After a decade and a half of bickering, accusations, allegations, a lengthy lawsuit and nearly $350,000 in legal costs paid by ratepayers to its attorneys in Susanville and Sacramento (according to a 2016 public records act request from the Lassen County Times), the Lassen Municipal Utility District’s attempt to avoid the obligation and cost of removing the Hayden Hill powerline continues.
Maurice Anderson, Lassen County’s planning director, updated the Lassen County Board of Supervisors on the progress of LMUD’s effort to “retain and energize” the Hayden Hill power transmission line at its Tuesday, March 22 meeting.
The first part of that process is the completion of an Environmental Impact Report followed by a revision of the county’s general plan that would require approval by the Lassen County Board of Supervisors. The process also may require additional approvals by state and federal agencies. Lassen County assumes responsibility as the lead agency in the EIR process, but LMUD assumes responsibility for all costs.
Anderson said he expects the county’s approval of the EIR and the general plan revision would be conditioned that they both “meet and satisfy all conditions by the Forest Service (and other agencies) which would have their own environmental review process and their own entitlement process … ”
Richard Egan, Lassen County’s administrative officer, said, “I just want to make a point I think needs to be made often — doing a $300,000 analysis doesn’t guarantee anything. It’s not within this board’s jurisdiction to decide whether that’s a good gamble for LMUD’s ratepayers, but at any rate it doesn’t confer any definitive benefit by doing that. It may, in fact, result in an analysis that shows the line still should be removed and then the ratepayers are paying not only the inflated amount to remove the line but also the (cost of) the environmental analysis. I want that to be made very clear.”
Responding to LMUD’s request to produce the EIR, Anderson said the county received three responses to a Request for Proposals for an Environmental Impact Report on the powerline. He said the building department rejected one proposal that did not meet the county’s requirements, and he said both remaining bids are in the “$300,000 and change” range.
“I don’t want to rewrite the whole thing,” Anderson explained to the board, “but we have a powerline now owned by LMUD, originally owned by Lassen Gold Mine, Inc. (aka Kinross Gold). As part of the environmental review that was originally done as one giant document with multiple agencies, there was a requirement to remove the powerline (when the gold mine closed) and that was in order to not analyze the impacts the powerline might have in the future — growth inducing impacts, bio, etc.”
Responding to a question from supervisor Jeff Hemphill, Anderson said originally “a deal was struck to not study those implications that the line staying energized might have, and LMUD is making an application to now study those things in order to qualify, and their desired effect would be to have an EIR that was certified … They’re trying to go back and do that analysis so they can keep the line in place.”
“So, what’s the county’s exposure if we renege on that deal and approve the line — because that’s the original deal — the line was to be removed after the closure of the mine?” Hemphill asked.
“That was the original idea,” Anderson said, “but they’re (LMUD) certainly in a position where they can make an application to modify that. That’s a prerogative of LMUD to make that application and try to modify that deal.”
Anderson referred the liability question to County Counsel Amanda Uhrhammer, and she said the county has no liability if the EIR is modified as LMUD desires.
“If they get it modified, they’re able to modify it,” Uhrhammer said.
Anderson said the other agencies that originally agreed to allow the construction of the powerline to provide power only to the gold mine without an EIR on the condition the powerline would be removed when the mine closed may conduct their own environmental reviews, and he expects any decision made by Lassen County would have to consider their reviews as well. He said discussions with other agencies continue, and he hopes those discussions can be completed this week.
“There’s no perfect world,” Anderson said. “When they originally did this, from what I understand, it was a combined document with all the different agencies … As you can imagine it was a huge challenge to coordinate all of that. After three decades, this is probably a response to those challenges that happened when you try to get everybody on the same environmental document … So, we may have to tinker with the RFP.”
Supervisor Aaron Albaugh said the line traverses the Modoc National Forest and the gold mine had to get a special use permit to put it in.
“How is this going to affect the Modoc National Forest’s special use permit,” Albaugh asked. “This is kind of silly in a way, because every five years you’re “begging them to keep this special use permit going.”
Pat Holley, LMUD’s general manager, said the special use permit was transferred to LMUD two years ago, and that development allowed LMUD to move forward with this process.
“The Forest Service has been very cooperative,” Holley said. “In early discussions with them, they believe the project is categorically exempt. So, we’ll see what they come out with. They’re in talks with county staff right now.”
Albaugh said in his experience with federal agencies, the decisions ultimately depend entirely upon who’s in charge.
“To have a special use permit with something this big, you’re putting a lot of gamble on perpetuity of the same person with the same values,” Albaugh said. “That’s an awful big gamble, an awful big gamble.”
“Yes,” Holley said.
Hemphill asked Holley what it would cost to remove the line. Holley said the latest estimate is $1.04 million.
“So, you guys are looking to do this EIR because it’s a cheaper out than doing what the original plan was as far as the line?” Albaugh asked. “Is that a fair statement? To the ratepayers you’re looking at $300,000 to keep the line there … ”
“Yes, for every dollar we preserve — that’s ratepayer money that is not expended — we don’t have to adjust our rates,” Holley said.
Then Holley said the second reason for LMUD to fight to keep the line is simply common sense.
“We just see so much — a lack of common sense in California energy policy,” Holley said. “To remove an asset that’s worth millions of dollars and could help ranchers in the area, we just don’t believe that’s good policy. So, we’re doing everything we can to make sure that it’s transferrable, that it has a long life, that it’s permitted properly. Two reasons for doing it.”
Supervisor Gary Bridges asked Holley about the value of the line.
“If you had to build it today — costs are escalating — we’ve seen 20 percent inflation in just three years,” Holley said. “Ten million dollars three years ago, maybe it’s $12 or $15 million if you had to build it now.”
“That’s a pretty good investment, then,” Bridges said.
“Is that your service district up there?” Supervisor Tom Hammond asked.
“No, it is not,” Holley said. “Surprise Valley (Electric) has been involved with us, and they would have to accept the line under some conditions and be the operator. We would not. We would transfer it to them.”
“So those people would not be LMUD customers?” Hammond asked.
“They will not be LMUD customers,” Holley said.
Egan said, “You mentioned the reason for requesting relief from the condition of removing the line is to transfer the line to Surprise Valley Electric — it’s in their territory — and I’m just curious, for the record, what the extent of those negotiations are and is that a transfer for value or is that going to be some sort of gift to that … ”
“No, there has been no negotiation on price or terms,” Holley said. “There has been general agreement and we’ve got their board-endorsed letter … that indicates they’re very interested in doing this, so whenever we get it to a point where it is analyzed properly from the environmental standpoint, then we can talk about transfer. They basically have a letter of intent with us by that letter they submitted.
“Those seem to be two very different things,” Egan said, “that there’s general agreement but there hasn’t been any discussion on price or terms.”
“Yeah, we’ll get to that one when the time is right,” Holley said.
A local legal controversy for more than 15 years
Frank Cady, then LMUD’s general manager, bought the line for $65,000 in December 2007 — a purchase LMUD later characterized as “worthless.” As part of the purchase agreement, LMUD assumed all the obligations and duties associated with the ownership of the line, including its removal pursuant to Lassen County’s reclamation plan.
In 2009, Ray Luhring, then LMUD’s general manager, wrote in a notice of exemption, “The district shall acquire from Lassen Gold Mining, Inc. the right, title and interest to the Hayden Hill 69kV electric power transmission line without incurring the obligation to remove said transmission line as required by the Conditional Use Permit and Reclamation Plan pertaining to Lassen Gold Mining, Inc.’s mining operations. The district proposes to leave the existing transmission line in place, unenergized, for possible future use and to prevent the economic waste of removal. Ratepayers are the beneficiaries.”
According to the notice of exemption, LMUD sought a categorical exemption based on state law that “exempts existing facilities of publicly owned utilities,” and, “exempts replacement or reconstruction of existing utility systems involving no expansion of capacity. There can be no significant effect on the environment by simply leaving the line in place.”
Then in December 2010 the publicly owned utility district filed a lawsuit seeking to overturn the purchase alleging Cady had purchased the line without the LMUD board’s approval — despite the board’s consideration of the purchase in closed session, the issuance of the $65,000 check signed by Cady and treasurer Fred Nagel, the ratification of the check register that included the $65,000 check by the board as well as correspondence from two general managers — Cady and Luhring — confirming in writing the power line’s purchase by the district.
In its lawsuit, LMUD asked the court to set aside the sale, return the $65,000 purchase price and again make Lassen Gold responsible for removing the transmission line.
After more than five years of legal wrangling, in July 2016 at LMUD’s request, United States District Court Judge Morrison C. England, Jr. dismissed the lawsuit with prejudice (meaning it cannot be filed again). Gene Chittock, LMUD’s general counsel said the lawsuit was unnecessary because Luhring’s notice of exemption had not been challenged in more than two years.
“The situation at the time that (the lawsuit) was filed was much different,” Chittock explained in July 2016, “in that there was some serious threat of removal (of the power line) that resulted in large exposure to LMUD. We believe those issues are resolved now.”
Chittock said the district had a good case against the gold mining company, “and I think we would have prevailed, but since the situation changed (due to the exemption), there was no reason to spend another couple hundred thousand on litigation to get a result that wouldn’t have changed anything … because of our categorical exemption, we believe we’re no longer required to remove it.”
In response to a Public Records Act request from the Lassen County Times in 2016, LMUD reported it had spent about $341,115.84 on the lawsuit, mostly in legal fees to Chittock and Downey Brand Attorneys, LLP. How much LMUD has spent on legal services in the seven years since the Lassen County Times’ Public Records Act request is unknown.
At the county’s insistence, the LMUD board has reserved more than $1 million in its budget to guarantee the removal of the Hayden Hill line.