National Energy Technology Laboratory, Pittsburgh, PA
“To have some jokers take that money and put it in their pocket and to have them be totally incompetent, shame on them.” — Former Montana Gov. Brian Schweitzer
by Rone Tempest
— June 10, 2014
Just when things looked bleakest for his Two Elk power plant project, Mike Ruffatto got an unexpected helping hand from President Obama’s American Recovery and Reinvestment Act, the administration’s $787-billion stimulus program to create jobs and revive the moribund economy.
In the first half of 2009, the problems facing Ruffatto and Two Elk had looked overwhelming.
The project had nearly tripled in cost, from $330 million to over $900 million, in the nearly 14 years since it was first proposed.
Relations had deteriorated with the major Powder River Basin coal companies that were supposed to supply the “waste coal” to burn in the Two Elk plant. And there was no sign anywhere of a power supply transmission agreement, essential to Ruffatto’s plans.
The tax-exempt industrial development bonds that had been one of Ruffatto’s main selling points to investors were being audited by the Internal Revenue Service to see if they still complied with federal laws, which, it turned out, they didn’t.
And if the IRS audit were not bad enough, the bond market itself had collapsed in the 2008 economic crisis. NAPG had been forced to buy back the $445 million bonds from the bankers who held them, and place them in escrow.
Mike Ruffatto
“Obviously, the entire municipal bond market totally fell apart,” Ruffatto recounted in a September 2011 interview with WyoFile. “We bought them and are holding them on our balance sheet to be used later for the project.”
Meanwhile, Ruffatto had some unanticipated expenses in his California operations. In 2008, he had to finance half of a $14 million refit of the Rocklin biomass plant he co-owned with Constellation Energy.
Faced with all these financial challenges, Ruffatto in the summer of 2009 put his California luxury beach home in Corona del Mar on the market and shortly after that put his four prized California power plants — in Bakersfield, Fresno and Rocklin — up for sale.
According to state real estate records, Ruffatto and his first wife Joan in 2004 had bought the Bayside Place house — a stunning, two-story, four-bedroom, four-bathroom, Mediterranean-style structure with its own private pier and giant boat slip for their motor yacht — for $7.8 million. Joan died in 2007 from complications of lupus. In July 2009, according to the Orange County Business Journal, Ruffatto sold the house to Los Angeles Angels owner Arte Moreno for $12.1 million.
Mike Ruffatto bought this waterfront home at 105 Bayside Place, Corona del Mar, California, in 2004 for $7.8 million.
In an even more significant effort to raise capital, Ruffatto then put his 50 percent share of the four California power plants — the plants that had been the core of his North American Power Group since he acquired them out of bankruptcy court in 1992 — up for sale for an undisclosed price. The sale was to be handled by New Harbor, a boutique New York investment bank.
According to a former business associate, Ruffatto received at least one attractive offer for the four power plants.
But thanks to the 2009 American Recovery and Reinvestment Act, Ruffatto did not have to sell.
“He left money on the table,” said the former business associate, who spoke with WyoFile on the condition that he not be named in the article.
In early September 2009, Ruffatto was notified by the federal Department of Energy that North American Power Group had been selected as one of 10 recipients of stimulus grants to study “promising geologic formations for CO2 storage.”
Ruffatto’s successful proposal to the DOE National Energy & Technology Laboratory (NETL) was to study the carbon sequestration potential of his 880-acre Two Elk site. The Powder River Basin, along with the Rock Springs Uplift in southwest Wyoming, had long been considered possible sites for CO2 storage.
NAPG got a $4.9 million grant from the DOE in 2009 and another $5 million grant for the same project in 2010.
The stimulus program was not designed to rescue private companies facing financial difficulties. Its purpose was to stimulate new business and create new jobs.
Overnight, however, the DOE grants allowed Ruffatto to meet his existing company payroll and possibly even enhance his Wyoming property, while waiting to resurrect his dream of an energy empire in the Wyoming high plains south of Gillette.
This is what the Two Elk location looked like after more than a decade of supposed power plant construction activity. Yet Mike Ruffatto was able to win $10 million in a DOE stimulus program to conduct a carbon sequestration characterization study. (click to enlarge)
But NAPG was not the only applicant for stimulus funds to study underground carbon storage in the Powder River Basin. In fact, a number of scientists and engineers interviewed for this story did not think NAPG was even the best candidate.
“The shame of it was that there was another, worthy project up on the Crow reservation in southern Montana that got edged out by NAPG for the stimulus grant,” said an engineer familiar with both projects.
Montana State University submitted an application on behalf of the Crow Nation to study carbon storage on the tribe’s reservation, which straddles the Powder River Basin in southeastern Montana.
The Montana State team, directed by Dr. Lee Spangler, a physical chemist who heads the university’s Big Sky Carbon Sequestration Partnership, assembled an impressive team of participants in the project — called “Many Stars Site Characterization Study” — including the Los Alamos National Laboratory, Lawrence Livermore National Laboratory, and sequestration industry leader Schlumberger Carbon Services.
The Many Stars proposal predicted that the stimulus grant would create jobs for nearly 100 people on the reservation during the seismic and drilling phases.
Linked to the Crow Tribe’s proposed $7 billion Many Stars coal-to-liquids effort, the sequestration grant was viewed by tribal leaders, including then-chairman Cedric Black Eagle, as a step toward lifting the reservation out of its wrenching poverty while simultaneously protecting the environment.
“We were very cognizant of the effects of CO2. We were concerned and we wanted to be good stewards of the earth,” said Black Eagle. “When they told us that we didn’t get it we were disappointed, but we assumed our grant proposal wasn’t written well enough.”
Former Crow tribal chairman Cedric Black Eagle was perplexed by the Many Stars rejection in favor of Two Elk.
Why NAPG’s Two Elk proposal was chosen over the Crow Nation project is not clear. Federal agencies generally do not release details of decision-making processes involving competing proposals. Since January 2012, when the DOE suspended the Two Elk carbon project for accounting irregularities, all questions about the project have been referred to the U.S. Attorney office in Pittsburgh, Pennsylvania.
DOE denied WyoFile’s June 2013 Freedom of Information Act request because of what the Department stated are ongoing, concurrent investigations by the DOE Inspector General and the Department of Justice.
There seems to be no obvious political explanation for the award to Ruffatto, nor evidence of his having any inside track to the Obama administration. The Montana State Many Stars effort was part of a package that had the full and vocal support of Montana’s Gov. Brian Schweitzer, a prominent Democrat.
“The beauty of Many Stars,” recalled Schweitzer, now out of office and chairman of a Montana mining company, “is that you were in a place that has 50 percent unemployment and the youngest population in Montana, and it’s rural. ‘Needy’ is one way of putting it. But they also have 3 billion tons of coal on the Crow reservation. All the numbers are aligned and, frankly, shame on anybody who took the money and didn’t move the ball in terms of carbon sequestration.”
Former Montana governor Brian Schweitzer was a leading proponent of the Many Stars project.
Judging only by contributions to political candidates, Ruffatto does not appear strongly affiliated with either major party, and certainly not with Obama. Over the years, he has given money to candidates and committees for both parties, Democrat and Republican. Before the 2008 presidential primary campaign, Mike and Joan Ruffatto each gave $2,300 to Obama’s strongest opponent, Hillary Clinton.
Similarly, although his son worked for North American Power Group, no record has surfaced of any effort by Wyoming U.S. Sen. Mike Enzi (R) to influence the awards of carbon sequestration stimulus grants, although the senator did write letters supporting other, unrelated stimulus proposals in Wyoming.
Another mystery surrounding the choice of North American is the unusual decision by DOE to extend by one week the application deadline for the stimulus grant — a decision that appears to have primarily benefited one applicant, Ruffatto’s North American Power Group.
Without the extension, said two men who worked on the proposal, North American’s last-minute application likely would not have been completed in time.
John Talbott, who was then managing director and project manager for the Big Sky Carbon Sequestration Partnership, through his position at Montana State was involved in both the Many Stars and North American Power Group proposals. The Many Stars bid, Talbott said, was completed well ahead of the deadline.
“But it was late in the game when North American contacted us, relatively close to the deadline,” Talbott recalled in an interview with WyoFile. “I can remember doing a lot of work on the weekend trying to get that one turned around and then it was subsequently extended which gave us more time to work on it.”
Former Montana State University carbon specialist John Talbott worked on both Two Elk and Many Stars.
A drilling engineer who also worked on the hurried North American bid agreed.
“It literally takes months and months to do a proper proposal like this,” said the engineer, whose company was involved in several similar projects. “I was contacted by Mike (Ruffatto) less than a week before the application was due. He kept calling me over the weekend for more cost estimates. Without the extension they wouldn’t have made it in time.”
“After all of the applications were finally in,” the engineer continued, “we did a kind of handicapping around the office about the possibilities. I remember saying ‘This one doesn’t have a chance in hell.’”
John Talbott, who is currently at Oregon State University in Corvallis, said “I have to admit I was surprised when Two Elk (NAPG) got the grant. Many Stars seemed like a better proposal to us, primarily because we had time to work on it and the Two Elk project was a kind of ‘hurry up’ thing. Like I said, we cranked that thing out in a matter of a week or less.”
Responding to WyoFile requests for more information about the extraordinary deadline extension that allowed Mike Ruffatto and North American Power Group into the competition, National Energy Technology Laboratory chief counsel Paul Detwiler said the laboratory could find no records explaining why the extension was granted nor who requested it. Such extensions are considered very rare and and are usually well documented.
In addition to its last-minute nature, NAPG’s proposal was in several other ways a conspicuous anomaly among the 10 projects that received the carbon sequestration stimulus grants. The rejected Montana State-Crow Nation proposal, in fact, was much more like the other successful candidates.
Seven of the other recipients were universities — including the University of Wyoming — with project leadership, almost all scientists or engineers, already working in the field of carbon sequestration. The two other private companies that won stimulus grants to look at CO2 storage, Sandia Technologies in Houston and Geomechanics Technologies in Monrovia, California, were scientific and engineering consulting firms that already had broad experience in sequestration technology.
Unlike Two Elk, UW successfully drilled the deep site characterization well that was the centerpiece of the federal stimulus grant (courtesy University of Wyoming — click to enlarge)
In all of the other cases, the stimulus grant manager, called the “chief investigator,” was a scientist or an engineer with established credentials in the field. In the case of the “Two Elk Energy Park Industrial Carbon Capture and Storage Applications Project,” the chief investigator was Mike Ruffatto, a Stanford political science major and a graduate of the University of South Carolina law school.
Moreover, all of the other projects specified the new jobs they would add to the economy, almost all of them scientific or technical positions. The University of Utah, for example, listed some 11 new jobs created by its sequestration project, including positions as “research scientist,” “geologist,” “geological technician,” “physical science researcher,” and “drilling manager.”
Geomechanics Technologies reported that it added “staff geologist and research engineer” positions to study offshore sequestration potential not far from Los Angeles.
The University of Wyoming reported hiring “four research scientist associates” for its successful proposal to study sequestration potential in the Rock Springs Uplift. The UW project’s chief investigator was Prof. Ronald C. Surdam, the former state geologist and a nationally recognized expert on carbon sequestration geology.
Surdam, who at the time received a $210,000 annual salary from the University of Wyoming, took no compensation from the stimulus grant.
Renowned geologist Ronald Surdam led the successful UW project while drawing no salary from the federal stimulus grant
In contrast, the Two Elk sequestration project added no new jobs. Instead, Ruffatto paid himself and five employees from his own company to do stimulus grant work, although much of that work was never clearly defined.
Ruffatto, at $214.30 an hour, was the most highly paid. Vice President Brad Enzi, who majored in communications at the University of Wyoming, earned $80.29 an hour. Matt Munford, a former UW strength and conditioning coach, was paid $57.69 an hour.
By putting himself and his existing staff on the stimulus grant payroll, Ruffatto added a layer to the Two Elk project that did not exist in any of the other grants.
Pay vouchers obtained by WyoFile under a 2011 Freedom of Information Act request showed that from September 16, 2009, through July 31, 2011, Ruffatto was paid $955,343.29; Enzi $128,394.73; and Munford $44,050.32, all from public stimulus grant funds.
The stimulus money, in fact, accounted for a significant amount of the total compensation that Enzi, Munford and other employees received from 2010 until early 2012, when the federal grant was suspended for accounting irregularities. In separate interviews with WyoFile both Enzi and Munford said their regular salaries remained unchanged despite the additional stimulus grant work.
“I received a paycheck from North American Power every two weeks,” said Munford, who is no longer with the company and now works as a real estate salesman in Cheyenne. “My paycheck was the same amount every time, except when the health insurance switched around and that is what I received from North American. Now anything after that or anything further or deeper than that Mike Ruffatto’s going to have to provide that information to you.
“Mike Ruffatto is ultimately accountable,” said Munford, who was in charge of finding transmission for the Two Elk power plant. “He’s like a head coach.”
Brad Enzi, vice president of North American Power Group is a 1997 University of Wyoming journalism-communications graduate
In a September 2013 divorce filing in Laramie County Court, Brad Enzi reported his annual income as $146,520. Federal pay vouchers show that before the stimulus grant was suspended, most of this amount was paid with taxpayer funds. In fact, during the life of the federal grant, Ruffatto used stimulus funds to pay most of the regular salaries of Enzi and several other employees at North American Power Group.
However, these payments represent only part of the full amount of salaries and benefits paid to NAPG employees from public funds. The Freedom of Information Act materials released to WyoFile did not show the salaries and benefits paid in the second half of the year, from July 31, 2011, until January 2012, when DOE suspended the grant.
In a September 20, 2011, interview with WyoFile, Ruffatto described his work on the stimulus grant as “labor intensive” and said that to do the work he took a pay cut.
“It (his stimulus grant income) was deeply discounted from my salary to arrive at what we thought would be fair for the DOE and approved by them,” Ruffatto said. In one month alone — October 2010 — he charged the federal government $76,369.52 for his efforts, claiming that he had put 76 hours a week into the project.
In interviews with WyoFile, both Brad Enzi and Matt Munford said they were unsure how the pay they received from the stimulus grant was calculated, since they continued to get what had been their regular NAPG salary.
Brad Enzi, who has played in the band Bell Diablos, earned $80.29 per hour while working on the DOE stimulus project. (click to enlarge)
“All the accounting is handled out of Denver, I just don’t know,” said Enzi.
Both Enzi and Munford were equally vague about what, exactly, they did for the stimulus project, and what percentage of time they spent on the federal payroll compared to their other, primary duties working on the Two Elk power plant project.
“I don’t mean to be obtuse, but I have no idea how the bills back out,” said Enzi. “I just turn in my time sheet to Denver.”
“Ruffatto had brought in some supposedly big guns from different places,” said Munford. “We spent a lot of time wearing a lot of different hats, but for whatever reason I don’t know. For me to speculate on any of that would be out of my context. It’s not my place.”
Asked to look at the Two Elk carbon project hours and rates, engineers and managers from other, similar, stimulus grants were puzzled about how it would have been possible to log the number of hours reported by Ruffatto and his team, when the true work of the project, the actual science and research, were out of their domain.
“It’s not about the pay rate,” said one experienced engineer after going over Ruffatto’s NAPG pay vouchers. “It’s the number of hours. That’s the key. What was he doing during those hours?”
In interviews, Ruffatto is defensive about his qualifications to direct and manage what was essentially a scientific and engineering project.
“I don’t have the background in the sense of formal training,” Ruffatto told WyoFile. “But I was involved in oil and gas operations for a number of years in the 1970s, and on the exploration side, too.”
Nowhere is it clear what Ruffatto was doing. In a September 2010 interview with Colorado journalist Allen Best, Ruffatto compared his company’s carbon sequestration research to mass production of ships in World War II. To get the stimulus grant, Ruffatto had proposed drilling a deep characterization well; but now, he claimed to be working on a design for … something. Something grand, grandiose, of worldwide significance.
“You need the equivalent of a Henry Kaiser Victory Ship,” Ruffatto said. “That is what we are trying to do in our project, not just showing how carbon capture works but designing something that can be easily replicated, not just in the United States, but around the world.”
Mike Ruffatto compared carbon sequestration research to the WWII victory ships program. (click to enlarge)
In his stimulus grant proposal to the Department of Energy, Ruffatto said he had contracted with two universities and several leading engineering firms to conduct the geological research and drilling.
His alma mater, Stanford University, Ruffatto said would receive $625,943 to analyze existing data from the area around the Two Elk site, and also interpret the results of a 15,000-foot “deep characterization well” that would be the centerpiece of the stimulus project.
Montana State University, which lost out for the same stimulus grant in its bid on behalf of the Crow Nation, would be paid $255,379 to do some of the same kind of research.
International energy giant Schlumberger Technology Corp., Ruffatto reported, “will assume responsibility for the drilling contractor and overall completion of the well.” Ruffatto said that Petrotek Engineering Corp., a leading Colorado-based underground injection consulting firm, would handle “injection control and permitting” for the project.
On paper, at least, it looked like Ruffatto had lined up an impressive team.
By the time the DOE pulled the plug on the Two Elk stimulus grant in January 2012, however, it was clear that none of these sub-contractor relationships had worked out as Ruffatto had advertised, mainly because the “deep characterization well,” on which the whole project was based, was never drilled.
Without a deep well to study the underground geology, said Stanford’s Dr. Sally Benson, an internationally recognized ground water hydrologist, the university ran out of things to do. Stanford terminated its participation in 2011 after receiving only $99,917.03 — about 15 percent — of its sub-contract with NAPG.
“I’ve thought a lot about this and I simply do not know what motivated the project to turn out like it did,” Benson told WyoFile. “It would be unfair to speculate.”
Montana State’s participation ended in September 2011, after it received $124.913.08, less than half of its NAPG sub-contract. “By that time,” said Talbott, then at Montana State, “everyone decided that this was not what we thought it was going to be so let’s cut and run.”
Petrotek engineer Hal Demuth said his company “did some work on the project but, in the end, the underground injection was never permitted by the Wyoming Department of Environmental Quality.”
A deep characterization well — the centerpiece of the DOE stimulus project — was never drilled at the Two Elk site in northeast Wyoming (click to enlarge)
Schlumberger’s chief carbon sequestration engineer, meanwhile, said his company’s relationship with NAPG never got past the informal stage.
“There were initial discussions regarding Schlumberger supervising the drilling, but negotiations never started,” said Wayne Rowe, Western U.S. Program Manager for Schlumberger Carbon Services. “And no contract to do so was ever offered or signed.”
Other than a recent statement that “Two Elk is a very complex project with significant challenges for science, technology, finance and oversight,” Ruffatto has never publicly explained why the deep well was never drilled in the Two Elk stimulus project.
The two most similar stimulus projects in the Rocky Mountain region, one by the University of Wyoming near Rock Springs and another by the University of Utah near Craig, Colorado, both were successful in drilling their deep characterization wells, on time and on budget.
As early as March 2011, subcontractors involved with the Two Elk carbon project were already becoming concerned about the lack of progress, particularly Ruffatto’s failure to sign contracts for some preliminary procedures, such as drilling a series of shallow “monitor wells” to test seismic levels at the site.
“We kept thinking, why can’t he get a simple contract to drill a well?” said one of the participants in a March 24 meeting with Ruffatto at his Greenwood Village, Colorado, headquarters. “Ruffatto was supposed to get a contract, but it went on forever. No contract. No contract. No contract.”
One of those attending the March 2011 meeting was Scott Heimer, co-owner of Water System Drilling in Gillette, the company that was supposed to drill the monitor wells.
“We were in a way fancy conference room. Schlumberger, myself, Petrotek, Tom Dea (of TZA Water Engineers, Lakewood, Colorado), Brad Enzi and Matt Munford, all talking about the plan to move forward and the depth they wanted me to go,” said Heimer. “They wanted me to put up a bond. I said I’d have to have a signed contract, but I never got one. After that, I kind of pulled the plug on Two Elk. I figured I had already put in a couple of hundred hours on that project, and never got a dime.”
It is unclear when the DOE, and its National Energy Technology Laboratory that was supposedly overseeing the stimulus grants, became alarmed about accounting irregularities and lack of progress on the Two Elk stimulus project.
According to a March 2013 report by the DOE Inspector General’s office, the agency was already concerned about the lack of detailed documentation from NAPG for the $4.9 million grant the company had received in September 2009, but despite this, the agency gave another $5 million to the company a year later, in September 2010.
The WyoFile story detailing the large salaries paid to Ruffatto, Enzi, and other NAPG employees also appeared in September 2011.
For that story, National Energy Technology Laboratory chief counsel R. Paul Detwiler told WyoFile that the Two Elk project had been reviewed and audited for 2009 and 2010, and that “no issues were identified during the audits.”
Deputy DOE Inspector General Rickey Hass audited the suspended Two Elk stimulus grant
In his March 2013 report, the DOE inspector general did not identify NAPG by name, but the facts of the case described — including dates, award percentages, amounts of money, suspension by the DOE — perfectly match NAPG and no other project. Rickey Hass, the DOE deputy inspector general for audits and inspections, declined to comment. However, a spokesman for his office said “we stand by our report.”
The IG report said that after the company received the additional $5 million in 2010, “the recipient did not respond to numerous requests from program officials for documentation or questions related to the scope of the work.”
The inspector general reported that “officials suspended the award in January 2012 because the project was behind schedule, and the recipient failed to meet key deliverables.” The inspector general’s office said it continues to question approximately “$3.7 million in costs reimbursed by the Department.”
Following the DOE’s suspension of the Two Elk stimulus grant in 2012, all questions about the project have been referred to Assistant U.S. Attorney Paul Skirtich in Pittsburgh, which has jurisdiction over the National Energy Technology Laboratory. Skirtich is an expert on prosecutions of fraud under federal False Claims Act. In September 2012, for example, he spoke before the Greater Pittsburgh Chapter of the Association of Certified Fraud Inspectors on the subject, “Proving Fraud and Recovering Assets.”
Citing ongoing concurrent investigations by his office and the DOE inspector general, Skirtich has declined to comment on the case. In his most recent statement to WyoFile, Ruffatto said “North American Power Group is cooperating with the U.S. government in determining where problems may have occurred and the best course to follow going forward.”
At some point, however, the focus of the federal probe into the Two Elk stimulus project shifted from what Mike Ruffatto did not spend money doing — namely, drilling the deep characterization well that was to be the focus of the research — to what he actually billed the government for reimbursement from public funds.
One invoice in particular stands out.
According to Ruffatto’s last quarterly report on the project, he billed the government — and received — $2,791,103 to pay one of his subsidiaries, North American Land & Livestock for “heavy equipment mobilization; drilling pad and mud pit construction; drilling water procurement and layout area preparation.” North American Land & Livestock did not do the work, but hired it out.
According to engineers on other similar sequestration projects in Wyoming and Colorado, the kind of work described is a routine first stage before the actual drilling of a deep well.
The only problem, said one engineer involved in the University of Utah sequestration grant in Craig, Colorado, is that such work should never cost more than $150,000. “And that’s if you have to build a road into the site,” he added. “You could have drilled a deep well for that amount of money.”
The Two Elk project did not have to build a road into the site. That had already been done in 2005 as part of the old Two Elk power plant project.
Meanwhile, the owner of the Gillette company that performed the site preparation work described in Ruffatto’s voucher for North American Land & Livestock, told WyoFile that he was paid much less than $2.7 million.
Looking through documents in his office, Tyler Miller, owner of Earth Work Solutions, found e-mail exchanges with NAPG vice president Brad Enzi and vouchers for work his company did at the site in February and March 2011, billed to North American Land & Livestock.
“Looks like we did some leveling, layout, and three different water well pads. It was a pretty big footprint,” Miller said.
Miller said he found only three records of payment – for $51,000; $23,000 and $12,000.”
“There was a lot more planned, but we were paid in full for what we did,” Miller said.
The total: $86,000.
Recent developments
With the stimulus grant under investigation by the U.S. attorney and DOE Inspector General and his ambitious plans for a Wyoming electricity empire continuing to flounder, Mike Ruffatto then turned back to California — the site of his impressive early business successes — for his two newest ventures. But both projects, a solar facility and a natural gas power plant, have suffered serious setbacks recently that threaten their futures.
In November 2011, Ruffatto’s North American Power Group won a bid to build a 15-megawatt solar energy facility for the Marin Energy Authority in Northern California.
However, according to Marin Energy executive director Dawn Weisz, that contract was cancelled in late 2012 because of North American’s failure to meet several project milestones, including a commencement-of-construction deadline of February 2012. Another issue was that Ruffatto had changed the site of the proposed solar facility from Placer County in northern California to property he owned in Kern County in southern California.
Marin Energy’s Dawn Weisz cancelled NAPG solar contract for failure to meet deadlines.
Marin declared North American in breach of contract and confiscated $500,000 Ruffatto had put up as a construction bond.
Ruffatto, meanwhile, told the Marin Independent Journal newspaper in March 2013 that it was all a misunderstanding.
“We don’t think we are in default nor that it was an effective cancellation of the contract,” Ruffatto said. “We ran into an unexpected problem last fall that may have led to some misunderstandings with Marin Energy Authority. We have the financing, project permits, regulatory approvals and are ready to go ahead and complete the project.”
No way, said executive director Weisz in an interview with WyoFile.
“We terminated the contract and that’s the end of it,” said Weisz.
Late last month, another California power project in which North American Power Group has a 49 percent interest suffered a potentially fatal blow when a southern California utility that had agreed to buy the power withdrew its support.
The project was a partnership with a newly formed company called Native American Energy Resources to build a 56-megawatt natural gas power plant, named Jasmin III, for San Diego Gas & Electric Company on the site near Bakersfield where North American Power Group jointly owns two coal-fired power with Japan’s IHI Power Services Corporation.
Native American Energy Resources’ president is Eric Hoffman, a member of the northern California Karuk Indian tribe. Although Hoffman lives in northern California, the company’s headquarters is in the North American Power Group office suite in Irvine, Ca.
In an interview, Hoffman said the company is not sponsored by the Karuk tribe. However, because he is Native American, the company qualifies under California law as a “Diverse Business Enterprise” which gives it certain preferential advantages before the California Public Utilities Commission, the industry regulator.
In a July 3, 2013, letter San Diego Gas & Electric urged the California PUC to approve a power purchase agreement it had executed with Native American Resources.
However, North American Power Group’s Japanese partner claimed in a series of letters that Ruffatto did not have the authority to offer Bakersfield site for a new power plant.
In an April 4, 2014, letter to the state utility commission, IHI Power corporate counsel Matthew Adams informed the commission that the Native American Resources-North American Power Group proposal contained a critical “material misstatement” related to greenhouse gas reduction credits that the applicants claimed to have under their control.
“On behalf of IHI power,” Adams wrote, “we write to advise you that NAER does not have the right to use or allocate any greenhouse gas/CO2 reduction benefits” related to the proposed Jasmin III plant. Any such decisions, Adams wrote, would require “IHI Power’s consent.”
Then in an April 22, 2014, letter to the PUC the San Diego utility withdrew its request for approval, leaving this project, like the solar project to the north, in the lurch.
Ruffatto has since told associates that he plans once again to put his interest in the four California power plants — in Rocklin, Fresno and the two in Bakersfield — up for sale.
— Rone Tempest was a longtime national and foreign correspondent for the Los Angeles Times. One of the co-founders of WyoFile, he served as its editor from 2008 to 2011. His first story on the Two Elk power plant project appeared in February, 2008. Tempest lives in Lander.
Sources & Acknowledgements
EDITOR’S NOTE: This Two Elk series, supported by grants from the Fund for Investigative Journalism and WyoFile founder Christopher Findlater, is an extensive case study of one troubled project; its audacious Colorado-based promoter, and the state and federal officials who kept the project alive despite numerous warning signs that it was a scheme beyond saving. This is the final installment of WyoFile’s Two Elk Saga series. Click here for a complete catalogue of this series, including the Introduction and Parts 1-6.
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