On the fuzzy front lines, what is ‘business friendly?’

It’s been a fuzzy concept, this promise by Gov. Dannel P. Malloy to create a business-friendly government. Daniel C. Esty, the commissioner of energy and environmental protection, is about to give it some definition with a shot at settling a long-running pollution case.

In a case involving groundwater pollution around the site in Milford where BIC once manufactured pens and razors, Esty has delayed court action against the company while he personally attempts to negotiate a settlement.

Daniel C. Esty

For the second time in a month, the former Yale academic’s ability to publicly explain his approach to resolving competing interests in public life is likely to be tested. The last time, in a test of his dual role overseeing energy policy and utility regulation, he stumbled.

“I am learning personally about the difference in the role of a public official versus a professor,” said Esty, sitting in his office overlooking Bushnell Park in Hartford. “You know a professor gets to say what he wants, when he wants, how he wants. And now I have to be much more careful. And I’m learning.”

As a commissioner with one of the most sensitive portfolios in the Malloy Administration, he needs to learn fast. Like other agency heads with regulatory or enforcement powers, he has to find the appropriate balance between enforcing the law and answering the governor’s call to reinvent government with an eye toward job creation.

“We do feel ourselves to be in a tough situation. We need to create jobs,” Esty said. “We need to really understand each and every aspect of state government as part of the broader commitment of the governor, the number one commitment of the governor: the economic growth and jobs.”

The BIC case involves contamination of industrial property with the solvent TCE, or trichloroethylene. After TCE was found underneath the Caswell Cove condominium complex downhill from the industrial area, the state paid for a venting system.

Jordan Realty, the owner of a nearby site also found to be polluted with TCE, has cleaned its property. Its lawyer, Paul Jacobi, says Jordan’s fear is that it eventually will be sued for the cost of the remediation, while BIC is fighting the state’s demands for further testing.

“All we are asking them to do is investigate the property,” Jacobi said.

BIC has said its testing has been extensive and sufficient.

Jacobi, who represents businesses, said he applauds the Malloy Administration’s pledge to improve the state’s business climate, but that should be done by improving permitting procedures, not cutting short the investigation of a polluted site.

“I just don’t get it,” Jacobi said.

Esty said his staff is examining the department’s 25 permitting procedures. In the case of BIC, he said he is trying to speed up the resolution of the case, which he says benefits everyone.

“The case is already eight years old,” he said. “And one of the things I’ve heard all across the state from business, big and small, is that the uncertainly of the Connecticut business environment, where you’ve got these issues that go on and on, and there’s not clarity about what the expectations are, is a major drag on the attractiveness of economic activity in the state of Connecticut.”

Esty said the state is not compromising its standards with his effort at a settlement. To negotiate, Esty has relinquished his role the department’s adjudicator in the case to a deputy.

“If it doesn’t work, we’ve given up nothing,” Esty said. “We can pursue all of the other actions we might otherwise have wanted to pursue, and we will.”

Jacobi called Esty’s involvement unusual, which Esty denied.

“This came to me from the staff saying we’re at a decision point. We either go hard at litigation, which is going to be a very bloody battle, because it’s very complicated case,”  Esty said. “Or we can try to resolve this by settlement and get BIC to agree to what we would think is the end game anyway, which is…”

He stopped, then reached for a piece of paper and read aloud a description of the settlement goals, as dictated by his legal staff: “We’re going to get the management of the contamination on or emanating from the BIC site in a manner that protects the environment and public health.”

With his technical staff, he has met with BIC’s officials, keeping the lawyers out of the room.

It is his first effort to mediate a settlement. Esty said he is comfortable with the role, even though he concedes recently mishandling another aspect of his job.

His new agency not only gives him charge of environmental enforcement, but he also is the overseer of two energy functions: a bureau that must establish the state’s first energy policy, and a separate regulatory entity, the Public Utilities Regulatory Authority.

Some legislators voted for the new structure voicing concerns that placing both functions under the same commissioner could create inherent conflicts and compromise the independence of regulators, who had been based in an autonomous agency.

In the first test of his dual function, Esty fumbled a chance to demonstrate his recognition that PURA’s regulators have independence in regulatory matters, even if he runs the overall department.

At the urging of Attorney General George Jepsen’s office, Esty intervened in an application by Connecticut Light & Power for approval to provide 1.2 million smart meters for all its customers at a cost of $863 million over four years, beginning in 2012.

Jepsen’s office had opposed the application, contending that the high cost did not justify the benefits of allowing consumers to better track their energy use and CL&P to potentially charge different rates for peak and  off-peak consumption.

On Aug. 30, Esty wrote a letter ordering PURA to suspend its review of the CL&P application until the department formulates a policy on smart meters.

“To ensure that PURA decisions from this time forward are consistent with new policy directions, PURA must halt the currently pending smart meter” application review, Esty wrote.

Esty said he wrote his letter unaware that a PURA commissioner had prepared a draft decision dated Aug. 29 denying the CL&P application. The “must halt” language sounded like an order, and the timing made it appear that Esty was trying to short circuit an action by PURA hostile to the utility.

“It should have been much more of a request. And I think it came out sounding jerk-ish, and that was too bad,” Esty said. “I would very much write a different letter if we got to do that part again.”

Esty said he apologized to Kevin DelGobbo, the chairman of PURA.

“He did make an extra effort to reach out to me about the tone of the letter,” said Delgobbo, a one-time Republican lawmaker who described Esty as aware of the need for the authority’s independence. “I know he is very sensitive to that.”

The appearance of heavy-handed action by a tone-deaf commissioner grew more ominous as The Hartford Courant reported that Esty had been paid $205,000 as a consultant by CL&P’s corporate parent over eight years, beginning in 1997.

Last week, Malloy said unequivocally he saw nothing wrong in Esty’s intervention in the regulatory issue, despite the former consulting relationship. He noted that Esty is recusing himself from matters dealing with his consulting clients in the past five years.

Under state ethics law, Esty had no conflict, as he was not in a position to financially benefit from his intervention.

“The code always looks at whether any action you are taking you will have a financial gain or loss,” said Carol Carson, executive director of the Office of State Ethics. She said Esty consulted extensively with her office about his former business dealings, even before he took office.

Once someone joins state government, the ethics code does not bar them from acting on matters involving a former client, so long as there is no continuing financial relationship, she said.

An official who leaves state government is barred in most instances for one year from working for a company that he formerly regulated.

“So a five-year look-back is a pretty extensive look-back,” Carson said.

Connecticut has no legal standard defining what constitutes an appearance of a conflict. In Massachusetts, the law defines an apparent conflict as anything that would cause a “reasonable person” to conclude an official might be biased.

In such cases, the official has a duty to disclose the apparent conflict, she said.

Esty said he was confident he had no actual or apparent conflict in the CL&P case, but he blew a chance to begin to publicly define the appropriate relationship between his department’s role as an energy planner and regulator.

“The sad thing is that … the week before, we had a staff retreat and talked about this area of PURA and the energy, policy and technology bureau relationship as something of a constitutional moment,” he said. “We’re defining the relationship.”

But when the opportunity came a week later with the CL&P case, the professor missed the teachable moment.

“We swung the bat and missed the ball,” he said. “I think we’ve learned a lot from that. We ve got to be very careful. We should have not rushed. We should have taken the time to see what the picture looked like.”