“The short of it is that the courts and the Legislature are the watchdogs over state agencies,” said Nancy Volmer, communications director at Utah Courts. “The Legislature does it through audits and the courts do it when people bring cases to court.”
Parker Douglas, chief of staff for Utah Attorney General Sean Reyes, said opinions are only given and published at the request of a state entity, like the CIB or the governor’s office. And he said those opinions would not necessarily be made public.
Recently, the CIB has come under scrutiny for committing $53 million to four counties to purchase “throughput capacity,” or the right to ship goods like coal, through a multi-commodity export terminal in Oakland, California.
Lawyers from Earthjustice, the Sierra Club, Grand Canyon Trust, the Center for Biological Diversity and the Moab-based Sloan Law Firm have asserted that the loan promotes mineral development, and violates federal law and the Utah Constitution regarding the use of mineral lease revenues.
Under the federal Mineral Leasing Act, mineral lease funds — royalties collected by the U.S. government for mineral extraction on federal lands and then passed on to the state — must be used for “planning,” “construction and maintenance of public facilities,” or the “provision of public services.” Further, under state law, the CIB must provide grants and loans to state agencies — cities, counties, and county coalitions — which may be socially or economically impacted by mineral development on federal lands.
“State and federal law mandate that mineral lease funds must be used to alleviate the impacts of mineral development on Utah localities,” Earthjustice lawyers wrote in a Nov. 2 letter to Reyes. “The counties plan to use the loan to do exactly the opposite — to build a coal-export terminal that will promote yet more mineral development, exacerbating the very impacts that the funding is supposed to alleviate.”
The Utah Attorney General’s Office published an opinion on mineral lease revenue in the past. In 1993, an opinion was issued which concluded that economic development projects are an ineligible use of mineral lease funds.
“Economic development, by itself is not one of the traditional local government services that Congress intended to be eligible for funding by mineral monies ...,” the 1993 opinion stated. “The use of mineral lease monies for ‘mere’ economic development — usually meaning assistance to private businesses and enterprises in their operations — raises Utah Constitutional issues.”
But Douglas maintains that the opinions of the Utah Attorney General’s Office are just that — opinions — and are not legally binding. It’s the courts, he says, which are the ultimate authority on determining constitutionality.
“My take is on it is that oftentimes people want an opinion letters to be a court decision. It’s just not our function,” Douglas said. “And you don’t want it to be. You don’t want the AG saying the law is something other than what the legislature says it is. You let the courts decide that. That’s why you have a judicial process.”
The co-author of the 1993 opinion, Assistant Utah Attorney General Thom Roberts, is also the current legal counsel to the CIB. Although he has raised concerns to the board regarding the throughput capacity project, Roberts told The Times-Independent, that as lawyers for the state, the attorney general’s office gives the CIB legal advice, but it’s the board that chooses how to follow it.
“I am the legal advisor to the impact board. We give them legal advice and help them with regard to them carrying out their programs,” Roberts said. “Whenever they approve a project, they make a determination that their applicant is a lawful and eligible applicant and the project is a lawful and eligible project under their statute.”
On Sept. 3, five months after the board approved funding for the Oakland project, CIB chairman Keith Heaton asked Susan Eisenman, division director of the attorney general’s state agency counsel division, who determines the constitutionality of CIB funding for major infrastructure projects.
“My question is, who determines the legality and constitutionality of these types of things? Mr. Roberts was fairly adamant in the last meeting that he had reservations and concerns that they were not [constitutional] and the board appreciated his counsel on that but voted to move forward with it,” Heaton said. “So who makes those determinations and how does it affect this board’s decision?”
Eisenman responded by saying the constitutionality of “something” is determined in court. She later told The Times-Independent that she was speaking in general terms, and not specifically about the Oakland throughput capacity project or other major infrastructure projects.
“How it’s determined if something is constitutional or not is when a court case is brought in and the court says that it is so,” Eisenman told the board Sept. 3. “Which isn’t to say that I would advise the board to understate the unconstitutionality or the legal aspects and hope that nobody sues. But ideally that’s how it is determined if something is unconstitutional or illegal.”
Courts, audits as ‘watchdog’
Although she would not comment on the potential for a court case, Wendy Park, a lawyer for the Center for Biological Diversity, told The Times-Independent that the CIB’s violations are “serious.”
“We believe there are serious legal violations here,” Park said. “They are using funds purposed to be used in their local communities to relieve them from the burdens of the fossil fuel industries, [so] the private partnership goes completely against what these funds are intended for.”
A lawsuit could be filed at the state level, or according to Patrick Etchart, spokesman for the U.S. Office of Natural Resources Revenue, entities could bring allegations to the federal government.
Operating under the U.S. Department of the Interior, the Office of Natural Resources Revenue is responsible for collecting mineral lease revenue from extraction companies and then dispersing those funds to the states. Etchart said the office has an enforcement arm, which works closely with the U.S. Justice Department.
“If anyone is aware of any concerns they would contact the Office of Natural Resources Revenue,” Etchart, said. “If we suspect any violation of the law, [our] enforcement [office] will refer to the Office of Inspector General or to the U.S. Justice Department and the U.S. Attorney’s Office.”
The U.S. Attorney’s Office declined to comment, saying the office would neither confirm nor deny that an investigation is being conducted until an entity has actually been charged.
Beyond the state and federal court system, the Oakland throughput capacity project has now garnered the attention of the Utah State Auditor. Calling the throughput capacity loan “interesting,” Financial Audit Director Van Christensen said his office may make a determination on whether the loan is an allowable use of state funds.
“As far as the potential $53 million commitment in Oakland, we are aware of the issue and are familiarizing ourselves with relevant laws. Beyond that there has been no decision regarding what if anything we will do,” Christensen said.
As the state auditor’s office looks further into the loan, the Office of the Legislative Auditor General may be asked to specially audit the CIB to determine if the board is serving the Legislature as intended and meeting the needs of the public.
Utah Senate Minority Leader Gene Davis, who sits on the Legislative Audit Subcommittee, told The Times-Independent that once the Legislature reconvenes in January, he will request that the CIB undergo a formal audit in the special legislative auditing process.
“I would like see our legislative auditor take a look at that issue and see if it’s in the scope and context of what the CIB [can fund],” Davis told The Times-Independent. “The CIB is for ‘community impact’ and I don’t see where a harbor in Oakland that may be a distribution point for coal is really a ‘community impact’ for coal development. I don’t think [the CIB] is an economic development tool. It’s designed to help communities.”
Utah Senate President Wayne Neiderhauser, who also sits on the audit subcommittee, said while the issue might be worthy of an audit, without knowing more detailed information, he can’t comment on whether or not it would actually be prioritized in January.
And despite recent legal allegations, the Oakland throughput capacity project still has support at the highest levels of the state, including Gov. Gary Herbert.
“Gov. Herbert supports the Utah Permanent Community Impact Fund Board project and believes it will bring meaningful economic development to rural Utah,” Herbert’s spokesman, Jon Cox, told The Times-Independent when asked about the throughput capacity project. “Coal is an important energy source. As international economies gradually move toward alternative sources of energy, coal will serve as an important transitional energy source for decades to come.”