Fools Rush in Where Angels Fear to Tread: Excerpts from the Bass Energy Depositions

After Council redeemed itself by unanimously rejecting a new drilling resolution, residents were still left wondering how the city ended up being sued by Bass Energy in the first place. I’ve gotten a lot of questions about that.

I figure the best people to explain it are the key players involved in the drilling fiasco.

Through a Freedom of Information request, I obtained copies of the depositions given in the Bass Energy lawsuit.  This blog contains excerpts from those depositions.  

There are several things to keep in mind as you read the deposition testimony:

1) The deposition testimony was given under oath, under penalty of perjury.

2)  A typical deposition technique is to ask questions about the same topic at different times throughout a deposition. I have grouped the deposition testimony by topic, noting where in the transcript it can be found.

3) The city’s attorney (John O’Neil) questioned Bass Energy President Bill Hlavin and Bass Energy landsman, Edward Repasy. Bass Energy’s attorney (William Dowling) questioned all of the Highland Heights officials.

4) The timeline:
Jan. 23, 2007 – Council passes a resolution authorizing the mayor to sign 2 drilling leases, conditioned on the parties’ agreement to 3 specific drilling sites in the park and on the municipal complex property.
March 6, 2007 – the mayor signs a drilling lease for the park.
March 28, 2007 – the preconstruction meeting for the new park parking lot project is held.
April 20, 2007 – the date on the plat map created by former city engineer Andy Blackley and his company, Stephen Hovancsek & Associates, for Bass Energy showing 2 drilling sites in the park (in woods behind Hawthorne and near tennis courts).
April 24, 2007 – the new park parking lot construction project begins.
July 27, 2007 – the state issues drilling permits for the 2 sites listed on Bass’s plat map.
October 2007 – the park construction project is completed.
November 2007 – residents learn of the drilling plan.
Dec. 18, 2007 – the mayor issues a “no-drilling” memo.
Jan. 22, 2008 – Council rescinds the mayor’s authority to sign drilling leases (before anticipated second lease was signed).
July 18, 2008 – Bass sues the city for breach of contract.
July 2, 2009 – Judge Eileen Gallagher denies Bass Energy’s request for a drilling injunction, orders the parties to go to arbitration and notes that Mayor Coleman had “no power” to sign the drilling lease in March 2007 because the parties hadn’t yet agreed on 3 specific drilling sites.

5) Highland Heights Ordinance 107.03(a) prohibits city officials and employees from being paid – directly or indirectly – by anyone other than their city employer for services rendered with respect to any matter “under consideration by Council.” The responsibility to obey that ethics law lies with each individual official/employee and, of course, supervisors don’t have the legal authority to override that law or exempt subordinate officials/employees from its application.

The deposition testimony:

Topic: The City Budget and Financial Benefit of Gas Wells to City

Deposition testimony of Mayor Scott Coleman

Q: And can you tell me what your annual (city) budget is?
A: No, I can’t.
Q: Approximately?
A. I wouldn’t venture a guess.  (p.17)

Q: You’re not able to tell me with any more precision what the amount of the budget was?
A. Sir, I’m an accountant and I – and I speak in – not generalities, in specifics. If I don’t know the answer to that, I’m not going to venture a guess.  (p. 19)

Q: Did you assess the overall likely advantage to the city (from the gas wells) in dollar terms?
A: I didn’t assess it. I took what Bass Energy thought would be the royalties that we would get.
Q: What did they tell you?
A: I don’t recall. (p. 46).

Deposition Testimony of Finance Director Anthony Ianiro

Q: Do you know if anybody conducted a study of the financial impact on the city, if any, relating to these leases?
A: I am unaware of any study. (p. 16).

Topic: Due Diligence/Investigation of Drilling Process/Dangers Prior to Passage of January 2007 Resolution

Deposition testimony of Mayor Scott Coleman

A: Around February of 2006 (law director) Mr. Paluf had mentioned to me that he was approached by some entities that were interested in drilling in our city park. We brought that to council – we brought that notion to council sometime the first quarter of 2006, wanted to know if council was interest in pursuing this, having the entities come to council to talk about it, they said they were, we did that, Bass Energy came to talk to us about that, we had subsequent meeting of the same. (p 37).

Q: …would you say that the law director Mr. Paluf was the person primarily responsible for communicating with Bass?
A: Yes. (p. 117).

Q: Did you feel prior to the council passing the resolution authorizing you to enter into the lease, did you feel that you understood the well drilling process?
A: Yes.
Q: Did you feel that you personally had adequate opportunity to investigate and to understand that process?
A:  Yes. (p. 45)

A: I’ve learned high-level what the (drilling) process is… — I mean I don’t know the geological process. I know that rigs come in and they drill into the ground, gas comes up, there’s some residuary brine and other things that has to be put into a container and taken off, I know that they need – I now know that they need a certain area to put the equipment in to drill
.….
Q; What area do they need?
A: I don’t know specifically. I know it’s a larger area than I originally thought.
.…
Q: Mayor Coleman, have you actually gone anywhere to personally view the drilling process?
A: No.  (p. 20-22).

Q: …What do you understand the dangers to be (associated with the drilling process), if you have any understanding?
A: Gas leakage.

Q: Did you discuss that danger with the people from Bass Energy?
A: Yes.

Q: And what did they tell you and what was your understanding?
A: They said we shouldn’t be concerned, they haven’t had issues of danger in their experience… of any significance.

Q: Have you consulted with anyone other than the Bass people about the dangers associated with drilling a gas well?
A: No.

Q: Have you sought any expert advice from anybody other than the Bass people about the well drilling process?
A: No

Q: Do you know if anybody associated with the city has consulted with any experts other than Bass Energy about the process?
A: No. (p. 24-25).

Q: ..Did you personally make a determination as to whether those gas wells (in the park) would pose a threat to the health and safety of the citizens of your city?
A: No. (p. 50)

Q: You were personally in favor of entering into those (two) drilling leases by the time the  (2007) resolution was presented to council?
A: Yes. (p. 57).

Topic: Due Dilligence/Investigation of Legal Issues Pertaining to Drilling

Deposition testimony of Mayor Scott Coleman

Q: What’s your understanding of the validity or effectiveness of that (the city’s drilling) ordinance post-House Bill 278 (the new state drilling law)?
A: I don’t know. (p. 27).

Q: (Referring to statements made by Councilwoman Cathy Murphy at a November 13, 2007 Council meeting). And it says there, “She said it was apparent that there has been miscommunication and that the agent for Bass Energy has no understanding of the city’s approval process as outlined in Section 733 of the Codified Ordinances of Highland Heights (the city’s drilling ordinances). In response to Mrs. Murphy’s inquiry if … the city being the landowner of the park has authority on approval, law Director Paluf replied yes.”
Prior to that meeting…had you ever discussed with council whether the Codified Ordinances had been superseded by the state statute?
A. I don’t recall. (p. 33-34).

Topic: The Signing of the Drilling Lease on March 6, 2007

Deposition testimony of Edward Repasy, landsman who procured drilling lease for Bass

A: According to (Law Director) Tim Paluf, he had mentioned to me that we needed to do the three readings (of the 2007 drilling resolution), once the three readings were approved the mayor could sign the lease. (p. 13).

Deposition testimony of Council President Cathy Murphy

A. The (January 2007) resolution was a conditional..opportunity for the lease – for two leases for three sites and upon that condition being met, yes, I was satisfied.
Q: What was the condition?
A: Approval of the sites by the city.
Q: And did you ever approve sites?
A: No. (p.23)

Deposition testimony of Mayor Scott Coleman

Q: Section 2 (of the Jan. 23rd resolution) says “This resolution is contingent upon the approval of the three sites by the City of Highland Heights and the commitment of Bass Energy to drill the wells on all three sites.”….Which entity did you understand was going to approve the three sites?
A: City Council.
…
Q: You would agree that by this resolution the council was giving you the authority to enter into the lease?
A: Correct.  (p. 57-58).

Q: Did you believe that you having been given that authority likewise had the authority to approve the locations of the wells?
A: No. (p. 74)

Q: What happened between January 23 and March 6 (2007) in regard to the lease or the drilling of the gas wells?
A: There was discussion about the location of the wells.
Q: And who had the discussion about the location of the wells?
A: Members of Bass (Energy), members of city administration and myself.
.…
Q: Who attended that meeting on behalf of the city?
A: I was there, (law director) Tim Paluf,  (former city engineer) Andy Blackley. That’s all I recall… (p. 61-62)

Q: Was it your understanding that you were going to go ahead and sign a lease after that meeting?
A: Yes.
Q: Okay. In fact, you did go ahead and sign –
A: Yes (p. 60-70)

Topic: Selection Process that led to issuance of State Drilling Permits for Well Sites near the tennis courts and in the woods behind Hawthorne Drive

Deposition testimony of Mayor Scott Coleman

Q: Did you believe that there were areas in that park where a well could be appropriately drilled?
A: Where a well could be appropriately drilled? Yes. (p. 76)

A: (In the meeting that immediately preceded the mayor’s signing of the drilling lease) We received proposed locations of the wells.

Q: From whom?
A: I don’t know who gave that. I believe it was from a drawing that (former city engineer) Andy Blackley had made.
.…
Q: And he (Blackley) was proposing those spots for the gas wells on behalf of the city?
A: No, he was – he was showing some spots where a well could be located. Mr. Blackley doesn’t have the authority to propose spots on behalf of the city.
Q: Did you understand that you did (have that authority)?
A: No. (p. 64).

A: We only spoke of two locations at this meeting and they discussed the process that (they) would come in and… the amount of the area that was needed to dig a well was now made apparent to me at this meeting and it was – it was going to cause the destruction of many trees. I wasn’t in favor of that, but that’s when I learned the amount of area that they needed to drill a well and the two proposed locations.
Q: And they proposed, Bass proposed specific locations?
A: Bass didn’t. It came from a drawing from Andy Blackley. (p. 66-67).

Q: Okay. And Mr. Mayor, did Bass ever receive written approval from the city of the location of the well and the related materials?
A: Not to my knowledge.
Q: You would agree with me that Bass did have drawing of – that were prepared by the city engineer (Andy Blackley), correct?
A: Correct.
Q: Those drawings prepared by the city engineer purported to show the drilling sites?
A: Correct. (p. 72)

Q: (Referring to the plat map that Bass Energy used to obtain drilling permits). Let’s look at (gas well) number 1 first, wellhead number 1 (which was located in the woods behind Hawthorne Drive)…What sort of area of the park is that?
A: Treed.
Q: Did you believe that to be an appropriate area?
A: No.
Q: Why not?
A: Because it would have caused the destruction of a large amount of trees..(P. 79)

Q: You would agree with me that Bass had one or more meetings at the park with representatives with the city?
A: Never with me. (p. 72-73)

Q; Have you ever gone to the park with the Bass Energy people?
A: I don’t recall. I don’t believe so. (p. 89)

Deposition of Bill Hlavin, President of Bass Energy

A: …I did go to the preconstruction meetings for the city – for the expansion of the park…park parking lot and I went to – to the wells – when they staked the wells. I was out there with the mayor and the law director and the fire chief and everybody else when they actually put the stake in the ground. (p. 97)

Q: …Who was at that staking meeting (in the park)?
A: Myself, Ralph Gregory (from Bass), Ed Repasy (the Bass landsman), the mayor, the city engineer, the city engineer’s surveyors, the fire chief, and the building inspector … we were told to drill this well when the park was shut down and definitely after baseball season, so we had a window to do our work in, let’s say in the winter and we would hope that all the construction traffic and everything to do with the (new park parking lot) construction would mask any of the – any of the drilling that was going on …That was the original plan, to just have this all blend in as one construction area. (p. 98).

A: This (the staking meeting) was all about defining where the wells would go and with everybody there, there were absolutely no objections … the only comments I had heard at one of the meetings from the mayor was that he did not want it on the parking lot and he didn’t want I in areas where children were playing, and I heard him say once or twice, “let’s try and keep it in the woods” … (p. 99)

Deposition testimony of Edward Repasy, landsman who procured drilling lease for Bass

A: (describing a meeting with Service Director Thom Evans and former city engineer Andy Blackley after the drilling lease was signed) They pulled out this map, they had compass drawings on the map indicating that they had sat down and figured out 300 feet from property lines …and we were told at that point the wells weren’t going in the park proper itself, they were going in the woods; that’s where the mayor and the law director wanted them to go. (p. 22-23)

A: …there was another meeting out in the park shortly thereafter (after the well sites were actually staked) a week or two weeks maybe. It was a final meeting I guess. The mayor was there for a little while, he looked at the location for the first well which is off the parking lot, Tim Paluf was there, Thom Evans, Andrew Blackley, the fire chief was there, assistant fire chief was there…(p. 41)

Q:..So there’s a plat which showed two sites of the wells and you believe that’s the written approval that you received from the city?
A: Well, the state thought so, so I mean I believe so, yeah. (p. 39)

Topic: Work Performed by Andy Blackley for Bass Energy

Deposition testimony of Mayor Scott Coleman

Q: Was there an agreement between the city and Bass that Bass would use the (former city) engineer’s services and pay the city for those services?
A. I believe so.
Q: And what was that agreement?
A: I don’t recall.
Q: Was it written?
A: I don’t recall.
Q: What’s your understanding of the agreement?
A: I don’t have a broad enough understanding other than to think we had one
.…
Q: Do you know at whose request there was that relationship whereby the engineer would do some work for Bass?
A: No.
Q: You did know that Bass, as you testified before, paid the city for those services, correct?
A: Correct. (p. 119-120).

Deposition testimony of former City Engineer Andy Blackley, President of Stephen Hovancsek & Associates

A: In this case because it was a city property and we had – we have already had done work on city property and we typically do the preparation of plans and surveys on city property it was agreed upon with Bass Energy that we would provide the surveying backgrounds and – for use on a site plan for the gas wells and that the money – we would then be paid out of deposits that they (Bass) would make with the finance department.
…
Q: And you then submit invoices to the city?
A. To the city, yes sir. (p. 10).

Q: And describe the scope of services that your firm rendered in regard to the gas well project.
A: Well, we did some field survey work, we staked two potential locations, we prepared a site plan – two site plans for two different wellheads. (p. 11).

A: (After the meeting that preceded the mayor’s signing of the drilling lease) I think I went – went back and discussed it with Mr. Smoltz (a surveyor), who’s also my business partner, that we had this assignment to prepare site plans for Bass Energy and then I believe then — and it was going to based on the surveying that we’d already done out there and some additional field survey work and that we had two general locations in mind and that if he needed more information, that he – that either Mr. Hlavin or Mr. Repasy (from Bass Energy) would be in contact with him and tell them – and they would tell him what additional information that they wanted on their site plan. (p. 26)

Q: Did you ever meet with planning and zoning in regard to plausible zoning sites?
A: No. (p. 47)

Deposition testimony of Finance Director Anthony Ianiro

Q: What was that check (a May 25, 2007 check) for?
A: I believe this was a check that was a deposit that the city received from Bass Energy for work that our engineer was going to do.
Q: Do you know why you engineer was doing work for Bass Energy?
A: Specifically, no, but—no, specifically, no. (p. 23)

Q: So he (Blackley) was submitting invoices for work in addition to his retainer to the city during this period of time?
A: That’s correct.
Q: And then Bass was paying you some portion of the invoice amount?
A: That’s correct. (P. 26)

Topic: the 2008 Resolution Rescinding the Mayor’s Authority to Sign Drilling Leases

Deposition testimony of Mayor Scott Coleman

Q: …what were you advising city council and the department heads of in your memorandum (dated Dec. 18, 2007)?

A: That I don’t support the drilling of wells on city property. (p. 101)

Q: Did those statements of citizens of your city, did those affect your opinion as to the appropriateness of drilling in the – on city property?
A: No.
Q; You weren’t influenced at all by that?
A: I don’t believe so.
Q; Mr. Mayor, as of the time that you wrote your (Dec. 18) memorandum…as of that time you said, “I have had a conversation with the law director and despite the legal ramifications, if any, I think we should suspend the project indefinitely.” What did you understand at that time the legal ramifications to be?
A: I’m not an attorney so I didn’t know if there would or wouldn’t be any.” (p. 104)

Q; Did you communicate your decision or your conclusion to Bass?
A: No. (p. 108)

Q: Now, prior to the adopting of that resolution (Jan. 22, 2008 resolution rescinding the mayor’s authority to sign drilling leases) had you had any discussion of the possible or probable legal ramifications of your taking this action?
A: I don’t recall.
Q: You don’t remember any consideration of whether this was appropriate from a legal standpoint?
…
A: From a legal standpoint I don’t recall discussing that. (p. 111).

Q: Did you ever discuss with council or with anyone else whether it was lawful for you to enter into a contract and then propose to rescind it by subsequent legislation?
A: I don’t recall that conversation.
Q; Have you during the course of your service as either a councilperson or as a mayor, have you ever attend any seminars or any other education activities in regard to your contractual – your contract liabilities as a city?
A: Me personally? No. (p. 112)

So there you have it, sworn testimony directly from the mouths of the major players in the drilling fiasco.

Here’s a few of the things that I see:

• A mayor who brought the idea of drilling to Council, who personally favored drilling and who believed there were appropriate drilling sites in the park …
• A lack of due diligence, including the failure to conduct adequate financial, cost/benefit and legal analyses, both before and after the original drilling resolution was passed…
• A Council that expected to have the final say as to whether 3 suitable drilling sites could be found, but was entirely excluded from the well site selection process…
• A mayor who, along with members of his administration, was actively involved in the well site selection process…
• A former city engineer who, while working for the city in connection with the drilling lease, also received indirect payments from Bass for work that he and his company performed for Bass, which included surveying the park, selecting drilling sites, and producing the plat map that Bass Energy used to obtain drilling permits for the park…
• A mayor who, 9 months after signing a drilling lease for the park, issued a “no drilling” on city property memo, which prompted Council to rescind its 2007 drilling resolution – the action that led Bass Energy to file its breach of contract lawsuit…
• An “original plan” to have the drilling “blend in as one construction area” and to use the new park parking lot construction project to “mask” the drilling of gas wells in the park – perhaps to keep residents from finding out what was going on until it was too late, until after the gas wells were already installed…

The deposition testimony leads to several obvious questions:

Question #1: Is there any reason to plan to “mask” what you’re doing – unless, of course, you know that what you are doing is wrong?

Question # 2: And if you know that what you’re doing is wrong, shouldn’t you just stop right there and not go any further – especially if you are a seasoned public official with almost 2 decades of experience in elective office?