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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. Yes diversity is so very important. With justice Rucker off ... the court is too white. Still too male. No Hispanic justice. No LGBT justice. And there are other checkboxes missing as well. This will not do. I say hold the seat until a physically handicapped Black Lesbian of Hispanic heritage and eastern religious creed with bipolar issues can be located. Perhaps an international search, with a preference for third world candidates, is indicated. A non English speaker would surely increase our diversity quotient!!!

  2. First, I want to thank Justice Rucker for his many years of public service, not just at the appellate court level for over 25 years, but also when he served the people of Lake County as a Deputy Prosecutor, City Attorney for Gary, IN, and in private practice in a smaller, highly diverse community with a history of serious economic challenges, ethnic tensions, and recently publicized but apparently long-standing environmental health risks to some of its poorest residents. Congratulations for having the dedication & courage to practice law in areas many in our state might have considered too dangerous or too poor at different points in time. It was also courageous to step into a prominent and highly visible position of public service & respect in the early 1990's, remaining in a position that left you open to state-wide public scrutiny (without any glitches) for over 25 years. Yes, Hoosiers of all backgrounds can take pride in your many years of public service. But people of color who watched your ascent to the highest levels of state government no doubt felt even more as you transcended some real & perhaps some perceived social, economic, academic and professional barriers. You were living proof that, with hard work, dedication & a spirit of public service, a person who shared their same skin tone or came from the same county they grew up in could achieve great success. At the same time, perhaps unknowingly, you helped fellow members of the judiciary, court staff, litigants and the public better understand that differences that are only skin-deep neither define nor limit a person's character, abilities or prospects in life. You also helped others appreciate that people of different races & backgrounds can live and work together peacefully & productively for the greater good of all. Those are truths that didn't have to be written down in court opinions. Anyone paying attention could see that truth lived out every day you devoted to public service. I believe you have been a "trailblazer" in Indiana's legal community and its judiciary. I also embrace your belief that society's needs can be better served when people in positions of governmental power reflect the many complexions of the population that they serve. Whether through greater understanding across the existing racial spectrum or through the removal of some real and some perceived color-based, hope-crushing barriers to life opportunities & success, movement toward a more reflective representation of the population being governed will lead to greater and uninterrupted respect for laws designed to protect all peoples' rights to life, liberty & the pursuit of happiness. Thanks again for a job well-done & for the inevitable positive impact your service has had - and will continue to have - on countless Hoosiers of all backgrounds & colors.

  3. Diversity is important, but with some limitations. For instance, diversity of experience is a great thing that can be very helpful in certain jobs or roles. Diversity of skin color is never important, ever, under any circumstance. To think that skin color changes one single thing about a person is patently racist and offensive. Likewise, diversity of values is useless. Some values are better than others. In the case of a supreme court justice, I actually think diversity is unimportant. The justices are not to impose their own beliefs on rulings, but need to apply the law to the facts in an objective manner.

  4. Have been seeing this wonderful physician for a few years and was one of his patients who told him about what we were being told at CVS. Multiple ones. This was a witch hunt and they shold be ashamed of how patients were treated. Most of all, CVS should be ashamed for what they put this physician through. So thankful he fought back. His office is no "pill mill'. He does drug testing multiple times a year and sees patients a minimum of four times a year.

  5. Brian W, I fear I have not been sufficiently entertaining to bring you back. Here is a real laugh track that just might do it. When one is grabbed by the scruff of his worldview and made to choose between his Confession and his profession ... it is a not a hard choice, given the Confession affects eternity. But then comes the hardship in this world. Imagine how often I hear taunts like yours ... "what, you could not even pass character and fitness after they let you sit and pass their bar exam ... dude, there must really be something wrong with you!" Even one of the Bishop's foremost courtiers said that, when explaining why the RCC refused to stand with me. You want entertaining? How about watching your personal economy crash while you have a wife and five kids to clothe and feed. And you can't because you cannot work, because those demanding you cast off your Confession to be allowed into "their" profession have all the control. And you know that they are wrong, dead wrong, and that even the professional code itself allows your Faithful stand, to wit: "A lawyer may refuse to comply with an obligation imposed by law upon a good faith belief that no valid obligation exists. The provisions of Rule 1.2(d) concerning a good faith challenge to the validity, scope, meaning or application of the law apply to challenges of legal regulation of the practice of law." YET YOU ARE A NONPERSON before the BLE, and will not be heard on your rights or their duties to the law -- you are under tyranny, not law. And so they win in this world, you lose, and you lose even your belief in the rule of law, and demoralization joins poverty, and very troubling thoughts impeaching self worth rush in to fill the void where your career once lived. Thoughts you did not think possible. You find yourself a failure ... in your profession, in your support of your family, in the mirror. And there is little to keep hope alive, because tyranny rules so firmly and none, not the church, not the NGO's, none truly give a damn. Not even a new court, who pay such lip service to justice and ancient role models. You want entertainment? Well if you are on the side of the courtiers running the system that has crushed me, as I suspect you are, then Orwell must be a real riot: "There will be no curiosity, no enjoyment of the process of life. All competing pleasures will be destroyed. But always — do not forget this, Winston — always there will be the intoxication of power, constantly increasing and constantly growing subtler. Always, at every moment, there will be the thrill of victory, the sensation of trampling on an enemy who is helpless. If you want a picture of the future, imagine a boot stamping on a human face — forever." I never thought they would win, I always thought that at the end of the day the rule of law would prevail. Yes, the rule of man's law. Instead power prevailed, so many rules broken by the system to break me. It took years, but, finally, the end that Dr Bowman predicted is upon me, the end that she advised the BLE to take to break me. Ironically, that is the one thing in her far left of center report that the BLE (after stamping, in red ink, on Jan 22) is uninterested in, as that the BLE and ADA office that used the federal statute as a sword now refuses to even dialogue on her dire prediction as to my fate. "C'est la vie" Entertaining enough for you, status quo defender?

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