Wyoming's 'Dark Money' Coal Campaign

Oct 2, 2020


At a Sep. 3 press conference, Gov. Mark Gordon introduced a nonprofit that's been advocating for Wyoming's coal industry for years: the Energy Policy Network. He announced a new contract with the group in which taxpayers would "contribute" $250,000 this year.

The governor believes there's still a place for Wyoming's coal in the electric utility market despite the long and accelerating shift toward renewable sources and natural gas.

"We face the challenge that many other states' public service commissions, unfortunately, don't see it that way," Gordon said.

That's where the Energy Policy Network comes in.

In as many as nine states EPN, a nonprofit, has campaigned to keep power plants burning Wyoming coal. State officials say EPN has preserved $38.5 million in tax revenue a year by extending the lives of coal plants. Taxpayers' new donation to EPN will save the state millions more, they argue.

"Extending the life of coal is a wise investment for Wyoming, wise investment for the globe," Gordon said.

When it comes to the state's investment in EPN, however, some question the ethics of Wyoming handing taxpayer dollars to a coal advocacy group without direct control over how that money is spent.

With Wyoming as its single biggest funder, the nonprofit forms local groups in other states with names like the Arkansas Affordable Energy Coalition or the Indiana Coalition for Affordable and Reliable Electricity. But if residents in those states know Wyoming's money is behind such groups, it's likely through the work of journalists or watchdog organizations.

"Wyoming has never been shy about its involvement," Jason Begger, the deputy director of the Wyoming Energy Authority, said. "But [the state] certainly has never given EPN the OK to talk about its relationship with Wyoming. Due to [EPN's] classification, I don't believe they do need to disclose their donors. So, they don't."

EPN is registered as a 501(c)(4) nonprofit, and such organizations aren't in fact required to disclose their funders to the public. In modern politics, the designation is often derided as "dark money." Corporations, foundations and wealthy individuals like the Koch brothers have used 501(c)(4)s to cloak involvement in political and regulatory affairs.

The classification's association with a state government, however, is more novel.

Local and national transparency advocates call the idea of taxpayer dollars funding such political maneuvering troubling.

"This is the first time that someone has said that a state itself -- as in one of the 50 states - is the source of dark money spending. So, this is a new one for me," said Ciara Torres-Spelliscy, a Stetson University professor and expert on money in politics.

"It is a little bit troubling that one state might use the subterfuge of dark money to compete with its sister states in a way that is not above board," she said.

For EPN's proponents, first in the Mead administration and now in Gordon's, the group's work is not only justified, but critical.

"Is it unusual? Maybe so, but these are certainly unusual times. And these are important times for Wyoming," Randall Luthi, Gordon's chief energy advisor, said.

An investigation by Wyoming Public Media and WyoFile explores the tactics, and ethics, of the 501(c)(4) two Wyoming governors have now backed in their attempts to save coal. Internal communications, regulatory filings and interviews illustrate a lightly staffed but wide-ranging effort to keep Wyoming coal burning.

'Invest in the fight.'

Kelly Mader, a Sheridan native who served in the Wyoming House and Senate during the 1980s, founded EPN in 2015.

"Kelly felt like, and I guess the state felt as well, that there should be someone out there protecting the market in the coal consuming states," EPN's CEO Randy Eminger said. Mader died in the summer of 2016. Eminger, a former D.C. lobbyist, took the group's helm.

A photographer of Randy Eminger from the Energy Policy Network website
Credit Energy Policy Network

To prospective funders, Mader pitched EPN as a counter to the Sierra Club's Beyond Coal campaign. Left-leaning billionaires and foundations have given hundreds of millions of dollars to the Sierra Club, itself a 501(c)(4).

EPN has one employee and most years takes in a little more than $500,000 in donations, according to tax filings.

Coal country had catching up to do, Mader told the Wyoming Mining Association in 2016. A slide from his presentation read: "The war is not lost. Invest in the fight."

"With sufficient resources, EPN will show up - anywhere and everywhere - just like the opposition does and has been doing for years," Mader told the trade group, according to a copy of his presentation.

'Test case': Oklahoma 1,138 megawatts

The group's first engagement was in Oklahoma in 2016 - amid a showdown over the 1,138 megawatt coal-fired Sooner Generating Station. (In a very simplistic accounting, one megawatt of electricity powers about a thousand homes).

Utility company Oklahoma Gas & Electric wanted to put new pollution controls on the Sooner Station to keep it operating - at a $500 million cost to Oklahoma ratepayers. Without the scrubbers, the utility would close the plant on Jan. 1, 2019, Eminger said.

Environmental groups opposed keeping the plant running. So too did wind energy and natural gas companies, Eminger recalled in an interview with reporters. Oklahoma's Corporation Commission - a board of three elected commissioners - had already twice rejected the scrubber proposal when EPN got involved, Eminger said.

EPN formed a coalition to support the utility company that included corporations like Michelin Tire and American Airlines, along with railroad companies and rural electric co-ops.

"It was kind of our first test case," Eminger said. "Thank goodness it was a two-to-one vote in favor."

The Sooner Plant's longevity equals "another 2.6 million tons of coal a year that comes out of the [Powder River Basin] to that plant that wouldn't be there," he said.

Environmentalists were dismayed. "OG&E's decision to keep the Sooner plant operational and take $500 million from the families and small businesses of Oklahoma … is an insult to the hardworking people of the state," Al Armendariz, who worked to close the plant as deputy regional director for the Sierra Club's Beyond Coal campaign, said.

During the Sooner plant fight, Armendariz was not aware of EPN's connection to Wyoming, he said. But he called any credit EPN took for the win overblown - a criticism echoed by activists in other states.

"OG&E was going to do this anyway," Armendariz said. "They seemed determined to prop up this 40-year-old coal plant. I don't think an organization out of Wyoming had any influence."

Eminger argued EPN did shift the commission. "There were a lot of players, but I think we played a role in it," he said.

The Oklahoma fight established a playbook EPN has since deployed in other states.

Colorado - 660 megawatts

A slide from a presentation Randy Eminger made to a Wyoming legislative committee in 2018 lays out EPN's typical strategy.
Credit Screengrab of presentation acquired through a public records request

Though in Oklahoma EPN came down on the side of the utility company, in other states it advocates against electricity producers' own wishes to move off coal.

In Colorado, when Xcel Energy sought to close two units of the Comanche Generating Station with a combined 660 megawatts of PRB coal power, EPN worked through the Coalition of Ratepayers. The group billed itself as a local coalition advocating for small businesses and residential ratepayers and was the primary opponent to the plant's closure. Records showed that the coalition was funded by a think-tank called the Independence Institute, which in turn was funded by the Energy Policy Network.

"In the end, our little 'Ratepayer Coalition' made it a great show," Eminger wrote in one email to EPN's supporters.

"It's a common tactic when lobbying on a particular issue to create an innocuous or positive sounding group even if it's funded by [those] with a vested interest," Lloyd Hitoshi Mayer, a Notre Dame Law Professor and expert in nonprofits and election law, said. "There's political psychology behind this."

The public might react one way to an effort labeled as on behalf of Wyoming coal mining, as opposed to one pushed by local small business owners, he said.

And indeed, criticism was swift once the Wyoming connection surfaced.

"If the state of Wyoming wants to make a case to Colorado ratepayers and our regulators that we should keep coal plants online for longer ... they're welcome to make that argument," Joe Smyth, an Energy and Policy Institute researcher and Colorado resident, said in March. "But hiding their role by funneling money to this group suggests that they haven't been pursuing an open and transparent argument."

It's not easy for Wyoming to intervene officially in a utility case, Luthi said. The state attempted to intervene in a separate case in Colorado and was turned down, he said.

"It's probably most effective in other states' [public service commission] hearings that they're hearing from groups that are within their state," Luthi said. "That's one of the things EPN seems to do extremely well."

The efforts in Colorado failed. The Comanche Plant is slated to close early.

"I lost the Comanche fight... We lost the NIPSCO fight in Indiana. So, every one of them has not been a success," Eminger said.

NIPSCO: 2936 megawatts

The "NIPSCO fight" refers to EPN's opposition to the Northern Indiana Public Service Company, one of several utilities in that state announcing a plan to move away from coal - including from the PRB.

For that battle, EPN created a local coalition, hired and directed a media relations firm, brought in an attorney to cross examine the utility's experts and developed written testimony "debunking" the need for closing the plants, according to emails EPI obtained through records requests and provided to reporters.

That EPN push wasn't enough. The closures proceeded.

A wave of potential plant retirements in Indiana have made the state something of a national battleground for both pro- and anti-coal advocates.

"It's ground zero. There's absolutely no question about it," Kerwin Olson, director of Citizens Action Coalition, an environmental and consumer group, who fought for NIPSCO plant closures, said.

NIPSCO was just the first of Wyoming's engagements through EPN in that battleground.

'This closure has me very worried'

When it comes to choosing campaigns, Eminger said it's mostly up to him.

"Maybe I should coordinate with [Wyoming] more than I do. But they said, 'Look, Randy, you've had some success in the past,'" he said, "and they've kind of left me alone to decide that."

In July 2019, however, it was Wyoming's new gubernatorial administration that picked the fight.

Further state support for EPN wasn't guaranteed when the Gordon administration took over in 2019. In fact, it wasn't until this summer that the new administration committed to funding the nonprofit. Tax filings and emails between Eminger and one of his board members show the intervening 18 months was a time of near-existential angst.

Eminger reached out to the Gordon administration within days of its taking office. His email included a powerful calling card for Wyoming politics - a letter signed by executives of Wyoming's principle coal companies and the directors of coal and mining associations. The letter asked the new administration to continue funding EPN.

As its largest single funder, the state of Wyoming's support has always been critical to EPN. In 2017 and 2018, Wyoming's payments constituted close to half of the total contributions EPN brought in, according to the organization's tax filings.

A records request captured one supplementary tax filing not normally made public. The 2017 document shows coal company Cloud Peak Energy paid the firm $150,000 that year, making it the second biggest contributor behind Wyoming's $250,000. Together, the coal company and the state provided 70% of EPN's 2017 revenue.

Campbell County, epicenter of Wyoming's coal industry, gave $60,000.

As Eminger introduced himself to the Gordon administration, his funding was running thin. Cloud Peak went bankrupt in May 2019. Campbell County also ceased giving as its budget shrunk with coal's decline.

On Feb. 4, 2019, Eminger wrote EPN's vice president, Jacob Williams, and said the group needed more money from Peabody and Arch Coal.

"They will need to step in or the operation will likely come to an end at some date," Williams wrote in response.

"As long as I receive the 250k from Wyoming governor, EPN will be okay," Eminger wrote.

Wyoming did not contribute the $250,000, and other financial documents suggest EPN burned through its savings as a result.

It's unclear whether state officials know the importance of their funding to EPN.

"Are we making up 50% of their funding?" Begger asked in a Sept. 18 interview. "I don't know," he said.

Luthi was also unaware of the percentage of EPN's funding that comes from Wyoming taxpayers, he said: "Certainly I would say without the Wyoming funding I doubt they would be doing a whole lot to help PRB coal."

Rockport: 2600 megawatts

Nine months after taking office, the looming closure of a massive coal plant in Indiana consuming PRB coal kicked off the Gordon administration's financial relationship with EPN.

"Is there time to appeal the Rockport Unit? I don't know where the funding would come from, but this closure has me very worried," Gordon's Policy Director Renny MacKay wrote to Eminger on July 21, 2019.

The Indiana Michigan Power Company's Rockport Generating Station is at the center of a years-long battle. A massive plant, it's two units each have a 1300 megawatt capacity - around 83% of which comes from PRB coal. Right now, the utility's preferred plans would not renew the lease for Unit 2 beyond 2022. Unit 1 faces a mandatory retirement by 2028.

A 2014 investigation by the Center for Public Integrity found Rockport is one of the nation's 22 "Super Polluters;" meaning it was one of the biggest spewers of both greenhouse gasses and pollutants that harm public health nationwide.

"Those emissions are reaching not just across Indiana but also up the eastern seaboard," said Wendy Bredhold, senior campaign representative for the Beyond Coal campaign in Indiana.

In October 2019, Eminger told MacKay it would take $50,000 for Wyoming to become a "prevalent voice" in the ongoing fight for the extension of Rockport's life. The Gordon administration agreed and made its first payment to EPN on Sept. 17, 2019.

This time, part of EPN's strategy relied on the weight of the governor. In emails, Eminger suggested Gordon get in touch with Union Pacific to seek more funding. He also suggested Gordon or his office reach out to influential individuals including the utility company president, Indiana Gov. Eric Holcomb and executives at Wilmington Trust, an investment group that holds the lease for Rockport Unit 2.

At least one of those calls happened. Gordon called Nick Akins, the president of Rockport operator AEP, to push for keeping the plant open.

It's a tough fight, Eminger said, and the chances of the units staying open are slim.

Even an Indiana lawmaker did not know Wyoming provided funding until journalists brought it to his attention. Indiana State Rep. Matt Pierce (D-Bloomington) is a member of a task force examining Indiana policies concerning electric generation portfolios. He wasn't aware Wyoming had involvement in Indiana utility regulations at the time, he told WyoFile and Wyoming Public Radio.

The coal lobby brought up the importance of Indiana jobs, not Wyoming ones, when coal plants came up, Pierce said.

Gov. Mark Gordon speaks to lawmakers on the opening day of the 2020 Legislative session.
Credit Mike Vanata/Wyofile

Asked if the people of Indiana deserve to know another state is intervening in their regulatory affairs for its own benefit, Bredhold from the Sierra Club had a question for Wyoming citizens:

"I'm really curious: Do they want their government to be spending money to try to keep coal plants running in Indiana?" she said. "Is that where they want their money to go?"

Wyoming legislators first signed off on funding EPN in a section of the 2014 state budget that read: "taking actions to improve access to markets and address related regulatory, logistic and infrastructure concerns." The group has since reported from time to time to legislative committees.

This year, the Wyoming Legislature appropriated $1 million for a new "coal marketing" fund. It's where Gordon got the money to sign on for two more years, at $500,000, with EPN. (Gordon only mentioned one year of the contract at the press conference.)

The new funding pot and the September press conference where Gordon announced the contract suggests the state's policymakers, at least, do want to keep spending money this way.

For now, Wyoming appears committed to funding the 501(c)(4) until 2022. There are plenty of fights in which EPN can engage. A large utility company announced just this week that it would close 6,200 megawatts worth of coal plants in Ohio and Illinois by 2027. Much of that coal comes from the Powder River Basin, according to the Sierra Club.

Gray areas

The Wyoming taxpayer may be EPN's primary funder, but it's not clear that means the state calls the shots.

"I don't get direction from Randall [Luthi] or Renny [MacKay] or anybody from the Wyoming Legislature," Eminger said. "They just appropriate the money and tell me to go do what I think is best."

Wyoming pays EPN for research, communication and administrative costs, Begger said.

The nonprofit can join in a coalition and provide economic data, "but if you're actually going to file a lawsuit against a company or a state, that's actually the domain of the [Wyoming] Attorney General's office," Begger said. "If there's going to be state advocacy in a sense of lobbying legislators or governors or things like that, that should come out of the governor's office."

One paragraph of the contract with EPN describes "educating and communicating" the benefits of Wyoming coal to legislatures and regulators of coal-consuming states.

"I guess one person's advocacy and education is another person's lobbying, but it could be somewhat of a gray area there," Begger said .

Luthi agreed. "I can't say that [lobbying has] been banned outright, when we have it right there in the contract," he said.

Eminger said he does not lobby, and pointed to EPN's website and mission statement as evidence of his group's transparency. "I'm not lobbying and I'm not incognito, either one," Eminger said.

Jason Begger, on the right, at a committee meeting during the 2020 session of the Wyoming Legislature
Credit Andrew Graham/WyoFile

Verbiage aside, EPN is active in litigation and funds or partners with other groups that are registered lobbyists in Indiana and Colorado.

In Arkansas, for example, the Arkansas Affordable Energy Coalition - an EPN initiative - is litigating to block a settlement between the Sierra Club and the utility Entergy, which has agreed to close two power plants early.

The EPN-backed coalition joined with the Arkansas Attorney General in the legal action.

To establish legal standing, EPN identifies itself for the court as a trade organization "representing the interest of low-sulfur coal from the Powder River Basin of Wyoming."

A spokesperson for the Arkansas Attorney General told reporters the local coalition never disclosed its connection to Wyoming's government in meetings.

Ethical questions

State governments owe each other honesty, Richard Painter, a chief White House ethics lawyer during the Bush administration, said.

"I think it's not something that a government should be doing," Painter said, of a state utilizing a 501(c)(4). "The government should be principally about transparency and accountability, not trying to avoid the law.

Even the most infamous dark money spenders seem to agree the tactic is for private entities, not state ones. "Transparency is meant for the government, not for private individuals," Philip Ellender, the head lobbyist for Koch Industries, told the New York Times in 2018.

Wyoming needs to engage because it's other states' regulatory bodies that are weighing decisions impacting Wyoming's future, officials here said.

"This is something we needed to have in the arsenal," MacKay said of EPN, "because we are so beholden on what happens outside of Wyoming."

Begger too said Wyoming is at a disadvantage against the wave of funds opposing coal - EPN is an affordable way for the state to fight back.

"Wyoming certainly doesn't have the resources or the expertise to go out there and fight every fight," he said.

But, "how would we feel if it were turned around?" Senate Revenue Committee Chairman Cale Case (R-Lander), asked in response to reporters' descriptions of EPN"s work. "What if Colorado was coming in here and arguing for a renewable energy standard in front of the Wyoming PSC? I think we would probably think that is unethical, especially if they were doing it secretly."

Many states promote their own industries, Eminger said, but he couldn't name a parallel example to Wyoming and EPN. Nor could Luthi, MacKay, Begger or any of the political nonprofit experts.

Asked if the use of a 501(c)(4) was unusual, Luthi credited the idea to the Mead administration.

"This is a program that existed before we showed up on the scene, and I think we just followed it and took advantage of the legwork that had been done by the Mead administration," Luthi said. "We certainly do feel confident EPN is doing a good job, or we would not have gone through with another contract."

Return on investment

At the Sept. 3 press conference, Begger touted big savings for the state through a small investment in EPN's work.

"Just think about that: $38 million per year on about a $250,000 investment. That's pretty great," he said.

The figure is based on the extended lives of four power plants, though the opposition in three of those cases argues EPN overstates its role.

A slide from a March 2019 presentation given by Randy Eminger to the Wyoming Infrastructure Authority. EPN calculates the money it's saved Wyoming based on how many years its work extends a power plant's life. Environmentalists contest how much of an impact EPN has had on three of these plants.
Credit Screengrab of presentation acquired through a public records request

But as cheap natural gas floods the grid and more renewable energy comes online, that metric may be flawed even if EPN's claims are correct. An open coal plant doesn't mean one running at full throttle.

In fact, the four coal plants EPN points to as success stories were already seeing drops in PRB coal consumption prior to 2020. Those declines accelerated sharply this year.

Comparing PRB coal consumption during the first half of 2018 with the first half of 2020, three of the four plants cited saw their coal consumption drop by about 70%, using data from the U.S. Energy Information Agency. The fourth plant saw a 50% drop.

One of those plants is the Sooner Station in Oklahoma, EPN's first win and Mader's evidence that "the war is not lost." Eminger suggested the plant kept burning 2.6 million tons of PRB coal a year after EPN's intervention.

Halfway through 2020, the plant has burned only 473,550 metric tons of PRB coal.

"Wow," Eminger said when told about the plant's capacity this year. "Is that right?"

In a follow up email to reporters, Eminger said the drop was likely due to increased use of other energy sources and an economic slowdown because of COVID-19. He expected an economic rebound would increase coal consumption.

"It will also depend on how cold of a winter we have and the price of natural gas," he wrote.

Have a question about this story? Please contact the reporter, Cooper McKim, at cmckim5@uwyo.edu.