Kleen Energy's fatal deal

FORTUNE -- When the natural gas ignited, it caused a blast so powerful that people 30 miles away thought there had been an earthquake. Inside the almost finished power plant in Middletown, Conn., around 11:15 a.m. on Feb. 7, the explosion blew the siding off the structure, crumpled construction trailers, and sparked a conflagration that sent a dense plume of black smoke hundreds of feet in the air. Six men died. Another 50 were injured, some of them gravely.

They had all been laboring at the Kleen Energy plant that Super Bowl Sunday, pushing to wrap up construction ahead of schedule so that the lead contractor could collect a $14 million bonus for early completion. The cause of the disaster was identified almost instantly: a "gas blow" gone awry. In theory, it's a simple procedure -- highly pressurized nitrogen, steam, air, or natural gas is propelled through pipes to clean out debris. Natural gas is the most dangerous choice; safety depends on dispersing the gas effectively and avoiding even the slightest spark. At the Kleen plant large quantities of gas were vented into a partially enclosed area that had a door that opened into a space where pipefitters were using blowtorches and open-flame industrial heaters warmed the men on a frigid winter day.

In retrospect, it wasn't surprising that something went wrong. There was no safety meeting that morning. Workers complained about the strong smell of gas, according to their affidavits, but were told to keep working. "This is a gas plant -- what do you expect to smell?" a supervisor said, according to the affidavits, only moments before losing his life in the explosion.

The federal authorities rendered harsh judgments. The Occupational Safety and Health Administration concluded in August that the construction firms "blatantly disregarded well-known and accepted industry procedures." OSHA cited 370 violations and imposed a $16.6 million fine, its second largest ever (exceeded only by the penalties for BP's (BP) Texas City refinery explosion). The Chemical Safety Board deemed the Kleen accident "preventable." Criminal investigations are ongoing, and the inevitable wave of civil litigation has begun.

There will be endless squabbling about who had what responsibility in the calamity. But that ignores the bigger mystery: How did this power plant, the sort of heavily regulated, billion-dollar engineering challenge usually developed and built by a handful of multinational construction behemoths, end up in the hands of a homegrown trio -- a Connecticut construction firm, a former city councilman, and a garbage hauler in his seventies? That's not just a historical question either, since the same firm has repaired the plant, restarted construction, and expects to open it next year. This is a tale of a trio who smoothly navigated local politics, sweet-talked the legislature, and outmaneuvered a Fortune 500 corporation to win a giant prize. But ultimately their understanding of power (the political kind) would far exceed their understanding of power (the electric kind).

No Kleen without Armetta

If you own the joint, you can enter any way you like. Phil Armetta is driving me to visit the outer reaches of the Kleen Energy site. He sees no need to use the main entrance. Instead Armetta steers his Lexus off the town road, through a gate with a no trespassing sign, and into a dusty, unpaved expanse with rocks the size of baseballs, before sailing slowly and majestically down the side of a steep embankment and landing on a rough construction road. "I used to drive a cab in New York City," he assures me as I flinch. "We're fine."

There would be no Kleen Energy without Phil Armetta, who bought the land and hatched the idea for the power plant. He's an institution in these parts -- owner of the memorably named Dainty Rubbish and sometimes referred to as a "trash magnate" in the local press. At 79, the Brooklyn native is bursting with energy, charm, and affability. "I used to dream of girls, and now I dream of projects," he croons, though you get the feeling he hasn't completely forgotten the charms of the opposite sex.

Armetta presents me with a three-ring binder filled with details of a half-dozen past and current business ventures, a biography, newspaper clippings, and a collection of his maxims. The biography cites "my first visit to an incinerator" as helping inspire his career in garbage. "You make your money when you buy, not when you sell," he tells me. "That's in the book."

As Armetta sees it, Kleen is a story of renewal. Its site was ravaged by decades of feldspar mining. Hoodlums used to congregate there, and it was used as an illegal dumping ground. But Armetta saw potential, and in 2000 he scooped up the 137 acres on the Connecticut River for a mere $300,000.

Beyond professions of regret for the lives lost in the explosion -- " Deaths like these are always tragic" -- Armetta deflects questions about sensitive topics by repeatedly saying, "I'm just a high school dropout," and suggesting that I talk to his partners. Despite the tragedy, Armetta maintains the plant will be a boon. Connecticut depends on outdated coal-fired plants, and Kleen will boast gas turbines that provide electricity to power one-fifth of the state's homes while emitting dramatically less pollution than coal. He claims the plant will save consumers $1.25 billion over 15 years. "Everybody makes out," he says. "We lower prices, it helps consumers. We make hundreds of jobs. And since it's a cleaner plant, it should be easier to sell."

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