Investigation: Gov. Cooper didn’t benefit from pipeline fund, but “improperly used his authority” to strike a deal

A top advisor to Gov. Roy Cooper allegedly told a Duke Energy lobbyist that Cooper, not Secretary of the Environment Michael Regan, would make the final decision on a key permit for the Atlantic Coast Pipeline, according to an investigative summary released today.

Investigators with Eagle Intel based the information in part on a text message from Duke Energy lobbyist Kathy Hawkins to the utility’s CEO Lynn Good. In that text, Hawkins reportedly wrote that Ken Eudy, the governor’s senior advisor, had informed her of who would approve or deny the permit.

“That’s a key point,” Eagle Intel officials told state lawmakers Wednesday afternoon at a meeting of the joint governmental operations commission.

Hawkins’ account of Eudy’s comment is puzzling because Regan does not make permitting decisions. Those duties fall to DEQ division directors who personally sign the permits. It’s unclear from the investigators’ documents if Eudy knew that.

These details, many of them contradictory, are spread over hundreds of pages of exhibits provided on Wednesday by Eagle Intel to lawmakers.

Investigators concluded Gov. Cooper did not personally benefit from the fund or the resolution of a solar dispute, but that he “improperly used the authority and influence of his office to cause the ACP partnership to commit to a $55 million mitigation fund that he placed under his complete control.”

“Governor Cooper continued to use his authority and influence to delay the ACP permitting process until Duke and Dominion agreed to increase the fund amount to $57.8 million,” the summary read.

Ford Porter, spokesman for the governor, issued a statement decrying the investigators’ conclusions: “The report is wrong, and it is full of inaccuracies and contradictions that clearly ignore inconvenient facts. The report even concedes that the permit was done properly, that Duke believed the permits weren’t dependent on the fund or the solar settlement, and that the Governor did not benefit.”

Republican lawmakers hired Eagle Intel to investigate whether Gov. Cooper had used the water quality permit and a solar energy dispute as leverage to extract a voluntary $57.8 mitigation fund, outlined in a Memorandum of Understanding, from Duke Energy and Dominion Energy, co-owners of the ACP.

For the past 11 months, Eagle Intel, at a cost of $83,000 in public money, reviewed tens of thousands of documents and conducted interviews with dozens of people involved in the fund and the water quality permit. The investigation contains hundreds of pages, posted online at the legislative committee website.

Eagle Intel’s information from Hawkins contradicts Eudy’s testimony earlier this month before a legislative subcommittee on the ACP. At that meeting, Eudy told lawmakers that he did not inform anyone Gov. Cooper would decide the fate of the water quality permit.

DEQ spokeswoman Sharon Martin disputed Hawkins’ account, telling Policy Watch that the decision on the 401 certification was made by the director of the Division of Water Resources Linda Culpepper, “as is the usual process at DEQ.”

The purpose of the $57.8 million fund was not only to pay for environmental mitigation, but also economic development and renewable energy projects in eastern North Carolina, through which the pipeline would run. Several business leaders in eastern North Carolina had requested help with economic development because of the impracticality of individual industrial facilities tapping into the pipeline and the cost to do so — at least $1 million each.

The timing of the announcement of the fund and the approval of the water permit immediately stoked theories — debunked by Eagle Intel’s investigation — that a pay-to-play deal had been struck. Gov. Cooper announced Dominion and his office had agreed on the fund on Jan. 26, 2018, just two hours before the N.C. Department of Environmental Quality (DEQ) approved the water quality permit, essential to the ACP’s progress.

A solar energy settlement involving Duke Energy is also central to the investigation. It appears the governor was deeply concerned about House Bill 589, which passed the state legislature in 2017 with bipartisan support. The measure was intended to accelerate solar energy development, but soon after the bill’s passage, Duke Energy and solar developers began feuding over interconnection requirements to the grid.

The impasse became a part of negotiations on the mitigation fund. However, the investigation concluded that Good, Duke’s CEO, understood from a conversation with the governor that he “wanted these tasks completed by the end of December 2017, and at the same as the issuance of the ACP permits.”

However, Good told investigators that the governor did not condition the issuance of the environmental permits on the creation of a mitigation fund or the resolution of the solar dispute. Good said “Duke did not and would not pay for permits,” according to investigators.

As Policy Watch reported this year, the governor’s office and DEQ did coordinate on the timing of their respective announcements, based on communication in public records. But there is no proof in the public record that the permit approval hinged on the fund.

Regan and senior members of the DEQ staff, particularly Deputy Secretary Doug Heyl, who has since left the agency, routinely communicated with the governor’s office about the status of various permits.

Gov. Cooper knew when DEQ would approve the permit; DEQ knew the fund announcement was coming. On Jan. 1, 2018, William McKinney, general counsel for Gov. Cooper’s office, exchanged text messages with the governor: “Should review it [the MOU}with Regan if he hasn’t seen it,” Cooper wrote. “It’s what we discussed earlier, right?”

Text messages sent on Jan. 2, 2018, indicate the memorandum of understanding was cancelled because the solar dispute wasn’t resolved, but DEQ was not involved in that disagreement.

On Jan. 4, as DEQ finalized a hearing officer’s report containing public comments on the pipeline, Regan requested that he review the document, which delayed the issuance of the water quality permit by two weeks. “This is unusual,” investigators told the legislative committee Wednesday afternoon. “It was outside the usual time frame.”

Last week, DEQ released statements and testimony transcripts of 10 division-level employees, all of whom said they were either unaware of the fund or that the fund did not determine the timing of the permit approval. Eagle Intel investigators told lawmakers Wednesday that lower-level staff working on the permit “were very professional, technical minded. They did a very good job.”

Assistant DEQ Secretary Sheila Holman knew about the fund and helped draft spending priorities for it, which included economic development and environmental mitigation. Eagle Intel said they asked DEQ if they could interview Holman for further clarification. “We were not allowed to speak to her,” investigators said.

But in her written statement to investigators, Holman said she was unaware of any “direction given to the Division of Water Resources to accelerate or delay their review and decision” on the permit certification based on the status of the fund.

Duke Energy officials told investigators that the fund was the governor’s idea, not theirs.

After an explosive legislative budget committee hearing in February 2018, at which time lawmakers ambushed Lee Lilley, director of legislative affairs for the governor’s office, Eudy reportedly called Hawkins, the Duke lobbyist, and asked her to prepare a letter stating the utility voluntarily provided the fund. (Further fueling suspicions about the coziness between the governor and the utilities, Lilley’s previous job was a lobbyist for Dominion Energy.)

Hawkins told him that “they were not doing that,” according to the investigative summary, and Duke management agreed.

This contradicts Eudy’s statement to the committee last week that he did not ask Duke for the letter.

Eagle Intel didn’t interview Eudy, who opted to testify publicly.

If paid, the $57.8 million will not be used for its original intended purpose. Lawmakers subsequently redirected the money to school districts in counties along the ACP route. In addition, the MOU laid out a schedule of payment, but none of those benchmarks have been reached. Construction has been halted while the U.S. Supreme Court prepares to rule on the legality of federal permits issued in Virginia.

The committee did not act Wednesday so its membership can review the documents.