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Justices weigh contract dispute in $2.7 billion Rockport coal-to-gas plan

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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 Thursday. 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 upwards 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, 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 contained 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 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.
 

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  1. "So we broke with England for the right to "off" our preborn progeny at will, and allow the processing plant doing the dirty deeds (dirt cheap) to profit on the marketing of those "products of conception." I was completely maleducated on our nation's founding, it would seem. (But I know the ACLU is hard at work to remedy that, too.)" Well, you know, we're just following in the footsteps of our founders who raped women, raped slaves, raped children, maimed immigrants, sold children, stole property, broke promises, broke apart families, killed natives... You know, good God fearing down home Christian folk! :/

  2. Who gives a rats behind about all the fluffy ranking nonsense. What students having to pay off debt need to know is that all schools aren't created equal and students from many schools don't have a snowball's chance of getting a decent paying job straight out of law school. Their lowly ranked lawschool won't tell them that though. When schools start honestly (accurately) reporting *those numbers, things will get interesting real quick, and the looks on student's faces will be priceless!

  3. Whilst it may be true that Judges and Justices enjoy such freedom of time and effort, it certainly does not hold true for the average working person. To say that one must 1) take a day or a half day off work every 3 months, 2) gather a list of information including recent photographs, and 3) set up a time that is convenient for the local sheriff or other such office to complete the registry is more than a bit near-sighted. This may be procedural, and hence, in the near-sighted minds of the court, not 'punishment,' but it is in fact 'punishment.' The local sheriffs probably feel a little punished too by the overwork. Registries serve to punish the offender whilst simultaneously providing the public at large with a false sense of security. The false sense of security is dangerous to the public who may not exercise due diligence by thinking there are no offenders in their locale. In fact, the registry only informs them of those who have been convicted.

  4. Unfortunately, the court doesn't understand the difference between ebidta and adjusted ebidta as they clearly got the ruling wrong based on their misunderstanding

  5. A common refrain in the comments on this website comes from people who cannot locate attorneys willing put justice over retainers. At the same time the judiciary threatens to make pro bono work mandatory, seemingly noting the same concern. But what happens to attorneys who have the chumptzah to threatened the legal status quo in Indiana? Ask Gary Welch, ask Paul Ogden, ask me. Speak truth to power, suffer horrendously accordingly. No wonder Hoosier attorneys who want to keep in good graces merely chase the dollars ... the powers that be have no concerns as to those who are ever for sale to the highest bidder ... for those even willing to compromise for $$$ never allow either justice or constitutionality to cause them to stand up to injustice or unconstitutionality. And the bad apples in the Hoosier barrel, like this one, just keep rotting.

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