ILNews

Justices weigh $2.7 billion Rockport deal

Back to TopCommentsE-mailPrintBookmark and Share

A controversial, politically charged power plant proposal voided by an appellate court and later waylaid by the General Assembly and Gov. Mike Pence landed before the Indiana Supreme Court Sept. 5. Attorneys for and against the proposed plant pleaded that terms of the contract were on their side.

At issue is a contract pushed by former Gov. Mitch Daniels and approved under his watch by the Indiana Utility Regulatory Commission that would have guaranteed the sale and purchase of substitute natural gas to fund construction of a $2.7 billion coal gasification plant in Rockport, a town along the Ohio River in southwest Indiana.

Opponents argue the proposal is an unproven, environmentally harmful design and an example of crony capitalism that would saddle utility ratepayers with a 30-year contract to buy gas at rates upward of double the current market price. Supporters say the plant would be a cutting-edge, clean-coal facility, diversifying the state’s energy supply that would drive economic development and that the contract has safeguards for consumers.

A divided panel of the Indiana Court of Appeals reversed the IURC’s green light and voided the entire contract because its definition of “retail end user” differed from the statutory definition. Chief Judge Margret Robb dissented, finding IURC’s approval could be affirmed by simply excluding the offending section of the contract.

After the COA ruling, lawmakers dealt a blow to the proposal, passing Senate Enrolled Act 494 that deferred to the Supreme Court and likely set the stage for a new round of regulatory review if the contract is affirmed by the court. Plant backers responded to Pence’s signing of the bill by suspending work on the plant.

The matter made national headlines last month when Justice Mark Massa refused to recuse himself due to what plant opponents argue is conflict of interest. His 27-year relationship with project manager Mark Lubbers, a former adviser to Daniels who recruited Massa to state government and spoke at Massa’s robing ceremony after Daniels appointed him to the bench, was cited.

An unlikely coalition of utilities and environmental and consumer groups oppose the proposal backed by Indiana Gasification and its parent company, Leucadia National Corp. The case is Indiana Gas Company, Inc. v. Indiana Finance Authority, 93S02-1306-EX-407.

Norman Funk of Krieg DeVault LLP argued on behalf of utilities including Vectren, Ohio Valley Gas Inc. and Sycamore Gas. Funk said the Indiana Court of Appeals ruled correctly, citing a term of the contract that allowed it to be voided entirely if any provision was invalidated.

But parties to the contract amended it to comply with statute after the Court of Appeals ruling, and Chief Justice Brent Dickson pressed Funk on why such an action would not render the case moot.

“Certainly an amended provision cannot trump the Indiana Utility Regulatory Commission’s jurisdiction,” Funk said. “This is a regulated contract.”

Funk also warned that justices should be wary of Robb’s dissent. He said the cases she cited were inapposite because they didn’t concern contracts that required state agency approval or contain clauses like those in this case. He said the court was not at liberty to “blue-line” a contract that required approval from a state regulatory agency.

“We believe it would be a usurpation and a violation of separation of powers,” Funk said, “for this court to tell the (IURC) what it must do.” Allowing an amended contract to stand without required agency approval, he said, would mark the court “wading into new constitutional waters.”

But attorney Karl Mulvaney of Bingham Greenebaum Doll LLP argued that another provision of the contract gives signers ultimate authority over its provisions. “The parties to the contract can enter into an amendment,” said Mulvaney, representing plant backers Indiana Gasification and the Indiana Finance Authority. He likened the contract to that of a real-estate purchase.

“We really believe we have an absolute right to amend this contract,” Mulvaney said. He said the justices should affirm the contract as amended.

When Justice Loretta Rush pressed Mulvaney on whether he was “asking us to do something contrary to the statute,” she asked what his fallback position was. Mulvaney said the court could affirm the 2011 contract as approved by the IURC “and you don’t say anything about the amendment.”

Mulvaney opened his argument by saying he had never seen a case in which a contract was the target of the Legislature as was the case here. “There have been separation of powers problems,” he said.

Funk, too, referred to the Legislature’s action and developments subsequent to the COA opinion as “kind of the gorilla in the courtroom,” but Justice Robert Rucker at times reigned in both attorneys in an effort to narrow the scope to matters briefed. He told Funk, “This is not properly before us.”  

Mulvaney opened his presentation focusing on the act of the Legislature. “Both sides have told you this is a unique case,” Mulvaney said, adding the court could deal sua sponte with legislation that “impairs a contract.”

Rucker asked Mulvaney, “Wouldn’t it be more important for the court to address … either the Court of Appeals got it right or got it wrong?”

Funk opened his argument telling the court there were two issues before it: whether the IURC-approved contract complied with statute, and if it didn’t, what the proper remedy would be.

Massa presented the first question for Funk, the only question he asked during the 40-minute oral argument. “Hasn’t that been effectively mooted by the subsequent action of the parties?” Massa said, referring to the amended contract. Funk said he didn’t believe the amendment mattered.

The section of the contract stipulating that any voided section voids it entirely, he said, was “not an accident, not an oversight, not a misplaced comma. … Either all of it is valid or none of it is valid.”

“This is not a garden-variety, bilateral contract entered into by the private sector,” Funk said, arguing the contract could not be “rewritten judicially.” He also argued there was a likelihood that ratepayers would see no savings until the expiration of the 30-year contract guaranteeing purchase prices.

But Mulvaney said justices should give deference to the IURC ruling and stressed safeguards that were provided in the contract.

“The Indiana Finance Authority negotiated this looking at a lot of different models” of potential commodity costs for substitute natural gas compared with current and projected costs. “The contract price is going to be more favorable over time,” he said.•

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. IF the Right to Vote is indeed a Right, then it is a RIGHT. That is the same for ALL eligible and properly registered voters. And this is, being able to cast one's vote - until the minute before the polls close in one's assigned precinct. NOT days before by absentee ballot, and NOT 9 miles from one's house (where it might be a burden to get to in time). I personally wait until the last minute to get in line. Because you never know what happens. THAT is my right, and that is Mr. Valenti's. If it is truly so horrible to let him on school grounds (exactly how many children are harmed by those required to register, on school grounds, on election day - seriously!), then move the polling place to a different location. For ALL voters in that precinct. Problem solved.

  2. "associates are becoming more mercenary. The path to partnership has become longer and more difficult so they are chasing short-term gains like high compensation." GOOD FOR THEM! HELL THERE OUGHT TO BE A UNION!

  3. Let's be honest. A glut of lawyers out there, because law schools have overproduced them. Law schools dont care, and big law loves it. So the firms can afford to underpay them. Typical capitalist situation. Wages have grown slowly for entry level lawyers the past 25 years it seems. Just like the rest of our economy. Might as well become a welder. Oh and the big money is mostly reserved for those who can log huge hours and will cut corners to get things handled. More capitalist joy. So the answer coming from the experts is to "capitalize" more competition from nonlawyers, and robots. ie "expert systems." One even hears talk of "offshoring" some legal work. thus undercutting the workers even more. And they wonder why people have been pulling for Bernie and Trump. Hello fools, it's not just the "working class" it's the overly educated suffering too.

  4. And with a whimpering hissy fit the charade came to an end ... http://baltimore.cbslocal.com/2016/07/27/all-charges-dropped-against-all-remaining-officers-in-freddie-gray-case/ WHISTLEBLOWERS are needed more than ever in a time such as this ... when politics trump justice and emotions trump reason. Blue Lives Matter.

  5. "pedigree"? I never knew that in order to become a successful or, for that matter, a talented attorney, one needs to have come from good stock. What should raise eyebrows even more than the starting associates' pay at this firm (and ones like it) is the belief systems they subscribe to re who is and isn't "fit" to practice law with them. Incredible the arrogance that exists throughout the practice of law in this country, especially at firms like this one.

ADVERTISEMENT