nuclear-powered electrical plants has led to a call for expansion of U.S. uranium enrichment capacity. To date, the stuff has been reproduced in three government plants in Tennessee, Ohio and Kentucky, and plans were drawn up to expand the Ohio plant at a cost of $2.1 billion. Instead, if legislation now pending before Congress is passed, an entirely new plant will be built at Dothan, Alabama, with roughly the same capacity as the proposed addition, but costing $2.7 billion (plus another three billion dollars for generating plants and other facilities). It will be built and owned by a company created by Bechtel, Uranium Enrichment Associates (Goodyear Tire and Williams Companies are the two associates).

Under the UEA proposal, which depends on passage of the Nuclear Fuel Assurance Act, the federal government would turn over its uranium enrichment technology to UEA, supply essential components, oversee construction of the Dothan plant, guarantee loans where necessary, guarantee the process, and stockpile enriched uranium for UEA’S use in case there is any delay in plant start-up. The government would also agree to buy from UEA and cut back its own contracts to assure the UEA market. The price would include a guaranteed return of 15% on UEA equity investment and. just to be safe, UEA could make the government

buy back the plant during the first year after start-up if it wasn’t working out. The government, in turn, could seize the plant for “gross mismanagement, willful misconduct or gross negligence” on UEA’S part, but since the government is to guarantee both plant and process it is hard to see how this applies.

The Energy Resources Development Administration and the General Accounting Office (the accounting arm of Congress) both vigorously opposed the UEA plan, but after a private meeting between senior government officials and UEA management last May ERDA found the company deal, slightly modified, acceptable after all. Hearings before the Joint Committee on Atomic Energy have not thrown much light on this sudden switch by the administration (GAO remains opposed). An ERDA official told me: “The government realized that if a private company did this the money would not have to come out of the budget; it would help to meet the budget cutback.” But the same end could be achieved by financing the plant through government-guaranteed bonds.

Bechtel’s Washington enemies think the company increased its Washington muscle when it hired five high executives from government jobs, including two former members of the cabinet and the former general manager of the Atomic Energy Commission. The company says these men don’t even work on projects that bring them into contact with their old Washington buddies, ERDA changed its mind, Bechtel says, to bring free enterprise and competition into the uranium business.

Bechtel says the UEA proposal is a good buy for American taxpayers, because “the government has a better deal where it has no cash investment in a venture but shares in over 50% of the return by way of taxes, royalties, etc., while the risk and effort are carried by others, than w'here the government has 100%. sole ownership accompanied by 100% of the risk and effort.” Representative John Anderson of Illinois told the joint committee: “It is no longer a private enterprise venture at all. All of the risks have been removed and a rather princely profit has been assured the investors. The UEA deal may yet be blocked, although it fits the pattern of many other arrangements in which private industry is massively underwritten by public effort in the name of free enterprise.

Pipeline to Conflict.

On July 26, 1973, Bechtel incorporated a subsidiary, Energy Transportation Systems Inc. (ETSI) to build a$750-millioncoal slurry pipeline to carry coal 1,036 miles from Campbell County, Wyoming, to a coal-fired generating plant under construction at White Bluff. Arkansas. A lobby

was launched to get legislation permitting the pipeline to cross the right-of-way of ETSI’S rivals, the railway companies.

The next day, July 27, Bechtel approached the Office of Coal Research and suggested that the government should do a study on the most economic way to transport coal over long distances. The study was approved, Bechtel got the contract to perform it, and was paid $413,200 for the work. It showed that a coal slurry pipeline was cheaper than rail transport. The government didn’t know about Bechtel’s interest in ETSI at the time.

In the spring of 1975, a study at the University of Illinois, funded by the National Science Foundation (this one only cost $189,000) concluded that “where roadbed is already available ... the resultant transportation cost is only one half that of a new slurry pipeline.” Richard A. McDermott, a Washington lawyer, wrote to the science foundation on behalf of ETSI, attacking this study and demanding a disclaimer on the front page of the report. Such a disclaimer was carried, although the foundation and McDermott both deny it resulted from his intervention. The Illinois group was denied a grant for further work, and the report was held back from publication.

Finally, the Senate Subcommittee on Energy Research and Water Resources conducted a hearing on the ETSI contract, and committee chairman Senator James Abourzek put this question to Moody Tidwell III, a lawyer for the Department of the Interior: “If a company that is looking for government approval and government permits, right-of-way permits, and so on, if they are doing a study on whether or not pipelines are the better way to transport coal, is it not a conflict of interest, then, to have a company doing that study if it also owns a pipeline company that wants to transport coal by pipeline?”

Tidwell replied: “It looks bad. But again, I would not deny Bechtel the contract for that reason alone.”

“If you cannot see it,” commented Abourzek, “somebody else is going to have to see it.”

However, the committee came to no conclusions. Bechtel says it was never in a conflict of interest, and puts all the fuss down to “the railway industry,” which “bitterly opposed the further development of coal slurry transportation just as they have opposed changes and competition over the years.” Bechtel says the pipeline is being built by ETSI, not Bechtel, and the study was done by Bechtel, not ETSI. The timing and the fact that the study came up with the right answer are just coincidences.

Lobbyists from Bechtel and Burlington Northern, its chief railway rival, are hard at work both in the west and in Washington. Each side accuses the other of misstating facts and roughing up the public interest. It should be quite a tussle, but anybody who thinks Bechtel is likely tolose a battle involving corporate muscle or political pull hasn’t been paying attention.ö