May 2009 Memo re: Broome County Natural Gas Leases

7/31/2019 May 2009 Memo re: Broome County Natural Gas Leases

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Recusal

Bill Huston's Blog (Binghamton NY)http://williamahuston.blogspot.com/2011/02/sluzar-letter-to-bc-legislature-re.html

Tuesday, February 8, 2011Sluzar letter to the BC Legislature re: recusal

I believe this memo is important, as it outlines a possible legal strategy should any of our legislators witha conflict of interest fail to recuse themselves from voting. This has implications throughout NY, not justin Broome Co. -- editor

Broome County Attorney's OfficeBarbara J. Fiala, Broome County Executive Joseph Sluzar, County AttorneyEdwin L. Crawford County Office Building 44 Hawley Street P.O. Box 1766 Binghamton, NewYork, 13902Phone (607) 778-2117 Fax (607) 778-6122 Email: [email protected]

MemorandumTo: Dan Reynolds, Chairman; Broome County Legislators.

cc: Barbara Fiala, Broome County Executive; Pat Brennan, Deputy CountyExecutive; Darcy Fauci, Deputy County Executive; Eric Denk, Legislative Clerk.From: Joseph Sluzar, County AttorneyDate: May 4, 2009Re: Broome County Natural Gas Leases______________________________________________________________________________

Broome County has approximately 6,000 acres of land. Much of this acreage is eligible for leasing tonatural gas companies for exploration and drilling. In fact the County received some unsolicited offers in2008. This year the County Administration has taken more formal steps to solicit lease proposals from gasdrilling companies. If submitted proposals have merit, resolutions will be presented to the legislature forauthorization. Additionally, the Legislature may also consider a local law designed to regulate the

industry's use of County roads and other related issues.

Several Legislators, directly or through private coalitions, have been negotiating with natural gascompanies for leases on privately owned property. I have been asked by other Legislators if this scenariopresents any conflicts of interest. In fact, I believe it does. Clearly, legislators that have negotiated orexpect to negotiate with gas drilling companies have a potential conflict of interest. That conflict triggersvarious disclosure and recusal obligations.

New York State General Municipal Law, NYS public Officers Law, federal statutes and the BroomeCounty Code and Charter all contain ethics' rules which define and prohibit conflicts of interest. Theserules are applied by the courts on a case-by-case fact analysis. See Matter of Parker v. Gardiner PlanningBoard, 184 AD 2d 937, 585 NYS2d 571 (3d Dep't.), leave denied, 80 NY 2d 761, 592 NYS2d 670

(1992). The identification of a possible conflict often turns on the nature and extent of the legislator'spersonal interest. That interest is defined as something which generates a direct or indirect pecuniary ormaterial benefit that accrues to the Legislator. General Municipal Law 800; Broome County CodeChapter 19 2. The question then becomes how closely does that interest conflict with the business of themunicipality.

Oftentimes ethics rules fail to anticipate all factual possibilities confronted by legislators. Even when thespecific rules do not clearly define prohibited activity, legislators must avoid even the appearance of aconflict of interest. Courts have repeatedly stated that officials should avoid voting on any matters which


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violate the spirit of the conflict of interest rules. In Tuxedo Conservation and Taxpayers Association v.Town Board of the Town of Tuxedo, 69 A.D.2d 320, 418 N.Y.S.2d 638( 2d Dept 1979), the Court statedthat recusal may still be necessary even without a technical violation of the conflict of interest rules:

It is asserted that he did not violate section 809 of the General Municipal Law, which forbids certainspecified conflicts of interest. Be that as it may, while the anathema of the letter of the law may not apply

to this action, the spirit of the law was definitely violated. And since his vote decided the issue we deem itegregious error.

Thus the question reduces itself to one of interest. Was Martineau's vote prompted by the "jingling of theguinea" or did he vote his conscience as a member of The Town Board? In view of the factualcircumstances involved, the latter possibility strains credulity. For, like Caesar's wife, a public officialmust be above suspicion.

Not only must a legislator vote his conscience as a member of a municipality, he must also create anenvironment which allows residents to measure that vote. Consequently a legislator should discloseinformation to the public which is needed to evaluate personal motives. This is emphasized by federal lawwhere it is a crime to create "any scheme or artifice to defraud" including to deprive another of the

"intangible right of honest services." 18 USC 1341,1346. "Honest services" is a difficult concept.Certainly you can argue that it is a subjective standard, but it is a standard used by prosecutors.Consequently, a legislator has a fiduciary relationship with citizens requiring full disclosure of thepotential motivation behind, and material information relevant to his official acts, including fulldisclosure of conflicts of interest, which would provide citizens . . .with the information necessary toevaluate his motivations for official acts.1

Local natural gas drilling will impact all residents and property owners of Broome County. After all, theMarcellus Shale underlies the entire County. Legislators do not have a conflict of interest simply becausea particular resolution may financially benefit the Legislator as a member of the public. Everyone receivesthose general benefits. When, however, a particular resolution impacting the natural gas industry relatesto a project for which the Legislator will be more directly or personally impacted, then there is the

possibility that public business will conflict with the legislator's personal interest. When that occurs theLegislator should not participate in the discussion or vote and should make certain public disclosures.

Last year various Broome County private coalitions organized to negotiate directly with gas drillingcompanies. Some coalitions successfully executed leases which called for advance bonus payments andproduction royalty payments. Anecdotal evidence indicates that the bonus payments reached as high as$2,500 to $3,000 per acre with royalty payments approaching 18 per cent. Other coalitions continue tonegotiate with gas drilling companies. There are also many individuals who have executed and negotiatedleases outside of private coalitions. Presumably development of a natural gas play will create otherbusiness opportunities beyond lease payments.

As these private activities continue, the County also finds itself involved in the potential natural gas play.

Currently a legislative committee is finishing work on the issue of retention of mineral rights onforeclosed property acquired by the County.2 The County legislature appropriated gas lease revenues intothe 2009 County budget, and the administration has just issued a Request for Proposal for municipal gasleases. This will lead to a discussion of pipelines, truck routes, easements and other related issues. TheCounty has commissioned an economic study to estimate the fiscal impact of a natural gas play in theregion. It has begun consideration of a local law to regulate the use of roads by the industry. Legislatorsthat gather information, deliberate and vote on these issues must do so from the perspective of themunicipality. All of these dynamics, however, have placed the county's municipal business in potentialcompetition with private interests.


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The foregoing possibilities suggest that there are many situations where the motives or honest services ofthe legislator landowner may be questioned.3 In other words, on legislative natural gas issues will theindividual legislator be considering his own interest or the interest of the County?

I believe our legislators have the ability and desire to separate private interest from public business, but

that does not end the inquiry. Ethics rules do not define the substantive role, duty or motives of alegislator. Instead the rules are designed to prevent the legislator from being put into a situation where hismotives can be questioned by others. The rules are designed to give citizens confidence in their publicinstitutions and elected leaders.

Broome County may be presented with many situations where a legislator's motives or honest servicescould be questioned by a resident.

The legislature is asked to deliberate and vote on a gas lease on County land. Will the individual legislatorbe concerned about the impact of a County lease on his own lease or negotiations?

The legislature is asked to deliberate and vote on a pipeline gathering easement. Will the individual

legislator be concerned whether the easement hastens development on private leases or County property?

The legislature has already been asked to comment on a proposed local law regulating natural gasvehicles on County roads. The gas companies do not want a local law regulating the use of roads. In factthey claim that such a local law might slow development. Will the legislator worry about development onprivate land or will he only consider the best interests of the County?

Legislators may be asked to lobby NYS or their own colleagues concerning rules regulating the drillingactivities of natural gas companies. Will the individual legislator consider the impact of the proposed ruleon his property or will he be concerned about theimpact on the County?

All of these present potential conflicts of interest for the individual Legislator.4 And in turn they trigger

obligations of disclosure and recusal.

Under the current dynamics, I do not believe the owner of a home and small residential lot has a de factoconflict. I believe, however, every legislator for him and his immediate family should disclose realproperty holdings, natural gas leases and the existence of past, present or expected negotiations for naturalgas leases. Additionally certain legislators should recuse themselves from discussion and voting onnatural gas issues, whether the issue is simply information gathering or consideration of a specificresolution. Recusal should apply to the following situations:

The Legislator, or an immediate family member, has a lease with a natural gas company.5The Legislator, or an immediate family member, belongs to a private coalition that is negotiating or hasnegotiated in the last year with the natural gas industry.

The Legislator, or an immediate family member, is privately negotiating or has negotiated in the last yearfor a natural gas lease, or the legislator believes that negotiations will soon commence.

Legislators should also know that their ethical obligations to citizens extend beyond disclosure andrecusal. Part of fulfilling that obligation is to accept no gifts from companies involved with developmentof the natural gas play.6 Additionally we recommend that all public business contacts with industrymembers be conducted at County facilities or with other county officials present.7


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This is a very fluid situation. As the natural gas play develops and matures, the political, social, legal andeconomic dynamics may change. For example, an individual Legislator may currently own a small parcelof land, yet have absolutely no current interest in or expectation of a natural gas lease. Interest, however,can suddenly develop based upon changes in the energy marketplace. This may create a conflict wherenone previously existed.

There is also the possibility that too many legislators may be saddled by a conflict of interest. Forexample lease speculation activity may re-ignite targeting all real property in Broome County. If thatoccurred, it might be difficult to obtain a quorum or majority of the legislature to deliberate and vote onnatural gas issues. The "rule of necessity," however requires that the legislature vote on certain issues.8 Inthe event that conflicts touch too many legislators, the recommendation of the law department would beto establish a bright line. A conflict would then be based upon how much relative natural gas income isreceived or acreage is owned by the legislator or immediate family. Interest below a certain amountwould not be considered a conflict. Interest above would be considered a conflict. This may be somethingthat has to be addressed in the future.

I realize that this Memo contains very conservative advice. However, "the mixture of politics, possibleconflicts of interest, and large sums of money are the classic ingredients found in a growing number of

federal prosecutions against public officials."9 This is an issue which must be reviewed repeatedly andopenly. Every Legislator must diligently and continuously monitor his own situation to determine whendisclosure and recusal are necessary.

--------------------------------------------------------------------------------Endnotes

1 USA vs Joseph L Bruno, Indictment, 09-CR-29 (ND NY). The indictments for former officials Joseph Bruno andRod Blogojevich each contained allegations that the officials deprived their constituents of honest services.

2 Taken alone, a discussion about tax foreclosure properties does not create a conflict of interest for any legislators(unless of course a legislator or immediate family member is involved in the foreclosure process). However, theCounty's involvement in mineral right issues will not stop with this discussion. The discussion will soon spread to

other issues which potentially bring public business into conflict with personal interest.

3 The County Executive hosted a recent meeting to discuss natural gas development issues. Several other electedofficials attended the meeting. It was not initially clear if those other officials attended in an individual capacity,elected capacity or both. Disclosure and recusal would address this issue.

4 Our current situation is similar to the recent controversy concerning the proposed development of wind farmsacross New York State. Last July the NYS Attorney General launched an investigation of both wind energydevelopment companies and local officials with the following statement: "In recent months, the Attorney generalhas received numerous complaints regarding the two companies from citizens, groups and public officials in eightcounties alleging improper relations between the companies and local officials . . . " NYS AG Press Release, July 15,2008. As a result of this investigation several companies have signed a "Code of Conduct for Wind Farm Development."

5 Immediate family member would include spouse, minor child or dependent. General Municipal Law 800;Broome County Code Chapter 19 2

6 The General Municipal Law and the Broome County Charter and Code have a prohibited gift threshold of $75.00.NYS General Municipal Law 805-a. Broome County Charter & Code, Chapter, 193. The NYS lobbying actwhich applies to Broome County prohibits any gift except those of nominal value. NYS Legislative Law, 1-c(j)and 1-m.

7 Legislators would be well served to memorialize in writing all contacts with all natural gas developmentcompanies. Contacts about public business should be held at public facilities preferably with at least two Countyemployees present. The date, time and location of contacts about private business should be filed with the Clerk ofthe legislature.


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8 The classic "rule of necessity" involves votes on salary. There is a blatant conflict of interest for a legislator to vote on his ownsalary. Nevertheless, there is no other public agency besides the legislature to make the salary decision. Despite the obviousconflict, the rule of necessity allows the individual legislators to cast votes.

9 Bond, Schoeneck & King, PLLC, Informal Memo, dated March 31, 2009.

Posted by Bill Huston at 5:41 PM

comments:Jeff said...

This is an excellent point. I thought there might be another motivator for some legislators to be backingdrilling (besides a source of money to fund the county budget shortfalls).February 13, 2011 5:02 AM

May 2009 Memo re: Broome County Natural Gas Leases

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