State nearly announced Utah Lake island plan had won an EPA loan. Trouble is, it wasn’t true.

Staffers with the Department of Environmental Quality stepped in to prevent the gaffe, documents show, spawning questions from the company’s lobbyist.

The sunken company that sought to dredge Utah Lake and build artificial islands almost persuaded the governor to hold a news conference announcing it had received a massive federal loan.

Weeks earlier, however, the Environmental Protection Agency told Lake Restoration Solutions, or LRS, the company wasn’t even invited to apply for federal funds, emails and records show. The governor’s office canceled the news conference just days before it was scheduled to take place. But the fact it was almost held shows the influence the project held within state government.

The news conference that wasn’t

LRS had attempted to get a $385 million low-interest loan in 2020 from the EPA’s Water Infrastructure Finance and Innovation Act program, or WIFIA. Local governments typically use the program to upgrade aging water treatment plants. But LRS wanted the money to help fund its $6 billion venture, which aimed to dredge Utah Lake and use the sediment to create island real estate.

The company didn’t get a WIFIA loan in 2020. So it tried again in 2021, this time seeking $893 million. But by year’s end, scientists and cities had started raising questions about the feasibility of the project and whether it would cause more harm to the shallow lake and its ecosystem.

Then, on Nov. 21, 2021, LRS lobbyist Steve Styler began coordinating with the governor’s office on a news conference, emails obtained through a records request show. Styler scheduled the conference for Friday, Dec. 3. LRS even requested the swanky Gold Room in the Utah Capitol to make the announcement.

(Bethany Baker | The Salt Lake Tribune) Gov. Spencer Cox speaks in the Utah Capitol's Gold Room on Tuesday, Oct. 10, 2023. This had been anticipated as the site for the news conference on the supposed federal Utah Lake loan.

The governor’s staff asked the company to prepare a briefing sheet outlining the news conference agenda and a summary of the remarks officials would make.

The event would begin with Gov. Spencer Cox unveiling a public-private partnership, or “P3,” between LRS and the state, according to the briefing sheet. LRS CEO Ryan Benson would then take the podium, declaring the EPA had “selected” LRS to participate in its WIFIA low-interest loan program.

“Our project is one of only a small number of P3s to receive WIFIA funding to date,” Benson would say, according to the briefing sheet.

But that’s not how the WIFIA process works. Cities, public utilities and other parties send the EPA a letter of interest outlining their proposal. The agency reviews the submissions, then whittles them down to finalists it invites to formally apply for WIFIA funds. A few get placed on a waitlist because the EPA needs additional information before it makes a decision on whether to extend an invitation.

Erica Gaddis, then the director of the Utah Division of Water Quality, sent an email to the EPA the Monday before the governor’s scheduled news conference.

“We are hearing rumors Lake Restoration Solutions has been approved by EPA for the full amount of their WIFIA loan,” Gaddis wrote. “Can you please confirm if that is true ASAP?”

A spokesperson for the Utah Department of Environmental Quality, or DEQ, confirmed Executive Director Kim Shelley was also aware of this rumor.

By the following morning, Gaddis and Shelley had their answer. The EPA had notified LRS almost a month earlier that the company was on the waitlist.

“They have not [been] approved for any financing,” a WIFIA program official wrote, “or even invited to submit an application yet.”

The same day as LRS’ scheduled news conference with the governor, the federal agency planned to make a formal announcement about the 39 projects it had selected to apply for WIFIA loans. LRS was not among them.

Emails show Shelley relayed the information to the governor’s office.

“Moving a project to the waitlist allows EPA to request more information,” Shelley wrote, “... It does not in any way signal approval or the intent to fund a project.”

LRS’ news conference with the governor never happened.

“Press conferences are routinely placed on the governor’s schedule and canceled for a variety of reasons,” a Cox spokesperson said. “According to our records, the governor’s office canceled the press conference on Nov. 28, 2021, and on Nov. 29, 2021, cited the need for additional information from state officials before rescheduling.”

The EPA even sent a formal statement to Gaddis a week later further clarifying LRS was on the waitlist and was not about to receive a federal infusion for its project.

LRS announced it dissolved and declared bankruptcy earlier this year. It never received any federal assistance.

Benson, the LRS CEO, did not respond to a list of questions emailed to his attorney.

State employee leaves DEQ

Gaddis left the Division of Water Quality, an agency within DEQ, in April 2022. She declined to speak on the record or respond to a list of questions.

A week after her departure, an attorney with the Salt Lake City firm Armstrong Teasdale filed a public records request seeking Gaddis’ communication with the EPA and scientists critical of the LRS island-building project. The request asked for anything regarding LRS, Utah Lake or the WIFIA loan.

Emails show Shelley sent the governor’s office — at its request — copies of the documents soon after they were compiled.

“I stand by my determination after conducting an investigation the last time similar allegations were made about my department/staff by Steve,” the DEQ director wrote Jon Pierpont, the governor’s chief of staff, “that Erica ... did not influence the outcome of any funding opportunity with EPA or the WIFIA program.”

DEQ confirmed the “Steve” Shelley referred to was Styler, the LRS lobbyist. The department did not know whom Armstrong Teasdale was working for in seeking Gaddis’ communication. The law firm did not respond to an email asking whether it worked for LRS or its lobbyists.

Asked if DEQ felt compelled to remove Gaddis, a spokesperson said her departure was unrelated to the LRS project. A spokesperson for the governor said it is normal for the office to communicate with state officials about records requests.

“In no way did Chief Pierpont pressure DEQ Director Kim Shelley to remove personnel in response to the concerns [LRS] related;” the spokesperson said, “rather, he asked her to look into Styler’s concerns.”

Styler did not respond to requests for an interview.

(Utah Legislature) Lobbyist Steve Styler, left, speaks about a bill during a legislative committee hearing on Feb. 2, 2023.

A look ‘behind the curtain’

Around the time LRS tried to get its second WIFIA loan, Brigham Young University ecology professor Ben Abbott was challenging the company’s assertions that dredging would address Utah Lake’s water quality, algal blooms and invasive species on his blog and in public forums. He regularly met with elected leaders and state officials to ensure they understood the latest science on Utah Lake.

LRS sued Abbott for defamation in January 2022. Abbott filed an anti-SLAPP countersuit, alleging the company was trying to silence legitimate public debate about its plans.

A judge tossed out the LRS suit earlier this year and allowed Abbott’s case to proceed.

His lawsuit discovery produced LRS’ briefing document for its planned public-private partnership news conference with the governor.

“It wasn’t until we got these documents through the lawsuit,” Abbott said in an interview, “that we saw behind the curtain.”

In 2021, the Legislature approved a $10 million loan guarantee to help LRS get its WIFIA funds, although that state money was never paid out either. But Abbott wonders how LRS was able to get as far as it did, and drum up the amount of state support that it did, for an idea that was unproved.

“It’s a situation where some … are strategically targeting our government and trying to enrich themselves and their friends,” Abbott said. “It doesn’t take a business genius to realize these guys were not good partners.”

Before filing for bankruptcy, LRS transferred $80,000 in capital and forgave $250,000 worth of debt to Big Game Forever, a nonprofit Benson founded to lobby against federal protections for wolves, court documents show. The Legislature has given that group a combined $5.1 million since 2012, even though a legislative audit found Benson had mismanaged funds.