CHARLESTON, W.Va. — Some West Virginia lawmakers wish they had a particular piece of information prior to last week’s deal to give FirstEnergy Solutions enough financial breathing room to keep the Pleasants Power Station alive.
During a quick special session, lawmakers in both houses voted overwhelmingly to eliminate the financially-struggling power station’s $12.5 million annual business and occupation tax obligation in hopes of bolstering its standing in an upcoming power capacity auction.
Lawmakers were moved by the power plant’s perilous financial situation, the time crunch of preparing for the auction, the 160 jobs and other taxes produced by the plant and the hook that this plant is the only one in West Virginia affected by that tax.
What legislators did not know was that a company owned by Gov. Jim Justice and his family is in an active federal lawsuit with FirstEnergy Solutions, which claims it is owed a $3 million final payout on a coal deal.
The lawsuit was first described in a story that ran in West Virginia’s Ogden newspapers after the bill had already passed.
There is no evidence that the federal lawsuit has anything to do with the tax relief approved by West Virginia government officials this week.
FirstEnergy Solutions, representatives of the Justice companies and officials in the Governor’s Office all say there is absolutely no connection between the two matters.
But some state lawmakers, including several in leadership positions, wish the matter had been disclosed up front.
“Absolutely. Should have been disclosed. Should have been information made available to us,” said Senate President Mitch Carmichael, R-Jackson.
He said the merits of the bill were enough for solid support. But Carmichael said he views the lawsuit from the standpoint of lawmakers who have to stand and describe potential conflicts before casting votes.
“We’re very attuned to making sure there is not a conflict of interest when we cast a vote,” Carmichael said. “The chief executive should have absolutely disclosed the fact that he had an ongoing legal dispute that involved $3 million.”
Senate Finance Chairman Craig Blair said he had questions about the bill and was put at ease prior to a vote on the Senate floor. He was persuaded that time was of the essence because of the power capacity auction in August.
“What we were doing was better than not doing anything at all,” Blair, R-Berkeley, said in a telephone interview.
But, he said, “Then I find out about the governor. The governor should have told us what was going on. I have no idea behind the scenes whether that had a bearing. I don’t believe it did.”
Blair added, “I don’t like being out in the dark and dealing with questions like this now because the governor wasn’t transparent.”
House Minority Leader Tim Miley, D-Harrison, also voted for the bill. He said it puts the power plant on equal footing with other plants that aren’t affected by B&O tax. He also hopes the change in the law could help natural gas-powered plants to be built in the energy-rich region he represents.
“My vote was based on what I thought the overriding policy ought to be,” he said. “And that is that non-regulated entities in the state should all be treated the same.”
But Miley wished he had known about the situation in court between FirstEnergy Solutions and the governor’s company.
“When you are in public office you bend over backwards to make sure your actions are beyond scrutiny and that your motives are never questioned. I think the governor should have avoided this scrutiny by disclosing the litigation between his company and FirstEnergy Solutions,” Miley said.
“When you don’t disclose that information, people are left to wonder whether there was some ulterior motive behind the governor pushing this legislation so hard.”
Staff who dealt with the bill were not aware of the court situation, said Brian Abraham, general counsel for the Governor’s Office.
Justice has not placed the 90-some companies in his family’s ownership in a blind trust. Instead, the governor says he has passed responsibility for the coal and agriculture operations to his son, Jay, and oversight of The Greenbrier resort to his daughter, Jill.
So Abraham said he doubted the governor was aware himself about the lawsuit involving one of those businesses, Bluestone Energy Sales.
“The governor never mentioned it or brought up in any of our conversations. I’d be shocked if he was aware of the case,” Abraham said on the telephone. “He no longer engages in any of the operations of these companies.
“So to say we should have told the Legislature I don’t think that has anything to do with anyone’s jobs at all with the jobs or the tax savings anyone was able to keep.”
Abraham underscored that there was no connection between the court case and the power plant legislation.
“The inference that somehow the governor did some quid pro quo is frankly ridiculous,” Abraham said.
“That never, ever came up. The outcome of the bill, even if it passed, there would be no reason for a company in bankruptcy to somehow just drop a case. There was no deal struck of any kind whatsoever.”
Other aspects of the power plant story should be emphasized above questions about the lawsuit, said Richard Cullen Jr., a spokesman for the James C. Justice Companies who works for PLUS Communications in Washington, D.C.
The questions posed to Cullen were:
Given Jim Justice’s role as the head of his family businesses and also as the chief of the executive branch, is there any reason to draw a connection between the court case and the legislation?
Should lawmakers have received a heads up?
Cullen stated in response, “The governor literally pulled all-nighters and brought people together within a few days to save the Pleasants Power Station, protect hundreds of good-paying coal jobs, and ensure the entire state continues to benefit from the hundreds of millions of dollars in economic activity it produces.
“The bill passed with huge bipartisan margins in chambers. The fact that the governor is getting anything other than praise for using his unique abilities to save the plant is, frankly, sad. Your readers deserve better.”
FirstEnergy Solutions filed an adversarial proceeding against Bluestone Energy Sales Corp. last December. It’s an outgrowth of the company’s Chapter 11 bankruptcy case in the U.S. Bankruptcy Court of the Northern District of Ohio.
FirstEnergy Solutions claims Bluestone failed to make a final payment of $3,082,397.60 on a coal supply agreement.
Bluestone Energy denies the allegations and asked the bankruptcy court to dismiss key parts of the claim. The lawyers for Bluestone contend FirstEnergy can’t prove it is entitled to the compensation.
Beyond that, there is no relation between the court case and the West Virginia power plant legislation, said lawyer Richard Getty, whose firm represents Bluestone.
“Absolutely no connection at all — if you read our filings you would know that we owe FirstEnergy nothing — we will be filing a Summary Judgment Motion to dismiss their claim after discovery is completed,” Getty wrote in an email.
On May 13, the federal bankruptcy judge overseeing the case filed an order denying a motion to dismiss. The back-and-forth between the parties was still going on through late June.
FirstEnergy Solutions agrees there is no connection between the court case and the legislation, said Brenda Adrian, a spokeswoman for the company.
“At least from the FES side it is pretty easy, and that is they’re really not connected,” she said. “The lawsuit is sort of like a collection case in the bankruptcy court, and that has nothing to do with the tax relief that was passed.”
At the West Virginia Capitol last week, representatives of FirstEnergy Solutions were able to persuade West Virginia lawmakers that time was of the essence to give the plant a chance to survive.
The Governor’s Office put out a news release about 6 p.m. last Friday with the first description of the bill aimed at saving the power station.
In the release, Justice said officials with the plant came to him just the prior week to say they needed help to stay open. The governor said he checked with state revenue officials who crunched the numbers for tax relief for the plant.
“This bill is so incredibly important because we’re talking about saving people’s jobs – good coal jobs – and saving entire counties that would be devastated if this plant were to close for good,” Justice stated.
“This is an emergency and I’m calling on the House and Senate to work along with me to act on this as quickly as possible. We have a chance to save whole communities and we need to take it.”
FirstEnergy Solutions officials and the president of the Pleasants County Commission described the power plant’s importance as a source of jobs that may pay up to $80,000 a year counting overtime. They described the other taxes paid by the plant and its workers, as well as the West Virginia coal used by the plant.
By midday Tuesday, the bill overwhelmingly passed both houses of the Legislature.
“It would have been nice to know more about the governor’s connection at the outset,” said Senator Corey Palumbo, D-Kanawha, who serves on the Senate Finance Committee. “I doubt it would have changed the end result though.”
The House of Delegates talked about the bill for more than an hour in Finance Committee before discussing it for another hour in a floor session.
House Majority Leader Amy Summers, R-Taylor, said no one in the Legislature or on the governor’s staff was aware of the lawsuit. There were plenty of other reasons to vote in favor of the bill, Summers said.
“I made my decision based on the pleadings of the Pleasant County Commission, the lost job potential at the plant, and the understanding that FES is the only merchant plant in WV that pays this tax,” she said. “The urgency of the decision was based on the August date of the capacity auction.”
House Finance Chairman Eric Householder, R-Berkeley, said the reasons to vote for the bill were overwhelming. Those include an estimated $400 million in economic activity through the power plant, plus the jobs. Householder also pointed to 3.5 million tons of West Virginia coal that is being mined in Ohio County for electrical generation at the plant.
“I do not believe a connection exists between the court case and the legislation because the Pleasants Power Plant must win the capacity auction in August in order to stay in business,” Householder said.
Delegate Mick Bates, the ranking Democrat on the Finance Committee, is not so convinced. He voted for the bill but wishes he had known about the lawsuit.
“The whole thing smells ripe,” said Bates, D-Raleigh.
“It is a sad day when you have to start your questioning of anyone that comes before the West Virginia Legislature with a bill or issue, “Have you any ongoing financial disputes or legal actions pending with our governor or one of his mismanaged businesses?”
Bates noted that under normal conditions, there would have been a full committee process plus three separate days of consideration on each chamber floor.
“I would hope that we would have a full and complete explanation from the company and Governor Justice before he signs the legislation,” Bates said.
Delegate Isaac Sponaugle, D-Pendleton, asked a series of questions about the FirstEnergy Solutions bankruptcy during last week’s House Finance Committee meeting. The questions were aimed at determining the power plant’s financial condition and odds of survival.
“I can only speak for myself, but I was leaning towards a no vote with this bill prior to the House Finance Committee,” Sponaugle said. “I felt like a lot of my questions were answered to the relevant bankruptcy issues along with the testimony by the county commissioner from Pleasants County that changed my mind on the matter.”
Part of that discussion, Sponaugle said, should have been the lawsuit in the same bankruptcy case. Sponaugle wants a greater examination of what happened.
“There is absolutely no excuse for this not to be disclosed prior to consideration of the bill,” he said.