Big grant to oil firm shrouded in secrecy-- Citgo will not discuss the $15.7 million it got in federal port security aid.

The Philladelphia Enquirer, Posted on Thu, Jun. 19, 2003 By Jennifer Lin Inquirer Staff Writer

Last week, after the U.S. Department of Homeland Security awarded long-awaited and highly competitive grants for port security projects, many in the maritime trade were baffled by the windfall for Citgo Petroleum Corp.

The odds of anyone's getting a grant were no better than one in five. Even then, most of the winners were awarded less than $1 million. But Citgo, the profitable U.S. subsidiary of the Venezuelan national oil company, hit the jackpot: a $13.5 million grant to upgrade security at its refinery in Lake Charles, La.

That's more than the combined 24 grants for the Delaware River port system.

More than the nine grants for Los Angeles, the busiest container port in the country.

More than the 17 grants for every other private business or port authority in Louisiana.

So why did one company get so much money, and where is it going?

The Homeland Security Department won't say, citing security concerns.

Neither will Citgo.

"We will not discuss any of the items that the money will be used for," said Kent Young, a spokesman for Citgo at the company's U.S. headquarters in Tulsa, Okla. "That was a condition of our application, that it be held in confidence."

In addition, Young preemptively said the terms of the grant award would not be available through the open-records provision of the federal Freedom of Information Act (FOIA). "It is my understanding that it is not subject to FOIA," Young said.

The secrecy shrouding the Citgo grant points to a larger problem with the billions in taxpayer money being directed to fight the war on terrorism, according to Gary Bass, executive director of OMB Watch, a nonprofit government watchdog group in Washington that tracks budget issues.

"This administration equates secrecy with security," Bass said. "It's our firm belief that access to information will actually make us feel safer. Once the public knows what steps are being taken, there's not only a better feeling about security, there's accountability to assure that we are safer. We can verify that various steps have been taken."

Mark Hatfield, a spokesman for the Transportation Security Administration (TSA) of the Homeland Security Department, defended the confidentiality of the grants because of the sensitive nature of the projects.

"You don't want to tell people where the hole is before you have it plugged," Hatfield said.

The size of the Citgo award also raised eyebrows among other oil companies, as well as port officials, because of the fierce competition for scare federal dollars for port security. For the latest round of port funding, the Homeland Security Department received 1,112 applications for the $245 million to be handed out.

Some maritime groups that lost out in grants were dismayed to see one company get so much.

"There are so many things that are not getting funded," said Doug Dillon, executive director of the Tri-State Maritime Safety Association, a nonprofit group in Newport, Del., that did not get funding for a project to increase vessel tracking on the Delaware River.

While the nation's airports have ramped up security since 9/11, the 361 seaports across the country have not received the same level of federal support for security improvements. Many lawmakers and maritime officials believe that the nation's port system is the weak link in homeland security.

With ports, the two biggest threats are terrorists using shipping containers to plant bombs, or sabotaging refineries or tanker ships.

The government's own concern about the vulnerability of chemical plants and refineries was evident in the large number of port security grants going to private companies in those sectors.

In distributing $245 million last week in port security funding, the Homeland Security Department directed 15 percent of the money to refineries, tank terminals and pipelines.

Citgo received the most money, with grants totaling $15.7 million for facilities in Lake Charles; Paulsboro; Savannah, Ga.; and Corpus Christi, Texas.

Sunoco Inc. was second, with a combined $5.1 million in grants for plants in Philadelphia and the Houston area.

Hatfield, a TSA spokesman, said the process for awarding the grant money was strictly prescribed. The grants were determined by a committee made up of officials from TSA, the Coast Guard, and the Maritime Administration of the Department of Transportation.

"The awards are made strictly on the merits of the proposal," Hatfield said.

He said Citgo had conducted a security assessment of its Lake Charles refinery in December 2001 and again in April 2003. "They did the groundwork, and that put them further ahead," Hatfield said.

While not disclosing the specifics of the Citgo grant, he said the money would be used to control access to the company's refinery facilities. He added that under grant guidelines, the money could be used to buy such equipment as identification-card readers, lighting systems, or perimeter cameras.

Citgo, which earned $140 million in the first quarter of this year, had received a previous TSA grant in 2002 to buy a patrol boat and to build a boat ramp and boathouse for its Lake Charles facility. The company is part of Petroleos de Venezuela S.A., the national oil company of Venezuela.

In Lake Charles, the Citgo grant took many in the port community by surprise. Located in southwestern Louisiana, the port stretches 35 miles from the Gulf of Mexico up through the Calcasieu River Waterway to the city of Lake Charles.

In addition to Citgo, the region has two other refineries, plus river terminals for receiving liquefied natural gas, a volatile cargo that raises the security risk for the waterway.

Jim Robinson, director of navigation and security for the state-run Port of Lake Charles, said he knew nothing about the Citgo grant, other than its enviable size.

"I could contract a private security company to provide round-the-clock surveillance for the entire waterway for two years on that size of a grant," Robinson said. "But I doubt that's what they're going to spend it on."