Monday, February 14, 2011

Is Someone Going To Investigate Why This Coal Gasification Deal Is So Important To Daniels?

There is no better state in America in which to engage in politically corrupt activities because there is no other state in America where the news media is either as incompetent or as lazy as it is in Indiana, or where the prosecutors responsible for protecting the public are always close to the people engaged in the public corruption. The latest example of this fact is the inability of the news media to figure out there is something really sleazy about Gov. Mitch Daniels' full court press for a coal gasification project in Indiana that is disfavored by industry and is founded upon questionable technology. The Star's Ted Evanoff has a story on the defeat of legislation that would have allowed the construction of a special pipeline at enormous cost to support the project but refuses to connect the dots that have been pointed out to him.

Indiana's Senate has handed Gov. Mitch Daniels a setback on the big coal gasification plant he wants to see built at Rockport.

Senators rejected a measure that would have cleared the way for a special pipeline sought by investors to move carbon dioxide away from the southwestern Indiana plant to buyers on the Gulf Coast.

The vote last week marked an unusual defeat for the Republican governor, whose party dominates the Senate.

The bill's Republican sponsor, Sen. Beverly Gard of Greenfield, said some lawmakers who voted against the bill didn't understand its significance.

Without legislation allowing eminent domain for such pipelines, lead investor Leucadia National Corp. doubts it could secure the federal guarantees on construction loans for the $2.6 billion gasification plant it has proposed at Rockport . . .
Backers were stunned when the bill failed Tuesday on a vote of 28-21, with 16 of the chamber's 37 Republicans opposed.
Let's begin our analysis by looking at who is behind this obscure Leucadia National Corp. most Hoosiers and few lawmakers had ever heard of before this proposed deal surfaced.
This week, the top Leucadia official in Indiana, Mark Lubbers, once a chief adviser to Daniels, is expected to confer with company and legislative leaders about bringing the eminent domain measure back to the General Assembly . . .

The defeat is considered a setback for investors and a coal industry counting on a grand energy strategy backed by some of the wealthiest names in American finance, including Goldman Sachs and General Electric Financial . . .

With the measure killed in the Senate, Leucadia consultant William Rosenberg said Lubbers and officials from Denbury and Leucadia will have to find a way to bring the matter up again . . .
Leucadia, run by two of America's wealthiest men, Ian Cumming and Joseph Steinberg, brought in Rosenberg as a consultant to look at the gasification proposal for Indiana. He had worked with Lubbers in the late 1980s in Indiana as a consultant for another company.
Mark Lubbers is the top official with the company in Indiana. He formerly served as the governor's top communications aide but was allowed to represent outside interests while on the governor's payroll, a move that was questioned at the time by ethicists. Lubbers invested in a company that was awarded a lucrative contract by the Indiana State Police while he was being paid a six-figure salary to advise the governor. He also formerly served former Gov. Robert Orr as an adviser on the failed Marble Hill nuclear power plant that was later scrapped by the utility building it, PSI, which is now owned by Duke Energy. Rosenberg served as an energy adviser to former President George H.W. Bush. And then you have Goldman Sachs and GE Financial weighing in as well. There's another name that surfaced with respect to this project who happens to be one of the largest campaign contributors to Daniels ignored in Evanoff's story. That would be Jerry Slusser, whose name appeared in an e-mail that the Northwest Indiana Times received in response to a public records respect after the Star first unearthed dozens of e-mails that shed light on the cozy relationship key officials of the Indiana Utility Regulatory Commission had with executives of Duke Energy that led to the controversial hiring of the IURC's chief counsel Scott Storms. Here's what The Times reported on the e-mail in question:

E-mails obtained by The Times show that when a generous campaign contributor and friend of Gov. Mitch Daniels came calling, state regulators knew just who they were dealing with and hoped their effort would be recognized.

In the e-mails, an Indiana Utility Regulatory Commission staffer points out the political connections of Indianapolis businessman Jerry Slusser as he scrambles to set up a meeting between Slusser, Commissioner Jim Atterholt and staff at the Midwest Independent Transmission System Operator (MISO).

IURC staffer Robert Pauley e-mailed David Hadley, MISO vice president of state regulatory relations, on June 29: "This guy is a friend of the Governor's, Mark Lubbers, et al. He also has some times (sic) to Mr. Rosenberg's gasification's proposals."

Lubbers was a reference to Mark Lubbers, Gov. Mitch Daniels former political director. Rosenberg is William Rosenberg, president of Indiana Gasification LLC, which is developing a coal gasification plant in Spencer, Ind.

Slusser has been a prominent Daniels campaign contributor, donating $116,936 to the Mitch for Governor Campaign between 2004 and 2008, according to campaign contribution data at the Indiana Secretary of State's website. Slusser also donated $94,107 to Daniel's political action committee Aiming Higher, which played a key role in returning a Republican majority to the Indiana House in the fall elections.

Slusser did not return phone messages requesting an interview left at the jet charter company he owns, Vitesse Aviation Services, in Greenfield, Ind.
Star reporters working on this story are well aware of the e-mail connecting Slusser to the deal but have ignored it as irrelevant to the story. In 1998, a Commodity Futures Trading Commission Administrative Law Judge ruled that Slusser and others were involved in the misappropriation of "$6 million of customer funds" and other financial hijinks and assessed a $10 million fine against Slusser and his firm, one of the highest ever assessed at the time, although the size of the fine was later reduced on appeal.  Also, a 2003 Time magazine story connected Slusser to energy scams.

As the Star reports, the coal gasification plant in Rockport backed by these individuals hit a big roadblock in 2006 when Indiana gas utilities and industrial users of gas refused to buy any of the Rockport gas, saying ample supplies were available on the open market. But Daniels rushed to their rescue by forwarding a plan that puts Indiana consumers on the hook to finance the deal. As the Star reports:

When the project was collapsing, Daniels shored it up in 2008. His initiative would put the state in the natural gas business. That controversial plan is now being considered by the Indiana Utility Regulatory Commission.

Under the plan, the Indiana Finance Authority, a state agency, would buy almost all the Rockport gas at a wholesale price of about $6 per million BTU and resell it on the open market.

If the market price is below $6, the loss would be passed to Indiana's 1 million gas-burning households in the form of higher natural gas bills. If the gas sells for more than $6, the finance authority would split the profits with Leucadia's subsidiary, Indiana Gasification LLC.

The state's share of the profits would be used to lower the residential gas bills across Indiana. Estimates place the household savings at about $100 per year in the event gas prices, now about $800 per year for the typical home, rise to $2,000.
Another curious aspect of the legislation that would allow for the construction of the special pipeline to benefit the coal gasification plant is a provision that would give the eminent domain authority to the Department of Natural Resources instead of the IURC, which typically has such authority. "There is an authority in the state who oversees pipelines. That's IURC. This bill went around that and gave it to DNR," [Sen Karen] Tallian told the Star. "Why we needed all these strange, out-of-the-normal patterns, I don't know." Also, notice the legislation exempts business utility users; only residential utility users will wind up having to pay more if the project proves unprofitable, which many industry observers believe is more than likely to occur. That's why businesses so strenuously opposed the deal when Daniels first proposed it.

I simply don't understand the inability or refusal of the news media in this state to connect the obvious dots involving this coal gasification deal. It seems to be driven more by a desire to line the pockets of Governor Daniels' friends and political contributors without any concern for merits of the project's benefits to the public, which ultimately is going to wind up paying for it.


Had Enough Indy? said...

Neither the State nor the City should act as a banker for these deals that aren't solid enough to attract capital on the open market and on their merits.

You have made a compelling case that the coal gasification deal is to benefit the well connected at the expense of the taxpayers.

The North of South deal is exactly that, here in Indy.

Gary R. Welsh said...

I couldn't agree with you more, Pat. I'm outraged that Mickey Maurer is using the Indianapolis Business Journal editorial pages to push that North of South deal when the bank in which he owns 25% of the stock and serves as Chairman of the Board wouldn't lend a dime to it. Naturally, Maurer worked as Daniels' first economic development chief. I think Mr. Maurer should make full disclosure to the public so we can understand why he believes taxpayers should finance a private business development his bank would never touch.

Paul K. Ogden said...

I had a client and a prospective client who both worked at a coal gasification plant around Terre Haute.

The prospective client had had a nervous breakdown after an explosion killed several workers at the plant. He saw body parts of his friend fly past him.

They both told me stories of how incredibly dangerous the technology is and the explosions they witnessed. The coal gasification building doesn't even have walls because they expect explosions and want the blasts to go out and not take down the building.

Both quit their jobs...they couldn't take the danger and people getting injured or killed.

Bradley said...

I hope the closer Daniels gets to "officially" running for president (since he has been running for at least a year, if not more, now), the more the news media will start connecting the dots to expose the governor and get a story (the Teflon has to wear-off, eventually). We can only hope these stories are exposed before more people get hurt, as Paul talks about in his post. The lies, cover-ups, waste of money, cronyism and deaths should be absolutely unacceptable.