How does the largest utility in Texas — Energy Future Holdings — go bankrupt? Click here to find out more in a Fort Worth Star-Telegram op-ed by Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis, who examined Energy Future Holdings for The Sierra Club and Public Citizen Texas.
Posts Tagged ‘EFH’
How to mess up a major Texas utility
Posted in Energy, Energy Future Holdings, Utilities, tagged bankruptcy, EFH, Texas on April 16, 2014 |
Citizens Group Challenges Permit for EFH/Luminant Coal Mine: Demands Cash Bond for Cleanup
Posted in Air Quality, Coal Plants, TCEQ, tagged EFH, Luminant, mine reclamation, Texas, Texas Railroad Commission on October 29, 2013 |
Neighbors for Neighbors (NFN), an organization of residents near Luminant Mining’s Three Oaks Mine, filed late Monday for a contested case hearing on an EFH subsidiary’s request to renew the mining operation in Lee and Bastrop counties.
In its filing, NFN asks the Texas Railroad Commission, the agency that administers mining law in Texas, to require Luminant Mining to post cash or an outside bond to cover the estimated $60 million cost of cleaning up the strip mine. The group points out since EFH, the parent company of Luminant Mining, is expected to file for bankruptcy by the end of this year, there may not be funds to cover the cost of cleanup. Click here to see a copy of the filing.
“Does a company have to go bankrupt and walk away from its mines in order for regulators to step in?” asked NFN president Travis Brown. “It would be the height of irresponsibility for Texas to allow a company going bankrupt to say, ‘Trust us, we’re good for it.’ We want Luminant Mining to post real bonds to assure that the mining restoration gets done.”
Russel Bostic, a local rancher and NFN member, said “I live next to the mine, and the company has condemned and is planning to use my land. My family wants our land to be restored to its original condition so we can return.”
Lignite coal mined at Three Oaks is used to supply Luminant’s two coal-fired power plants near Rockdale.
Under federal and state law, mining companies are required to restore mined areas to their original condition. Those companies must also set aside money so resources will be available for the restoration, even if the company abandons the mine. The law was created because many U.S. mines were abandoned when companies went bankrupt, leading to contamination of surface water and groundwater.
In Texas, Luminant Mining is responsible for the operation and cleanup of eleven active strip mines. If EFH goes bankrupt and sufficient cash has not been set aside for cleanup, taxpayers could end up with the estimated $1.01 billion cost of cleaning up all the mines.
Instead of requiring that $1.01 billion be set aside in cash or a real bond, the Railroad Commission allowed Luminant to “self-bond,” which means the company is relying on a “guarantee” that their own assets will cover the bonds without having real cash bonds set aside that the state can readily access. In recent years, EFH has shifted to third party guarantee of the bonds, but the third party is another subsidiary of EFH, so still them.
In its current request for a mining permit for Three Oaks, Luminant Mining is again asking to post a self-bond for cleanup.
Brown said, “The company recently said in a community meeting at the mine that they intend to pledge assets for the cleanup bond. They said they need to operate the mines and coal plants to generate revenues to pay the new debt. But nowhere in their most recent 8K [financial statement to SEC] do they make that commitment.”
Brown added, “This is especially disturbing since the company also says – in the same 8K – that they expect the price of gas to go up and coal to stay low. That’s the same poor business plan that has led to this bankruptcy.”
Michele Gangnes, an NFN member and a bond attorney, said “The law is clear, and Texas regulators should take immediate action to demand a cash bond so taxpayers and the environment are protected.”
Gangnes added, “In many states, Luminant Mining would be required to put up a cash bond before allowing the Tree oaks mine to expand. But EFH has been playing a shell-game, and state regulators have allowed it. We are asking the Railroad Commission to guarantee that EFH has to set cash aside or post a third-party bond specifically for cleanup of the mines in this bankruptcy deal.”
Docs demand tighter emissions at coal EFH plants
Posted in Air Quality, Energy, Global Warming, Health, Toxics, tagged Dallas County Medical Society, East Texas, EFH, Luminant, Luminant Generation Company LLC, public citizen texas, Texas on August 28, 2013 |
Today the Dallas County Medical Society filed a petition with the Texas Commission on Environmental Quality asking the agency to adopt rules to reduce the pollution from three old coal-fired power plants that contribute disproportionately to high ozone levels in Dallas-Fort Worth and East Texas.
“Evidence is overwhelming that our high ozone levels are causing increasing numbers of area children to develop asthma, and are contributing to the many asthma attacks, chronic lung disease exacerbations, and heart attacks we see every day in our emergency rooms, clinics and hospitals,” said Robert Haley, MD, a Dallas internist and epidemiologist. “A large body of medical research shows that more people of all ages develop respiratory illnesses and die prematurely in cities with high ozone levels, and we have among the highest ozone levels in the country.”
To address this issue, DCMS and the Texas Medical Association sponsored a study by Daniel Cohan, PhD, an environmental engineering scientist at Rice University, to review all the scientific information about ozone pollution in North Texas and identify ways to reduce ozone levels without compromising the state’s energy grid or jobs. Click here for study. 2013 white paper august 1 2013
“The Cohan Report identified these three very old coal-fired power plants south and east of Dallas, built in the 1970s, that have never been required to meet current emission limits and which contribute disproportionately to ozone levels in the Dallas-Fort Worth area,” according to Cynthia Sherry, MD, DCMS president. “With the impending bankruptcy of the plants’ owner, Energy Future Holdings, the plants likely will change hands.” The petition asks that the TCEQ require these plants to meet the same low emission levels for ozone-forming gasses that are required of the company’s two newer lignite-fired power plants. “This is the time to require that the plants lower their emissions to protect the health of North Texans,” Dr. Sherry said.
The three power plants are Big Brown near Fairfield, Martin Lake near Longview, and Monticello near Mount Pleasant.
“Because of their age, these three plants emit large amounts of pollution for a relatively small amount of electricity produced,” said Cohan, the report’s author. “Today’s technologies offer economically more attractive alternatives that would be far less polluting.”
According to the report, a combination of natural gas, geothermal, coastal wind, and solar production could replace the energy production capacity — and the East Texas jobs — of the three old coal plants at equivalent prices to Texas ratepayers. East Texas, where the three coal plants operate, has uniquely amenable geologic characteristics that make geothermal power generation unusually attractive.
Energy Future Holdings, an investment group that purchased the power plants from TXU, is facing bankruptcy because the drop in energy prices from the boom in natural gas production has reduced the profitability of coal. It also faces new requirements to control mercury emissions, and the Environmental Protection Agency is formulating additional requirements for controls on CO2 emissions.
“The financial press is predicting bankruptcy or restructuring of Energy Future Holdings,” according to Tom “Smitty” Smith of Public Citizen’s Texas office. “The petition by the physicians and environmental groups will put the company or new owners on notice that they can’t keep running these old, polluting plants without investing in new pollution controls. Concerned citizens can add their names to the petition by visiting PETITION WEB SITE.”
The petition can be found at http://www.ipetitions.com/petition/tceq-please-clean-up-northeast-texas/
To comment on the petition, go to http://www10.tceq.state.tx.us/epic/efilings/ . To submit comments, use Docket No. 2013-1612-RUL, which was assigned to this Petition for Rulemaking (Dallas County Medical Society Petition: EPA-Compliant Pollution Control on Old Coal Plants).
The scientific report can be found at www.dallas-cms.org/news/coalplants.pdf.
“Bad air day: Report details power plant dangers,” Texas Medicine, June 2013, pp. 45-49, accessed at: http://www.texmed.org/Template.aspx?id=23977
State regulators looking more closely at $1 billion of future mining restoration obligations at Energy Future Holdings
Posted in Coal, Global Warming, tagged EFH, energy future holdings, Energy Future Holdings NPR, Luminant, Luminant Generation Company LLC, mining reclamation, public citizen texas, Texas on July 8, 2013 |
NPR’s State Impact reported this morning that Energy Future Holdings (formerly TXU) has “self-bonded” approximately $1 billion for future mining restoration in Texas in lieu of real cash bonds. Click here to hear the entire story.
In the transcript of the story it discusses the main concerns of Public Citizen and Sierra Club who have been investigating this issue for the past six months.
At the heart of the two groups’ (Public Citizen and Sierra Club) concern is what’s called “self-bonding.” Under federal law, mining companies must post bonds as a form of insurance to cover the cost of reclamation in case the companies run into financial trouble. Instead of using an outside company to provide the bonds, mining operators in Texas are allowed to self-bond. Some coal states don’t accept self-bonding.
Texas has approved Luminant Mining’s self-bonding. The self-bond’s “third party guarantor” is a sister company, Luminant Generation. It’s the power plant company that burns the coal from Luminant Mining.
The environmentalists say they’re worried that those power plant assets might also be claimed by other creditors, jeopardizing the funds Texas might recover to pay for reclamation.
Luminant’s parent company, Energy Future Holdings, has explained in annual reports to the United States Securities and Exchange Commission that the company faces creditworthiness requirements for different regulators in Texas, among them the Railroad Commission. For years, the reports said that “we believe we will have adequate liquidity to satisfy such requirements” or “we believe we would have adequate liquidity capacity and/or financing capacity to satisfy such requirements.”
But then, in a 2012 report, that line disappeared.
“It was the smoking gun,” said Public Citizen’s Smitty Smith.
On page 100 of EFH’s 2008 10K filing, page 100 of EFH’s 2009 10K filing, page 98 of EFH’s 2010 10K filing, and page 93 of EFH’s 2011 10K filing, the following appears
The RRC has rules in place to assure that parties can meet their mining reclamation obligations, including through self-bonding when appropriate. If Luminant Generation Company LLC (a subsidiary of TCEH) does not continue to meet the self-bonding requirements as applied by the RRC, TCEH may be required to post cash, letter of credit or other tangible assets as collateral support in an amount currently estimated to be approximately $xxx (from a low of $600 million in 2008 to a high of 990 million in 2011) million. The actual amount (if required) could vary depending upon numerous factors, including the amount of Luminant Generation Company LLC’s self-bond accepted by the RRC and the level of mining reclamation obligations. . . .
In the event that any or all of the additional collateral requirements discussed above are triggered, we believe we would have adequate liquidity and/or financing capacity to satisfy such requirements.
On page 85 of EFH’s 2012 10K filing, only
The RRC has rules in place to assure that parties can meet their mining reclamation obligations, including through self-bonding when appropriate. If Luminant Generation Company LLC (a subsidiary of TCEH) does not continue to meet the self-bonding requirements as applied by the RRC, TCEH may be required to post cash, letter of credit or other tangible assets as collateral support in an amount currently estimated to be approximately $850 million to $1.1 billion. The actual amount (if required) could vary depending upon numerous factors, including the amount of Luminant Generation Company LLC’s self-bond accepted by the RRC and the level of mining reclamation obligations. . . .
appears, the followup statement, found in the previous 4 years 10K filings is conspicuously missing.
In the event that any or all of the additional collateral requirements discussed above are triggered, we believe we would have adequate liquidity and/or financing capacity to satisfy such requirements.
NPR’s story goes on to say “a media liaison for Energy Future Holdings, Allan Koenig, would not comment specifically about the line that disappeared.” But that was followed up by an email from the company saying, “We fully satisfy the bonding requirements of the Railroad Commission of Texas for our coal mines, which means that our reclamation obligations are guaranteed.”
Well, yes they do satisfy the bonding requirements allowed by the RRC and their obligations are guaranteed by Luminant Generation, but it is all the same company and still at risk if the assets of the company, should a reorganization occur, be found insufficient to meet the bond amount currently estimated at $850 million to $1.1 billion. EFH is telling the Railroad Commission ‘Trust us, we’re good for it’ even though the company debt is rated as junk status by the financial ratings agencies like Standard and Poor’s. What EFH is doing is like a family getting a second mortgage on a house and losing their jobs. How can Texas regulators have any confidence that the assets of Luminant Generation will be protected from the bankruptcy process and available to cover future mining reclamation costs?
In a memo from the Railroad Commission (RRC) to Luminant Mining Company regarding Docket No C12-0006-SC-46-E, on the Oak Hill Mine application for replacement bond, it appears Luminant reassured the RRC that in their 2012 3rd quarter filing EFH’s liquidity amount (at that time) was $3.8B and that amount would be sufficient to cover all obligations including Luminant Minings reclamation needs. However, we don’t know that this will still be the case 3 to 12 months from now should EFH file for bankruptcy.
We believe the RRC and Texas would be best served by requiring a more secure form of bonding for reclamation needs.
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