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Mitch Daniels's Presidential Prospects Could Be Dimmed by Power Plant Scandal

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2010-11-18-Edwardsportplant.jpg

Under construction: Duke Energy's Edwardsport plant. Photo by author.

Anyone who thinks Indiana's Republican Governor Mitch Daniels should run for president hasn't paid much attention to the dark cloud hanging over Duke Energy's new coal gasification plant -- a massive industrial complex rising up at the edge of the tiny town of Edwardsport, Indiana.

Three highly placed men have lost their jobs in recent weeks in a scandal over influence peddling at the Indiana Utility Regulatory Commission, while a citizens' organization is accusing Duke of misleading the commission and mismanaging the project.

The ethics scandal broke Sept. 21 when the Citizens Action Coalition of Indiana, a 40,000-member group that has attacked this power project with the fury of a grizzly, put out a press release noting a lawyer's move from a job at the IURC to a job at Duke Energy without waiting the year required by Indiana government's ethics code.

The CAC was right to be concerned. The lawyer, Scott Storms, had had a hand in decisions involving the Duke plant at the very time he was negotiating for a job at Duke Energy. Duke Energy subsequently fired him, as well as the man who hired him, Mike Reed, who had himself held an executive director position at the IURC while decisions on Duke were being made. Acting to contain the damage, Gov. Daniels removed David Lott Hardy from his position as chair of the IURC.

Hardy, Storms, and Reed were all employed at the IURC when it first approved a sweetheart deal with Duke in 2007. That deal has awarded Duke steadily increasing amounts of ratepayer money as plant construction costs have spiraled upward from the original estimate approved by the IURC -- $1.985 billion -- to a current predicted cap of nearly $3 billion.

The CAC's Kerwin Olson has pointed out to the IURC that if these rate increases were property tax increases, voters would have a chance to vote in a public referendum. If they were general tax increases, they would have to be approved by the General Assembly and the Governor.

"Yet with respect to this decision to pass on a total of nearly $3 billion to the ratepayers, only one opportunity has been afforded the public to be heard"--and that was before the IURC first approved the plant in 2007. In testimony Olson recently submitted to the IURC, he asked the IURC to hold two public hearings in Duke's Indiana territory.

In addition, given five ongoing investigations into the ethics scandal, Olson said that the IURC should suspend "all orders and hearings" on additional relief for Duke until the results of the investigations by the state, Duke Energy, and the U.S. Department of Justice are known.

Olson submitted this testimony during an IURC move toward what could be a definitive IURC go-ahead for Duke Energy to finish the plant at ratepayers' expense. The agreement under IURC consideration would cap the project's costs to be covered by ratepayers at $2.975 billion.

The CAC of Indiana -- an advocate for ratepayers, environmental sanity, and health rights -- has argued that if more electricity is needed (and CAC questions that), ratepayer money ought to be spent instead on increasing efficiency and developing wind and solar power. To the CAC, this 618-megawatt integrated gasification combined cycle plant, nearly four times as big as the old coal plant it replaces, is a greenwashed boondoggle of massive proportions -- not needed by the Hoosiers who are paying for it, not economically justifiable, and unlikely to fulfill the "clean coal" promises made on its behalf.

Anyone who doubts the force of this argument should read the testimony that consultant David A. Schlissel submitted to the IURC on behalf of the CAC, the Sierra Club, and two smaller environmental groups who oppose the tentative agreement that would cap the project at a sum about a billion dollars higher than the estimate three years ago.

According to Schlissel, Duke "has grossly mismanaged its resource planning for the Edwardsport project and has failed to fully disclose to the IURC the risks and the significance of higher construction costs." He recommended an IURC investigation to determine whether Duke had misled the commission. Olson, for his part, told me, "Duke has concealed evidence, grossly mismanaged the project, possibly committed fraud, misled the public and been less than forthcoming before the commission."

In a talk to a couple dozen citizens gathered at the library in Bloomington, about an hour up the road from Edwardsport, Olson also laid out the argument that a selling point which Duke used to get the plant approved in the first place was always just that -- a selling point.

Before the plant was approved, Duke held out the promise of using underground storage to sequester the carbon dioxide the plant produces. It turns out that the terrain at Edwardsport is the wrong terrain for carbon sequestration, even if carbon sequestration were a good idea -- and there are reasons to doubt that. The company might pipe some of the CO2 to another site, but Olson says the plant as it is being built now could not capture more than 18 percent of the carbon dioxide it produces in any case. "We believe they never had any intent to capture any of the CO2," he says.

Supporters of Mitch Daniels for president would do well to be worried by the storm swirling around the centerpiece of his drive to expand the coal-based sector of Indiana's economy. While he might hope to contain the damage with investigations he has ordered the Indiana inspector general and the IURC to carry out, the federal investigation requested by the CAC would bring a more rigorous outside perspective to bear.

Meanwhile, despite the fact that plant is already half built, the CAC is saying that the best thing for Indiana ratepayers would be for the IURC to stop construction altogether. I'd like that fine, not only because I'm a ratepayer but also because I've watched the destruction coal mining does, in the Appalachian mountains where I have family roots and also in southwest Indiana. Half an hour's drive north of the Edwardsport plant, Peabody Energy has ripped up the land in what is touted to become the biggest surface mine east of the Mississippi -- Bear Run. I drove around it one day and thought I'd wandered into a mine-ravaged stretch of Wyoming.

There's a precedent in Indiana for stopping a power plant in mid-construction: Marble Hill Nuclear Power Station was abandoned in 1984 because of cost overruns when it was even closer to completion than the Edwardsport plant is. The Citizens Action Coalition played a role in bringing that plant down. Indiana environmentalists and ratepayers have good reason to hope that, in this case, history will repeat itself.