Legalectric

A couple of days ago, a little birdie sent me an uplifting article, and what I like most about it is the use of the term “boondoggle,” which is the definition of Minnesota’s “own” Mesaba Project:

For Carbon Capture, DOE Moves Oxycombustion Ahead of IGCC

If IEEE’s Spectrum is using that term, the rest of the world can’t be far behind!

We’ve been having quite a few go-rounds about Mesaba lately, since Iron Range Resources unilaterally decided to significantly and substantively alter the “contract” for the $9.5 million in funding.   I’d started a post on that and can’t find it for the life of me, so here we go… Now remember, this is not including the state’s Renewable Development Fund money or the DOE’s money thrown at this project, this is “only” the state IRR’s money, $9.5 million, and the interest on that “loan” is 20%:

MCGP Exhibit 5023 – IRR & Excelsior Convertible Debenture Agreement

You’ll find that interest rate on p. 12, 20% simple interest per annum on the outstanding principal.  Since they’ve paid nothing on it except the $40k that they were found to have spent improperly (with many other issues not addressed because the IRR had “destroyed” documentation… yeah, right…), 20% simple interest per annum on a “loan” from 2004 means that there’s another $8,000,000 due now.  And this does NOT take into account the initial $1.5 million from IRR, it’s just the agreement above.

And as noted above,  a couple of weeks ago, it seems the IRR unilaterally decided to significantly and substantively alter the “contract” … based on exactly what???

Here’s how Commissioner Sandy Layman characterized the predicament:

The principal balance owed by Excelsior Energy, Inc. to Iron Range Resources under the
existing loan documents is $9,454,962.

No mention is made of the more than $10 million in interest.   Nada…

Here are two of Aaron Brown’s posts:

Excelsior Energy to seek huge break from Iron Range Resources

… and …

This Iron Range blogger is done apologizing for Iron Range cronyism

Here’s Charlotte Neigh’s editorial, published in the Grand Rapids Herald-Review and on the Citizens Against the Mesaba Project site:

IRR WRITES OFF $ MILLIONS OWED BY EXCELSIOR ENERGY

By failing to declare Excelsior Energy in default, which would put an end to the Mesaba Energy Project, the Iron Range Resources Board is enabling Excelsior to draw down the remaining $2.3 million of Department of Energy funding, which can continue to provide handsome salaries for Tom Micheletti and his wife and co-president, Julie Jorgensen.

In April 2007 Excelsior Energy defaulted on its $952,376 interest payment on loans from IRR and it hasn’t paid any interest yet. Since then interest has been accruing on $9.5 million at the rate of 20% per year and the annual payments should be about $2 million. In addition, Excelsior was supposed to pay $800,000 per year on the principal, starting in December 2009, which it also failed to do. After repeated extensions of the due date, payment was supposed to be made by December 2010.

However, at a non-public meeting on August 10th, an IRR committee discussed Tom Micheletti’s proposed changes to the terms of the loans and the IRR Board rubber-stamped these amendments at its meeting on August 19th. From the limited information available, it can be determined that: the annual principal payment will start in December 2010 and will be reduced from $800,000 to $100,000; the interest will be calculated at the reduced rate of 5% instead of 20% and annual payments are not required; and if Excelsior pays off the entire principal by 12/31/17, the interest rate will be recalculated at 3% per year. This amounts to a loss of revenue to IRR well in excess of $10 million, in addition to the $9.5 million that probably never will be repaid.

The high initial interest rate reflected the risk level of the Mesaba Energy Project, which has been borne out by Excelsior’s failure to attract investors or customers. This is despite having spent nearly 40 million public dollars, including approximately $20 million from the federal Department of Energy and $10 million from Minnesota’s Renewable Development Fund, in addition to IRR’s $9.5 million. Tom Micheletti did not offer the IRR Board any revised plan for making this project succeed. When the remaining $2.3 million is gone, Excelsior can declare bankruptcy without assets to repay its creditors, and its co-presidents can walk away.

Micheletti touts the accomplishment of a final environmental impact statement but that process has not been finished because it still lacks a Record of Decision by the DOE. Micheletti touts the accomplishment of having the site approved by the Public Utilities Commission but fails to mention that the project cannot proceed without required regulatory permits. The air permitting has been delayed since 2006 and is problematic because this project is competing with mining operations that can’t be located elsewhere for scarce space for more pollutants in the airshed.

Sensible people must wonder why the IRR Board would do this, or why it would have funded this project in the first place, or why it would have waived the requirement for matching funds, or why it would have extended the due date for payments while it continued throwing good money after bad. A likely factor is the generosity of Excelsior insiders at campaign fundraisers for some of these legislators the week before the committee meeting and over recent years.

FEIS NOT ACTUALLY “FINAL”: AIR AND WATER PERMITS LACKING

The final step for the environmental impact statement (issued in November 2009) is a “record of decision” (ROD) prepared within the DOE, vouchsafing that all has been done thoroughly and properly and the project should be allowed to proceed with DOE support. However, the ROD has been delayed and the monthly reports indicate “schedule uncertain”. We don’t know all of the reasons for this but they may include concerns previously raised by the EPA, the Army Corps of Engineers and the federal land managers. One of the known reasons is Excelsior’s failure to acquire the necessary air and water permits from the Minnesota Pollution Control Agency (MPCA). Apparently Excelsior continues to qualify for cost-sharing contributions from the $22 million DOE fund ($2.3 million remaining) while it pursues these permits.

Excelsior is not actively pursuing water permits at the MPCA; if there have been any changes since the June 2006 applications, revised applications will be required. In late spring Excelsior contacted the MPCA regarding the air permits and work is currently underway to determine what updates to the 2006 applications will be required. It appears that no draft permit will be issued in the foreseeable future and if one ever is, it can be appealed to the EPA, a process that could take 18 months.

I’ve just by utter accident discovered a few things…

We all remember Byron Starns, attorney for Excelsior Energy’s Mesaba Project, the coal gasification project from hell.  Check his bio – CLICK HERE – he’s done some amazing things, that Reserve Mining case in particular.

Now let’s take a walk back on memory lane, the 2003 Prairie Island bill, where the “Environmental Coalition”, i.e., Izaak Walton League, MCEA, ME3/Fresh Energy, and Xcel and Tom Micheletti did a deal that advance wind some, let Xcel continue using Prairie Island and increased cask storage, and opened the door for Micheletti’s Excelsior Energy and their IGCC plant that they’d been promoting since the 2002 session.  On one hand, the “Environmental Coalition” including MCEA, in the middle we have Xcel, and on the other we have Tom Micheletti and Excelsior Energy…

Here’s the 2003 Prairie Island bill:

Minnesota Session Laws 2003 – 1st Special Session, Chapter 11

Here’s what it did for Mesaba (as if calling burning garbage “renewable” wasn’t enough):

Excelsior Energy Mesaba Project related parts of 2003 Chapter 11

When the Power Purchase Agreements for Excelsior Energy’s Mesaba Project came up at the PUC,  MCEA intervened, both as a party and representing others:

Petition to Intervene – MCEA – Waltons – Fresh Energy

To look at the full docket, go to www.puc.state.mn.us and “Search Dockets” and search for  PPA docket “05-1993” and Siting docket “06-668.”

And look who filed a Notice of Appearance for Excelsior Energy dated April 27, 2006:

Notice of Appearance – Byron Starns, et al – PPA Docket

And representing Excelsior Energy in the Siting Docket dated September 26, 2006:

Notice of Appearance – Byron Starns, et al – Siting Docket

And look who is noted in the MCEA Annual Reports as providing legal services to MCEA in 2005 and 2006, look in the fine print, why it’s Byron Starns!

MCEA Annual Report 2005

MCEA Annual Report 2006

Oh, but that’s not all, look who joins the Board of MCEA in 2007 … and remains through 2008… and 2009 according to his bio on the LSD site — why, it’s Byron Starns again!:

Board of Directors, Minnesota Center for Environmental Advocacy, 2007–2009 (linked)

2007 – MCEA’s IRS 990

2008 – MCEA’s IRS 990

His bio states he was on the MCEA board in 2009, but the 2009 IRS 990 does not list him as having been on it at reporting year end.

I just spoke with Byron Starns, who, with the forwarning to don his Kevlar vest, was kind enough to entertain a few questions, and said that (close to quotes but not quite):

MCEA has an ethical requirement, that everyone on the Board must make full disclosure of interests and conflicts, and that when issues do come up, anyone with a conflict has to leave the room.  He said he didn’t participate in any decisions related to energy matters for MCEA.  He does not recall if the fact that he was on MCEA’s board was disclosed in the Excelsior Energy Mesaba Project PPA or Siting dockets.  Also, he noted he is no longer on the Board of MCEA.

I don’t recall any disclosure about this — do you?

Is it “not a conflict” because MCEA’s interests and the interests of their “clients” the Waltons and Fresh Energy are so closely aligned with those of Excelsior Energy because of that 2003 agreement?

WTF?

The ALJ’s recommendation has come out in the Excelsior Energy Mesaba Project docket and he’s recommended that a permit be issued.  Really…

This is the judge who tossed out my client, Public Intervenors – Mesaba, Xcel Energy and Minnesota Power because we didn’t file testimony.  Show me in the rules where filing testimony is required…

THERE WERE NO PARTIES IN THIS DOCKET, JUST EXCELSIOR ENERGY.

Read it for yourself:

ALJ Report 12-28-09

I’m at a loss about what to say…