by Sally Denton
During the hearings, a Connecticut rabbi fasted outside the Senate Office Building to protest Shultz’s appointment, and though Shultz was confirmed in a 97–0 Senate vote, speculation about Bechtel remained a subject of concern to several senators. Howard Metzenbaum (D-OH) expressed alarm about the “pervasive” connection among Shultz, Bechtel, and the Arab world. Just days after the confirmation hearings, the Washington Post reported that Habib—the presidential envoy trying to negotiate a settlement in Lebanon—was also on Bechtel’s payroll as a consultant. Senators felt that Shultz should have disclosed the Habib-Bechtel relationship, and should have admitted that he had hired Habib to work for Bechtel and then insinuated him into the White House, circumventing Secretary of State Haig. The revelation outraged Senator Pressler. He accused Habib of conflict of interest and called for his immediate resignation. Appearing on the Sunday-morning television talk shows, Pressler described it as a “very, very serious matter.” The senator argued Habib should resign because he was a paid consultant to a company “that actively lobbies for pro-Arab causes” and as such could not be trusted as an unbiased negotiator and ambassador. Pressler felt personally “betrayed” by Shultz and incensed that Shultz had been dishonest with the committee.
The Associated Press was simultaneously reporting that CIA Director William Casey and a number of other officials in the Reagan administration also had connections with Bechtel, bringing media attention to the revolving door between government and Bechtel for the first time since Drew Pearson wrote his exposés of Bechtel-McCone in the 1950s. (Bechtel denied later that Casey was “an employee or consultant to Bechtel—contrary to irresponsible claims,” and issued a formal warning to journalists to “beware” of reporting it as fact.) Newspaper editorials echoed Pressler’s objections, and a Florida congressional candidate used the issue during his campaign, proclaiming, “Bechtel is controlling our Middle East policy.”
Habib did not resign and reportedly “gave the stink little thought,” wrote John Boykin in Cursed Is the Peacemaker. He would claim later that he had an “understanding with George [Shultz]” that his job was not to lobby Congress or to solicit business abroad for Bechtel, but only to advise Bechtel “about the facts of life in various countries.” The administration expressed full confidence in Habib. A White House spokesman said any “implication of any conflict is absurd.” The controversy soon died down. For his part, Habib found sardonic humor in the suggestion that his Bechtel connection would make him more pro-Arab than his “having Lebanese blood in his veins.”
Still, not even the company’s most cynical critics could have predicted how Bechtel’s political influence in Washington would set the stage for privatizing foreign policy and transforming the Middle East, a development that tilted foreign relations more toward the benefit of private interests than those of the US and the general welfare of its public. After the media coverage of Shultz’s confirmation hearings, Americans were becoming familiar with the Bechtel name for the first time. “The essential point . . . is not that Bechtel is anti-Israel or pro-Arab,” journalist William Greider concluded. “It is that Bechtel is for doing business. Anywhere, anytime. Just as it wants to open a world market for plutonium, Bechtel wants to build whatever it chooses, regardless of foreign policy interests.”
For his part, Steve Jr. expressed disappointment at losing his two top executives, complaining to a reporter that the government would now go to such lengths to avoid any hint of conflicts of interest that his company was sure to suffer. He claimed to be bothered by the negative media attention brought to Bechtel as a result of its revolving door with Washington. The “insinuations about our supposed influence with the government” especially irked him. “It’s unfortunate that we don’t have all the power it’s alleged we have. If we did, we could help fix some of the problems that exist around the country.” At the forefront of Steve Sr.’s complaints about the direction the country was heading was the “rising tide of overregulation” of industry by government.
Yet Bechtel’s ties to the government increased during the Reagan presidency, enhancing hugely the company’s revenues. Exploiting a vast and profitable new industry, Bechtel’s numerous lobbyists were pressing Congress to fund multibillion-dollar cleanup efforts at radioactive and hazardous waste sites from the old Manhattan Project. The new industry had been spawned by the partial meltdown of the reactor core at Three Mile Island in Pennsylvania on March 28, 1979. It was the worst accident in nuclear power plant history, and posed a great danger to the nearby population, as radioactive materials were released from the core into the reactor building and beyond. The China Syndrome, a box-office hit about a fictionalized accident at a nuclear power plant, had been released just twelve days before Three Mile Island occurred, so public awareness was at a heightened state.
The thriller, starring Jane Fonda, was a dramatic portrait of what global disaster a nuclear meltdown would cause. Fonda used the film and the Three Mile Island accident as a launching pad for her antinuclear activism. To counter the actress and an escalating antinuclear movement at a moment when the public was calling for government to implement tighter regulation of the industry, the nuclear lobby dispatched Edward Teller. The tireless father of the hydrogen bomb—called “one of the most hawkish physicists ever to serve the US government”—Teller began a massive promotion about the safety of nuclear power. “The antinuclear propaganda we are hearing puts democracy to a severe test,” Teller prophesied. “Unless the political trend toward energy development in this country changes rapidly, there will not be a United States of America in the twenty-first century.”
Three Mile Island signaled a personal call of duty for Steve Jr., even though Bechtel had not designed or built the reactor. He “became obsessed with proving that nuclear power really was safe and with keeping the industry viable,” according to a senior Bechtel executive. “He was absolutely determined that Bechtel should devote its full resources to keeping atomic energy alive.” He and thirteen of the country’s leading utilities formed a lobbying group—the United States Committee for Energy Awareness—to repair what they saw as the character assassination of the nuclear industry, and to press Congress to renew its commitment. The organization’s founders pledged $100,000 each from their companies to launch what would mushroom into a $30 million advertising and lobbying campaign. The committee developed a sophisticated strategy that included placing supposedly independent energy experts on radio and television talk shows and submitting letters to the editors and Op-Eds to dozens of newspapers throughout the country—all designed to establish the credibility of the group “as more than a propaganda organization,” wrote Howard Kurtz in the Washington Post. “What its slick, low-key television ads failed to mention is that the group gets more than half its funding from 50 utilities, some of which have billed their unsuspecting customers for the media blitz.”
As the world’s largest builder of nuclear reactors, Bechtel was poised to profit from the next phases of nuclear energy: decontamination, remediation, and storage of nuclear waste. The legacy of decades of Cold War bomb making left dozens of sites from the old Manhattan Project that posed health and environmental risks. Even before Shultz joined the administration, Bechtel had obtained a $320 million contract from the US Department of Energy to clean up thirty-two radioactive sites.
Energy had been the core of Jimmy Carter’s domestic agenda, and DOE his “pride and joy.” The newly created Cabinet-level department was designed to regulate nuclear energy, material, waste, and weapons, while also stimulating alternative energy and efficiency as part of a doctrine for America to become less dependent on Middle Eastern oil. Steve Jr., like Reagan, was convinced that the only energy problem in America was government interference. Free enterprise could do a better job of energy production than government, Reagan declared. On the campaign trail, Reagan vowed to eliminate the DOE, citing it as the quintessential example of ineptitude and waste. “If the Reagan administration has its way, DOE will soon be dispersed
to the bureaucratic winds,” one account described Reagan’s opinion of the giant bureaucracy of twenty thousand employees and a $10.5 billion budget. Once president, though, he changed his mind. Following the election, when Reagan’s advisors took a closer look at the department, “the story goes that they were surprised to find that the Department of Energy actually designed and built the nation’s nuclear weapons.” Reagan had a new affinity for the department he had considered dismantling, and the DOE mushroomed under his watch, becoming a revenue stream for Bechtel of unprecedented scale. Ironically, despite Bechtel’s virulent assaults on the agency, it would become the company’s financial propeller into the next century, with Bechtel securing its place as DOE’s prime contractor for the next thirty-five years.
When Reagan took office, the American economy had slipped into the most severe recession since World War II, with the rest of the world soon following. Steve Jr., seeing “few megaprojects in the offing” as a result of the downturn, decided to expand operations even further onto the international stage. The nuclear power market, which had been Bechtel’s biggest moneymaker, had taken a nosedive, with no new nuclear power plants ordered since the mid-1970s, and with a robust nuclear-freeze movement gaining ground. The last nuclear power plant in the United States had been licensed in 1976. “For one thing, it took a long time to build nuclear plants, and the cost estimates at the beginning were not the same as the actual costs at the end of a completed installation,” Judith Nies explained the changing face of nuclear energy even before the Three Mile Island meltdown. Not only was nuclear electricity more expensive than projected, but the public was becoming alarmed about the dangers of the reactors.
In the first year of the Reagan administration, Bechtel scored additional multibillion-dollar DOE contracts. “We have to approach projects as a multinational organization with a multinational staff and multinational sources,” Steve Jr. told employees, explaining that Bechtel was establishing what it called “bailout teams—flying squads of engineers, scientists, and other specialists who could be rapidly deployed to emergency situations to assess what needed to be done and to do it.” The company’s decontamination business expanded after it was awarded $1.5 billion to clean up Three Mile Island. It was but the first of many contracts that Bechtel won from the federal Formerly Utilized Sites Remedial Action Program (FUSRAP) to reduce radioactivity and treat hazardous waste at the nuclear sites, established in 1974 by the US Army Corps of Engineers. Bechtel’s thirty-year, $2.5 billion contract was particularly ironic, given John McCone’s misleading denials that radioactivity endangered life. “Winning FUSRAP put us in the vanguard of the nuclear cleanup business,” said Craig Weaver, a Bechtel executive. “It gave us the technical know-how we needed to perform this work successfully, and led to the establishment of our office in Oak Ridge, Tennessee, near our DOE customer.” DOE was no longer Bechtel’s nemesis that threatened its extinction, but was now its coveted “customer” that would insure its survival.
As part of the FUSRAP golden goose, Bechtel also received contracts during that first year of the Reagan administration to oversee the cleanup of uranium mining operations in the American West, to design and build the Waste Isolation Pilot Plant in New Mexico, and to engineer a government uranium enrichment facility in Ohio. Even that was but a glimpse into the future steady stream of profits that DOE would provide Bechtel over the coming decades. When yet a third Bechtel executive joined the Reagan administration as DOE’s number two official, the company’s good fortune soared, proving Steve Jr.’s pessimistic forecast to be unfounded.
CHAPTER NINETEEN
A World Awash in Plutonium
For more than twenty years, W. Kenneth Davis had headed Bechtel’s nuclear division, having been hired away from his government job as head of the Atomic Energy Commission in 1958. So when the US market for building nuclear power plants tanked in the 1970s, Davis was the innovator at Bechtel who had anticipated the collapse and guided Steve Jr. and Shultz into the international nuclear marketplace. By the early 1980s, two presidents—Ford and Carter—were “sufficiently alarmed by the potential of a world awash in plutonium that they tried to slow down Bechtel,” according to a 1982 press account. Congress had even enacted nonproliferation legislation intended to curb Bechtel’s and other American nuclear manufacturers’ global ambitions. But all that changed with the “Bechtel Cabinet,” as journalist and author William Greider dubbed it, which mixed “their private interests with their public obligations.”
While still at Bechtel, Davis had drafted the Reagan transition report on nonproliferation policy. Under the guise of nonproliferation, that policy rolled back the law and allowed Bechtel to pursue overseas nuclear customers. Like Davis, Shultz had been an outspoken opponent of the Carter administration’s nuclear nonproliferation policy, claiming that it gave foreign competitors, especially France and West Germany, an advantage in the world market. That position was at odds with Shultz’s creation thirty years later of an elite nuclear deterrence group, officiously christened the “Four Horsemen of the Non-Apocalypse,” and with the grandiose vision of ending nuclear weapons “as a threat to the world.” But that side of Shultz would be decades in the future. For now, Davis and Shultz advocated sharing uranium enrichment and reprocessing with all nations that have “a legitimate need.” Davis’s report included a recommendation that the nuclear export decisions that had been regulated by the US Nuclear Regulatory Commission (NRC) be shifted to Shultz’s State Department. The administration wasted no time, and Bechtel expanded its nuclear facilities around the world.
No other individual did as much to shape the nuclear power industry as Davis, who had been there at the creation of the atomic age. An MIT-educated engineer, Davis had operated in the nuclear arena since the late 1940s, working on breeder reactors and helping design the federal nuclear laboratory at Livermore, California. He, like his colleague McCone at the AEC, zealously advocated a partnership between government and industry to build nuclear power plants across the country, if not the world. Called “65-degree Davis” by his friends because he once skied a slope that steep, the avid hiker and outdoor enthusiast did more to promote nuclear power than anyone in America.
Throughout all of nuclear power’s setbacks during the 1970s, Davis had been its indefatigable champion—a believer long after most of his scientific colleagues had become apprehensive about the risks associated with the industry. He downplayed the perils of weapons proliferation as trivial and thought nuclear power was the most revolutionary energy source in the history of mankind. He dismissed the supposed dangers of radiation as a bogeyman confected by antinuke extremists, and was a fanatic believer that nuclear power was the only high-density, low-carbon energy source that could meet the needs of the world. Once, in a chance encounter with antinuclear physicist Amory Lovins, Davis was so venomous toward him that Lovins felt he had been greeted as if he were “the Antichrist.”
Like his fellow Bechtel partners Shultz and Weinberger, Davis had also become a wealthy man working for the company. His financial disclosures upon joining DOE in 1981 revealed that he was receiving more than $500,000 annually in Bechtel salary, bonuses, and stock benefits. He also had assets worth at least $4.5 million, including $750,000 worth of Bechtel stock alone, as well as substantial shares of SOCAL, Occidental Petroleum, and Pacific Gas and Electric. Many congressional staffers were alarmed by Davis’s appointment as assistant secretary of energy, believing that the Department of Energy had brought him in to represent Bechtel’s interest in energy policy. Those qualms were rattled further when the DOE sought a waiver that would allow Davis to participate in decisions and bids involving Bechtel—a brazen request met with vigorous opposition by some members of a House oversight committee.
Davis, as deputy to Secretary of Energy James Edwards, was widely seen in Washington as the department’s real muscle. An alter ego to the unsophisticated figurehead Edwards, Davis was the DOE representative at the White House and in Congress. He backed Reagan’s
vision of energy policy, which included removing federal energy price controls and massive subsidies for nuclear and synthetic fuels, while gutting any emphasis on solar energy, alternative resources, and conservation. Like Davis and Steve Bechtel Jr., he saw environmentalists as diabolical subversives. Although Edwards was in line with the administration goals, he was nonetheless a Washington neophyte whose inarticulate bumbling undermined his authority with the White House, which bypassed him to deal directly with Davis. It was an “open secret” that Davis ran the department. The offices of the inspector general, general counsel, and directors for international, congressional, and public affairs all reported to him. From the start, there was widespread speculation that Edwards wouldn’t last long in the Cabinet. Indeed, just a year into the administration, he decided to resign and told Davis he planned to recommend him as his successor. On June 25, 1982, while on vacation at Lake Tahoe, Davis heard on the radio that Shultz had replaced Haig as secretary of state. He knew that had sealed his fate, certain that Reagan would not risk the scrutiny that three Cabinet members from Bechtel would produce.
While the Department of Energy is a benign-sounding name connoting the ethereal realms of the sun, wind, and water, the agency is far more about nuclear weapons and national security than it is about natural resources. “When the average person, or the average scholar, or even the average presidential adviser ponders international relations, national security, and the Cold War, thoughts do not necessarily turn to the Department of Energy. The Central Intelligence Agency and the Departments of State and Defense come readily to mind,” the official DOE historian once said. But DOE “shaped the way the Cold War developed and played out and kept the Cold War from developing into a full-fledged ‘hot’ war.” The department and its predecessor agencies designed and built the nation’s nuclear arsenal, and its leaders participated at the highest levels of domestic and foreign policy relating to those weapons.
