Article from the Electric City Blog http://ecityblog.blogspot.com/search/label/Coal Plant

GEE GUY..................

6/26/2007

Attorneys on Water Deal

Most coal readers will recall that the City has signed a Water Service

Agreement with SME. I have remarked in the past that this is to the credit

of Tim Gregori, the head of SME, because SME absolutely needs the water to

build the power plant. He obtained a signed agreement for water, even

though the City of Great Falls has no signed agreement with SME.

Given that the terms of our eventual agreement with SME have not been

finalized and reduced to writing, one could suggest that it was somewhat,

say, premature to enter into a binding, enforceable agreement to give up

our water. We have lost any leverage that SME's need for water might have

given us in the negotiations since we cannot threaten to withhold that to

which SME has a legal, contractual right.

As an attorney, I could suggest that one might have wanted to make the

Water Service Agreement conditioned upon certain things, most notably the

City's continued involvement in the project. Or, perhaps, one could have

conditioned it on the City and SME being able to negotiate a mutually

satisfactory Development Agreement.

These are clauses that anticipate contingencies and allow one side or the

other an 'out' to the contract. For example, most contracts to purchase a

home contain one for financing: if you can't get your financing, you can

get out of the deal.

Since the Water Service Agreement does not contain a contingency clause,

my professional curiosity led me to wonder who represented the City of

Great Falls in negotiating the agreement. This is because one could make a

reasonable argument that this Water Service Agreement should have

contained such a clause, and that the attorney representing us in the

negotiations should have insisted on such a clause.

At one point, I wondered whether, perhaps, the City was represented by

Luxan & Murfitt, a Helena law firm on this. If the City's attorney was

Luxan, that would be a potentially troublesome issue because we know now

that Luxan represents SME. If we were to encounter a situation where one

law firm represented both parties to a contract, that would be a fairly

unusual situation.

I have researched this issue as far as I can. I cannot definitively answer

the question without drawing certain inferences. Since those inferences

could lead to very strong conclusions, and since I cannot say that they

are 'factual,' I will not draw them. I will only state the facts as I know

them.

Fact: By email dated April 30, 2007, the City of Great Falls, acting

through Peggy Bourne, informed me that the "legal counsel who worked on

the water service agreement was a Mr. Torske. He was retained by SME. Dave

Gliko provided legal review" for the City of Great Falls. Mr. Torske is

James Torske from Hardin, Montana.

Fact: Harley R. Harris, a lawyer with the Luxan & Murfitt law firm,

prepared a Memorandum, dated November 22, 2004, and entitled: "Legal

Analysis-City of Great Falls Water Service To Salem Plant."

Fact: On December 7, 2004, the City of Great Falls ratified a contract

whereby it agreed to pay Luxan & Murfitt $140.00 per hour for legal

services.

Fact: On January 18, 2005, the City Commission authorized a payment of

$2,737.28 to Luxan & Murfitt.

Fact: On March 15, 2005, the City Commission authorized a payment of

$5,220.96 to Luxan & Murfitt.

Fact: On March 15, 2005, the City Commission was presented with and

approved the Water Service Agreement.

Fact: On August 16, 2005, Harley Harris, a lawyer with Luxan & Murfitt

represented to the City Commission that he had been representing the City

for the last "six to eight months" on the water rights issue involving

"concerning the change of the present point of diversion to be diverted

upstream of the Morony Dam to allow the place of use to be the location of

the proposed Highwood Station coal-fired generation plant."

Fact: On March 21, 2006, the City Commission authorized a payment of

$6,050.81 to Luxan & Murfitt.

Fact: On May 16, 2006, the City Commission authorized a payment of

$5,154.24 to Luxan & Murfitt.

Fact: On March 20, 2007, the City Commission authorized a payment of

$8,712.19 to Luxan & Murfitt.

Fact: SME sends the City of Great Falls "Cash Flow Projection" sheets

documenting SME's development costs, and the City of Great Falls then pays

25% of these expenses.

Fact: The City of Great Falls has provided me with what it represents to

be all of the "Cash Flow Projection" sheets documenting all of the

development costs that have been reimbursed or contributed to SME by the

City. According to the information provided by the City, the total amount

contributed is $1,534,412.55.

Fact: According to SME, it paid Luxan & Murfitt $9,588.17 prior to its

January 13, 2006, report.

Fact: According to SME, it paid Luxan & Murfitt $19,785.43 on May 15, 2006.

Fact: According to SME, it paid Luxan & Murfitt $11,864.27 on June 15, 2006.

Fact: According to SME, it paid Luxan & Murfitt $20,412.09 on October 15,

2006.

Fact: According to SME, it paid Luxan & Murfitt $28,170.44 on January 10,

2007.

Fact: According to SME, it paid Luxan & Murfitt $25,717.26 on January 10,

2007.

Fact: According to SME, it paid Luxan & Murfitt $23,566.93 on February 15,

2007.

Fact: On February 21, 2007, I received a letter from Luxan & Murfitt

wherein they represented SME.

Fact: The City of Great Falls paid 25% of all Luxan & Murfitt's charges to

SME by way of reimbursement.

Fact: The disbursement records provided to the City of Great Falls by SME

(and ultimately provided to me by the City) do not show any record of any

payment to an attorney James Torske of Hardin, Montana. (UPDATE: I should

have thought of this sooner. Thanks, Firefly. This is a search result from

the City's website.)

No conclusions drawn.