Unwatched Embers Still Aglow as Fiery Battle Over Coal Plants Subsides
Written for the University of North Texas, 2007
© Layne Tisdel Martin
Key players in the fight against a proposed onslaught of new Texas coal plants are touting triumph at the announcement of the pending buyout of energy giant TXU. But unread fine print and unspoken details suggest their victory is far from complete.
If approved, the plans of two private equity firms to purchase TXU Corp. for $45 billion will be the largest acquisition in history. The hefty deal includes a preliminary agreement to forgo the construction of eight of the 11 coal-fired plants originally proposed by TXU. Many environmental organizations, who have been working ceaselessly for the past year to rally opposition against the plants, are celebrating what may be a premature declaration of victory.
Local environmental advocates fear that the waning of the media blitz will lead to a dangerous decrease in the public outcry against the remaining plants. There is also concern that the negotiations between TXU buyers and the Environmental Defense Organization were more of a publicity stunt than a promise. With some of the most important local media watchdogs turning their attention elsewhere in the aftermath of the buyout, these worries may not be unfounded.
Dallas Morning News environmental reporter Randy Loftis said he would be focusing on other pursuits now that the TXU buyout has been announced.
"The coal plants are all I've covered for almost a year," Loftis said. "But I'll have to find something else to write about now."
The decrease in publicity may be an ill-timed side affect of the buyout, since TXU's privatization means the public will already get less information about the company's internal affairs. As a private company, the energy empire will not be required to release financial statistics or publish quarterly reports.
TXU's sudden willingness to scrap eight of its prized new plants is surprising, considering that as recently as two weeks ago, the company was threatening statewide blackouts if it was prevented from building all 11 facilities. Governor Rick Perry's change of heart has also raised suspicions. Despite his avid support of TXU's original plan to riddle the state with coal plants, Perry has publicly praised the buyout deal.
In 2005, Congress repealed the Public Utility Holding Act of 1935, a motion that opened the doors to the TXU acquisition by lifting the injunction against private buyouts of public utility companies. Financial analysts have noted that leveraged utility buyouts almost inevitably lead to a dramatic increase in the company's debt levels, making the buyers’ lofty promises of lower electricity bills seem unlikely to be upheld.
Until the purchase is finalized in the second half of this year and then works its way through a long list of regulatory commissions, none of the newly proposed changes are set in stone. If the buyers do close the deal, whether they uphold the promised rate cuts and sustainable energy investments is open to speculation. Regardless of the final approval of the TXU merger, many other heatedly contested Texas coal facilities are still scheduled to be built.
"There are other utility companies in Texas who have plans for eight or nine other coal-fired plants and those are still on the drawing board in addition to three that TXU still wants to build, so we're still looking at about 11 coal-fired plants in Texas," said Jackson Williams, Executive Director of the Texas Clean Sky Coalition. "In addition, there are 159 coal-fired plants on the drawing board in 42 other states, so Texas was really just the first battlefield and it still is the first battlefield in a nationwide fight."
The Texas Clean Sky Coalition's million dollar advertising campaign against the coal plants has been criticized as a covert attempt by gas companies to thwart the competition of cheaper coal power. Only one gas company, Chesapeake Energy Corporation, has come forward about its involvement with the Coalition. Headquartered in Oklahoma City, the company is the third largest independent producer of natural gas in the United States.
Vice President Thomas Price admitted the company contributed to the Texas Clean Sky Coalition ads and said other gas companies were also involved, but would not disclose how much Chesapeake spent on the campaign and refused to name the other gas companies that contributed. Despite the controversy surrounding its sources of funding, Williams said the Coalition would continue to fight other utility companies proposing coal plants in Texas as well as the three coal-fired facilities that were not abandoned by the negotiations between TXU buyers and environmental groups.
Written for the University of North Texas, 2007
© Layne Tisdel Martin
Key players in the fight against a proposed onslaught of new Texas coal plants are touting triumph at the announcement of the pending buyout of energy giant TXU. But unread fine print and unspoken details suggest their victory is far from complete.
If approved, the plans of two private equity firms to purchase TXU Corp. for $45 billion will be the largest acquisition in history. The hefty deal includes a preliminary agreement to forgo the construction of eight of the 11 coal-fired plants originally proposed by TXU. Many environmental organizations, who have been working ceaselessly for the past year to rally opposition against the plants, are celebrating what may be a premature declaration of victory.
Local environmental advocates fear that the waning of the media blitz will lead to a dangerous decrease in the public outcry against the remaining plants. There is also concern that the negotiations between TXU buyers and the Environmental Defense Organization were more of a publicity stunt than a promise. With some of the most important local media watchdogs turning their attention elsewhere in the aftermath of the buyout, these worries may not be unfounded.
Dallas Morning News environmental reporter Randy Loftis said he would be focusing on other pursuits now that the TXU buyout has been announced.
"The coal plants are all I've covered for almost a year," Loftis said. "But I'll have to find something else to write about now."
The decrease in publicity may be an ill-timed side affect of the buyout, since TXU's privatization means the public will already get less information about the company's internal affairs. As a private company, the energy empire will not be required to release financial statistics or publish quarterly reports.
TXU's sudden willingness to scrap eight of its prized new plants is surprising, considering that as recently as two weeks ago, the company was threatening statewide blackouts if it was prevented from building all 11 facilities. Governor Rick Perry's change of heart has also raised suspicions. Despite his avid support of TXU's original plan to riddle the state with coal plants, Perry has publicly praised the buyout deal.
In 2005, Congress repealed the Public Utility Holding Act of 1935, a motion that opened the doors to the TXU acquisition by lifting the injunction against private buyouts of public utility companies. Financial analysts have noted that leveraged utility buyouts almost inevitably lead to a dramatic increase in the company's debt levels, making the buyers’ lofty promises of lower electricity bills seem unlikely to be upheld.
Until the purchase is finalized in the second half of this year and then works its way through a long list of regulatory commissions, none of the newly proposed changes are set in stone. If the buyers do close the deal, whether they uphold the promised rate cuts and sustainable energy investments is open to speculation. Regardless of the final approval of the TXU merger, many other heatedly contested Texas coal facilities are still scheduled to be built.
"There are other utility companies in Texas who have plans for eight or nine other coal-fired plants and those are still on the drawing board in addition to three that TXU still wants to build, so we're still looking at about 11 coal-fired plants in Texas," said Jackson Williams, Executive Director of the Texas Clean Sky Coalition. "In addition, there are 159 coal-fired plants on the drawing board in 42 other states, so Texas was really just the first battlefield and it still is the first battlefield in a nationwide fight."
The Texas Clean Sky Coalition's million dollar advertising campaign against the coal plants has been criticized as a covert attempt by gas companies to thwart the competition of cheaper coal power. Only one gas company, Chesapeake Energy Corporation, has come forward about its involvement with the Coalition. Headquartered in Oklahoma City, the company is the third largest independent producer of natural gas in the United States.
Vice President Thomas Price admitted the company contributed to the Texas Clean Sky Coalition ads and said other gas companies were also involved, but would not disclose how much Chesapeake spent on the campaign and refused to name the other gas companies that contributed. Despite the controversy surrounding its sources of funding, Williams said the Coalition would continue to fight other utility companies proposing coal plants in Texas as well as the three coal-fired facilities that were not abandoned by the negotiations between TXU buyers and environmental groups.
Two coal-fired units at Oak Grove in Robertson County and one at Sandow in Milam County were not canceled by the agreement. These are the only three of the 11 originally proposed facilities that will burn Texas lignite, a type of coal that produces far more pollution than the cleaner variety that would have been imported from Wyoming to fuel the eight plants that were canceled.
Dallas Mayor Laura Miller has said the TXU merger could make it more difficult to prevent the three dirtiest plants. The Texas Commission on Environmental Quality (TCEQ) has suspended its vote on the remaining plants until the Senate approves a third commissioner, a position for which Governor Perry has nominated his former assistant Buddy Garcia.
A January 2007 study by the U.S. Department of Energy revealed that 159 coal-powered plants are scheduled for construction over the next ten to twelve years, enough to power approximately 96 million homes. The study concluded that coal generates about half of all the electricity for the entire United States.
NASA climate scientist James Hansen, one of the earliest experts to warn against global warming, addressed the National Press Club last week, contending that an end to coal-burning is the number one solution to global warming.
"There should be a moratorium on building any more coal-fired power plants," Hansen said. "Until we have that clean coal power plant, we should not be building them. It's as clear as a bell."
Hansen proposed using cellulosic ethanol for electrical power and then sequestering the carbon dioxide emissions underwater to prevent their release into the atmosphere.
Some have questioned whether all 11 coal plants originally proposed by TXU were ever actually intended to be built. The uncanny timing of the buyout seems to have worked in the utility giant's favor.
"This changes the landscape for everybody," Dallas Mayor Laura Miller told the Dallas Morning News. "The timing is rather unsettling because it appears that this rush for the coal plants may have been to help build up the value of the company, because they would have had a nice corner on the electricity market with low-cost production units."
Days before the merger was announced, TXU shares increased more than sevenfold, prompting accusations of blatant insider trading. Shares surged to all-time highs in the week after the buyout went public, leaving no room for doubt about the company's immediate benefit from the merger.
Nationwide advocacy group Environmental Defense helped to negotiate the environmental stipulations of TXU's sale agreement. The negotiations included an endorsement of the U.S. Climate Action Partnership (USCAP) platform, which calls for a mandatory federal cap on carbon dioxide emissions. The agreement also included a provision to reduce the company's carbon emissions to 1990 levels by the year 2020.
"This is a huge victory for the environmental community," said Environmental Defense president Fred Krupp in a press release last week. "It sends a clear message about the undeniable momentum in our campaign calling for federal global warming legislation."
Jim Marston, Director of Environmental Defense's energy program at the Texas branch, said the organization will continue to fight coal-fired plants proposed by other energy companies.
"I have my staff doing a thorough analysis of every announced plant whether the permit has been applied for or not," Marston said. "The team is working to uncover the details of where the plants would be located as well as how clean each facility would be."
Marston said Environmental Defense is far more supportive of coal plants that would use Integrated Gasification Combined Cycle (IGCC) technology to reduce the environmental impact of the coal burning process.
"What they do is gasify the coal before it's combusted," Marston said. "The first thing that means is it's a lot cleaner and a lot more like burning natural gas. It produces a concentrated waste stream of carbon dioxide that's a lot easier to capture and a lot easier to put underground."
Marston said Environmental Defense would oppose any coal plants that didn't take significant steps to counteract global warming.
Kohlberg Kravis Roberts & Co. (KKR) and Texas Pacific Group (TPG), the two private equity firms involved in the TXU merger, say they are taking definitive action to accommodate environmental concerns about the buyout.
"As a result of this transaction, the newly privatized company will deliver price cuts and price protection benefits to electric customers, strengthen environmental policies, make significant investments in alternative energy and institute corporate policies tied to climate stewardship," stated last week's KKR press release.
The agreement promises a 10 percent price decrease in electric rates and a 20 percent reduction in mercury, sulfur dioxide and nitrogen oxide emissions from 2005 levels, through reductions at existing units and by installing emission controls at the new Oak Grove and Sandow units.
Henry Kravis, a founding partner of KKR, said the firm had listened to all constituencies with a stake in the issue, Governor Perry, electric customers and various environmental groups.
"We have developed a new vision with management of how we can turn TXU into a more innovative, customer-centric, environmentally friendly company," Kravis said in the KKR press release. "We recognize the need to balance growth with environmental considerations."
Neither KKR nor TXU returned phone calls last week and TPG's Public Relations Director Owen Blicksilver declined to comment on the issue.
Dallas Mayor Laura Miller has said the TXU merger could make it more difficult to prevent the three dirtiest plants. The Texas Commission on Environmental Quality (TCEQ) has suspended its vote on the remaining plants until the Senate approves a third commissioner, a position for which Governor Perry has nominated his former assistant Buddy Garcia.
A January 2007 study by the U.S. Department of Energy revealed that 159 coal-powered plants are scheduled for construction over the next ten to twelve years, enough to power approximately 96 million homes. The study concluded that coal generates about half of all the electricity for the entire United States.
NASA climate scientist James Hansen, one of the earliest experts to warn against global warming, addressed the National Press Club last week, contending that an end to coal-burning is the number one solution to global warming.
"There should be a moratorium on building any more coal-fired power plants," Hansen said. "Until we have that clean coal power plant, we should not be building them. It's as clear as a bell."
Hansen proposed using cellulosic ethanol for electrical power and then sequestering the carbon dioxide emissions underwater to prevent their release into the atmosphere.
Some have questioned whether all 11 coal plants originally proposed by TXU were ever actually intended to be built. The uncanny timing of the buyout seems to have worked in the utility giant's favor.
"This changes the landscape for everybody," Dallas Mayor Laura Miller told the Dallas Morning News. "The timing is rather unsettling because it appears that this rush for the coal plants may have been to help build up the value of the company, because they would have had a nice corner on the electricity market with low-cost production units."
Days before the merger was announced, TXU shares increased more than sevenfold, prompting accusations of blatant insider trading. Shares surged to all-time highs in the week after the buyout went public, leaving no room for doubt about the company's immediate benefit from the merger.
Nationwide advocacy group Environmental Defense helped to negotiate the environmental stipulations of TXU's sale agreement. The negotiations included an endorsement of the U.S. Climate Action Partnership (USCAP) platform, which calls for a mandatory federal cap on carbon dioxide emissions. The agreement also included a provision to reduce the company's carbon emissions to 1990 levels by the year 2020.
"This is a huge victory for the environmental community," said Environmental Defense president Fred Krupp in a press release last week. "It sends a clear message about the undeniable momentum in our campaign calling for federal global warming legislation."
Jim Marston, Director of Environmental Defense's energy program at the Texas branch, said the organization will continue to fight coal-fired plants proposed by other energy companies.
"I have my staff doing a thorough analysis of every announced plant whether the permit has been applied for or not," Marston said. "The team is working to uncover the details of where the plants would be located as well as how clean each facility would be."
Marston said Environmental Defense is far more supportive of coal plants that would use Integrated Gasification Combined Cycle (IGCC) technology to reduce the environmental impact of the coal burning process.
"What they do is gasify the coal before it's combusted," Marston said. "The first thing that means is it's a lot cleaner and a lot more like burning natural gas. It produces a concentrated waste stream of carbon dioxide that's a lot easier to capture and a lot easier to put underground."
Marston said Environmental Defense would oppose any coal plants that didn't take significant steps to counteract global warming.
Kohlberg Kravis Roberts & Co. (KKR) and Texas Pacific Group (TPG), the two private equity firms involved in the TXU merger, say they are taking definitive action to accommodate environmental concerns about the buyout.
"As a result of this transaction, the newly privatized company will deliver price cuts and price protection benefits to electric customers, strengthen environmental policies, make significant investments in alternative energy and institute corporate policies tied to climate stewardship," stated last week's KKR press release.
The agreement promises a 10 percent price decrease in electric rates and a 20 percent reduction in mercury, sulfur dioxide and nitrogen oxide emissions from 2005 levels, through reductions at existing units and by installing emission controls at the new Oak Grove and Sandow units.
Henry Kravis, a founding partner of KKR, said the firm had listened to all constituencies with a stake in the issue, Governor Perry, electric customers and various environmental groups.
"We have developed a new vision with management of how we can turn TXU into a more innovative, customer-centric, environmentally friendly company," Kravis said in the KKR press release. "We recognize the need to balance growth with environmental considerations."
Neither KKR nor TXU returned phone calls last week and TPG's Public Relations Director Owen Blicksilver declined to comment on the issue.
In a press release last week, the Sustainable Energy and Economic Development (SEED) Coalition said that three of TXU's existing plants rank among the 10 worst mercury polluters in the nation and four of their existing plants still have no scrubbers to reduce sulfur pollution.
"It is likely that other companies with pending coal plant permits may move forward now, and we expect to continue fighting coal plants in Texas," said Karen Hadden, Executive Director of SEED, in the press release. "It's very clear that citizens in Texas want clean air to breathe, and clean air for their children and grandchildren."
Judges at the State Office of Administrative Hearings have recommended denial of the permit for TXU's Oak Grove coal plant because they do not believe pollution controls will be adequate to reach the promised emission levels. There are no state laws in Texas to regulate or even monitor emissions. The state's permit process for proposed power plants does not address cumulative effects of multiple units and does not require public health studies in highly populated regions.
According to the SEED Coalition, the Oak Grove facility alone could emit as much pollution as 350,000 cars and its nitrogen oxide emissions could cause Austin to reach non-attainment for health-based air quality standards. The organization noted that the Oak Grove plant's 1,440 pounds of toxic mercury emissions will risk the contamination of Texas waterways and fish.
"Mercury causes permanent brain damage in children, and at a time when the nation as a whole is striving to get down to 15 tons of mercury a year, adding 1,440 pounds makes no sense," Hadden said.
The TCEQ could decide whether to approve the Oak Grove permit as early as mid-March. Even if that facility is not built, TXU already generates 2,300 megawatts of nuclear power and 5,800 megawatts of coal-fired power in Texas. Despite the reduction in proposed new coal plants, a move that will prevent 56 million tons of annual carbon emissions, the state of Texas will maintain its status as the leading greenhouse gas emitter in the nation and the seventh largest emitter in the world.
"It is likely that other companies with pending coal plant permits may move forward now, and we expect to continue fighting coal plants in Texas," said Karen Hadden, Executive Director of SEED, in the press release. "It's very clear that citizens in Texas want clean air to breathe, and clean air for their children and grandchildren."
Judges at the State Office of Administrative Hearings have recommended denial of the permit for TXU's Oak Grove coal plant because they do not believe pollution controls will be adequate to reach the promised emission levels. There are no state laws in Texas to regulate or even monitor emissions. The state's permit process for proposed power plants does not address cumulative effects of multiple units and does not require public health studies in highly populated regions.
According to the SEED Coalition, the Oak Grove facility alone could emit as much pollution as 350,000 cars and its nitrogen oxide emissions could cause Austin to reach non-attainment for health-based air quality standards. The organization noted that the Oak Grove plant's 1,440 pounds of toxic mercury emissions will risk the contamination of Texas waterways and fish.
"Mercury causes permanent brain damage in children, and at a time when the nation as a whole is striving to get down to 15 tons of mercury a year, adding 1,440 pounds makes no sense," Hadden said.
The TCEQ could decide whether to approve the Oak Grove permit as early as mid-March. Even if that facility is not built, TXU already generates 2,300 megawatts of nuclear power and 5,800 megawatts of coal-fired power in Texas. Despite the reduction in proposed new coal plants, a move that will prevent 56 million tons of annual carbon emissions, the state of Texas will maintain its status as the leading greenhouse gas emitter in the nation and the seventh largest emitter in the world.
