June 1, 2012

California: The State that Can't Shoot Straight

There can be no doubt why California is losing their credit rating and respect in the business world. The administration that is elected to manage all permitting and regulatory statutes can't keep their promises and habitually act in bad faith both to petitioning companies and  municipal agencies. They also coerce qualified appointees who resist caving in to the will of approval committees on contentious issues. 

The pages of this blog are filled with the horror stories of carefully negotiated bipartisan supported legislation that gets axed by ideologically-run legislative committees or baldly rewritten by unelected staffers. The fate of AB 222 in 2010 was the latest sorry saga. The outcome of that debacle was so egregious (conversion technologies with any emissions could not be permitted - a condition for which no company could comply) that CalRecycle decided it had no choice but to abide by the spirit of the legislation rather than the letter of the overreaching statute.  

They notified a Canadian company, Plasco Energy Group, and their contracting municipal waste authority in Salinas Valley that if they succeeded in surviving the regulatory hurdles, they would qualify under the state's Renewable Portfolio Standard (RPS). Based on that assurance, the municipal utility and private enterprise have invested time and considerable resources to meet the environmental requirements. 

A new governor and a newly nominated Director of CalRecycle, Caroll Mortensen, expressed their commitment to that legal opinion - until the eve of the final decision on her appointment. Suddenly, and in bad faith, the previous legal opinion was rescinded.

Below is a letter written by Jim Stewart, Chairman of the Bioenergy Producers Association, to Governor Brown recounting the sequence of events and stressing the lack of ethical integrity in the treatment of the parties by CalRecycle. Another detailed technical and legal analysis of this travesty has been published by Michael Theroux on his excellent TeruTalk blog.

"Trust" is rapidly becoming a four-letter punchline for business developers when relying on Sacramento for fair and honest treatment. This could be the blackest mark tarnishing Jerry Brown's legacy as governor - that and the resulting deficit.

May 30, 2012

Honorable Governor Jerry Brown
c/o State Capitol, Suite 1173
Sacramento, California 95814

Subject:  CalRecycle Rescission of Legal Opinion Regarding Plasco Energy Eligibility for Renewable Portfolio Standards

Dear Governor Brown:

On Wednesday, May 23, 2012, the Director of CalRecycle issued a letter rescinding the agency’s November 23, 2010, legal opinion that the Plasco/Salinas Valley gasification project is a qualifying renewable energy project in the State of California.

This letter had the effect of destroying the economic viability of this project, and the trust that private companies and local governmental agencies should be able to place in the actions of state government. In a moral sense, that trust is the number one consideration.

This rescission came after Plasco Energy Group, a Canadian company, and the Salinas Valley Solid Waste Authority, had, in good faith, made a significant financial commitment over 18 months to comply with CEQA and other permitting requirements in costly detrimental reliance upon what they understood to be a formal opinion by the State of California.

Plasco further had felt encouraged, because you personally had made a telephone call to the company, expressing interest in the technology.

In notifying Plasco of its decision, CalRecycle said that it did not want to “hurt” the company or the Salinas Valley Solid Waste Authority, which has devoted seven years to its vision of a permanent non-landfill based waste management system.

CalRecycle’s Director asked Plasco to continue its work on the Salinas project and to “trust” the state to take the legislative steps necessary to enable the company to move forward. 

How can the state ask Plasco and the Salinas Valley Solid Waste Authority to continue to make substantial capital expenditures on this project when there is no assurance that the controlling legislators in your party who have blocked this industry’s progress in California for seven years will now enact the changes necessary to enable companies like Plasco to operate in the state with confidence? 

Indeed, just the opposite appears to be the case.  It is strange that this new rescission letter arrived one week before the confirmation of the new Director of CalRecycle, and the decision came abruptly and without any prior consultation with stakeholders.

For seven years, ideological rigidity in the legislature has thwarted every attempted revision of statute that takes into consideration new methods of dealing with California’s energy crisis via the productive use of the 30 million tons of post-recycled municipal solid waste that California places in landfills each year.  In so doing, the legislature has posited as irrelevant such issues as energy independence, national security, a better environment and job creation.

As a result of the uncertainties that state government has perpetuated, California’s biobased technology companies have already moved out of California or sited in other states thermal renewable energy projects amounting to approximately $1 billion in capital investment.

Is it any wonder that Chief Executive.net recently ranked California as the worst state in the nation with which to do business for the eighth consecutive year?

We sincerely doubt that Plasco will sustain its presence in California unless your administration takes immediate action to reverse this ill-advised decision, or it is able to show Plasco a clear path forward that it can rely upon.

This decision is resounding among those communities that are seeking alternatives to landfilling in the state, and throughout the emerging multi-billion dollar alternative energy, advanced biofuels and biobased chemicals industries.

Once again, state government has turned its back on some of the most promising new industries of the 21st Century.  Unless action is taken promptly to resolve this issue, it is certain to shut the door on any remaining confidence this industry may have with regard to doing business in this state.

BioEnergy Producers Association

James L. Stewart, Chairman

Hon. John Laird, Secretary, Resources Agency
Julia Levin, Deputy Secretary for Climate Change, Resources Agency
Cliff Rechtschaffen, Office of Governor Jerry Brown
Ken Alex, Office of Governor Jerry Brown
Gareth Elliott, Legislative Affairs Secretary,
Office of Governor Jerry Brown
Caroll Mortensen, Director, CalRecycle

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