Time for LMUD to explain its costly decisions

For more than a decade the staff at the publicly owned Lassen Municipal Utility District has followed direction from its elected board of directors that has cost ratepayers at least $500,000 since the district’s purchase of the Hayden Hill transmission line from Lassen Gold Mining, Inc. (Kinross Gold). Most of that money has gone to LMUD’s legal representatives.

 

How did we get here?

The Hayden Hill line was installed to supply power to the Hayden Hill Gold Mine that began operation in 1991. According to a reclamation plan approved at that time by the Lassen County Board of Supervisors, some environmental review requirements were waived under the condition the power line would be removed when the gold mine closed. Lassen Gold Mining posted a $500,000 letter of credit with the county “as security for habitat mitigation including reclamation.”

In December 2007, after the mine’s closure in 2005, Frank Cady, who at that time was LMUD’s general manager, purchased the power line for $65,000. The check for the purchase was signed by Cady and Fred Nagel, who was then an LMUD board member and the district’s treasurer, and the board of directors ratified the check register that included the check at a subsequent meeting.

According to the court file in the case, the check also was stamped by Bill Stewart, then LMUD’s controller, “certifying the check was a legitimate claim against the district.”

Two years later, on Dec. 22, 2009, LMUD’s directors approved a closed-session resolution alleging Cady had purchased the transmission line without the board’s approval.

In 2009 Stewart, now LMUD’s general manager, called the purchase “worthless to LMUD and its ratepayers,” and said, “LMUD has also learned removal of the Hayden Hill line, as required by the county’s reclamation plan, will be extremely costly — upwards of several hundreds of thousands of dollars.”

A year later, in December 2010, LMUD sued Kinross Gold seeking to void the purchase agreement because the district alleged Cady bought the transmission line without the board’s approval. But then on March 10, 2016 — after more than five years in court — LMUD had the court dismiss the lawsuit with prejudice — permanently — just before it went to trial.

On Oct. 30 2018, the LMUD board approved resolution No. 2018-06 in which it finally acknowledged it had, in fact, purchased the Hayden Hill transmission line in 2007 and that, “by virtue of this purchase, the district assumed financial responsibility for removal of the Hayden Hill line.”

According to a Nov. 8, 2019 letter to LMUD from Richard Egan, county administrative officer, the board of supervisors requested LMUD “comply with the approved reclamation plan,” or provide a “legally supportable alternative plan” by March 2020.

According to Egan, this week the board may release the Lassen Gold Mining funds ensuring the removal of the power line based on an Oct. 30 resolution that created an LMUD board-restricted reserve account in the amount of $916,798.49 to guarantee the line’s removal.

The LMUD board of directors has the fiduciary responsibility to the ratepayers to protect all of the district’s assets. The Hayden Hill fiasco has already cost the ratepayers hundreds of thousands of dollars in court costs and attorney fees in addition to what is now estimated to cost somewhere in the neighborhood of $1 million to remove the power line.

Enough is enough already. It’s time for LMUD to honor its legal commitments, remove the power line and then fully explain, if it can, this expensive boondoggle to its ratepayers.