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Secret Sellout or Pay to Play? Terry McAuliffe’s Parting Gift to Dominion Energy and the Atlantic Coast Pipeline

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by Jon Sokolow

Did Terry McAuliffe sell out Virginia right before he left office?  Or did he do something even worse?  Did McAuliffe accept $58 million (paid to various entities) in a pay to play scheme to guarantee Virginia would approve Dominion Energy’s Atlantic Coast Pipeline?

In late December, the then-outgoing Virginia Governor, a longtime cheerleader for the ACP, committed the state to a secret Memorandum of Understanding with Dominion and its pipeline partners.  This agreement, apparently never before reported in Virginia, let Dominion buy its way out of paying for damages to Virginia’s forests and water quality caused by construction of, and possibly by operation of, the ACP.  And McAuliffe did this before the pipeline has even been approved – it still has not been approved – much less built.

Let that sink in for a moment.

Terry McAuliffe gave Dominion a full and complete release from any and all damage to Virginia’s forests and water from the Atlantic Coast Pipeline.

And because this secret agreement has now been exposed, we know exactly what Virginia’s forests and water were worth to Terry McAuliffe.  It turns out not much. McAuliffe sold Virginia’s forests for $38,650,000 and he sold our water for half that – $19,200,000.  That’s a total of $57,850,000.  Not a penny more.  Literally, according to the agreement.

Even worse, it appears that this is not just another raw deal for taxpayers, not just another episode of taxpayer funded corporate welfare.  In fact, the agreement looks very much like a pay-to-play scheme like the one Dominion just signed with North Carolina – even the amount paid is almost exactly the same ($57,800,000) – right before that state approved the ACP.  At least one newspaper in North Carolina is describing that deal as a “pay-to-play scheme or a quid pro quo,” one that environmentalists and free market advocates agree is both unethical and vulnerable to a court challenge.  Even supporters of the pipeline in North Carolina admit that deal is corrupt: it sure looks like they’re buying the permit, by paying up this slush fund.

Virginia agreement was signed on December 28, 2017, apparently without any public disclosure, by outgoing Secretary of Natural Resources Molly Ward, and the details are sickening.  In fact, the deal is worse than the one signed by North Carolina.

First, Dominion agreed to pay $38,650,000 to three public and private entities, referred to as “Forest Mitigation Partners,” who are tasked with dispersing funds to others to  restore or enhance forest habitats that are “similar to those adversely impacted by the pipeline.  In return, Dominion gets a full release from any further liability: “The Parties further agree that such amount fully satisfies any and all mitigation responsibilities related to and otherwise fully offsets the direct or indirect forest-related impacts of the Project in Virginia.”  This language leaves the state without a remedy if the cost of damage to Virginia’s forest exceed the amount in the fund.  Construction accident – use the fund.  Pipeline leaks two years from now – use the fund.  Pipeline explosion ten years from now – you’ve already been paid Virginia.  And if the money is gone?  Too bad.  You don’t need to be a lawyer to understand that’s what “fully satisfied” means.

Second, the agreement says that, in return for a payment of $19,200,000 (to a group of entities known as “Water Quality Mitigation Partners”), Dominion gets a full release for any damage to water quality: “The Parties agree that such amount fully satisfies any and all mitigation responsibilities related to and otherwise fully offsets all water quality impacts caused by forest fragmentation.”  Lawyers may argue for years which “water quality impacts” were caused by “forest fragmentation” – the poorly drafted agreement defines none of these terms.  What is clear is that no matter how much damage is done, as far as the state is concerned Dominion is off the hook.

And in case there was any doubt on the breadth of the release Dominion gets, the agreement adds that “this Agreement reflect the full extent of natural resources-related mitigation measures and investments contemplated for the Project by the Parties.”  That’s Dominion’s way of saying don’t ask us for another dime, no matter what.

But this agreement contains something even far worse.  It says exactly how this agreement came about – “The Commonwealth requests, and Atlantic agrees to pay” the stated amounts – and then discusses how Dominion will get its money back “in the unanticipated event that the Project fails to obtain and maintain State Approvals.”  The key word there is “unanticipated.”  It suggests that Dominion was not just capping its liability but rather trading $58 million for a commitment from McAuliffe that the pipeline would be approved – a commitment that rejection would be, in the words of the agreement, an “unanticipated event.”  Paying millions of dollars to approve a private company’s pet project is exactly what it looks like – a good old fashion pay-to-play scheme – exactly like the one now being roundly criticized, even by pipeline supporters, in neighboring North Carolina.

If Virginia ultimately approves the Atlantic Coast Pipeline, it will be noted that the going rate for that regulatory approval is $58 million – exactly the amount Dominion paid for approval in North Carolina and now, apparently, in Virginia.

Except that Virginia’s agreement is far worse than the one signed by North CarolinaNorth Carolina’s agreement does not say that the $58 million paid to the state is in return for a release of further liabilities.  There is no such release language in the North Carolina agreement.  To the contrary, North Carolina’s agreement says “Nothing in this Memorandum shall be construed as precluding or otherwise barring the Governor of the State of North Carolina from recovering damages or equitable remedies from Atlantic for spills or leaks stemming from the ACP.” Virginia chose not to extract any such concession from Dominion, demonstrating that rolling belly up for Dominion is the “Virginia Way” – or at least Terry McAuliffe’s way.

Virginia now has a new Governor – and a large group of newly elected legislators who refuse to bow to Dominion’s every wish.  Governor Northam himself has pledged to protect Virginia’s natural resources and its water.  But the deal signed by McAuliffe would leave the state and taxpayers holding the bag if damage caused by Dominion’s $5.5 billion pipeline exceeds the paltry amount it set aside for potential damage.

Will Governor Northam allow this agreement to stand?  Will members of the Virginia’s legislature – regardless of where they stand on the pipeline – tolerate this taxpayer funded rip-off?  Or will Governor Northam and Secretary Strickler do right by Virginia and immediately revoke this reprehensible agreement with Dominion?

For every elected official in Virginia, the simple question is this:  Which side are you on?