Two Elk Stimulus: Big Checks nut no new jobs

Over the past two years, the federal stimulus program paid the owner of a Colorado-based energy company and the company’s Wyoming representative more than $1 million in salaries and benefits for a Department of Energy carbon storage study in Wyoming’s Powder River Basin, according to records obtained by WyoFile under the Freedom of Information Act.

Federal pay invoices show that Michael J. Ruffatto, founder and CEO of North American Power Group Ltd., based in Greenwood Village, CO, received $955,343.29, and Brad Enzi, NAPG’s Cheyenne-based representative and son of Wyoming US Sen. Mike Enzi, $128,394.73 for the Two Elk Energy Park Carbon Site Characterization project from September 2009, when the study began, through July 31, 2011, the last date for which records were available. According to the National Recovery Act Transparency and Accountability Board, Ruffatto and Enzi’s compensation is nearly 20 percent of the total spent so far on the project.

Overall, the price tag of the Two Elk carbon site characterization project is nearly $10 million — $9,949,962.00. Its purpose is to determine if the sub-surface geology of the Powder River basin is suitable for storing CO2 produced by power plants and other industrial sources.

The project was awarded two grants from the DOE National Energy Technology Laboratory. It is part of the Obama administration’s National Recovery Act stimulus package aimed at jump-starting the economy and creating new jobs.

However, in his most recent quarterly filing to the National Recovery Act Transparency and Accountability Board, Ruffatto, a millionaire lawyer and philanthropist who heads the scientific project, reported that “no new direct jobs have been created for this project.”

Rather than creating new jobs, Ruffatto reported, a percentage of his and other North American Power Group employees’ wages were paid for with stimulus funds. He estimated that, in addition,  15 “indirect jobs” and 60 “induced jobs” have been created by the federal stimulus money.

Two Elk

The timing of the stimulus grants was particularly good for North American Power Group. The company had seen a series of setbacks to its ambitious – but long delayed — $1 billion, 320-megawatt Two Elk power plant project 40 miles southeast of Gillette.

North American owns four smaller operating power plants in California, but the Two Elk plant on 880 acres in Wyoming is to be its showcase project. At one point, Ruffatto told investors of plans to build seven power plants on the Two Elk site — biomass, coal and natural gas — to provide power to Colorado and the American Southwest.

Had the dream been realized, he would have commanded a sizeable private utility.

But before the first Two Elk plant could be constructed in Campbell County, a combination of financing, transmission and regulatory problems slowed the construction process to a crawl and then to a standstill. Local residents jokingly referred to the stalled project (in the works since the late 1990s) as “No Elk.”

The latest blow to Two Elk came this spring, when an IRS audit determined that not enough progress had been made on the plant for North American to continue to qualify for tax exempt status on the $445-million in Industrial Revenue Bonds the company holds. The bonds had been sponsored by Campbell County and approved by successive Wyoming governors — Republican Jim Geringer and Democrat Dave Freudenthal.

The bonds were issued in 2007 by Campbell County under a creative interpretation of the US Tax Code that classified the coal-fired Two Elk power plant as a “solid waste disposal and recycling facility” because the promoters, North American Power Group, said they intended to burn “waste coal” from the giant nearby Arch Coal and Peabody Coal mines.

“Waste coal” is coal that mining companies judge not worth the cost of interstate rail transport to power generators. It is generally reburied at the mine site.

Under the North American plan, the Two Elk plant would  “recycle”  the lower quality coal by burning it. (See earlier WyoFile Story for more details)

Because interest received by tax exempt bondholders is excluded from gross income, the bonds were originally a major selling point for the power plant project.

But in an April 14, 2011, letter to Campbell County officials, the IRS manager for Tax Exempt Bonds Robert E. Henn wrote that an agency examination “determined that the Bond proceeds were not sufficiently spent to provide a solid waste disposal facility as required by the Code. The issuer (Campbell County) and borrower (North American Power Group) asserted that such a failure was the result of unanticipated impediments in proceeding with the facility.”

As a result, Henn wrote, “the parties agreed to convert the tax-exempt bonds to taxable bonds.”

Ruffatto said that North American still hoped to convert the bonds, now taxable, to “tax exempt bonds at a later date.”

In his letter, however, IRS supervisor Henn wrote that Campbell County and North American Power Group “should strongly consider the appropriateness of any future tax-exempt issuances with respect to the project unless there is an imminently implementable plan to buy them back.”

Meanwhile, North American’s website and public statements no longer mention “waste coal” in connection with the Two Elk power plant. Instead, as Ruffatto wrote in an October 26, 2010 letter to the California Energy Commission, it now plans to burn “woody waste resulting from the removal of hazardous fuels in forests throughout the western United States due to an epidemic of mountain pine beetles.”

76 Hours Per Week @ $214.38 Per Hour

Approved in 2009 and 2010, the federal stimulus grants to North American Power Group allowed Ruffatto to use federal funds to pay a significant portion of his own salary and that of several of his key employees, including Enzi, while waiting for conditions to improve for the construction of the Two Elk power plant.

Ruffatto bills the government $214.38 an hour as “chief investigator” for the stimulus project.

Both he and R. Paul Detwiler, chief counsel for the National Technology Energy Laboratory that awarded the stimulus grants, defended the payments to WyoFile as being consistent with the nature of the work and qualifications of the North American Power Group employees. This includes Brad Enzi, a 1997 University of Wyoming journalism-communications graduate and former Washington, D.C., lobbyist, who is paid $80 an hour from the federal stimulus grant, DOE documents show.

Ruffatto, 65, said in a telephone interview that his hourly rates were worked out in advance with DOE and, in his case, represented a “discount” from his normal rate of pay as chief executive of a regional energy company with offices in Colorado, California and Wyoming.

October salaries and fringe invoice documentation

A salaries and fringe benefits invoice for employees from the North American Power Group and North American Land & Livestock for the month of October. (courtesy of the Department of Energy — click to enlarge)

In one month alone — October, 2010 — Ruffatto was paid $73,369.52 in salary and benefits from the stimulus funds, according to the invoices obtained by WyoFile. Ruffatto reported working 305 hours in that month — or 76 hours a week— for the stimulus project, while also performing his other duties as CEO of North American Power Group.

By comparison, the Wyoming median household income for an entire year is $54,400, according to the most recent census reports. Ruffatto received more in federal pay and benefits during the two-year period than President Obama, whose annual salary is set at $400,000 with a $50,000 expense allowance.

According to his company website, Ruffatto founded privately-held North American Power Group in 1992:

“Ruffatto has over 30 years in the gas, oil and energy trading and power generation industries, including both regulated and unregulated businesses, as a businessman and lawyer. Mike served as a Board of Trustees member of the Western Electricity Coordinating Council from 1999-2002.”

A company presentation prepared for investors in December 2006 reported NAPG’s annual revenues at $85 million, with total assets at $614 million and a net annual income of $20 million.

Accordingly, Ruffatto maintains an upper income lifestyle. Public records show he owns homes in Colorado and California. The Arapahoe County Assessor appraises Ruffatto’s 6,000 square foot estate on 10.7 acres in the affluent Cherry Hills Village suburb south of Denver at $9 million.

Michael Ruffato's home in Corona del Mar, California

Michael Ruffatto’s home in Corona del Mar, California, is worth approximately $2 million. (Sarah Tempest/WyoFile — click to enlarge)

Public records show that Ruffatto also owns a smaller home that is valued in the neighborhood of $2-million in Corona del Mar, California, an extremely affluent Orange County beach community. In July 2009, the Orange County Business Journal reported that Ruffatto sold another, much more dramatic home in Corona del Mar for $12.1 million to Los Angeles Angels baseball team owner Arte Moreno.

Ruffatto is also a generous philanthropist and regular political contributor, primarily to Democrats, but also to Republicans.

In 2007, he and his late wife Joan gave $5 million to the University of Denver, where their daughter had attended college. Because of the gift, a building in the Morgridge College of Education is now named Ruffatto Hall. In 2009, Ruffatto was named in a Stanford University press release as a major donor to the university’s new $100 million Precourt Institute for Energy. The amount he gave was not disclosed.

Earlier this year, Ruffatto became engaged to prominent Orange County socialite Eve Kornyei. The couple is frequently pictured in charity newsletters and local newspapers attending fundraisers, particularly for the Segerstrom Center for the Arts, in Orange County.

According to records at the Federal Election Commission, Ruffatto contributes to candidates of both major political parties, most recently $4,800 to the successful 2010 US Senate campaign of freshman Colorado Democrat Michael Bennet. But he has also donated in the past to conservative Arizona Republican US Sen. Jon Kyl. In 2007, he gave $2,300 to Hillary Clinton’s campaign for the Democratic Party presidential nomination.

Enzi’s Work

There is no record of any donations to Wyoming US Sen. Mike Enzi. Enzi is a staunch opponent to the Obama administration stimulus program, which in 2009 he called “bailout baloney.”

“I don’t think Mike Ruffatto has ever met my dad,” Brad Enzi, 36, said in a recent interview.

The younger Enzi, a 6-foot, 8-inch former University of Wyoming walk-on basketball player, said that he and his senator father have never discussed the North American Power Group stimulus grants.

Mike and Brad Enzi

US Sen. Mike Enzi with his son Brad Enzi (right). Brad told WyoFile he spent a majority of his working time on the stimulus project meeting with others to try to understand the public perception of carbon storage. (Photo from Sen. Enzi’s Facebook profile)

“My dad and I have a very Chinese Wall relationship when it comes to what I do for a living and what he does for a living. We don’t even talk about energy policy … it’s always been a rule that my dad and I have, because it is one of those things you can look around and see abused on a constant basis,” Enzi said.

In another way, Brad Enzi — or at least his household — does benefit from his father’s position, as his wife Danielle Davis Enzi is a fund-raising consultant for Senator Enzi’s campaign fund and his leadership PAC, Making Business Excel.

According to the most recent filings with the Federal Election Commission, Danielle Enzi’s company, Enzi Strategies, which she operates out of the couple’s north Cheyenne home, received $70,910 in retainers and commissions from the Enzi political funds from July 2010 to July 2011.

The Federal Election Campaign Act permits such payments to family members as long as “the family member is providing a bona fide service to the campaign and the payments reflect the fair market value of those services.”

Regarding the North American stimulus grants, Brad Enzi said he was unaware of accounting details in the  project, including how his $80-an-hour pay rate was determined.

He said he receives the same salary from North American Power Group that he did when he joined the company five years ago to promote and develop the company’s proposed Two Elk coal-fired power plant southeast of Gillette in Campbell County.

“I don’t mean to be obtuse,” Enzi said, “but I have no idea how the bills back out. I just turn in my time sheet to Denver. Project administration is handled through that office.”

With Two Elk power plant construction “at a slow point,” Enzi estimated that since August 2010 he has spent an average of 60 to 70 percent of his time on the federal stimulus project “meeting with different groups, landowners, industry groups just trying to get a feel what the public perception of carbon storage is.”

Federal records show that Enzi was paid as much as $17,363.72 in one month — August 2010 — for his reported 182.5 hours work that month on the stimulus project.

In an email response to questions from WyoFile, R. Paul Detwiler, chief counsel for the National Energy Technology Laboratory in Pittsburg, Pa., said that the Department of Energy conducted a budget analysis before North American Power was awarded the grants, as well as a subsequent review by contract specialists at the federal agency.

Detwiler said the budget specialists concluded that “the salary and benefits being paid to Mr. Ruffatto and Mr. Enzi are appropriate for their skill set and the work they perform.”

Comparison To UW Carbon Storage Project

However, the pay rates are much higher than those of a similar, federally funded ($9,975,000.00) University of Wyoming carbon storage  study underway in southwest Wyoming.

The University of Wyoming’s carbon storage study, seen here, is similar to the Two Elk project. Both receive federal funds to search for and  study suitable reservoirs for carbon sequestration, but the UW project focuses less of its funding on leadership salaries. (Photo by Meg Ewald and the Carbon Management Institute — click to enlarge)

The principal investigator of that project, retired University of Wyoming professor and former state geologist Ronald C. Surdam, receives his $210,000 annual salary from state funds, as director of the UW Carbon Management Institute. Surdam, a nationally-recognized expert on carbon sequestration geology, receives no pay from the stimulus grant.

Nor does Surdam’s chief deputy in the project, Shanna Dahl. Dahl said the employee who gets paid most highly with federal stimulus dollars is a PhD research scientist who makes about $110,000 a year in salary and benefits. Dahl said the project is in the process of hiring another scientist to be paid with federal stimulus dollars at about the same pay rate.

The UW project is different from the North American Power Group carbon storage characterization project in that the bulk of the money spent by UW, over $8 million, went directly to the university’s main contractor, the Houston-based  drilling company Baker Hughes, Inc., to drill a 13,000-foot deep well near the Jim Bridger Power Plant in southwest Wyoming.

According to Baker Hughes vice president for communications Teresa Wong,  the drilling company donated an unspecified portion of its services to the project in kind. “We believe this is a great project for Wyoming and if it is successful, it will help facilitate and grow the CO2 storage industry in Wyoming, assist the coal industry to meet future CO2 targets and will thus create and preserve local jobs,” Wong said.

The Baker Hughes well was completed in August. Now the project is hiring scientists to determine if the Rock Springs Uplift and Moxa Arch deep saline reservoirs there are suitable for permanent CO2 sequestration.

The North American Power Group project is at a much more preliminary stage, with researchers collecting existing subsurface data for the important coal mining area surrounding Gillette. The North American Power Group project hired Montana State University, which helped Ruffatto write the proposal for the stimulus grant, and Stanford University, where Professor Sally Benson, like Surdam at UW, is a leading scientist in the area of geologic storage of CO2 in deep underground formations, as subcontractors.

According to the most recent quarterly report on the project ending June 30, Montana State had received $168,793.39 in stimulus funds since fall of 2009; Stanford had been paid $175,245.43 over the same period.

Employees work the drill at the site of the University of Wyoming’s carbon storage study. Since the well was completed in August, the project is now hiring scientists to determine if the Rock Springs Uplift and Moxa Arch deep saline reservoirs are suitable for permanent CO2 sequestration.(Photo by Meg Ewald and the Carbon Management Institute — click to enlarge)

Following enactment of the American Recovery and Reinvestment Act of 2009, the DOE National Energy Technology Laboratory picked 10 proposed carbon storage site characterization studies, including the two in Wyoming, to receive a total of $70 million in funding. A year later, the ten projects nationwide were awarded an additional $5 million each.

“We were very fortunate,” said Ruffatto, a political science graduate of Stanford University and law school alum of the University of South Carolina, “to be chosen among a number of other projects throughout the United States, each one of which is obviously looking at different features, different geologies, the end result of which is going to be to add to the knowledge base and data base that the Department of Energy and others have been trying to promote and hopefully commercialize.”

Frequent contributor Rone Tempest is a former national and foreign correspondent for the Los Angeles Times. From 2008-2010 he was WyoFile’s editor. He lives in Lander. Also contributing to this story from Orange County, Ca., were Ray F. Herndon and Sarah Tempest.

— If you enjoyed this investigative report and would like to see more quality Wyoming journalism, please consider supporting WyoFile: a non-partisan, non-profit news organization dedicated to in-depth reporting on Wyoming’s people, places and policy.

Salaries and Fringe Benefits Invoice for NAPG

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Published on September 27, 2011

{ 19 comments }

Not A Native October 24, 2011 at 9:54 am

Thank you Rone for finally investigating this scam project. We have been waiting for someone to pick this up for YEARS! Having watched this project get funded based on “construction” which at first was just a stake in the ground, and the next $400,000,000.00 was granted once a concrete pad (albeit, large) was poured. Since then, the section this proposed site sits on has been scarified of vegetation, supposedly in preparation for construction, but in reality, leaving it vulnerable to the topsoil being blown away by the infamous Wyoming winds and now covered in weeds, and a very nice road has been constructed for access to the site from Highway 450. In other words, I have watched this boondoggle unfold with my own eyes for years, and it is a joke amongst those of us who are in the know. We all kick ourselves for not getting in on the scam when it all began.

For years I have asked the local newspapers to conduct an investigation on Two Elks. The closest anyone came was to praise the supposed advent of the new technology and possibility of jobs. Thank you, thank you, thank you for finally getting out in the open what this is really all about.

Noter Republic October 15, 2011 at 9:03 pm

Final rant: I wonder if Enzi is one of those Republicans constantly harping about what a failure the stimulus was?

Noter Republic October 15, 2011 at 9:02 pm

Hypocrisy, thy name is Wyoming Republican. “Chinese wall” — give me a break! Do these people think every taxpayer out there is a complete idiot who is willing to swallow this tripe? At the same time Wyoming Republicans are decrying the deficit and wanting to cut federal payments to just about everyone in the middle and lower classes, they are funneling rivers of public monies into their own pockets. Dick Cheney, his wife, and several other family members were feasting at the public trough for years also. There’s plenty to go around to the Democrats also. Freudenthal essentially appointed his own wife to the federal bench. Let’s just face it — this country is ruled by the aristocracy and the military-industrial complex that Eisenhower warned about. And they inwardly laugh at the little people all the way to the bank.

Frank Giacobbe October 11, 2011 at 2:19 pm

when is the two-elks prject schedule for acceptingwoody-biomass at the facility in wyoming. thank you

Carlos October 7, 2011 at 12:59 am

Amazing…

JW September 30, 2011 at 2:02 pm

So…Red state? Check. “Right to work” state? Check. Jobs? Not so much. How’s it working out for Wyoming to be kissing up to the GOP for all of these years? If we don’t wake up soon, we will be living in a state that resembles a third world country, with large portions that are uninhabitable due to pollution, and our most important resource, our natural beauty, gone forever.

Kyle September 30, 2011 at 9:38 am

Interesting how a Senator’s son; a person holding a journalism degree, and a lawyer get tasked with conducting a study better suited for a geologist and folks with some engineering and science background.

I agree with Alice. The only way to stop this kind of Federal Tax dollar waiste is to stop paying taxes…the government won’t stop on their own. They are the worst money managers ever known. How can we stop them from borrowing more money at the expense of the ecomomic future for kickbacks, favors and pet projects? This is mindnumbing.

Carolyn Johnson September 29, 2011 at 12:29 pm

Outstanding investigation and article, thank you. How does any part of Two Elk and the sponsoring company have any credibility with any type of investor?

Jill September 29, 2011 at 8:51 am

Thank you for this investigative story. This important reporting and the overall corruption surrounding Two Elk deserves to be picked up by other news outlets and national media. Keep up the good work.

Hoya September 28, 2011 at 4:45 pm

Wish we had someone looking into the 54 million they wasted (stole) here in Arizona on the carbon sequestration scam.

Dustin Bleizeffer September 28, 2011 at 2:27 pm

DDD, Senator Mike Enzi of Wyoming is a Republican.

— Dustin Bleizeffer, WyoFile editor-in-chief

DDD September 28, 2011 at 2:19 pm

Enzi a Republican or a Democrat?

Geoff September 28, 2011 at 11:34 am

A reminder of the importance of investigative reporting, a rare commodity these days not just in Wyoming but around the country. So many of our corporate advocates of ‘free enterprise’ and deregulation have become adept at finding the federal trough. Investing in carbon storage research is, nevertheless, a suitable role for tax dollars – the private sector can’t turn it into profit. And it could shape the future energy industry, environment and economy both of Wyoming and the world. But it requires oversight and good partners, such as Ron Surdam and UW. Nice work, Rone.

DeweyV September 28, 2011 at 10:55 am

Wow. Astounding reportage, Rone. I wonder how much traction your story will get “elsewhere” since you pulled down the curtains.

It is bulletproof stories like this that show why we all need to support nonprofit issue-driven journalism. Finally we have a crystal clear, diamond hard example of Wyoming steamroller politics and the Good Old Boys doing what they do. People named ” Enzi” definitely have some ‘ splainin’ to do, but obviously state and national borders have little bearing.

Pay attention the next time you see Exxon or Duke Energy or whatever corporate energy utility is underwriting your PBS and public radio outlets. You have to ask…

Rob September 27, 2011 at 3:08 pm

But were these Obama shovel ready projects…that is the crucial question!

Larry in Wapiti September 27, 2011 at 12:16 pm

Thank God for Rone Tempest! This is the kind of reporting that the national networks should be pouncing on. But alas, this story, along with the Longshoreman’s Union shut-down of the Seattle Port have gone un-mentioned in the National Media (I’m talking about you MSNBC!).

Chris Merrill September 27, 2011 at 11:09 am

I find this passage from the story stunning:

“In one month alone — October, 2010 — Ruffatto was paid $73,369.52 in salary and benefits from the stimulus funds, according to the invoices obtained by WyoFile. Ruffatto reported working 305 hours in that month — or 76 hours a week— for the stimulus project, while also performing his other duties as CEO of North American Power Group.

By comparison, the Wyoming median household income for an entire year is $54,400, according to the most recent census reports. Ruffatto received more in federal pay and benefits during the two-year period than President Obama, whose annual salary is set at $400,000 with a $50,000 expense allowance.”

Rob September 27, 2011 at 9:01 am

And let’s not forget the millions of $$$$ Two Elk has been getting int he form of tax-exempt bonding authority from the state over years and years.

Somethign is very, very wrong here. Thanks for this Rone. Maybe it will bring some needed light to this rather suspicious situation.

Alice September 27, 2011 at 6:24 am

You may think the $9 million to UW is somehow different, but really, tax money is tax money (spending it through a university does not make it educational or useful–many projects in higher education facilities have no actual economic value, they just cost taxpayers). Billions have been poured into useless projects in wind, solar, biomass, etc in a worthless effort to try and reshape energy usage in the world. All have failed to date. As for Enzi, he never met a government handout he did not like if it came to Wyoming–wind, coal, schools, unemployment–he loves them all and apparently does not care about the cost to this country. Until this government stops handing out checks as rewards and stimulus projects, the national debt will continue to pile up and useless projects with huge salaries will continue. Cut all the funding and give it up. Otherwise, there is no way to stop this.

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