Making Waves

The Transportation Security Administration wades into the delicate business of giving profitable corporations taxpayer dollars to improve port security.

If you want to know what's at stake in securing U.S. ports from terrorist attack, consider what took place in Texas City, Texas, on a clear spring morning in 1947. The industrial port city 10 miles from Galveston was a conduit for raw materials fueling European reconstruction following World War II. When a fire broke out on the French-crewed freighter Grandchamp early on April 16, curious spectators flocked to the waterfront to watch the spectacle.

When 51,000 unmarked bags of ammonium nitrate aboard the ship exploded in the fire a short time later, the force was so great it knocked people to their knees in Galveston. The blast caused a tidal wave, sprayed shards of steel across Texas City, and set off dozens of secondary explosions. A nearby chemical plant became an inferno, causing another fertilizer-laden ship to explode hours later. Before the day was over, hundreds of people would be dead, thousands would be maimed, freighters would disintegrate and two small planes would be knocked out of the sky by the force of the explosions. It would take a week to put out the fires.

The Texas City disaster, disturbingly chronicled in Bill Minutaglio's book City on Fire: The Forgotten Disaster That Devastated a Town and Ignited a Landmark Legal Battle (HarperCollins, 2003), was an accident. Stephen Flynn, a former Coast Guard commander, now a security analyst at the Council on Foreign Relations, doesn't have any trouble imagining what could happen in a deliberate attack on a port.

"Some of the most dangerous things known to man are being played around with near waterfronts in order to turn them into things that ultimately are necessary for our economic vitality. A lot of it moves by barge. You'd be amazed at what moves around out there," says Flynn.

Figuring out how to protect hazardous cargo and secure ports from terrorist attack is proving to be one of the most difficult challenges for the Homeland Security Department. Part of the problem is the nature of the ports themselves. Federal agencies have jurisdiction over harbors and interstate commerce, but ports are generally regulated by state and local governments. Port authorities, the governing bodies of ports, vary widely. Some are branches of state or local government, while others are autonomous public corporations. Some can levy taxes or issue bonds, while others are funded directly by states and cities. Most port authorities lease property to private tenants, such as shipping companies, refineries and fuel storage operators.

To help shore up obvious weaknesses in port security, particularly where hazardous cargo is concerned, the Transportation Security Administration announced in June it would give 199 ports and companies that operate at ports $170 million in grants to improve security. The single largest grant, more than $13 million, went to Citgo Petroleum Corp. to upgrade security at its sprawling refinery facilities in Lake Charles, La. Citgo received other grants as well, for facilities in Georgia, New Jersey and Texas. Other multinational oil and gas and chemical companies also received grants. Sunoco picked up three grants, totaling $2.7 million, for its operations in Philadelphia alone. Not surprisingly perhaps, there was an outcry in the news media: Why was the government giving scarce resources to profitable corporations to do what should have been in their own interest to do?

Neither the Transportation Security Administration nor the companies would provide details of any of the grants, citing security concerns. Darrin Kayser, a spokesman for TSA, says it makes sense to give money directly to companies that run the ports. "The private entities are the ones that operate the terminals. They are the shippers; they are the carriers," he says. "They're the ones with the security concerns, so they're the ones that need the money."

As for the grant to Citgo, Kayser says, "You don't see what their share of costs are. We obviously can't discuss what they're securing, but hypothetically, if there's a port surrounded by dozens of miles of refineries, putting up fencing and surveillance and controlling that area so a terrorist can't get in there is going to cost a lot of money."


Most of the port security grants made in June require companies to share in the costs of security, Kayser says: "It was one of the factors we used in evaluating the proposals. We don't expect to do everything for Company X, but because Company X is in a community, they shouldn't be asked to provide everything. There is a cost-sharing mechanism there that we think balances the needs of the community while also stewarding the taxpayers' money."

Competition for the grants was fierce: Fewer than one in five applicants received any money at all, and in most cases, far less was awarded than sought. The grant applications were reviewed by officials from the Transportation Department's Maritime Administration, the Coast Guard and TSA. "The quality of the proposal is the primary consideration when we look at those grant programs, so we really don't bring a whole lot from the outside to the information they provide," Kayser says. Over time, as TSA gains experience in administering the grants, Kayser says he expects the processes will be refined. But for now, the reviewers must rely on the information provided by those applying for the grants. "Because this is so new, we really don't have a history of looking at these things."

To help level the playing field and ensure that experienced proposal writers don't have a huge edge over those ports and companies new to the grant application process, TSA has described the elements of a successful grant application on its Web site. The grants will be closely monitored by program managers from the Coast Guard, TSA and the Maritime Administration, Kayser says. "These management reviews look at accounting records, property records and business office processes. Grant officers also have stewardship responsibility over the funds and these grantees will receive audits," he says.

Sean Moulton, a senior policy analyst at the Washington-based government watchdog group OMB Watch, says, "There are serious concerns whenever you're talking about the government spending a large amount of money with little oversight, especially when that money is going directly to large, profitable corporations. There is concern about both government and corporate accountability." Moulton argues that TSA could reveal information about how the grants are to be spent without compromising security. "You can say if you're spending money on surveillance cameras and guards without telling me where those cameras will be placed and how the guards will operate."

The lack of visibility in how the grants are being used is a problem, Flynn agrees, but it may be unavoidable. "There's a tricky set of issues and challenges associated with this. Obviously, for most folks, alarms go off when you say taxpayer money is going to oil and gas companies," he says. "The core problem here is you can't secure critical infrastructure owned by the private sector as a self-help enterprise."

"One of the clear public policy challenges is that we don't even know what we want [companies and ports] to do," Flynn says. "There isn't enough expertise inside the federal government to know what it would take to secure these things, because the federal government hasn't had much presence in ports-they don't understand how they work and operate. And when they do come up with security measures, they're probably more likely to cause harm than good-they may not provide much security and they're certainly likely to add a lot of costs."

"At the end of the day, the goal absolutely has to be in setting requirements that are uniformly enforced, so you create an equal playing ground for everybody for doing the right thing," Flynn says.

It might seem to be in a company's self-interest to improve security, but that isn't necessarily so. Port operations are highly competitive, and security measures-surveillance cameras, alarm systems, gates, perimeter fencing, 24-hour security staff, employee identification systems, speed boats and crews to patrol waterways and the like-are expensive. Some improvements require one-time expenditures on installation or construction, but others impose ongoing costs. The Coast Guard estimates that necessary port security upgrades will cost about $7 billion over the next 10 years.

Any significant investment in security will raise the cost of doing business. Because profit margins are relatively small in the shipping industry, shippers must move large volumes of goods through ports as quickly as possible. Since shippers shop around for the lowest prices, ports could lose business if they raise prices to cover the cost of improving security. But the networked nature of the transportation system means that overall security won't improve unless all ports and their tenants make the same investments and upgrades. "The bad guys will gravitate to the weakest point," says Flynn. In the event of an attack, all ports would likely suffer severe economic consequences as federal officials would likely halt trade temporarily while they devised new plans for preventing future port attacks. "Then you won't even be rewarding the companies that do put measures in place because invariably, the federal government would come up with a different plan," Flynn says.

Susan Turner, director of government relations for the American Association of Port Authorities, says, "A lot of ports were waiting for federal grant money before making improvements," although some ports had taken significant steps to enhance security after the Sept. 11 terrorist attacks. The grants are important, in part because "they help ports make improvements much more quickly than they might otherwise be able to make them," she says.

Most critical infrastructure-things such as ports, power plants, dams and communications networks-is privately owned and operated. Nonetheless, all Americans benefit from these things, even if indirectly. Every time you visit a mall and purchase an item of clothing or a piece of electronic equipment, chances are pretty good that what you buy is imported, which means your purchase probably arrived in a shipping container aboard an ocean freighter. Chances are also good that item was shipped through the ports of Los Angeles or Long Beach, Calif., the entry points for nearly half of all containers that come into the country. Should Los Angeles County property owners alone bear the burden of securing that port? Probably not. Yet figuring out how to improve security in a meaningful way and spread the burden of those improvements fairly is another matter altogether.


At a House Government Reform Committee hearing on port security in Tampa, Fla., in August 2002, JayEtta Hecker, director of physical infrastructure issues at the General Accounting Office, explained why improving port security presents such formidable challenges. The Port of Tampa is a case in point, Hecker said. It is large and sprawling, with port-owned facilities interspersed among private facilities along the waterfront. It is the state's busiest port in terms of raw tonnage of cargo, and handles half of Florida's volume of hazardous materials, including anhydrous ammonia, liquid petroleum gas, and sulfur. The port manages a range of commodities, from fuel to fish, as well as a range of activities, from cruise ship transfers to ship repair. As many as 2,000 truck drivers enter the port daily just to deliver orange juice for shipment. Several heavily traveled public roads pass through the port, which is near Tampa's downtown business district. Also nearby is the Crystal River nuclear power plant and MacDill Air Force Base, home of U.S. Central Command-both of which could be attractive targets to terrorists.

Tampa is not unique. Most ports handle an enormous amount of traffic and material, much of it hazardous. Most are near major metropolitan areas and transportation hubs, and are accessible by land as well as by water. All of these factors make ports difficult to secure.

In July, Homeland Security published a number of interim port security regulations based on the 2002 Maritime Transportation Security Act, signed into law by President Bush last November. The regulations, which affect about 10,000 vessels-including tankers, passenger ships, cargo vessels, towing vessels, and offshore oil and gas platforms-as well as 5,000 land-based facilities and 40 facilities on the outer continental shelf, are aimed at reducing the exposure of U.S. ports and waterways to terrorist activities. Depending on the level of risk, the regulations will require passenger and baggage screening, vehicle screening, security patrols, personnel identification procedures, surveillance, and limited access to certain areas of ports and vessels. After hearing the industry's comments, Homeland Security expects to publish final rules in late October.

The Coast Guard estimates it will cost ports more than $1 billion over the next year alone to meet the new requirements. To help ports offset the costs of security, the Transportation Security Administration will award another $105 million in grants later this fall to ports and companies that operate at ports. Given the requirements, the grants are hardly enormous, says Turner of the port authorities association. As it becomes clear just how much security will cost, she expects an outcry among the association's members.

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