Editor’s Note

The Two Elk Saga by Rone Tempest was originally published as a seven-installment series on the Wyoming public policy news site, WyoFile.com, between May 20 and June 10, 2014. This e-book was constructed using Creatavist.com, the innovative software arm of the on-line publishing house Atavist.com. Like all of the content of WyoFile.com, it is offered free of charge as a public service to all readers. However, if you would like to encourage more of this kind of investigative journalism about Wyoming policy, people and places you are encouraged to contribute by visiting the website at WyoFile.com. WyoFile.com is a non-profit corporation exempt from taxation under Section 501(c)(3) of the U.S. tax code. All contributions to WyoFile are therefore tax deductible.

Introduction

“As much as we wanted it to be real, it wasn’t” — former Wyoming Gov. Dave Freudenthal, September 10, 2013

Mike Ruffatto’s dream was to build his own private utility, a massive, roaring, electric power empire, in the heart of Wyoming coal country.

Over the past 20 years, the Colorado attorney-businessman has promoted seven different power plants — five of them named Two Elk — in the rolling prairie and scoria outcrops south of Gillette. Had they been built, they would have met the electricity needs of millions of households in Colorado, California and Arizona, and employed thousands of Wyoming workers.

In his most visionary moments, Ruffatto told potential investors that he planned a “Wyoming Palo Verde” — a coal-fired version of Arizona’s 3.3-gigawatt nuclear power complex 45 miles west of Phoenix that powers cities across the American Southwest.

For admirers — and there were some — the Ruffatto idea was a bold play by a lone-wolf operator in a business arena where usually only established utilities or major regional cooperatives can compete.

New power plants cost more than $1 billion to build. Transmission lines can cost several hundred million dollars. No one ever said that Mike Ruffatto lacked audacity.

To skeptics, Ruffatto’s scheme was a taxpayer-milking fantasy as brazen as anything the late Billie Sol Estes ever concocted with his phantom West Texas fertilizer tanks.

“It was like a propaganda deal. It was all smoke and damn little fire,” said Vic Garber, former senior landman with Peabody Coal Company in Wyoming who had frequent dealings with Ruffatto and his agents over the years.

The Two Elk saga is made up of intertwined stories: one man’s outsized dream; Wyoming’s desire to believe in energy castles in the air, kept aloft by taxpayer dollars; and the federal government’s failure to bring anyone down to earth, until millions of dollars in public money had been squandered. It is, in short, a case study of territorial ambition, personal greed, political nepotism, government malfeasance, and a highly creative interpretation of federal tax laws.

On another level, however, it is a Gatsbyesque tale of a striving former Air Force navigator — the first of his working-class family to attend college — who built a modest energy business by piecing together scraps acquired from a bankrupt Oklahoma energy company, and then attempted to parlay it into unimaginable wealth as a Rocky Mountain utility magnate.

In this respect, at least, it is a very American story. Where else would someone even dare to propose building a line of seven $1-billion power plants on the sagebrush steppes in arid and remote Wyoming — populated by more pronghorn than people — to electrify Phoenix, Las Vegas and the rest of the air-conditioned American Southwest?

For a brief time at the very beginning of this century — when California was darkened by electricity shortages and Enron Corp. was in its full glory as a swaggering energy trader — the Two Elk dream seemed plausible enough, at least to a handful of politicians and bureaucrats in Cheyenne and Washington.

Two successive Wyoming governors, Republican Jim Geringer and Democrat Dave Freudenthal, allocated Ruffatto and his North American Power Group Ltd. a total of more than $445 million from the state’s allotment of tax-exempt industrial development bonds to finance the first stage of the dream, the 320-megawatt Two Elk I plant.

The Internal Revenue Service obliged, at least for a time, by agreeing to classify the coal-fired Two Elk I plant as a “solid waste disposal and recycling facility” so it could qualify for the bonds under special public-works provisions in the U.S. Tax Code.

State officials, meanwhile, spent $11,066,396 of Wyoming sales and use tax dollars, scrambling to build the infrastructure — new streets and sewers, sidewalks and culverts — to support the proposed new power plants.

Late to the party, the federal Department of Energy in 2009 and 2010 pitched in with $9.9 million in stimulus grants — part of the Obama administration effort to create jobs and revive the American economy.

To date, however, not one of the proposed North American Power Group plants has been built. The stimulus grants — ostensibly to study carbon sequestration potential on the Two Elk site — were suspended by the DOE in January 2012 because of numerous accounting irregularities.

But that was not until $7.3 million of the stimulus money had already been spent, much of it on inflated salaries for Ruffatto and his employees, including North American Vice President Brad Enzi, son of Wyoming’s senior U.S. Sen. Mike Enzi. Mike Ruffatto paid himself more than $1 million, more than President Obama made in the same time period. Federal pay vouchers, obtained by WyoFile under the Freedom of Information Act, show that Ruffatto used stimulus funds to pay Brad Enzi — whose Republican senator father described the stimulus program as “bailout baloney” — more than $130,000. This amount accounted for the bulk of Brad Enzi’s annual income, according to a financial disclosure he made in his 2013 Laramie County divorce case.

Meanwhile, no new jobs were created. Among the 10 similar carbon sequestration study grants issued in 2009-2010, Two Elk was the only one that did not create new jobs, the principal goal of the stimulus program.

Today, after more than 15 years of promotional hype and government indulgence, the only signs of construction — power plant and carbon sequestration study included — at the Two Elk site are: a gravel road leading from nearby State Highway 450; an empty metal shed used mainly by hunters as a place to gut their kills; and a forlorn, rebar-studded concrete pad shrouded with Canada thistle.

After the Two Elk stimulus grant was suspended in January 2012, it was referred by the Department of  Energy to the U.S. Attorney’s office in Pittsburgh, Pennsylvania, which has jurisdiction over the DOE’s National Energy Technology Laboratory, headquartered there.

More than two years later, National Energy Technology Laboratory chief counsel Paul Detwiler said the Two Elk case continues to be the subject of an “ongoing investigation.” Several recent attempts by WyoFile to obtain records related to the Two Elk case under the Freedom of Information Act were denied on the grounds that the case was still under active investigation and “pending enforcement action.”

Paul Skirtich, the Pittsburgh U.S. attorney and government fraud specialist in charge of the case, has not responded to numerous WyoFile inquiries into the status of the case. Rickey Hass, the deputy inspector general assigned to the DOE’s internal investigation of the case, has also declined comment.

Meanwhile, Charles Russell, a Denver public relations agent Ruffatto hired to represent him in dealings with the press, said his client and his client’s lawyers continue to provide documents to federal investigators as requested.

Ruffatto, through Russell, issued the following statement: “Two Elk is a very complex project with significant challenges for science, technology, finance and oversight. 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.”

Whatever the outcome of the lengthy federal investigation, the questions of how Ruffatto’s North American Power Group got the stimulus grants in the first place, and how the private company managed to keep them despite numerous warning signs that it was in trouble, are things for which federal officials and regulators bear considerable responsibility.

In fact, the irregularities surrounding the Two Elk case go back to the very beginning of the stimulus program, in August 2009, when North American Power Group benefitted from an extraordinary one-week extension in the application deadline for the carbon sequestration stimulus grant.

Although the extension was offered to all applicants for the 10 carbon sequestration grants offered by the DOE, North American Power Group appears to have been the principal beneficiary of the delay. Other applicants for the grant who were interviewed for this story said they were prepared to meet the original deadline.

But details of the extension — including who requested it; the reason it was granted; what, if any, support had been received from outside the agency, including possible Congressional requests — remain a mystery.

National Laboratory chief counsel Detwiler said the agency searched but could find no records — including emails or written communication — related to the extension except for one email forwarded by a project officer saying that the request for extension had been granted.

The curious, unexplained extension was only the earliest sign of something peculiar in the process that got Mike Ruffatto and his company nearly $10 million in public funds for a scientific project that ultimately did not meet any of its main objectives, including the drilling of a 13,000-14,000-foot-deep well that was supposed to be its centerpiece.

A six-month WyoFile investigation, supported in part by the Fund for Investigative Journalism in Washington, D.C., and based on a broad review of public records and dozens of interviews in 10 states and the District of Columbia shows that:

• The Department of Energy and its National Energy and Technology Laboratory awarded North American Power Group, Ltd. $9.9 million in stimulus funds despite the company’s extensive, well-documented history of problems including: missed deadlines; unrealized objectives; financial shortcomings; and permitting issues in three states, dating to the late 1990s.
• Despite the scientific and engineering nature of the stimulus project — one of 10 “carbon sequestration site characterization studies” commissioned by the DOE in 2009-2010 — the North American Power Group project was unique in that none of the key players in the company had any training or expertise in the area. Ruffatto is a lawyer with experience in natural gas marketing and power plant acquisition. North American vice-president Brad Enzi was a former Capitol Hill lobbyist with a communications degree. Employee Matt Munford was a former strength and conditioning coach at the University of Wyoming in the 1990s when Brad Enzi was a walk-on basketball player there.
• At the same time that North American Power Group was awarded the stimulus grant, another competing proposal for the same geologic and geographic area, sponsored by the Crow Nation and administered by the Big Sky Carbon Sequestration Project of Montana State University, was rejected by DOE-NETL. This was despite the fact that many scientists and engineers considered the Crow proposal — called “Many Stars” — more worthy and more likely to meet the Obama administration goals of creating new jobs and stimulating the economy. Unlike the last-minute North American Power Group bid, the Many Stars application had been in the works for several months and was completed well before the original deadline.
• Although a number of accounting irregularities had already surfaced in the first $4.9 million federal grant awarded to North American Power Group in 2009, DOE-NETL nonetheless awarded the company a second $5-million grant in 2010. The department did not suspend the two grants until January 2012, after most of the money had been spent.
• DOE officials either ignored or were unaware of an Internal Revenue Service audit of the Two Elk power project bonds that began in late 2009, three years before the stimulus grant was finally suspended. The audit, completed in April 2011, determined that Two Elk no longer qualified for federal tax-exempt status on $445 million in industrial development bonds that the project had obtained from the state of Wyoming. The IRS rescinded the tax-exempt status.
• Among the questionable bills paid in full by DOE was a $2,791,103 charge for “heavy equipment mobilization; drilling pad and mud pit construction; drilling water procurement; layout area preparation” from North American Land & Livestock, a private, wholly-owned subsidiary of NAPG, of which Ruffatto is the only officer. Engineers working on equivalent DOE-funded sequestration projects said the charge was more than 20 times what it should have been for the work described. The subcontractor, Tyler Miller of Gillette, Wyoming, who did the actual work in February and March 2011, said he billed North American a total of $86,000.
• DOE officials, at least initially, failed to track and compare the expense and salary vouchers filed by North American Power Group against those filed by two other nearly identical stimulus grants, one in Wyoming, administered by the University of Wyoming, and one in Colorado, administered by the University of Utah. Both of those projects met project deadlines and drilled deep exploratory wells that were part of the grant specifications. Neither submitted the huge salary and site preparation costs that NAPG invoiced. Both — unlike North American Power Group — created new jobs.

Originally published May 20, 2014 by wyofile.com

Part 1: “Wearing suits and using big words”

“My name is Mike Ruffatto. I’m president of North American Power Group and, on behalf of the Two Elk Power Company, I’m here to request the commissioners approve a resolution authorizing us to go forward …”   — Mike Ruffatto to Campbell County Commission, 1997

Ann Kennedy Turner remembers being impressed when Mike Ruffatto and his entourage — junior executives from his Colorado company, attorneys from the powerful Holland & Hart law firm, bond counselors from the Kutak-Rock LLP in Denver — flew into Gillette, Wyoming, for their presentation before the Campbell County Commission. They were seeking the county’s sponsorship for $330 million in tax-exempt bonds to finance the proposed Two Elk Power plant south of Gillette.

“They came in wearing suits and using big words,” she smiled, recalling the high-powered delegation during a recent interview in her Gillette newspaper offices. “They flew in and flew out. Ruffatto was very slick.”

Kennedy Turner is not easily impressed. Owner and editor of the Gillette News-Record newspaper, she has a statewide reputation as an outstanding journalist.

Since that 1997 meeting, she and her staff have done a thorough job documenting the high hopes and deep disappointments — mostly disappointments — of Two Elk and related North American Power Group projects in their county.

But that first 1997 appearance, at least, was all upbeat, an event brimming with optimism. Everyone, it seemed, was giddy over the prosperity that the Two Elk project promised to bring. The commissioners, led by Chairman Les Desavedo, were persuaded.

“It sounded like a good deal for Campbell County at the time and I think it would have been if they had upheld their side of the bargain,” Desavedo, who now lives in Arkansas, recalled in a recent telephone interview. “Ruffatto was a pretty good salesman and, to be honest, he actually impressed all of us.”

Mike Ruffatto, tanned and splendid amid his suited entourage, swept confidently into town. Construction, he told the locals, would begin in just a few months — the third quarter of 1997. In less than two years — the second quarter of 1999 — the plant would begin operating, at which time there would be 50 full-time employees. By the end of 1999, the plant would be at full capacity — pumping 250 megawatts of electricity, enough to power 200,000 to 250,000 households — into the regional grid.

Things would move fast, Ruffatto informed the commissioners. The cities and citizens of Campbell County needed to get ready for the big changes that were coming.

In the short-term construction phase, he said, 752 workers would be flooding into Wright, Wyoming, the nearest town. A temporary “man camp” would be required.

Longer term, the nearby towns would need new housing. Local schools should be ready to enroll a minimum of 74 additional students. Law enforcement would have to be increased, as would medical and fire protection services. Campbell County would need at least one new doctor.

Not to worry though, Ruffatto said, because the Two Elk plant and its components would contribute $500,000 in new ad valorem tax revenues starting in 1998, swelling to $2.1 million annually in 2001. The Wyoming Industrial Siting Council — the state board that oversees industrial projects valued at more than $191 million — would distribute impact assistance payments to local communities affected by the development.

Ruffatto’s pitch fit perfectly with the wish of many Wyoming politicians and promoters that the state get more “value-added” from its vast coal reserves. Instead of coal just being stripped from the ground and shipped away on mile-long trains, the coal would be burned right here, in plants manned by Wyoming workers who would spend their money in Wyoming businesses. The workers would marry and have Wyoming children and send them to Wyoming schools.

At the end of the presentation to Campbell County, commission Chairman Desavedo gave Ruffatto his blessing.

“Good luck and continue. Get it done,” Desavedo said, according to the meeting transcript.

For a new electric power plant, especially one located in a sparsely populated sagebrush steppe, you need three things: money to build the plant; transmission lines to get the power to markets; and utilities — customers — to buy the power you produce.

Sometimes, if you have lined up the customers and their signed Power Purchase Agreements (PPAs, i.e., contracts to buy the power for a set number of years), you can get the financing from banks or institutional investors. But you still can’t do anything without the transmission connection.

When Mike Ruffatto came up with the Two Elk concept, he had none of the three key components. First and foremost, he needed the financing.

“The problem with Two Elk,” Gillette oil and gas attorney Randall T. Cox observed a few years ago, “is that it was being proposed by promoters and not by an established utility. Every other plant in Campbell County has been built by a well-established utility.”

In fact, two other utility-owned coal power plants that were approved and permitted well after Two Elk —Black Hills Power WyGen II (2005) and Basin Electric Dry Fork (2006) — are up and running today. Meanwhile, Two Elk remains very much in limbo.

Knowing that his own financial resources were inadequate for a project this size, Ruffatto had to draw on some of the legal and business acumen he had demonstrated earlier in his life as a state prosecutor in Arizona and a successful businessman in California.

As an assistant attorney general in Phoenix in 1976, he spent more than a year in court handling 10,000 exhibits and helping prosecute one of the biggest business fraud cases in that state’s history. In California, he had turned his small natural gas pipeline and trading company into a $75 million-a-year business.

He had to be just as resourceful with the Two Elk project. Since he personally did not have the necessary vast sums of money, he needed some kind of an edge in order to attract outside investors.

The advantage he came up with was to ask for some of the tax-exempt industrial development bonding authority that Wyoming receives every year from the federal government, which at that time averaged about $225 million a year.

Investors like tax-exempt bonds for the obvious reason that they don’t have to pay federal taxes on the interest they receive from the bonds. But the public loses on these deals for the equally obvious fact that no money — in this case between $3 million to $4 million annually — goes into the treasury.

These kind of bonds — of which every state gets an annual allocation — are subsidized by ordinary American taxpayers. That’s why the federal government generally limits them to public works or education projects that directly benefit citizens, such as low-income housing, pollution control, airports, sewage treatment plants and student loan funds.

In fact, the $445 million in bond allocations to North American Power Group — a private, for-profit company based in Greenwood Village, Colorado — made it the third largest recipient of Wyoming’s share of tax-exempt bonds in history, behind only the Wyoming Student Loan Corporation and the Wyoming Community Development Authority.

The challenge for Ruffatto, who needed hundreds of millions of dollars, was to find a way around federal rules that limited industrial development bonds for a project like a traditional power plant to $10 million.

To avoid this limitation, Ruffatto said that Two Elk would not be a traditional plant but would use “waste coal” from the nearby Black Thunder mine and other giant mines in the area. Waste coal is lower-grade coal — more oxidized and higher in ash content — that the coal companies usually backfill into played-out coal pits rather than ship to their utility customers, who demand higher-grade coal.

Waste coal is less efficient and more polluting than the coal that meets the sulfur, moisture and fixed-carbon values set by utility customers. But it can still make money if you burn it at the mine mouth and do not have to pay for transportation. Ruffatto said he would get around the pollution problem by installing the state’s first ash storage and disposal facility, right on the plant site.

Then, somewhat surprisingly, Ruffatto managed to convince the Internal Revenue Service that because Two Elk would burn “waste coal,” it was not a power plant, but a “solid waste disposal and recycling facility.”

That qualified it for an exemption under the U.S. Tax Code and allowed Wyoming to exceed the $10 million bond limitation. The U.S. Tax Code grants exceptions to the $10 million limit for projects such as sewage treatments plants, public housing and other public works projects.

Ruffatto slotted Two Elk into the “solid waste disposal” exemption. In this case he would dispose of the “solid waste” (cheap coal) by burning it and sending the smoke into Wyoming skies.

This produced some very strange language in bond applications and other documents. Although Two Elk was to be a coal-fired power plant — in fact a plant dirtier than those that used higher-grade coal — it was referred to, legally, as a species of environmental project that “recycled and reused waste coal” and that only incidentally produced electricity.

As Two Elk bond attorney Michael K. Reppe wrote the Wyoming governor’s office, in one of many letters, “Two Elk will recycle and dispose of non-commercial or waste coal exposed during the mining process from adjacent surface mines, also producing electricity in the process.”

As long as the IRS bought into this curious concept, the state did, too. Sponsored by Campbell County, North American Power Group received bonding approvals from successive Wyoming governors — Jim Geringer, a Republican, and Dave Freudenthal, a Democrat — totaling $445,480,000 in installments starting in 1997 and ending in 2006.

Ruffatto was a blur of activity. He bought 880 acres of land from ranchers immediately adjacent to the Black Thunder Mine, contracted with coal companies for their “waste coal,” and hired Harry Underwood, a popular former Campbell County commissioner, to do the local political schmoozing.

He retained Weir International Mining Consultants (IMC) out of Des Plaines, Illinois, to do an extensive study on the availability and supply of “waste coal” — defined as coal that burns at a rate lower than 8,000 Btu/lb — at nearby mines. The coal shipped to customers from Arch Coal’s Black Thunder Mine has an average calorific value of 8,880 Btu/lb. Ruffatto thought he needed coal with a value of only 7,800 Btu/lb for his Two Elk plant.

“Based on our review of potential fuel sources for the Two Elk Power Project,” IMC president Dennis Kostic wrote Ruffatto in 1998, “it is our opinion that there is and will be more than an adequate supply of 7,800 Btu/lb fuel in the southern Powder River Basin that will be available for the life of the Two Elk project.”

IMC also did a transportation study showing that the waste coal could be trucked into Two Elk from adjacent Black Thunder, the nation’s largest operating coal mine, at a negligible cost, less than $1 a ton. In pricing terms this would give Two Elk a huge advantage over out-of-state utilities that had to move coal by rail hundreds, sometimes thousands, of miles to their power plants.

In 2000, Ruffatto also contracted with a California economic research company, MRW & Associates, to do an extensive “Western United States Power and Fuel Market Assessment for Two Elk Project.” The confidential report, obtained by WyoFile, concluded that as long as Two Elk had a customer for its power, it had the potential to be a very profitable project.

Because of the low cost of the “waste coal” and lower transportation and operating costs, MRW projected that, under the most likely scenario, Two Elk would have an annual profit in the tens of millions of dollars, rising from $64.5 million in 2003 to $119 million in 2022, based on an average output capacity of 93 percent.

Over the course of 20 years, the study projected, Two Elk could have an operating margin of between $1.5 billion and $2 billion, more than enough to repay investors. Enough money, in fact, to make Mike Ruffatto one of the richer men in the Mountain West.

But all of this was contingent on financing, transmission, and customers. By this time, Ruffatto claimed to have all three in hand, or almost in hand, according to the MRW report.

“The project is in the process of finalizing a firm wheeling agreement with PacifiCorp to deliver Two Elk power to various locations in the western grid,” MRW reported.

If true, that would take care of the tricky transmission problem.

As for customers, MRW noted a breakthrough: NAPG had a major partner to share the risk.

“The project plans to sell power for the first 10 years of operation pursuant to a long-term power sales agreement with a nationally-recognized power marketer,” the MRW report claimed. “This agreement provides the assurance that the initial years of operation by the project will meet pricing requirements necessary for financing.”

The MRW report stated that Two Elk now had: financing, thanks to Wyoming’s tax-exempt bond allowance; transmission from PacifiCorp Energy, one of the West’s biggest electric utilities; and customers through a long-term power sales agreement with a big-time partner. So things were looking good for Mike Ruffatto and his Two Elk dream, very good indeed.

Originally published May 22, 2014 by wyofile.com

Part 2: “Working class but not deprived”

“The thing that was always odd about Mike. He loved to see other people have fun but he didn’t participate much himself. Mike, he would just get more enjoyment like that, watching people around him have a good time.” – Ruffatto friend Patrick Dunahay, Denver 2013

To understand the Two Elk story you first have to understand the man behind it. It is not an easy task. The taciturn Ruffatto, who splits time between luxury homes in Colorado and California, is extremely reserved in public.

His shyness persists even when he appears with his socialite wife, Eve Kornyei Ruffatto, at charity events at the Segerstrom Center for Performing Arts or the American Film Institute or other venues for causes the couple supports with generous contributions. Occasionally he will allow himself to be photographed with a movie star, most recently actor Kevin Spacey, at one of these gatherings. But the photographs are rare and he usually looks like someone trying to edge out of the frame.

Ruffatto seldom grants interviews. When a persistent Denver television reporter started calling him recently, inquiring into the suspended federal stimulus grant, Ruffatto hired prominent crisis public relations consultant Charlie Russell of Denver to represent him to the press.

Russell’s most famous clients were John and Patricia Ramsey, parents of six-year-old JonBenét Ramsey who was murdered in the family home in 1996.

Previous high-profile business clients include former HealthSouth CEO Richard Scrushy and, briefly, former Qwest CEO Joseph Nacchio, both of whom were eventually sent to prison after convictions in federal courts. Russell’s reputation as a damage control specialist, however, came mainly from his work on Scrushy’s first trial in 2005 when a Birmingham, Alabama, jury acquitted him on all counts in a federal securities fraud case.

Even longtime employees and business associates say they know little about Ruffatto’s income or the origins of his wealth.

“All I know is that he came to Denver with money. But I don’t have a clue where he got it,” said one former senior officer with North American.

“I think he had been very successful in California before he moved here,” said Nick Muller, an attorney and longtime executive director of the Colorado Independent Power Producers Association.

In 1999 testimony before the Colorado Public Utilities Commission, Ruffatto said North American Power Group had only one outside stockholder, Denver business owner Patrick Dunahay. Dunahay is a successful automobile radio wholesaler whose daughter was a friend of Ruffatto’s teenage daughter in the affluent, horsey suburbs south of Denver where both families lived.

The Ruffattos, Mike and his late first wife Joan, brought two quarter horses with them from California when they moved to Denver in 1989. Their sprawling compound in Cherry Hills Village, valued by the Arapaho County assessor at over $7 million, has a stable attached directly to the house so it conforms to the suburb’s restrictive deed covenants about out buildings. Dunahay and his wife Mary, who live in nearby Littleton, were among the Ruffatto’s first and best friends.

“We became friends through our kids,” Dunahay said in a recent interview with WyoFile. “Later he told me about a coal-fired power plant project in Wyoming. He approached me and said ‘If you want to invest, give me $30,000.’ But I never got any paperwork on it. Later, when I reminded him about it, he gave me back more money than I had originally given him, but there never was any paperwork. No 10-K forms; no stock certificates. We were social friends.”

Dunahay remembered a trip the two couples took to Florida. “Mike was renting yachts and chartering this and chartering that. I told my wife ‘I can’t keep up with the Ruffattos. I’m going broke.’”

He recalled another time when Ruffatto invited him and Mary to dinner. “He said he was interviewing five guys for president of his company and that he was inviting all five to the dinner. He wanted us to help choose. Dinner ended and he said ‘What do you think?’ It set me back a notch. I think that’s when I realized that we might be the only friends that Joan or Mike had who didn’t need them for something.”

Over the years, Mike Ruffatto has been generous, too, with his money. His charities have included Denver’s National Jewish Medical and Research Foundation and the Lupus Foundation of America, which funds research into the disease that afflicted both his late wife Joan, who died in late 2007, and his daughter Katherine, who now serves on the Lupus Foundation board.

In 2006, the family adopted Chester, a retired Denver mounted police horse who still lives on their Cherry Hills Village estate. Later the same year, the Ruffattos gave $5 million to the University of Denver for what is now Ruffatto Hall in the Morgridge College of Education.

According to a biography that Ruffatto, through public relations specialist Russell, provided for this article, he was an only child born in 1946 in Berkeley, California, to a working-class Italian-American and German-American couple, James and Evelyn (Hess) Ruffatto. “Working class but not deprived,” is how Ruffatto described his childhood.

His paternal grandfather had been a miner in Illinois and a school janitor in California. His maternal grandfather worked construction in Oakland. Ruffatto’s father worked on the Santa Fe Railroad and as an air conditioning and refrigeration salesman, then as a small business owner. His mother was a beautician when she met and married James Ruffatto.

When he was in the fourth grade, the family moved to San Jose, then a quiet agricultural town famous for prunes. The city once had a minor league baseball team, the San Jose Prune Pickers. The same area would later become the mighty Silicon Valley, world epicenter of the computer and internet industries. But in those days it was a rural backwater in transition.

“You could ride your bike to the end of any street and end up in an orchard,” Ruffatto recalled.

Ruffatto attended Monroe Junior High School and the brand-new Del Mar High School. A good student, he played football and ran track. He also played trumpet in the school band. He spent what would have been his senior year, 1963-64, as an American Field Service exchange student in Germany, his mother’s ancestral home.

In the biography he provided WyoFile, he recalls that Germany in those years “was enjoying the energy of its post-war recovery while it was still ground zero in the Cold War. It was an interesting time.” The 1964 Del Mar High School annual featured a photograph of a tanned and athletic-looking Ruffatto, then sporting a flat-top haircut, and a note from him about his experiences in Germany.

“School is a great deal different here than in the United States,” Ruffatto reported. “The students do most of the work here. When you are called upon, you must stand alongside your chair, look the teacher in the eye and give the right answer in about 3 seconds or you have a bad mark.”

But in one way, he noted, high school life was the same. “There isn’t much difference between the way they dance here and California-style.”

Ruffatto was admitted on a partial scholarship to nearby Stanford University in 1964. He contributed with money he earned during the summers working in an auto repair shop and making candy at a Safeway plant in Santa Clara, California.

The 1960s were tumultuous times on American college campuses. Across San Francisco Bay in 1964, the University of California at Berkeley was gripped by the historic Free Speech Movement, precursor to mass student movements formed later over civil rights issues and the Vietnam War.

In 1966, David Harris, the national civil rights and anti-war leader, was elected president of the Stanford student body. Stanford, like UC Berkeley across the bay, had a strong anti-war movement.

Ruffatto was not untouched by these events. He pledged a fraternity that was created by former members of Alpha Tau Omega which — in a much celebrated 1960 stand against discrimination — was expelled from the national organization for admitting Jewish pledges. Ruffatto pledged the local replacement frat, called Alpha Tau Omricon, where he said he joined in votes to admit black members as well as Jews.

Despite the Vietnam War, Ruffatto joined the Stanford Air Force ROTC and, upon graduation, was commissioned as a second lieutenant in the Air Force. Ruffatto described his ROTC commitment as “partly patriotic and partly economic” as the military helped pay his tuition. He remains proud of his service, often referring to his North American Power Group, Ltd., as “veteran owned.”

After training at Mather Air Force Base in Sacramento, Lt. Ruffatto was assigned as a navigator to a RF-4 reconnaissance squadron that split time between Mountain Home, Idaho, and Europe, where it flew missions for NATO.

Promoted to captain after three years, Ruffatto became proficient enough in the RF-4 — the reconnaissance version of the F-4 Phantom fighter — that he was named a navigator training officer after the squadron moved to Shaw Air Force Base, Sumter, South Carolina.

In 1972 he enrolled in the University of South Carolina law school in Columbia, 45 miles west of Shaw AFB. In the mornings he attended law school; in the afternoons he trained Air Force navigators. When his unit was disbanded as part of an overall force reduction, Ruffatto joined an Alabama Air National Guard unit in order to maintain his flying status and help pay for law school.

After graduating from law school, Ruffatto moved to Phoenix, Arizona, where he had been hired by one of that state’s leading law firms, Snell & Wilmer. He passed the Arizona bar in 1975.

Starting in 1976, young lawyer Ruffatto began working on a contract basis with Arizona Attorney General Bruce Babbitt, who later became Secretary of the Interior under President Clinton.

Assistant Attorney General Ruffatto spent more than a year on one case, the sensational prosecution of Lincoln Thrift Association founder Robert H. Fendler on charges of conspiracy, false book entries, fraud, and failure to file individual or corporate income tax returns.

Fendler, who died in prison, operated 87 small thrift-and-loan institutions across the state in what was shown to be an elaborate Ponzi scheme. His prosecution in state court was one of the biggest fraud cases in Arizona history, dwarfed only by the Charles Keating savings-and-loan scandals a decade later. Lead prosecutor Ron Lebowitz recalled that the case had a staggering 10,000 exhibits.

A junior prosecutor in the case, Samuel P. “Terry” Goddard III, remembers Ruffatto as a hard worker and a mentor.

“Working by the hour was a good gig for Mike, since we worked around the clock preparing for the Fendler trial and then for over six months actually in trial. I think Mike did very well economically in the case, not enough to buy a power company, but well,” recalled Goddard, who later served as Arizona Attorney General and mayor of Phoenix.

“But he was always ambitious and bottom-line interested, so I’m not surprised that he went into business from law.”

Originally published May 27, 2014 by wyofile.com

Part 3: “Pennies on the dollar”

“He got these assets for pennies on the dollar.” — former Baltimore Gas & Electric executive on Mike Ruffatto California power plant purchases. 

Mike Ruffatto’s dealings in the energy industry go back to his days as a young lawyer in Arizona.

During his 1970s stint with the prominent Phoenix law firm, Snell & Wilmer, he worked in the business practice area. One of the firm’s biggest clients was the Arizona Public Service Company, the largest utility in Arizona.

After working briefly for another Phoenix law firm — Powers, Ehrenreich & Kurn — Ruffatto took a job with a private crude oil and petroleum product trading firm, Crysen Corp., which was headquartered in Santa Ana, California. Ruffatto and his young family — he married Phoenix grade school teacher Joan Burrows Smith in 1978 — moved there in 1982.

At Crysen, Ruffatto, describing his role as “problem solving,” concentrated on complicated crude oil transactions.

In 1985 he left that company to form a joint venture, Tri-Gen Resources, with Edgington Oil Company of Long Beach, California, which two years before had been bought by Saudi arms dealer and erstwhile billionaire, Adnan Khashoggi. A high-flying member of the international jet set, reputed to be the world’s richest man, Khashoggi was implicated in the Iran-Contra arms deals and the Lockheed bribery scandals.

Strapped for cash to maintain his breathtakingly lavish lifestyle, Khashoggi used his main asset, Edgington Oil, “as a virtual private bank account,” according to the Los Angeles Times, draining some $89 million“to pay the crew of his $70-million yacht, the 60 servants at his estate” in Spain, and to buy nearly $3 million in jet fuel for his airfleet. He installed his brother, Essam, as his man at Edgington, and forced the company to buy a helicopter to bring Essam to the office from his home in Santa Barbara. Essam appeared once or twice at the office; Adnan, never. Ruffatto told WyoFile that he never met Adnan Khashoggi.

Ruffatto developed the Tri-Gen joint venture into a significant gas trading business with offices in Orange, California, and Denver. As Khashoggi’s empire collapsed and was dismantled in bankruptcy proceedings, Edgington was sold in 1988 to John Castellucci, and the company’s oil-storage unit was sold to Atlantic Richfield. Also in 1988, Ruffatto bought out Edgington’s share of the Tri-Gen joint venture and immediately sold 51 percent of the company to North Canadian Oils, Ltd., the Calgary energy arm of Canadian business tycoons Peter and Edward Bronfman. The Bronfmans were looking for an outlet for Alberta natural gas and they asked Ruffatto to run their California shop.

But in January 1990 the Bronfman brothers discharged Ruffatto, triggering a minority stock buy-out provision under his employment agreement. In his resignation announcement with an energy trade magazine, Ruffatto said that “in three short years” since he formed Tri-Gen, the company had reached $75 million in sales and had $20 million in assets.

The Bronfmans disagreed with the amount Ruffatto demanded for his 49 percent share of the company, and the parties went into arbitration, reaching a settlement in late 1990 that made Ruffatto, who had been in the energy business a little over a decade, a millionaire many times over.

After moving to Colorado with his family — wife Joan and their two children — Ruffatto began to look for a way to invest the fortune he had made in the Tri-Gen buy out.

In late 1992 he found it.

By carefully following the affairs of two financially troubled companies, Ultrasystems Inc., a defense contractor and energy company in Irvine, California, and Hadson Corp., an Oklahoma energy company, Ruffatto saw his opportunity in Oklahoma City bankruptcy court.

In 1987 Hadson and Ultrasystems had merged, with Hadson as the surviving entity. Among other holdings, Hadson inherited four small California power plants — two state-of–the-art coal-fired plants and two alternative energy wood-burning plants — that Ultrasystems was building with its partner, Baltimore Gas & Electric Company (now Constellation), at a cost of $315 million in Bakersfield, Fresno and Rocklin.

In 1988, Hadson entered into a limited partnership agreement with Chrysler Capital Corp., a Greenwich, Connecticut, financial services company, for Chrysler to invest $45 million in the four plants for a minority percentage of the ownership. Another investment firm, Pitney Bowes Credit, also bought into the plants, leaving Hadson with an interest of about 6 percent.

Ruffatto, who from his days with Crysen Corp. had shown an interest in cogeneration and alternative power sources, had been carefully tracking the progress of the four Ultrasystems-Hadson power plants. Badly overextended and deeply in debt, Hadson Corp. in 1992 filed for reorganization under bankruptcy in Oklahoma City federal court.

Ruffatto then made his move. It was by all accounts a brilliant business maneuver.

According to federal bankruptcy records, Ruffatto paid only $1.7 million for Hadson’s 6 percent share of the plants. He then moved quickly to buy out Chrysler Capital and Pitney Bowes, both of which, in his words, “wanted to exit this area of business” and were ready to make favorable deals for their shares.

When the dust settled, the only son of working-class Californians, first in his family to attend college, owned a 50 percent share of four brand-new, modern, electric power plants that had cost over $300 million to build. According to federal bankruptcy records and former utility executives familiar with the deal, his total outlay for this spectacular deal was between $10 million and $15 million.

“He got these assets for pennies on the dollar,” recalled one admiring former executive with then co-owner Baltimore Gas & Electric (Constellation Energy). “He then refinanced them and took out a whole bunch of cash — north of $50 million.”

In addition, said the former executive, who agreed to talk for this article on the condition that he not be named, Ruffatto then brokered a deal through the California Public Utilities Commission and Pacific Gas & Electric, which had contracted for the power, to pay him several million dollars a year not to operate two of the plants, the wood-fired plants in Fresno and Rocklin.

“It was one of those weird things where he bought an operating asset, leveraged it, and then got the utility to pay him for curtailing,” the executive recalled. “It is kind of strange, but some of these old power purchasing agreements were not a great deal for the rate payer, so if you go to the PUC and you say ‘If you will pay me X millions of dollars I will remove the units from service and you go out and replace that power and it becomes a better deal for the rate payers.’”

That was the case in the early part of the 1990s when — like farmers paid not to grow crops — Mike Ruffatto was paid not to operate two of his newly acquired power plants. For what was already a great deal, it was icing on the cake.

In late 1992 Ruffatto used the money he made in the North Canadian Oils arbitration settlement, the money he leveraged from the purchase of the four California power plants out of bankruptcy court, and the money he was receiving for idling his two plants, to create his new Denver-based company, North American Power Group Ltd.

And it is no wonder that, given all his recent business victories, Ruffatto was brimming with confidence. He and his wife had bought an enormous new home and stable in the most exclusive neighborhood of suburban Denver’s Cherry Hills Village. They had a huge motor yacht moored in San Diego Harbor, and they were negotiating to buy a bay-front home with its own pier in Corona del Mar. (After his wife died in 2007, Ruffatto sold the waterfront house to Los Angeles Angels owner Arte Moreno for $12.1 million, about what Ruffatto had paid for his half of the four California power plants.)

Already a success by most measures, he was now ready to turn it into something bigger in the Rocky Mountain region, where he saw potential for small, aggressive, privately held energy companies like his new venture, North American Power Group.

As he told the Colorado Public Utilities Commission in testimony in 2000:

The energy industry has been restructuring itself over the past 25 years that I have been associated with it; first in crude oil, later in natural gas and finally with electricity. Regulated utilities have found that in many instances new entrants and smaller companies are able to provide products and services at lower costs than if the utilities did it themselves.

In 1995, North American Power Group began bidding on Public Service Company of Colorado power projects, hoping to establish a business relationship with the state’s largest utility.

In 1998, NAPG was short-listed on a contract to build two new gas-powered turbines for Public Service (commonly referred to as PSCO) in Aurora, near Denver International Airport. But when North American failed to win the final contract, instead of swallowing the bad news and moving on, Ruffatto decided to make a public fight of it. In a rare investigative hearing before the Public Utilities Commission, he accused PSCO of rigging the bids to favor companies with which it already had a relationship.

The upstart, NAPG, was taking on the state’s largest and most powerful utility in a public forum, a move that could be seen as bold. One independent power executive, Nick Muller, called it “bearding the lion.” Yet, even if he won the battle, Ruffatto risked alienating his biggest potential customer.

“Mike lost out and felt that he shouldn’t have lost,” recalled Muller, who was then director of the Colorado Independent Power Producers Association, which included NAPG as one of its members. “Mike is a strong-minded guy and I think he felt that with his successes in California — he made some pretty good money on some plants out there — that he wasn’t going to get pushed around. And that was kind of his attitude.”

The fight before the PUC was, at least in terms of the normal regulatory process, an especially nasty, public affair.

In words of Administrative Law Judge Arthur G. Staliwe, who oversaw the process, Ruffatto felt that NAPG had been “ambushed” by the utility when it ordered changes in the original proposal.

PSCO, for its part, reported that “NAPG lacked the necessary land use permit, gas turbine procurement contract, and financing with which to carry out the modified bid proposal.”

Testimony from PSCO, particularly that of two executives, David L. Eaves and Karen T. Hyde —  both of whom would later rise to high positions in the utility — was very critical of NAPG and its business practices.

Eaves said NAPG “misrepresented the status of its permitting, failed to supply the turbines it previously represented, withheld pertinent information misleading Public Service until problems were later discovered, and then ultimately refused to supply the power on time.”

Ruffatto testified that he was deeply offended by the PSCO accusations.

“Public Service has made many uncomplimentary remarks about NAPG’s ability to deliver the projects,” Ruffatto said. “My purpose in providing testimony in this docket is not to disparage Public Service. However, the record needs to be set straight, and I intend to do so.” He then went on to say that NAPG had never misrepresented anything in its dealings with the utility and had been honorable and forthcoming in all regards.

Asked her overall impression of Ruffatto’s testimony in the case, Hyde said, “Truthfully, it upset me. Overall, it presented a series of incomplete representations and skewed facts that painted a picture that was very much unlike what I recall.”

The PUC ruled against Ruffatto and NAPG.

Eaves currently serves as PSCO president and CEO. Hyde is regional vice president for rates and regulatory affairs for Xcel Energy Inc., parent company of Public Service Company.

Despite the setback, Ruffatto and NAPG continued to bid on projects for PSCO contracts. In 2006, Ruffatto even went so far as to issue a press release announcing a $1.2-billion power plant and transmission project tailored for the PSCO parent company, Xcel Energy, in Wyoming. Whether he intended it or not, the release gave the impression that the Xcel plant was practically a done deal.

“We are excited by the opportunity to serve Colorado’s growing energy needs with electricity generated from clean coal technologies in Wyoming’s Powder River Basin,” Ruffatto said in the PR Newswire release.

But that ambitious proposal, like others, was almost immediately rejected by Xcel, which issued a press release stating that the company planned to focus power development in Colorado. In fact, Ruffatto and his company have never won a contract from Xcel or PSCO, the biggest utility in their home state.

“I feel that Mike probably shot himself in the foot earlier by being so shrill in the battle before the PUC,” said Muller. “But that’s just what old timers like me were thinking at the time. It was just a matter of judgment.”

But some of the charges leveled at NAPG before the Colorado PUC — that the company consistently missed deadlines, that it was under-financed, that it skewed facts and misrepresented negotiations, that it failed to obtain the necessary permitting — were the same ones that would haunt Ruffatto and his company for the next 15 years in Wyoming in the Two Elk project, and which would lead to the suspension of the $10 million in stimulus grants he received from the U.S. Department of Energy.

Originally published May 29, 2014 by wyofile.com

Part 4: “Like I was purchased?”

“Are we a bunch of naïve buffoons? I don’t think we are. I just think we are way too trusting.” — Former Wyoming Gov. Dave Freudenthal

At one level the Two Elk saga — from its beginning as an ambitious power plant proposal to its conclusion as a failed and questionable stimulus project — is a revealing case of potential fraud and government malfeasance on a grand scale.

On another level, it offers a deep look into the sometimes desperate, often misguided, attempts by our country’s least populated state, Wyoming, to find a meaningful place for itself in the American economy and body politic.

“The problem was that you were sitting there and thinking ‘Man, something like this would really be good for the economy up there.’ And frankly, you kept hoping it was true,” former Gov. Dave Freudenthal said in a recent interview with WyoFile.

Since the coal boom in the late 1970s and early 1980s, Wyoming’s Powder River Basin has been the place where an impressive number of wildly ambitious, highly improbable energy projects have come to die — usually taking substantial sums of public money with them.

Behind this is the special alchemy — spinning coal into gold — that boosters and politicians for some reason find irresistible.

Wyoming has huge reserves of carbonized latent energy just under the topsoil – but that coal has always had its special problems. It is relatively low in energy, compared to coal in the eastern U.S. So it wasn’t until the late 1960s that industry eyes turned to Wyoming, after national interest in clean air made the energy content in the state’s coal less important than its sulfur content (which is lower than that of coals in the east).

Many ambitious state leaders were inspired by a visionary and broadly influential 1971 report called the North Central Power Study. The report, produced by the Interior Department and 35 public and private companies, assumed a steady 6.5 percent growth in electric power demand and predicted that by the late 1980s there would emerge a huge complex of 42 coal-fired power plants and seven coal gasification plants in eastern Montana, the western Dakotas and Wyoming.

The focus on Powder River Basin coal quickly dominated the energy development and industrial growth debates in the West of the 1970s and early 1980s, and strongly influenced the mindsets of up-and-coming policymakers and entrepreneurs in the West, including Freudenthal. Back then, Freudenthal was top aide to Wyoming three-time governor Ed Herschler, a Democrat famous for his “growth on our terms” slogan.

For the caretakers of the public trust in Wyoming, the question has always been: What’s the best, most profitable way to move the energy in coal to the urban markets that need it? Sometimes, but not always, politicians gave an afterthought to how the process might affect the environment.

Mine-mouth power plants like those projected in 1971 were appealing, but only a few popped up. As an alternative, railroads hauling the coal to distant power plants were obvious, and, it turned out, most practical. But there was a big downside to rail: the mile-long trains of open-top hopper cars that went out laden with coal had to deadhead back to the mines to pick up another load. It was costly and seemed inefficient, like buying a round-trip plane ticket and only going one way.

And the railroad could take a big cut of the profit that might have gone to the mines and to state coffers, if the coal could be processed in Wyoming.

Ever seeking a more profitable way, Wyoming’s coalfield alchemists dreamed up countless alternatives to rail that, over the years, have included gasification, liquefaction, distillation, concentration, compaction, combustion-transmission (Two Elk power plants) and flushing — the latter through immense coal-slurry pipelines.

And for almost every scheme — in the heart of coal country and in the corridors of the Wyoming capital — the promoters found ready-and-willing true believers, even for projects based on the flimsiest of faux science.

Sometimes the schemes were propelled by international crisis, such as the 1970s Organization of Petroleum Exporting Countries (OPEC) oil embargo that panicked consumers and created gasoline lines across the country. Other ideas took their inspiration from national events, as Mike Ruffatto and Two Elk did from the 2000-2001 California energy crisis.

And sometimes, it was just plain, old-fashioned greed that clouded common sense.

Probably the first of these doomed efforts to reach Campbell County was the $2 billion Hampshire Energy synfuels project in the 1970s, boosted by $4 million in Department of Energy research grants. The Hampshire plan was to convert, every day, 15,000 tons of coal into 20,000 gallons of gasoline.

Boosters in Gillette got so excited about this proposal that they planned adding an extra floor to the new city hall to house the Hampshire company headquarters and handle the boomtown growth — up to 10,000 new residents — they expected the project to produce. Moreover, city leaders were willing to dedicate 5.5 million gallons of the city’s wastewater to the project, rather than returning it to the aquifer that was the source of the community’s drinking water.

Conceived during the Jimmy Carter administration, the Hampshire project died a quick death in 1982 when oil shortages eased and President Ronald Reagan targeted Carter’s synfuels agenda for budget cuts.

“It was one of those things that just didn’t happen,” former Gillette Mayor Herb Carter told Gillette News-Record reporter Charlie Homans in 2004.

The Hampshire debacle was followed in short order by what has to be one of the lowest moments in Wyoming legislative history, the proposed multi-billion dollar, 1,386-mile, coal-slurry pipeline from Gillette to White Bluff, Arkansas, or, in a later variation, an even longer route into Texas.

The coal-slurry pipeline — pulverized coal mixed with water — was first proposed in 1974 by Energy Transportation System Inc. (ETSI), a consortium of companies that included the California engineering giant, Bechtel Corp.; the late Lehman Bros. financial house; and the Kansas-Nebraska Natural Gas Co.

The pipeline would have required a huge amount of water — 4.9 billion gallons a year. To facilitate the project, the Wyoming legislature blithely gave ETSI permission to draw what it needed from the subterranean pools of the Madison formation in the geological basin along the Bighorn Mountains.

The legislature stuck to its position even after an environmental impact statement estimated a drawdown of as much as 100 feet of groundwater over an area of 3,800 square miles, including Wyoming’s Niobrara and Goshen counties and parts of South Dakota.

The project was finally abandoned in 1984 in the face of growing opposition from ranchers and environmental groups, and even from railroads, which saw the project as competition for its coal traffic.

One leading opponent was Lusk rancher and legislator Melvin ZumBrunnen, who founded the organization Save Wyoming Water to fight the pipeline. The coal-slurry water legislation, ZumBrunnen said, had quietly slipped through the legislature and blind-sided ranchers.

“None of the ranchers were hydrologists or engineers,” ZumBrunnen told the Gillette News-Record,  “so it was just something that got past them at the time. But the more they dug into it, the more they found it would be a potential disaster.”

Then came the era of “clean coal.”

In 1987 the Wyoming legislature approved a bill that would allow the state’s Permanent Minerals Fund to loan up to $30 million to private developers of “clean coal” or coal enhancement technologies.

By 1995, the state had lent $20 million to three companies, including two in Campbell County, and all three had defaulted. Wyoming Treasurer Stan Smith declared the clean-coal loan program a “disaster” and said that no more money would be lent from the fund.

But that was after $8 million had already been loaned to a Colorado company called Char-Fuels, which had been first in line for the loans back in 1987. Char-Fuels’ proposal was for a $25-million coal-to-liquids demonstration project next to the Dave Johnston power plant outside Glenrock, Wyoming.

Wyoming officials became concerned in 1990 when an audit showed that of the first $2.27 million spent by Char-Fuels, only $6,455 had gone toward construction. But they became outraged in 1992 when Char-Fuels’ management said they wanted to move the whole project to Golden, Colorado.

“It’s bad enough that they are not doing what they said in building a demonstration project in Wyoming,” said then-state Representative Scott Ratliff. “To insult the state further, they’re putting their plant up in Colorado with Wyoming money.”

The most recent example of a major coal project misfire — not counting Two Elk — is the aborted University of Wyoming-GE High Plains Gasification research facility that ended up costing the state $7 million before it was terminated in 2011, when GE pulled out to concentrate on its China business. According to UW vice president and general counsel Rick Miller, $2.5 million of the state’s cost went for general expenses related to the project, and $4.5 million was to be used to repay GE for half of what the company had put into the project.

Although located in Cheyenne, the secretive $100-million private-public joint venture was to burn Powder River Basin coal. The abrupt GE pullout was a bitter event for former Gov. Freudenthal, who had convinced the legislature to obligate $50 million to the state’s side of the joint venture and who had seen it as one of his major achievements in office.

“I understand that GE is not a philanthropic organization, but I’m disappointed because I believe they made a commitment,” said Freudenthal. “It seemed to me that we had struck a bargain. It wasn’t something that you would sue over, but there was an awful lot of good faith and everybody was working at it.”

During his first term as governor, 2002-2006, Freudenthal had been one of those most publicly skeptical of Mike Ruffatto’s Two Elk project, several times rejecting the North American Power Group’s constant requests for more bonds.

Freudenthal was sensitive about controversial coal projects. In 1987 he had been an attorney for and investor in a Denver company, Energy Brothers Technology (later KFX Inc.), that received an $11.7 million state loan in the same controversial “clean coal” program that State Treasurer Smith described as a “disaster.”

Freudenthal’s Republican opponents seized on the Energy Brothers loan — which occurred when Freudenthal was a member of the state Economic Development and Stabilization Board — as a weapon against him in the 2002 governor’s race.

“I frankly don’t think we are skeptical enough,” Freudenthal said to explain his reluctance to rubber stamp Mike Ruffatto’s requests for state bonds. “I was involved in that fiasco involving clean coal and I learned a lot from that experience.”

Undeterred by rejection, however, Ruffatto and his agents kept the pressure up.

“As a general rule they would come in and ask for everything we had,” recalled Wyoming Assistant Attorney General Martin Hardsocg, who oversees the industrial bond applications. Hardsocg said the state eventually had to change the rules from a “first-come, first-served” January 1 deadline to give other applicants besides Ruffatto a chance for the bonds.

“We needed to allow the governor more discretion because Two Elk was coming in without fail on the first day of the year,” Hardsocg said.

At one point, faced with another barrage of bond requests from the Two Elk promoters, Freudenthal instructed his staff to confront Ruffatto with a battery of tough questions about the project before he approved any more bonds. “And we still didn’t get very good answers,” the former governor recalled.

But in September 2006, one month after he received $2,000 in campaign contributions from Ruffatto and his wife Joan, Freudenthal granted North American Power Group another $119 million from Wyoming’s federal bonding allocation. It was the last bond allocation that Ruffatto would get from the state.

After this, Ruffatto placed “Gov. Freudenthal” high on his Power Point presentations of state assets available for his project, along with favorable business climate and an abundant “mine-to-mouth” coal supply.

“Like I was purchased?” Freudenthal reacted angrily when he was informed of this in a recent interview. “That little shit.”

After his reelection in February 2007, Freudenthal received another $1,000 contribution from North American’s Brad Enzi, the Republican U.S. senator’s son, who was then vice-president for governmental affairs for NAPG.

Ruffatto had hired Enzi in 2006, when the gregarious 6-foot, 8-inch former University of Wyoming walk-on basketball player was 31 years old. Enzi had worked previously as a lobbyist for Black Hills Corporation — the Rapid City, South Dakota, energy company of which his father is a former director — and a lobbyist and field sales consultant for the pharmaceutical company SmithKline Beecham.

The next year, 2007, Ruffatto promoted young Enzi to replace Daniel Yueh, an electrical engineering graduate of the University of California with more than 30 years experience in power plant construction, as vice president in charge of Two Elk. Yueh said he had resigned because he was frustrated with North American’s inability to obtain transmission connections to complete the project.

The “preference allocation” letter that Freudenthal signed, approving the final $119 million in bonding, contained the following condition, as required by federal law: “No bribe, gift, gratuity, or direct or indirect contribution to any political campaign was offered or made as consideration for the allocation.”

Freudenthal said he was aware of the political campaign contributions from the Ruffattos and Brad Enzi, but said that they had not influenced his decision to approve the $119 million in bonding authority to North American. “There just wasn’t a lot of other demand for the allocation at the time,” Freudenthal explained.

Ever-affable Brad Enzi — who, using the stage name “Big Easy,” had played bass guitar for the former Cheyenne rock band Bell Diablos — was at the time the most prominent and enthusiastic public promoter of the Two Elk project and Mike Ruffatto’s dream.

“The history of America’s innovators include many cases of difficult trails, trials and roads to the progressive achievements that, in retrospect, we as a nation admire,” he explained to WyoFile in 2008. “With grit, determination and responsibility, ours will join the ranks of such success stories, and Wyoming will be proud of the quality jobs, ingenuity and innovation we will deliver.”

In interviews, Brad Enzi claimed that his father, Wyoming’s popular senior senator, has never met Mike Ruffatto, nor has Sen. Enzi attempted to intervene on NAPG’s behalf. “My dad and I have a very Chinese-Wall relationship when it comes to what I do for a living,” he told WyoFile.

Brad Enzi omitted that he had worked  briefly for Black Hills, his father’s former employer, or that he was a registered lobbyist from 1998-2000 for the pharmaceutical company SmithKline Beecham (now Glaxco SmithKline) while his father sat on the Senate Health Committee.

In addition to employing Brad Enzi, Glaxco SmithKline since 1998 has donated a total of $47,338 to Sen. Enzi’s campaign committee and political action committee, Making Business Excel.

In addition, for the past 10 years Sen. Enzi has employed Brad Enzi’s wife — now former wife — Danielle Davis Enzi as his fundraising consultant for both the campaign committee and PAC. Laramie County court records show that until their divorce in September 2013, Danielle Enzi’s payments from Sen. Enzi’s campaign contributions accounted for about one-third of her and Brad Enzi’s annual household income of $233,898.48. (According to the most recent Federal Election Commission records available ending March 31, 2014, Danielle Enzi continues to receive payments from Sen. Enzi, including a $10,000 fundraising/consulting bonus in January.)

Still, “Chinese-Wall” or not, having a highly recognizable last name has not hurt in the many times that Brad Enzi has gone before the Industrial Siting Council, Campbell County Commission and other public bodies, pleading for extensions on various permits NAPG has received from the state. His father, after all, had been a popular mayor of Gillette from 1974 to 1982 – serving during both the Hampshire and coal slurry pipeline episodes — before entering the Wyoming legislature and finally, beginning in 1996, the U.S. Senate.

As Laramie attorney Reed Zars complained in frustration after one such extension a few years ago, “They should have killed this project years ago. Frankly, I don’t see why they didn’t, except for a senator’s son smiling and waving some documents in front of them.”

In 2007, Zars represented the Sierra Club and the Powder River Basin Resource Council in an unsuccessful federal lawsuit attempting to stop the Two Elk project on the grounds that NAPG had failed to begin construction on time, violating the conditions of an agreement the company had reached with the Wyoming Department of Environmental Quality.

As late as April 2013, more than 17 years after the Two Elk plant was first proposed, Enzi told the Wyoming Industrial Siting Council that construction would finally begin this year, in January. But so far in 2014, said Dan Tracy, a rancher whose property abuts the Two Elk site, nothing has happened on the property except for an occasional visit from a reporter or television news crew looking into the stimulus scandal.

“They haven’t done a damn thing since they did a little leveling out there a few years ago,” Tracy said. “That metal building they put out there for show has been empty since they built it. I know that for a fact because our cows run right up against it.”

Originally published June 3, 2014 by wyofile.com 

Part 5: “The project from hell”

“If I could build it with a hammer, I would.” — North American Vice-President Brad Enzi, March 2007 before the Campbell County Commission.

Late in the year 2000, the big dream — the private power empire on the Wyoming high plains, the promise of inestimable wealth and, just perhaps, a chance to show up the Colorado utility that had slapped him around some months before — must have seemed tantalizingly close to Mike Ruffatto.

Out of almost nothing besides his own shrewdness and a creative interpretation of federal tax laws, he had come up with a seemingly steady source of attractive financing sponsored by Campbell County and the state of Wyoming, which granted him hundreds of millions of dollars in tax-exempt bonding authority.

He had somehow convinced the IRS that his coal-fired power plant was really a “solid waste disposal and recycling facility.” He had the giant coal companies willing and eager to provide the cheap “waste coal” that he needed to fire his turbines.

He also claimed he was on the verge of solving the tricky transmission problem.

And, best of all, he said he had the thing he needed most — a 10-year contract with a “nationally-recognized power marketer” to share the risk and reassure investors.

This all came with an unstated caveat, of course, because Ruffatto had already demonstrated a proclivity for announcing deals he did not have and promising deliveries he could not make.

In the spring of 2000, the California energy crisis had erupted in San Diego. Electricity prices spiked and quickly led to shortages that caused widespread blackouts across the state. At the time, the blackouts were attributed to power supply and transmission problems. It was a frightening moment, especially in California, the country’s richest and most populous state.

It seemed obvious to almost everyone that the United States, particularly the western United States, needed more electric power, and needed it yesterday.

And to Mike Ruffatto, it must have seemed especially propitious to have a power plant project already in the works. So much so, he decided to add two more projects to his construction agenda.

“With the help of the state of Wyoming and existing transmission owners to add new, large transmission lines, these new generation facilities can help lower prices and prevent the type of blackouts now happening in California,” Ruffatto told the trade Platt’s Coal Outlook in April 2001, during the height of the power crisis.

On April 6, 2001, Ruffatto unveiled plans to build a 500-megawatt mine-mouth plant he called “Middle Bear” next to Kennecott Energy’s Cordero Rojo complex 25 miles south of Gillette.

Exactly a week later, he announced that he would build another plant, Two Elk II, on the same site as Two Elk I. Like Middle Bear, this also would be a larger, 500-megawatt plant fired with higher grade coal from Powder River Basin mines.

“The facility is expected to burn up to 3 million tons annually of coal,” Ruffatto said. “Coal can be supplied from any of the 17 mines in the area.”

Two Elk II would be followed in the years ahead, he informed potential investors, by three more plants — Two Elks III, IV, V — until five major electric generating plants, each larger than the other, lined up on his 880-acre site next to the Black Thunder mine. From the air, it would look like a small industrial city.

“For the second time in less than a week,” the Gillette News-Record reported in its April 12, 2001 editions, “North American Power Group has announced that it will build a 500-megawatt power plant in Campbell County.”

A shortage of affordable power in California, Ruffatto told the News-Record, “puts Wyoming in position to play a major role in the power generation industry.”

So even before he had finalized the financing or — it turned out — pinned down the transmission on his first power plant, Ruffatto had announced plans for five additional plants, four more Two Elks and a Middle Bear.

In gambling terms he was “doubling down” on an already risky venture. (Some years later, in 2006, he would announce yet another plant, the proposed 1,000-MW Xcel plant near Douglas, bringing his total of planned Powder River Basin plants to seven.)

But in blackout summer of 2001, with the giant Enron Corp. and Williams Co. electricity trading floors in Houston and Tulsa dealing at a frantic pace and with no end in sight to the California power crisis, Ruffatto must have felt good about his chances.

And then things began to unravel.

In August 2001, only a few months after he had announced his Middle Bear and Two Elk II projects, federal regulators with the Western Area Power Administration cancelled two public meetings NAPG had requested to discuss new transmission lines to service the new plants.

Western Area Power environmental manager Jim Hartman described the NAPG proposals as too vague.

“Without a proposed route and clear project proposal to present to the public,” Hartman told The Associated Press, “the presentations will be ineffective and the public will not be able to provide meaningful comments.”

On September 11, al Qaeda terrorists attacked New York and Washington, destroying the World Trade Center twin towers and damaging the Pentagon. The attack jolted the economy and panicked potential investors across the land.

And then the biggest development of all — Enron Corp., which in 2000 had claimed revenues of $101 billion, began to sink.

Enron’s final collapse into bankruptcy in December 2001 had two major effects, both of which were bad for North American Power Group, Two Elk and Mike Ruffatto’s dream of energy empire.

First, the collapse supported the theory — later proven in federal court cases and in confessions from former Enron executives — that the California energy crisis had been artificial, manufactured out of electricity supply manipulations by Enron and other traders. This meant that the need for electricity was not nearly as great as had been believed in March and April of 2001, when Ruffatto was announcing his new power plants.

Second, the Enron collapse caused heavy collateral damage to many other affiliated companies.

One of these companies was Tampa Energy, or TECO, a large Florida utility that, it turned out, was the previously unnamed “nationally-recognized power marketer” that Ruffatto claimed would be his 10-year marketing partner in the Two Elk project. The Enron collapse meant that TECO — which had a reported $2 billion financial exposure in the Houston company’s bankruptcy — no longer had the money.

This news was received with funereal solemnity in Wyoming’s Powder River Basin, which had been getting comfortable with the idea of being a major player in the power generation industry.

“Enron Debacle Sinks Two Elk Partnership,” the state AP newswire announced.

“While (TECO) is still interested in Two Elk and still wants to be in Wyoming,” explained NAPG veep Daniel Yueh. “I don’t think they have a checkbook.”

In the decade to come, Ruffatto and his Wyoming team — first Yueh and later his Wyoming replacement, Brad Enzi — would try desperately to rekindle the project, periodically announcing chimerical new partnerships and new negotiations with potential investors.

But the Two Elk scheme never fully recovered from Enron’s dramatic failure.

In fact, in the spring of 2013 when Enzi went humbly before the Wyoming Industrial Siting Council to ask for the Two Elk project’s seventh construction permit extension in 16 years, he cited the 2001 Enron collapse, along with the 2008 economic downturn, as the main reasons for Two Elk’s troubles.

The Siting Council approved the extension 4-2, but with reservations.

“I haven’t heard anything here this morning that tells me it’s going to happen,” said council member Richard O’Gara. “If it didn’t happen between 1999 and 2006, or 2007, I don’t see how it’s going to happen moving forward.”

During the 13 years since Enron’s demise, there have been many announcements of imminent construction activity at Two Elk, as if the mere announcement were action enough.

We are going to go ahead and start construction. (Mike Ruffatto, August 3, 2002, in DouglasBudget newspaper)

We continue to make, frankly, very good progress. (Mike Ruffatto, April 22, 2005, to The Associated Press)

Unit 1 is officially commenced. Construction began in late May 2005. (Mike Ruffatto, January 2006, in a PowerPoint presentation to a meeting of Southwest Area Transmission group of the Western Electricity Coordinating Council)

The plant’s still going to commence this year. (Brad Enzi, March 7, 2007 before Campbell County Commission)

Construction is on-going at the site. (Mike Ruffatto, Oct. 26, 2010 in letter to the California Energy Commission)

Construction will begin in January 2014. (Brad Enzi, April 1, 2013 to the Wyoming Industrial Siting Council)

Of course, all of these statements were false. Other than the 2005 finishing of the gravel road to the site and the pouring of a concrete apron, no significant construction has taken place in the nearly two decades since the project was first proposed.

There were also occasional announcements of new partnerships or pending power purchase agreements, although they inevitably turned out to be much less than what Ruffatto and his loyal staff claimed they were.

In May 2003, for example, NAPG announced ecstatically that it had found a new partner, Michigan-based DTE Energy Co, to replace Tampa Energy.

“This is the most important event that we have been waiting for,” said Daniel Yueh. “We inked the first of several documents.”

Harry Underwood, NAPG’s local government liaison, said construction would begin once the partnership was finalized.

However, Steve Hudolin, the DTE executive who handled the Two Elk file, said that dealings between NAPG and his company — one of the largest utility holding companies in the country — never got that far.

“I think they may have inflated the relationship,” Hudolin said in a recent telephone interview. “The only document we ever signed with them was a confidentiality agreement.”

Hudolin said he traveled to Wyoming in 2003 to meet with Two Elk representatives and local officials, but came away without a deal.

“The issue was always that they needed someone to purchase the power. The reason we looked at them is that they said they had power purchase agreements and it turns out they didn’t. We stopped our participation.”

NAPG officials, meanwhile, blamed the DTE break-up on the Wyoming Department of Environmental Quality, which had revoked Two Elk’s air quality permit after inspections showed no construction progress on the site. The same state that had generously given them the investment advantage of tax-exempt bonds, they argued, had now deprived them of a willing partner.

But it seemed always to be the same thing with Two Elk. Before anything else could happen they needed to line up their electricity customers. No customers, no project.

It was that way with the transmission problem, too.

In October 2007, Brad Enzi announced that NAPG had signed an “interconnect transmission agreement” with PacifiCorp Energy, the Salt Lake City-based electric utility company.

“We’re really excited about it, obviously, because it is a milestone in our project,” Enzi told the Casper Star-Tribune.

However, PacifiCorp spokesman Jeff Hymas said Enzi and NAPG had once again misrepresented the facts in this case. What NAPG really needed to move forward on the project, Hymas said, was a “transmission service agreement.”

“Typically,” Hymas said in a 2008 interview with WyoFile, “a transmission service request such as this would not come directly from the company that owns the plant, but rather from the electric utility their generation is being sold to.”

In other words, before Two Elk could get transmission, it needed a customer and that customer needed to request a transmission service agreement. Moreover, PacifiCorp executives made it clear on background that they were not pleased with the way that NAPG had characterized the incomplete transmission arrangement to potential investors and state officials.

“We don’t want to be used as leverage,” one executive told WyoFile.

Brad Enzi later described the PacifiCorp flap over transmission as a “hiccup,” but, obviously, no longer a “milestone.”

Yet another example of premature announcement involved a small Utah utility.

In a 2008 letter to Campbell County, Mike Ruffatto announced that the cost of building Two Elk I — not to mention, and NAPG didn’t, Two Elks II, III, IV and V — had risen to $900 million, three times the original estimate. (Subsequent correspondence from Two Elk’s bond attorneys put the projected cost at more than $1 billion.)

To cover the increased costs of construction, Ruffatto wrote, “Two Elk expects to sell an undivided 34 percent tenant-in-common interest in the project to Utah Municipal Power Agency, which will be responsible for paying 34 percent of the project’s cost.” Ruffatto was counting on Utah Municipal, a small electric utility serving six Utah towns, the largest of which is Provo, to come up with $306 million for Two Elk.

But, as had been the case with DTE Energy five years earlier, the “expectation” of an imminent deal was more hope than fact.

Utah Municipal General Manager Layne Burningham told WyoFile that negotiations “never got beyond a non-disclosure agreement.”

“We were looking at either being a joint owner of the plant or taking out a power purchase agreement,” Burningham recalled in a recent telephone interview. “But in the end we just couldn’t get comfortable with the project. We met Mike and had a couple of meetings in Colorado. But the financing structure bothered us and it seemed like there was a lot of gaming going on.”

Meanwhile, frictions had started to develop between NAPG and the main coal mining companies, Arch Coal and Peabody Energy, with whom Ruffatto had contracted to get the “waste coal” that he intended to burn in Two Elk I, as well as the higher-grade coal he wanted to use in Middle Bear and Two Elks II through V.

Some of the friction with the coal companies came after October 2009, when the IRS began its audit of Two Elk’s $445 million in tax-exempt industrial development revenue bonds. The fact that it had taken the IRS so long to do an audit of the bonds — more than a decade after the first bonds were allocated in 1997 — is something of an oddity in itself.

A key condition of these tax-exempt bonds, Cheyenne bond attorney Barbara Bonds told WyoFile, is that the money be spent quickly to avoid arbitrage and other abuses of the bonds.

“You are not supposed to keep tax-exempt bonds,” said the aptly named attorney. “The whole concept of tax-exempt bonds is that we are all on the honor system, and everything is based on the reasonable expectation that 85 percent of the proceeds is spent within three years.”

Because of this expectation, it became clear that once the IRS began its belated audit, NAPG was likely to lose the tax-exempt status. This is what finally happened in 2011, when the IRS rescinded the exemption on all of the bonds, instantly taking away one of Mike Ruffatto’s main selling points.

But even before the audit report appeared, Ruffatto had begun to talk publicly about using other fuel supplies — for example, beetle-kill biomass — in the Two Elk plant. This upset some of the coal company representatives who had been working closely with Ruffatto over the years.

“I was very disappointed in Mike Ruffatto,” said Victor “Vic” Garber, a former Peabody senior land agent who now owns his own consulting firm in Douglas, Wyoming. “After all those years working with him to make a place where coal companies could actually market sub-standard coal, it turned out he flip-flopped like a fish on the bank. You know, one time it was coal, then all of a sudden he got all the way into burning beetle-kill, and timber, and so on.”

In countless public filings and appearances, Ruffatto had expounded on the virtues of using “waste coal,” saying that NAPG had entered into “life of the mine” agreements with the major coal companies. It was a major selling point and the critical element of his contention that Two Elk was, in fact, “a solid waste disposal facility” that qualified for tax-exempt bonds.

Whatever the fuel, Ruffatto still styled his power plant as some kind of environmentally friendly operation. NAPG and Two Elk Generation Partners, he wrote Mark Koostra of the California Energy Commission on October 26, 2010, had “recognized a growing need to provide long-term and sustainable use for woody waste resulting from the removal of hazardous fuels in forests throughout the western United States, principally due to an epidemic of mountain pine beetles.”

Of course, this immediately raised the question of why the Two Elk plant — and all the other plants Ruffatto said he still intended to build on the site — needed to be located in a treeless, sagebrush steppe only a few miles from the biggest surface coal mines in the United States.

Ruffatto had an answer for this, too. In fact, he had a new theory to replace the “waste coal” theory that had been the linch-pin of his project for nearly two decades.

“Additionally,” he wrote in the letter to the California Energy Commission official, “NAPG determined that there was an opportunity to efficiently and cost-effectively access biomass materials from throughout the United States, in part through utilization of the coal trains that return empty to adjacent sidings to load Powder River Basin coal for shipment.”

In other words, the advantage of Two Elk was no longer the great coal fields that surrounded it, but the empty trains that came into the Powder River Basin to load coal.

At some point around this time, according to Arch Coal spokesperson Kim Link, the “life of the mine” agreement between Arch and NAPG for waste coal from the Black Thunder mine was “terminated.” Link did not say which party ended the pact, saying simply, “I’m told that the agreement terminated.”

For his part, Vic Garber was not surprised.

“I call it the project from hell,” Garber said of Two Elk. “It has milked a lot of county, state and federal money forever. I find it unfortunate that Brad Enzi, the senator’s son, was involved in it. This whole thing takes on the nature of what I call milking the cow.”

Originally published June 5, 2014 by wyofile.com. 

Part 6: “Shame on them”

“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 

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.

“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.

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.

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.”

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.”

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.”

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.

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.

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.”

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.

“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.”

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.”

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.”

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 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 the 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.

Notes on Sources and Acknowledgements

First published as a series of  articles on WyoFile.com, this book is based on a broad review of public records and on dozens of interviews conducted since January 2011 in person, by telephone, or through email correspondence in 11 states — Wyoming, Arizona, Colorado, Michigan, Utah, California, Montana, Pennsylvania, New York, Maryland, West Virginia — and Washington, D.C.

Among the documents reviewed were Department of Energy invoices obtained under the Freedom of Information Act; quarterly filings with the federal Recovery Accountability and Transparency Board; Colorado, California and Wyoming real estate assessment records; state and federal environmental filings; Colorado and California public utilities commission filings and transcripts of investigative hearings; state and federal tax-exempt industrial bond applications and correspondence; three voluminous bond sale transcripts and supporting documentation including detailed financial records; Internal Revenue Service audit reports and related correspondence with Wyoming county officials; federal Inspector General audit reports; paper and email correspondence between state and federal officials; state and federal campaign contribution reports; promotional materials and presentations by North American Power Group; and hundreds of articles in both general news and trade publications.

Among those interviewed were North American Power Group current and former employees, including NAPG president Michael J. Ruffatto and NAPG vice president Brad Enzi; former governors of Wyoming and Montana; a broad range of current and former Wyoming, California and Colorado officials, both elected and appointed, including members of relevant regulatory agencies and commissions; DOE supervisors and officials with the National Energy Technology Laboratory in Pittsburgh; ranchers with property adjacent to the Two Elk site; coal company land agents; and more than a dozen contractors, subcontractors and vendors, including engineers and scientists with expertise in the CO2 carbon sequestration field. Supplementally — for comparison purposes — I  interviewed a number of scientists, engineers, contractors and accountants with several stimulus-funded carbon sequestration site characterization projects similar to the Two Elk project.

Beginning in January 2012 after WyoFile reported that DOE had suspended the Two Elk stimulus grant, our numerous requests and appeals for additional documents under the Freedom of Information Act have been denied on the grounds that the case was the subject of  an “ongoing investigation” and “pending enforcement action.” I should note, however, that in nearly two years of interviews with dozens of people connected to the stimulus grant, I only encountered one individual who said he had been interviewed by federal investigators. That person, one of the principle contractors in the Two Elk stimulus grant, said he was questioned in person by an investigator with the National Energy Technology Laboratory. However, most of those whom I interviewed were eager to share what they knew. Several of those whom I attempted to interview said they were restricted in what they could say to me by corporate policy or non-disclosure contracts with NAPG, but volunteered that they would be happy and willing to talk about the Two Elk project if they were contacted by federal investigators.

Acknowledgements:

The stories were funded by a grant from the Fund for Investigative Journalism, Washington, D.C., and a generous donation from WyoFile co-founder and longtime patron Christopher Findlater, formerly of Cheyenne and now living in Miami, Fla. WyoFile board chair Anne MacKinnon, an outstanding journalist and expert on resources policy, offered several excellent suggestions for an early draft. Olivia Koski of Atavist supervised the conversion of the website series into this ebook format using Creatavist software. My professional colleague John Lancaster and his wife Gail Walker graciously put me up in their Capitol Hill home during my Washington, D.C., reporting trip. My cousin Kim Tempest housed me in Denver and R.T. Cox hosted me in Gillette.

Special thanks go to the dozens of sources, named and unnamed, who volunteered hours of their time to help me understand the Two Elk Saga. It is proof once again that public service journalism is not possible without an engaged public.

Finally, this story would not have been possible without the loving support and diligent assistance of my wife, the writer and brilliant copy editor Laura Richardson.

— Rone Tempest

About the Writer

A descendant of Morman pioneers who first came to Wyoming in 1860 (Robinson, 9th Handcart Company), Rone Tempest was a longtime national and foreign correspondent for the Los Angeles Times. One of the the co-founders of the public policy website WyoFile.com, he served as its editor from 2008-2011. His first story on the Two Elk power plant project appeared in the inaugural edition of WyoFile in February, 2008. He lives in the foothills of the Wind River Mountains outside Lander, Wyoming.