Chron: Duo criticize Halliburton's Iraqi gas markup

By DAVID IVANOVICH
Copyright 2003 Houston Chronicle Washington Bureau
WASHINGTON -- Key congressional Democrats are challenging the bills Halliburton Co. is sending American taxpayers for trucking gasoline into Iraq.

Rep. Henry Waxman, D-Calif., and Rep. John Dingell, D-Mich., accused the Houston firm of gouging the U.S. public by charging far more than industry experts deemed reasonable to transport fuel 400 miles from a Kuwaiti refinery to Baghdad.

"Millions of Americans want to help Iraqis, but they don't want to be fleeced," said Waxman, the ranking Democrat on the House Government Reform Committee.

Halliburton has been shipping fuel into Iraq as part of an exclusive contract awarded by the Army Corps of Engineers to repair the country's dilapidated oil infrastructure.

Wendy Hall, a spokeswoman for Halliburton, said the company was directed "to acquire and transport gasoline through a hostile environment and deliver it to Baghdad.

"We used a sound procurement process which has been approved by the government," Hall said, adding that the company believes it is has been negotiating "fair and competitive prices to provide fuel to the Iraqi people."

But in a letter to Joshua Bolten, director of the Office of Management and Budget, Waxman and Dingell pointed to assessments from industry experts who described the fees as "outrageously high," potentially "a huge rip-off" and "highway robbery."

As of Sept. 18, the Army Corps had paid Halliburton subsidiary KBR, formerly Kellogg Brown & Root, more than $304 million to import nearly 192 million gallons of fuel into Iraq.

That worked out to a fee of $1.59 a gallon, the lawmakers said. Tack on the return of 2 percent to 7 percent the company is allowed to earn under the contract, and the price tag ticks up to somewhere between $1.62 and $1.70 a gallon.

Between April and September, the lawmakers noted, gasoline was selling on the wholesale market in the Middle East for about 71 cents a gallon. That means KBR was charging between 91 cents and 99 cents a gallon to truck in the fuel.

The lawmakers checked with some oil industry experts, who estimate that KBR should be able to transport the fuel for anywhere from 10 cents to 25 cents a gallon.

"This has been an outrage for a long time," said Phil Verleger, president of Newport Beach, Calif-based PKVerleger, one of the oil industry experts the Democrats consulted.

Of course, conditions within Iraq remain dangerous. Convoys on Iraq's highways have been attacked repeatedly.

But the lawmakers noted that the U.S. military is providing security for the convoys and footing the bill for that service.

One unnamed industry source told the lawmakers that SOMO, Iraq's state oil marketing organization, had been able to acquire gasoline through a crude oil exchange for about 50 cents less per gallon than Halliburton was charging.

Halliburton spokeswoman Hall said the company had chosen "suppliers who could meet the requirements defined by our client. These task order requirements included the ability to acquire the necessary quantities of fuel and the ability to deliver it in a hostile environment."

The cost of the Iraqi gas imports is being borne, largely, by the United States. Iraqi motorists are paying only 4 cents to 15 cents a gallon.

"We are paying -- taxpayers are paying -- $1.70 a gallon for gas," Waxman said. "Iraqis are paying a nickel."

Hall noted that "KBR is not responsible for establishing the price Iraqi motorists pay for gasoline at the pump."

Army Corps spokesman Bob Faletti said he could not confirm the lawmakers' figures. But he noted that both the Pentagon and the General Accounting Office, Congress' research arm, have auditors monitoring compliance with the contract.

"We've got the auditors there to make sure we aren't wasting money," Faletti said, adding, "They have not found any major discrepancies."

Halliburton's contract in Iraq has come under such severe criticism, in large part because the Army Corps awarded the huge assignment to Vice President Dick Cheney's former employer last March without seeking bids from other competitors.

This latest critique comes as the Army Corps is poised to award two new contracts to finish the work begun by the huge engineering, construction and oil-field services firm.

This is not the first time Halliburton has been accused of overcharging for work performed for the U.S. military.

Reviewing Halliburton's fees for work after the war in the Balkans, the General Accounting Office blasted Halliburton for charging $85.98 a sheet for 4-foot-by-8-foot sheets of plywood that investigators said could have been acquired for $14.06 per sheet.

Halliburton's bill included the cost of flying the plywood to the Balkans from the United States. Army officials deemed that an unnecessarily expensive way to transport the materials.

http://www.chron.com/cs/CDA/ssistory.mpl/business/2160022

 

So, American taxpayers are paying $1.70 for every gallon of gas that Iraqis use while they pay $0.05 to $0.15 per gallon. Talk about sweetheart deals. I wonder when the US will subsidize my gas like that.