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1945- 1959: Bringing Energy to the World

The war’s end gave Steve Bechtel an opportunity to do something he had wanted to do for years: relax in an informal retirement. He did so, beginning in late 1945, but not before liquidating most of the company’s wartime operations. This also meant parting ways with longtime partner Henry Kaiser, who planned to stick with manufacturing. Bechtel-McCone and W. A. Bechtel Co. were consolidated, and in 1945 a single enterprise was organized in its place, Bechtel Brothers McCone Co. (BBM). The new structure was headed by Bill Waste, a company veteran who became the first nonfamily member to lead the firm.

BBM made a big breakthrough in Steve’s absence, grabbing its first piece of major power work, for Southern California Edison (SCE), in 1945. SCE was converting its frequency from 50 cycles to the U.S. standard 60 cycles. Under the brilliant management of John Kiely, BBM was able to whisk the job away from the eastern firms. It was a huge victory and the first of many jobs Bechtel completed for SCE.

The rest of the operations ran the gamut. There was a food plant for H. J. Heinz that could process a ton of tomatoes a minute, and a futuristic flour mill for General Mills. Bechtel pipeliners continued to advance technology. On the Kettleman Hills pipeline in California, they pioneered semiautomatic welding, high-strength pipe, and gamma-ray photographs to spot-check welds. There was heavy activity in chemical plants and petroleum refining. There was a breakwater, a canal siphon, a tinplate mill and a steel mill, printing plants, and, in Missouri, the nation’s first coal hydrogenation plant, a pilot plant for producing synthetic motor fuel from coal.

Within months, however, Steve was eager to get back into action, and senior Bechtel executives, Waste included, couldn’t wait. Recalls Jerry Komes, a vice president at the time, “Bechtel Brothers McCone wasn’t doing terribly well. It was viable, but not on the scale the partners were used to. They wanted Steve to come back.” Steve formally returned as president at a directors’ meeting on October 8, 1946. His statement to BBM’s officers was characteristically low-key. “My chosen field has been and is engineering and construction,” he told the directors. “It is the most interesting, most stimulating and, in my opinion, one of the finest professional and business fields.”

Birth of the Modern Bechtel Corporation

During his brief “retirement,” Steve had thought very carefully about how he would restructure the company and how and where it would operate. Ken, Warren Jr., John McCone, and he agreed that BBM would have to be a more structured entity, run like other modern corporations with divisions overseeing various lines of work. And like other modern corporations, it would be run by professional managers, whether family or not. To accomplish his new goal, Steve formed a series of new corporate structures, a set of spokes with himself at the hub.

The strategic focus of the new Bechtel would be service, working with customers as much as for them. There would be no big capital outlays and no heavy borrowing. The company would travel light and finance its work with payments from customers who paid their bills on time. They would be selective about customers, pursuing only the best.
They also decided to concentrate on the biggest jobs, high-impact work that attracted industry attention, jobs that Bechtel would conceive and design as well as build. The new company would also seek to get half its work from overseas, a balance that would smooth out the inevitable peaks and valleys of the construction business; when one market was slow, another would pick up. Bechtel would diversify into targeted fields and go after projects in those areas as a further hedge against the cyclical swings of construction.

Steve headed off to Saudi Arabia in January 1947, leaving his senior managers to sort out the details of the new organization. Bechtel had been in the Middle East since 1943, working on a refinery in Bahrain and other projects. Steve’s first postwar sales trip produced a bonanza within weeks; word filtered back that Bechtel had contracted to build a major portion of the Trans-Arabian pipeline, called Tapline, linking the oil fields of the Arabian Gulf to the Mediterranean.

Bechtel in the Middle East

When a small group of Bechtel workers arrived in eastern Saudi Arabia in July 1947 at what would later be a major base camp for Tapline, they beheld a large expanse of sand bordering the sea. There wasn’t even a Bedouin camp to break the monotony. There was no vegetation and no fresh water. The temperature would have been around 120 degrees Fahrenheit in the shade—had there been any shade.

Saudi Arabia in 1947 had a forward-looking monarch, King Abdul Aziz Bin Saud, and a rich culture, but the desert nation had only a rudimentary infrastructure. The king dreamed of a country that could match any in the world with highways, utilities, airports, and the other manifestations of modernity—exactly the things that Bechtel was in the business of building.

Bechtel had worked in the Middle East even before the Saudi king requested its services. In 1943, during the war, Bahrain Petroleum Co. Ltd. (Bapco), a joint venture of Standard Oil Co. of California and the Texas Co., needed to double the capacity of its Bahrain refinery to 65,000 barrels per day and build a fluid catalytic cracker to produce 100-octane aviation fuel. To support and protect that output, Bapco also needed additional storage tanks and a pipeline 33 miles across the Straits of Bahrain, 16.5 miles of it underwater, to the Saudi port at Ras Tanura, a spit of land jutting into the Arabian Gulf. Bechtel was called upon to enlarge the Bahrain refinery, build the cracker, and construct associated facilities. In the same year, Bechtel received a contract from the Arabian American Oil Co. (Aramco) to replace a small refinery at Ras Tanura with a modern one.

Bechtel was building the foundations of a partnership with Saudi Arabia that would last for decades. Steve Bechtel forged solid working relationships with King Saud, his son Prince Faisal, and a tight circle of Saudi advisers. In 1946, Bechtel would begin the task of constructing a modern nation in the Arabian Desert. Over the next few years, it built part of a 350-mile railroad from the Arabian Gulf inland to the capital at Riyadh, a power plant to electrify the capital, a deep-water pier on the Red Sea in Jiddah, radio stations, and still more power plants. So closely was the company associated with the supply and distribution of electricity that in some newly connected Saudi households, one family member would ask another to “turn on the Bechtel.” Later, there would be modern airports at Riyadh and Jiddah, and a new highway linking Jiddah with the holy city of Mecca.

Saudi Arabia’s potential for economic growth and development was powered by a seemingly inexhaustible supply of fossil fuels. By 1947, four years after Bechtel first set foot in the Middle East, Saudi Arabian oil production had reached 250,000 barrels a day and was climbing steadily. There was much, much more available, but the country’s ability to move its primary source of revenue was limited. That crucial stream would flow through Tapline, the 1,068-mile Trans-Arabian pipeline from the Arabian Gulf to the Mediterranean Sea. And Bechtel would help build more than 800 miles of it.

Tapline

Tapline would reroute oil to Europe through the Mediterranean. Up until that time, Middle East oil moved south by tanker through the Arabian Gulf, through the Indian Ocean to the Red Sea, and then north through the privately owned Suez Canal. The 3,500-mile trip could take 12 days and cost oil companies 18 cents for every barrel that passed through the canal, or about $40,000 for each modern tanker. Tapline would deliver oil at a fraction of the cost.

It was a pipeliner’s dream. “This 30-inch, 400,000-barrel-per-day line will be the mightiest pipeline ever laid,” Steve announced with pride, “bigger than any oil line yet completed and almost as long as the Big Inch line running from Texas to New York.” And this, he added, was only the beginning: “I cannot help but foresee tremendous possibilities pointing towards potentially the biggest development of natural resources ever undertaken by American interests.”

In July 1947, work commenced. The pipeline began at the rich Abqaiq field, where 18 wells churned out 200,000 barrels of oil every day. Bechtel was responsible for 850 miles of Tapline, from the Arabian Gulf to Jordan. From Jordan, it would continue to the city of Sidon, on Lebanon’s coast.

Bechtel field engineers put all their experience to work. Among the many technical innovations was the first over-water use of a cableway “skyhook”—borrowed from loggers in America’s Pacific Northwest—to transport pipe and supplies from ships anchored in deep water nearly three miles offshore. They put double radiators on all the trucks to cool the engines.

The Postwar Energy Boom

For suppliers of anything from baby carriages to power plants, the 1950s was an age of nearly unrelenting demand. And just as Steve Bechtel had predicted, the demand for energy of all kinds grew steadily through the decade. America’s love affair with the automobile was rekindled, and Congress obliged by lacing the nation with interstate highways. In Europe, the demand for petroleum products would double as the continent shifted from coal to oil. And developing nations around the world began tapping their own rich oil reserves in response.

Bechtel launched a series of major projects that gave the organization the diversified look that would characterize it for years to come. Overseas, the company was building power plants in South Korea, rail tunnels in New Zealand, and oil pipelines across Iraq and Syria for the Iraq Petroleum Co. and through the jungles of Sumatra for Caltex. Increasing demand for oil kept Bechtel busy expanding projects in Saudi Arabia and Kuwait.

North America, too, saw its share of signature projects, many in Canada, where Canadian Bechtel Limited was established in 1949. These included a 439-mile segment of the Interprovincial pipeline, linking the oil fields of Alberta with the Great Lakes; the 643-mile Lakehead pipeline extension; and, in 1953, the world’s deepest underwater pipeline, as much as 238 feet beneath the Straits of Mackinac. Management and construction of major natural gas pipelines included the 2,300-mile Trans-Canada system serving Ontario and Quebec, the 800-mile Westcoast Transmission line supplying British Columbia, and the Tennessee Gas Transmission lines serving much of the eastern and midwestern United States. There were power plants in California and Hawaii, a nuclear power plant in New York State, and hydroelectric plants in Washington State.

The Bechtel organization had to expand and reconfigure itself to better respond to constantly shifting markets. An International Division was formed, the Power & Industrial Division was created, and the new Scientific and Nuclear Development Department came into being, as did Arabian Bechtel Corp., Bechtel Méditerranéenne, and International Bechtel Builders, Inc.

Bechtel was also expanding in other fields during this decade, including building its first aluminum plant and providing project management services to Inter•Continental Hotels for hotels worldwide. There was the Orinoco iron ore project, begun in 1951, deep in the interior of Venezuela. It took three years to open this new source of high-grade iron ore, the largest facility of its kind in South America.

The Trans Mountain Pipeline

One of Bechtel’s most dramatic projects on the North American continent was the $93 million, 700-mile Trans Mountain pipeline. Begun in 1952, it was built to carry crude oil from Alberta and, after climbing to an elevation of some 3,600 feet across the Canadian Rockies, deliver it to the Pacific Northwest. It was a grueling job. Construction crews ran into formidable natural barriers: rock-walled canyons, cascading rivers, and slide-prone cliffs. Bechtel was concerned, too, that the pipeline not disrupt the environment, a concern that further complicated the construction process. The first delivery of Alberta crude was made in Vancouver in the fall of 1953. Impressive as it was, the physical accomplishment of completing this sweeping high-rise pipeline was just as important for the organizational structure that made it possible.

The Trans Mountain Oil Pipe Line Co. was formed with Steve Bechtel Sr. as its first board chairman and Robert Bridges as president. It was the first major engineering management job in which Bechtel functioned as the owner’s representative with overall responsibility for design, engineering, procurement, and management of construction. In addition, Bechtel inaugurated a new concept in management, with the company handling the financing, making the executive decisions, and developing an operating organization.

Going Global

Just as Bechtel had avidly pursued joint ventures in an earlier generation, so it now took the lead to establish itself as manager of virtually every phase of a project from conception to completion. “We took an overall role as the right arm of the owner,” said then–Vice President Jerry Komes. “We developed a technique of management that allowed the client to run his own business while we took care of his construction. The technique proved handy in international settings where national pride can be a touchy issue. The Europeans and Japanese felt they were quite capable of building, so Bechtel could assume an overall position and leave the construction to the locals. We developed more flexibility, which opened up more opportunities.” To help frame solutions, Steve Bechtel would hopscotch the world, dropping in on heads of state and international businessmen to chat about their concerns.

During this period, according to Komes, “Steve operated on a more relaxed basis. He would take a trip around the world with no particular target in sight.” Komes and Bechtel would fly to London for lunch with old friends from British Petroleum or to pay a courtesy call on the head of Imperial Chemical Industries. In Paris, they would discover that J. Paul Getty was staying in the same hotel, Steve would give him a call, and they would get together to talk about world business—Getty’s concession in Kuwait, for example.

When Bechtel moved into Europe, said Bridges, “We were really unknown. People would ask us, ‘Beshtel? Who is this Beshtel that you call yourself?’” It didn’t take them long to find out. The Pipeline Division welded its way across continental Europe and Saudi Arabia, working out of a London office that had been opened to handle the Aden refinery, which was completed in 1954. And later, when oil was discovered in the North Sea, Bechtel’s London presence helped it secure contracts for the first North Sea offshore oil production facility for Hamilton Brothers. In the late 1960s, Bechtel won the Prestige de la France diploma, one of the highest honors awarded industrial firms operating in France. By then, questions about who this “Beshtel” was had long since been answered.

The Nuclear Age

If W. A. Bechtel’s breathtaking risk on Hoover Dam set the tone in the 1930s, Steve Sr.’s, and later Steve Jr.’s, commitment to nuclear power set the tone for the postwar decades and continued a family tradition. The Bechtels would bet the company on their strategic vision. Steve Sr. had been right about energy trends before, foreseeing the oil boom of the 1930s and steering the company into pipeline and refinery construction. Soon after World War II ended, he became convinced that nuclear energy would revolutionize electric power generation, and he wanted to be part of it.

A decade later, nobody doubted that nuclear energy could work. The real question was, Could anyone make a profit in it? Steve Jr., who would become president of Bechtel in 1960, proved it possible, but only after making an exponentially higher wager than his father had made on pipelines. Steve Jr. also learned to work with such giants as General Electric and Westinghouse in the process.

In late 1949, the company got an early introduction to nuclear energy as a government contractor. Engineers from Bechtel’s refinery division helped design the Atomic Energy Commission’s Van de Graaff nuclear accelerator at Los Alamos, New Mexico, in 1948, which led to a contract to build the AEC’s Experimental Breeder Reactor-1 (EBR-1) in late 1949. Set on a lava and sagebrush plain at an old naval proving ground in Idaho, EBR-1, a modest 100-kilowatt plant fueled by uranium 235, became, on December 21, 1951, the first reactor to generate electrical power from nuclear fission.

When Congress passed the Atomic Energy Commission Act of 1954, allowing private companies the right to build and operate nuclear power plants, the scramble for contracts was on. At Steve’s urging, the Bechtel board agreed to an aggressive “Triple Ten” strategy. Bechtel would commit 10 percent of its pretax profits and 10 percent of its management and engineering capability for 10 years to learning the technology of nuclear power. “It was an investment in technology,” said Steve Sr., “in positioning ourselves in an industry that we were convinced was going to be very big.”

Bechtel had joined with Pacific Gas and Electric and six major eastern and Midwestern utilities to form the Nuclear Power Group (NPG), a Chicago-based trade organization that promoted nuclear power and undertook economic and design studies for the AEC. By 1955, the group had completed a functional design for a nuclear plant; to build it, the group would have to incorporate. Steve Bechtel Sr., Perry Yates, and Robert Bridges flew to Chicago to discuss Bechtel’s involvement with representatives of the consortium. Willis Gale of Chicago’s Commonwealth Edison laid out the deal.

The NPG would incorporate and commit $15 million to research and development of its first nuclear plant. The utilities would each put up $2 million or $3 million. Bechtel would have to commit $1 million cash. It was an immense sum for Bechtel, but Steve decided that the company could not afford to miss the opportunity.

In 1955, the NPG went to the AEC with plans for Dresden-1, a 180-megawatt boiling water reactor, the world’s first large, privately financed, all-nuclear commercial power station. Commonwealth Edison put up $30 million for construction costs. Bechtel and GE had worked closely on the design, and GE now offered to fix the entire plant cost at $45 million if Bechtel would fix its portion at $33 million.

Having put up $1 million to join the nuclear club, Bechtel was now being asked to risk millions more to exercise its membership. Steve presented the proposal to a group of wary directors, some of whom had strong doubts about risking so much on an uncertain technology. He argued forcefully that, risky as it was, Bechtel had to go ahead, that the company had to be at the forefront of this revolutionary new technology. “He didn’t try to bulldoze anybody,” recalled John Kiely, a young director at the time, “but he obviously wanted to do it.”

Steve got his way. Construction on Dresden began in early 1957 and was completed in 1959. “Dresden did more to establish commercial nuclear power than any other single project,” Steve Bechtel has said. “It set the precedent for the utilization of an independent engineer-constructor and established the roles of the owner, engineer-constructor, and manufacturer in this type of work. It justified public utility boards in authorizing additional nuclear plants.” During Dresden’s construction, Bechtel won fixed-price contracts to build plants for PG&E at Humboldt Bay in California and Consumers Power of Michigan at Big Rock Point.

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