At the time, Blackwater was under contract with the CIA to help the agency with training at its North Carolina facility, sources told FOX News. The CIA reached out to Blackwater founder Erik Prince to use the firm's transportation resources and some of its assets already operating in Afghanistan to help with the goal of hunting Al Qaeda members.
But the program, which operated in fits and starts, never went operational, the source told FOX News.
The New York Times first reported the program late Wednesday on its Web site.
The Times, citing unidentified current and former government officials, said Blackwater executives helped with planning, training and surveillance for the program. The program never resulted in the capture or killing of any terror suspects, according to current and former U.S. intelligence officials. It was never fully operational, and has been canceled twice: once by then-CIA Director George Tenet, restarted by Porter Goss, and finally by CIA Director Leon Panetta in June.
Panetta then informed the congressional intelligence committees about the program for the first time the next day.
A CIA spokesman said Thursday that Panetta's decisions were not difficult.
"Director Panetta thought this effort should be briefed to Congress, and he did so," spokesman George Little said in a statement. "He also knew it hadn't been successful, so he ended it. Neither decision was difficult. This was clear and straightforward."
The officials told the Times that the CIA's use of an outside company for a potentially lethal program was a major reason Panetta called the emergency congressional briefing. The House Intelligence Committee last month launched an investigation to determine whether the CIA broke the law by not informing Congress about the secret program as soon as it was begun.
Blackwater, a North Carolina company now known as Xe Services, has come under heavy criticism for its alleged role in a September 2007 shooting in Baghdad's Nisoor Square that left 17 Iraqi civilians dead.
Intelligence sources told FOX News that Democrats are politicizing the program because Prince, who is no longer chief executive of the firm, is associated with it and there are other more operational bounty hunting programs that the CIA is pursuing with regards to Al Qaeda.
It was unclear whether the CIA had planned to use the contractors to capture or kill Al Qaeda operatives or just to help with training and surveillance. Government officials said bringing outsiders into a program with lethal authority raised deep concerns about accountability in covert operations, the Times reported.
The CIA has regularly used contractors for intelligence analysis and operations, former CIA Director Michael Hayden told Congress last year. Contractors participated in the secret harsh interrogations of terrorist suspects, he said. Contractors are no longer allowed to conduct interrogations, Panetta told Congress in April.
The Times reported that the CIA did not have a formal contract with Blackwater for this program but instead had individual agreements with top company officials, including Prince. Blackwater's work on the program ended years before Panetta took over the agency after senior CIA officials questioned the wisdom of using outsiders in a targeted killing program, the Times said.
"Director Panetta thought this effort should be briefed to Congress, and he did so. He also knew it hadn't been successful, so he ended it. Neither decision was difficult. This was clear and straightforward," CIA spokesman George Little said in a statement. "Director Panetta did not tell the (congressional) committees that the agency had misled the Congress or had broken the law. He decided that the time had come to brief Congress on a counterterrorism effort that was, in fact, much more than a PowerPoint presentation."
A message left on Xe spokeswoman Anne Tyrrell's cell phone and an e-mail message were not immediately returned late Wednesday.
Republicans who had been supporters of the Bush administration's interrogation and other war-on-terror tactics have dismissed the controversy over the program as much ado about little, suggesting it was an attempt by Democrats to provide political cover to House Speaker Nancy Pelosi, D-Calif., who has accused the CIA of lying to her in 2002 about its use of waterboarding, or simulated drowning, which many people, including President Barack Obama, consider torture.
Pelosi has said the House and Senate intelligence committees should "take whatever actions they believe are necessary to get more information on the subject," including whether former Vice President Dick Cheney played a direct role in proposing the secret program and withholding information from Congress.
Rep. Peter Hoekstra, R-Mich., the senior Republican on the House Intelligence Committee, has criticized the panel's investigation as "partisan, political theater." He said he would support a "balanced review," but contended Democrats were prematurely accusing the CIA of breaking the law.
FOX News' Jennifer Griffin and The Associated Press contributed to this report.