Rockport – Sheila Kennedy

I’m as Ethical as Scalia is NOT a Persuasive Argument

A couple of days ago, the Sierra Club, Citizens Action Coalition, Spencer County Citizens for Quality of Life and Save the Valley [update: the organization was Valley Watch, not Save the Valley] filed a petition asking Indiana Supreme Court Justice Mark Massa to recuse himself from hearing a case that will determine the viability of the controversial Rockport coal gasification facility. (I’ve written before about this boondoggle, birthed by political insiders and totally contrary to the free market principles to which the Daniels Administration paid so much verbal homage.)

Not even 20 hours after the petition was filed, Massa issued a ruling denying it. Clearly, the ruling had been written well beforehand–the lawyers who crafted the brief could have saved their (written) breath.

The argument for recusal rested on the long and intimate relationship between Massa and Mark Lubbers, whose personal fortunes are closely tied to the results of the lawsuit, and upon Massa’s friendship with and service to then-governor Mitch Daniels, who rammed the deal through over the qualms of both Republican and Democratic legislators. As columnist Charles Pierce wrote yesterday in his Esquire blog, “Massa couldn’t be more tied into the people who want to build the plant if he came to work every morning in one of those NASCAR firesuits festooned with logos.”

Massa’s ruling relied heavily on Cheney v. United States District Court, the infamous case in which Justice Scalia refused to recuse himself from a pending case despite the fact that he had gone duck hunting with the Vice-President–a named party— while the case was pending. Massa neglected to note that the Indiana Supreme Court, unlike the US Supreme Court, is governed by one of those pesky codes of ethics. (Can we spell “appearance of impropriety”?)

At least he didn’t defend himself by pointing out that Clarence Thomas sits on cases in which his wife has an interest, while he and Lubbers are just best buds. (Actually, relying on Scalia or Thomas for ethical guidance makes me think of that old adage about fish rotting from the head. But I digress.)

In a particularly disingenuous passage, Judge Massa wrote:

“I have a friend who works for General Motors; must I recuse if GM is a party to a case before our court?” he wrote. “All of us on this Court have many friends who are lawyers, some of whom appear before us, including several to whom I am closer and see more regularly than Mr. Lubbers. If mere friendship with these lawyers were enough to trigger disqualification, my colleagues and I would rarely sit as an intact court of five.”

Well Judge, if you had a friend who worked for General Motors, that would be a lot different than having a friend whose continued, highly lucrative employment depends upon a favorable verdict– a friend who got you your first political job 30 years ago, a friend with whom you have subsequently shared many meals and social occasions, a friend who was one of the very few invitees asked to speak at the robing ceremony when you were sworn in as Judge.

I’m disappointed, but not surprised. This is the man who, as a candidate for Marion County Prosecutor, ran an ad asserting that his opponent was unfit for the office because in his private practice he had represented a criminal defendant. (I know several Republican lawyers who had supported Massa until that ad ran, but based on its intellectual dishonesty, instead voted for Terry Curry.)

Massa evidently couldn’t see an appearance of impropriety if it bit him.

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The Legislative Process

Yesterday, the Indianapolis Star ran the second part of Matt Tully’s series on ethics at the Indiana General Assembly, or how a bill really becomes a law.

What struck me most was the irony–the amounts of money spent by vocal proponents of free enterprise and the market economy in pursuit of legislation privileging their positions in that market and/or protecting them against competition. Sunday liquor sales, gaming operations, banking rules, collective bargaining…for a state that celebrates capitalism, our lawmakers spend an inordinate amount of time picking winners and losers.

Want an example?

Also appearing in yesterday’s paper was a report on a hearing held by the House Utility Committee on the boondoggle known as the Rockport Coal-Gasification plant.

As readers of this blog will recall from previous posts, then-Governor Mitch Daniels entered into a thirty-year deal with Leucadia National Corporation, represented in Indiana by long-time Republican operative and Daniels friend, Mark Lubbers. (If the name sounds familiar, it’s because Mark Lubbers’ wife Teresa was appointed by Daniels to head up the state’s Commission on Higher Education.) The terms of the deal obligated the state to buy the company’s synthetic gas and resell it on the open market. Indiana ratepayers would get discounts or increases on their bills, depending upon whether the synthetic gas was more or less expensive than gas available on the open market. Seventeen percent of ratepayers’ bills would be tied to the Rockport plant’s rate.

State Senator Doug Eckerty, who opposes the deal, has sponsored a bill that would send the agreement back to the Indiana Utility Regulatory Commission for a full review.

In the committee hearing, Eckerty pointed out that gas prices have plummeted since the plant was first proposed, and that the manufacture of synthetic gas is no longer economically feasible. Coal gasification projects in other states have been abandoned. As he noted, if private sources will not finance these projects, why should taxpayers?

When natural gas prices were high, there was at least a thin justification for a deal that used Indiana ratepayers to guarantee the profits of a private company. Now even that pretense of a public purpose is gone. Mark Lubbers testified that gas prices are volatile, so the plant would protect ratepayers if and when the prices spiked again.

The problem is, whether gas prices rise again is irrelevant. The state should not be picking private-sector winners and losers. I hate to use a sports analogy, but government’s role in the economy is best compared to that of the umpire or referee in a game. When government abandons that role–when it suits up and plays with one of the teams–it is improper. It violates the rules, undermines the sport, and makes cynics of the onlookers.

It’s no different when the game is the free market.

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Champions of Free Enterprise…Not

The phrase that sums up so many of the sweetheart deals our elected officials seem to favor is “socialization of risk, privatization of profit.” It’s a phrase that perfectly describes the boondoggle that is the Rockport Coal Gasification project in Southern Indiana.

I first heard about Rockport when the plant was being built, from a relative whose company has a contract to work on the construction. He couldn’t believe the waste he encountered. As he noted, however, construction managers can afford to get sloppy when they know the burden of cost overruns will be borne by the rate-payers.

Then I had lunch with an acquaintance who’s spent 30+ years in the energy business. In the course of our conversation, he referred to the deal as “crony capitalism,” and explained how it began and how it will work: When gas prices were high, Leucadia National Corporation proposed building a plant in Rockport to turn coal into synthetic natural gas. The company would then enter into long-term, fixed-price contracts to sell that synthetic gas to utilities. This would provide a hedge against volatility and escalating prices–at the time, those rising prices were thought to be inevitable. Instead, thanks to fracking and other measures taken by the gas and oil companies, gas prices plunged, and the deal didn’t look so good. The utilities lost interest.

Mark Lubbers, a longtime confidante of Governor Daniels, is CEO of Leucadia. He evidently prevailed upon the Governor to enter into a deal that will protect Leucadia from the pesky risks of that free market Republicans claim to revere. The State stepped in to buy Rockport’s gas at a fixed price for 30 years; the state will then turn around and sell it to the utilities on the open market. “Profits” from the sales will be split between the company and the state. Losses–which are far, far more likely–will be eaten by the ratepayers. In other words, you and I assume the risks. Leucadia gets the rewards.

According to The Indianapolis Star, the deal will add $1.1 billion to Hoosier energy bills over eight years.

If the financial chutzpah this deal represents weren’t enough, environmental advocates are highlighting environmental and health risks attendant to the project. Yesterday, representatives of the Sierra Club, Citizens Action Coalition and Community Action of Greater Indianapolis called on Citizens Energy to defend its ratepayers and join Vectren in objecting to the deal. (Since Indiana’s Court of Appeals recently overturned the contract between Indiana and Leucadia, on grounds not relevant to the basics of this cozy deal, folks who object to going forward have another “window of opportunity” to derail it.)

The economic justification for high returns on investment, high salaries and big profits, is the element of risk. It’s a truism of genuine markets: No risk, no reward. When entrepreneurs invest in new enterprises, they put those investments at risk. If and when the new enterprise succeeds, they deserve to profit. This is called capitalism, and it has produced higher standards of living than any other economic system yet devised.

I don’t know what you call incestuous arrangements like Leucadia, or all the other cozy deals where well-connected businesses get to use taxpayers as hedges against market risk.

But it sure as hell isn’t capitalism.

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