Indiana Utility Regulatory Commission and Citizens Action Coalition and Regulation and State Government and Energy & Environment and Utilities and Government & Economic Development and Government

Watchdog: State agency heads colluded on gas deal

May 2, 2011

Former Indiana Utility Regulatory Commission chief David Hardy and the state's then-finance director, Jennifer Alvey, in 2009 and 2010 secretly and improperly discussed the merits of a $6.9 billion contract the Indiana Finance Authority ultimately struck with operators of a proposed gasification plant, plant opponents allege.

Citizens Action Coalition, the Sierra Club and other environmental groups on Monday presented copies of the e-mail to the commission, which is reviewing whether to approve the project agreement. The environmental groups are on record as opposing the plant.

Such direct, behind-the-scenes communication in such regulatory matters is generally prohibited under state law.

The e-mails show the agency heads discussing the plant as far back as 2009.

“The materials raise due-process concerns and provide evidence of communications that would, to a reasonable person, raise serious questions regarding whether the commission’s impartiality has been compromised in this matter by the advisory role to (the Indiana Finance Authority) in the negotiations,” according to the filing CAC attorney Jerome Polk made Monday with the IURC.

However, IURC administrative law judge Angela Webber denied a request to delay the hearing for 30 days, despite the e-mails.  She ruled that the e-mails were sent more than 30 days prior to the December 2010 filing of the gasification plant case, and they were “procedural and general in nature” rather than substantive.

“That’s nonsense from my perspective,” CAC Program Director Kerwin Olson after the hearing. “The commission is a biased body at this moment in time.”

CAC has until May 13 to offer rebuttal in the case, Olson said.

The IFA plans to purchase synthetic natural gas from the plant over 30 years, which proponents—including would-be plant operator Leucadia National Corp. of New York—have said will save Indiana gas customers more than $100 million by locking in low rates.

But the e-mails obtained by CAC raise serious questions about improprieties, as well as whether the contact had the blessings of Indiana Gov. Mitch Daniels’ staff. Daniels has been a supporter of the $2.7 billion gasification plant as part of his “homegrown energy” policy.

Under one of the e-mails obtained by CAC, Alvey appeared to confirm that Daniels adviser David Pippen provided then-IURC chair Hardy with “the run down” on negotiations the state was having with Leucadia.

“I’m preparing for maternity leave but wanted to give you a quick update. Pippen said he gave you the run down that we are holding unless we get some more movement on the guaranteed savings,” read a copy of an e-mail Alvey sent Hardy on Oct. 30, 2009, referring to the negotiations between IFA and Leucadia.

In an Aug. 14, 2009, message, Alvey tells Hardy she would “like to pick your brain confidentially” but adds: “I can’t provide you with much documentation without opening them up to public access.”

In another e-mail, Alvey tells Hardy about efforts to get favorable legislation for the deal involving IFA’s agreement with Leucadia.

Hardy responds: “If you need to meet with my troops, they can in my absence.”

CAC told the commission that “at a minimum, the e-mails provided to date give the appearance of impropriety.”

The group cited state law governing ex parte communications,  which says “administrative adjudications may not be made upon evidence secretly obtained by an administrative agency at a time and place other than that appointed for a hearing.”

Polk said such adjudications may not be made upon information received.

Olson told the commission Monday that he met with Alvey in late September 2010, and she indicated then that she had not talked to commission officials about the IFA’s proposed synthetic natural gas contracts with Leucadia’s Indiana Gasification.

But she said she “was anxious to go across the street and start the process,” Olson said.

“This was not a competitive and public process,” he said.

Alvey left her position early this year for a job in the private sector.

Gov. Mitch Daniels fired Hardy last year in a separate ethics matter after learning that the IURC’s chief attorney, Scott Storms, was presiding over Duke Energy cases even as he was talking to the utility about a job, which he later accepted. He and the head of Duke’s Indiana operations were later fired by Duke when the scandal came to light.

Incriminating e-mails showed that Hardy was aware of Storms' job-seeking and that he made light of a state ethics commission review of whether Storms had a conflict of interest.

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