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Texas Observer Fails Reporting 101 with Self-Bonding Stories

ELuminant_logo_sm300x189very college-level basic reporting course teaches this fundamental of journalism: get both sides of the story. But the Texas Observer gets an F for blatantly ignoring that standard in recent stories on mine reclamation self-bonding in Texas.

Luminant, the largest coal mining company in Texas, is prominently mentioned in the lead story and even attacked by a longtime environmental activist, who, as usual, is wrong. But did the Texas Observer bother to contact us for our side of the story?


And that’s beyond sloppy journalism. It’s unfair and irresponsible.

In the opening paragraphs, Texas Observer reporter Naveena Sadasivam, mistakenly describes the process Luminant followed to transition from bonds backed by the company’s demonstrated financial condition, or self-bonding, to a collateral bond to secure reclamation costs upon entering bankruptcy as required by the Railroad Commission of Texas. She wrongly implies it was impulsive and chaotic. It wasn’t.

If she contacted us, Sadasivam could have avoided these errors:

  • Energy Future Holdings and Luminant didn’t file for bankruptcy in “mid-2014.” It was in April, 2014.
  • Regulators didn’t “suddenly” have a problem. Months prior to the filing, we consulted the RCT regarding an approach for replacing our self-bonding in the event of a bankruptcy and RCT explained to Luminant what was expected under the rules for an orderly process.
  • There was no “strong-arming.” Well before filing, Luminant understood the regulatory requirements regarding bonding during a restructuring process and was committed to full compliance with those regulations. In consultation with the RCT, the company methodically arranged for a collateral bond secured by $1.1 billion in debtor in possession financing the bankruptcy court approved three days after filing. The RCT then unanimously approved.

Since before we filed for bankruptcy, Public Citizen’s Tom Smith has made misleading claims Luminant might not meet its reclamation obligations. He was wrong then and he’s wrong now suggesting we weren’t committed and able to cover them.

The facts, oblivious to the Texas Observer, back up that commitment. For more than 40 years, Luminant has set the standard in mined land reclamation, restoring nearly 80,000 acres, planting over 38 million trees and creating or enhancing more than 5,100 acres of wetlands, ponds and stream channels. In 2015, Luminant reclaimed more than 2,300 acres and planted over 1 million trees. More than 1,500 acres were reclaimed in 2014 and 1.5 million trees planted.

As an enthusiastic media partner of the environmental activists’ agenda to end coal generation, which the state relies on, and throw thousands of Texans out of their jobs, the Texas Observer has buried the solid fundamentals of good journalism. So these words, literally buried in its website, now ring hollow, “Our reporting is fair, accurate, and, as our mission states, it hews hard to the truth as we find it.”

Luminant Response to the Texas Observer

Luminant_logo_sm300x189To no surprise, the Texas Observer piece on Luminant’s 2015 property tax litigation is an incomplete description of the company’s effort to reach fair taxable values at our plants that are much lower because of sustained low wholesale power prices.

Our goal is paying our fair share and without the court challenges, those valuations would result in the company paying excess property taxes for 2015. To suggest any other motive, as this article does, is inaccurate and cynical.

Although we provided the Texas Observer with extensive responses and data explaining how market forces drastically reduced plants revenue, income and property values and why power plants are valued differently from homes, those points were excluded leaving the reader with insufficient context.

Historically low natural gas prices and, increasingly, subsidized wind generation, especially since 2014, have driven power prices sharply lower with forecasts for them to remain low for years.

The Texas Observer implies homes and power plants for property tax purposes are valued the same through comparable sales. They’re not, despite material we gave to the reporter explaining the distinction. Unlike the residential market, there are very few sales of power plants that can provide a good comparable value.

The best, most accurate and sensible way to determine the fair taxable value of a power plant is by using what’s called a market-based income model. Market-based income models are widely relied on in Texas by owners of large industrial properties that are income-producing assets.

Counter to what the Texas Observer reported, we have shared with county appraisers for the past several years that many of our units have lost significant amounts of income – well into the tens of millions of dollars for 2015 alone. And our annual filings with the Securities and Exchange Commission have shown a steadily decreasing value for these same plants.

Just as plant values were higher when power prices, revenue and income were greater, values must now accurately reflect the impact of low prices. What remains constant is that as a longtime member of the communities where our plants, mines and many employees call home, we remain deeply concerned about their overall success.

Power Makes a New World Possible

Together, we’re powering tomorrow’s untapped potential

3 Logos StackedAir conditioning. Holiday lights. Refrigerators. Hair dryers. Washing machines. Mobile phones.

These machines are so commonplace in our daily lives that we take them for granted, let alone think about the power that makes them work.  At EFH, Luminant and TXU Energy, we think about that power – a lot. We are part of a legacy of companies that have powered North Texas and beyond for more than 130 years and counting, changing the way we live, work and play.

Many of us don’t know a world before electricity; however, our ancestors lived when life’s daily tasks took more time and effort to complete. Before readily available electricity, household tasks like laundry were labor – and time – intensive requiring a washboard, washtub, wringers and even a washing bat; surviving a Texas summer was challenging to say the least (thank you air conditioning!); and getting from Point A to Point B required rumpled paper maps or worse yet, a little human interaction!

Like Kathleen Wolf Davis, editor-in-chief at Energy Central, mentions in her article, it is not until something is gone that we realize how important it is. It is because of the power industry that we have been able to fuel advancements in a variety of fields including the medical industry (CT scans, MRIs and ultrasounds), communication (computers, tablets and mobile phones), entertainment (video games, TVs and music), manufacturing (dishwashers, hair dryers, washing machines) and many other sectors.

The people who fuel our industry work to provide sustainable, affordable and reliable power so that our fellow Texans can conceive the ideas that better our lives. We are proud to produce the power that makes the day-to-day conveniences possible and moves us closer to the life-changing possibilities of tomorrow.


Tradinghouse Power Plant: A Legacy of Planning for the Growing Power Needs of Texas

We're committed to powering Texas with reliable, affordable and a sustainable supply of electricity


The following op-ed ran in this Sunday’s Waco Tribune-Herald discussing Luminant’s plans to build new natural gas plants at Lake Creek and Tradinghouse.


For more than six decades, Luminant has had a presence in McLennan County as part of our deep commitment to meet the electric power demands of our growing state. A natural gas plant at our Lake Creek site near Riesel became operational in 1953. Another gas plant at Tradinghouse Lake went online in 1970. Both plants were important assets in powering Texas till they were retired six to seven years ago and the sites cleared.

Just like our predecessor companies that built those plants in the mid-20th century, Luminant shares the vision of planning for the future so our state has reliable affordable power to remain a great place to live, work and grow. That’s why we’re developing plans to potentially build new natural gas plants at Lake Creek and Tradinghouse. The Texas Commission on Environmental Quality has already granted air permits to build two 230-megawatt simple-cycle combustion turbines at each site for a total of 460 megawatts at both locations.

In 2015, Luminant applied to amend the Tradinghouse air permit to allow the option of converting the two simple-cycle turbines to what’s called combined-cycle capability in which a common steam turbine is added at approximately 350 megawatts. We’re also asking for the option there to potentially build two more simple-cycle turbines totaling about 460 megawatts that could run in combined-cycle with a second steam turbine of about 350 megawatts.

If all these units at Tradinghouse were to be built and running in combined-cycle mode, they’d produce approximately 1,620 megawatts of high-efficiency, low-emitting state-of-the-art natural gas-generated electricity. That’s enough to power about 810,000 homes in normal conditions.

McLennan County, the city of Waco and the Greater Waco Chamber of Commerce have had questions about what impact nitrogen oxide emissions from the Tradinghouse plant, if built, might have on the area’s ozone. Vehicles, certain industries and fossil-fueled power plants all release NOx that can lead to ozone forming on hot, sunny days. The national ozone standard is 70 parts per billion as set by the Environmental Protection Agency and the Waco area complies at 67 ppb. Understandably, the local governments and chamber want Waco to stay in compliance. So do we.

Their concerns stemmed from computer modeling by a consultant hired by the Heart of Texas Council of Governments. The consultant plugged in some mistaken assumptions on how the units could operate and the associated emissions impacts if we just ran the four gas turbines without the steam turbines at Tradinghouse. That kind of generation is neither realistic nor economical but would’ve been allowed under the permit amendment if approved.

However, the modeling showed if Tradinghouse ran in full combined-cycle mode as designed, and as it actually would, the ozone impact would be negligible. We shared with the county, city, chamber and Tribune-Herald why the consultant report overestimated the projected ozone impact of the plant because of these inaccuracies.

We’re committed to being good neighbors. We listen. And we work together in the communities our plants call home. So, to address these concerns, we told the TCEQ in April to add a permit limitation that would allow only two of the gas turbines to run in simple-cycle mode at any given time.

Recently, an environmental activist wrote in the Trib opposing construction of the Tradinghouse plant, claiming Texas should no longer rely on fossil-fueled power plants, just renewable energy. Solar and wind have a place in the diverse energy mix that’s powering Texas. But to rely on intermittent forms of generation isn’t realistic. Just this spring, U.S. Interior Secretary Sally Jewell told those who demand fossil fuels remain in the ground that “to say we could shift to 100 percent renewables is naïve.”

In citing cities, such as Georgetown, that plan to purchase 100 percent renewable energy, what this activist doesn’t mention is that such deals are possible only because of dependable generation such as natural gas. Even the mayor of Georgetown acknowledges when there’s not enough wind or sun, his city must buy power from the ERCOT grid where almost 90 percent of the power comes from reliable fuels, such as natural gas.

We’ve made no final decision to build these plants at Tradinghouse and Lake Creek. Market conditions driven by low wholesale power prices just don’t financially support new generation. But more will be needed eventually and, by securing the needed air permits, Luminant wants to be in the position to quickly add new generation when conditions improve.

At Luminant, we’re proud of our stewardship of the air and water. All of our existing plants meet or exceed all the environmental rules and laws of our state and nation. And should we be granted the permit amendment we’re seeking and build at Tradinghouse, we can assure the people of McLennan County the affordable power generated there will use the best technology, emissions controls and, importantly, be dependable to keep up with the power demands of a growing Texas.

Luminant Responds to Dallas City Council Ozone Resolution


Luminant_logo_sm300x189We understand the city council wanting to make a statement on clean air. Luminant shares the desire for clean air and that’s why all our power plants meet or exceed the rules and laws of our state and nation on emissions.

Reducing ozone should be based on facts, however, and the facts show, the vast majority, about 80 percent, of nitrogen oxide emissions in the 10-county North Texas area responsible for the formation of ozone comes from mobile sources—cars, trucks, construction equipment, airplanes and locomotives, not power plants.

As the amended resolution recognizes, control measures such as Selective Catalytic Reduction on coal plants would help only where practical. The TCEQ already found the controls requested “are not necessary” to demonstrate attainment for ozone in the 10-county area by the 2018 deadline.

For more on the reality of North Texas ozone and power plants and the environmental activist groups behind this resolution, check out this POV blog post.

Update on Comanche Peak Nuclear Power Plant, Fair Taxable Value and Sustained Low Power Prices


There’s a lot of misunderstanding of how power plants are assessed for property taxes and the path provided by state law to ultimately determine their fair taxable value.

That’s certainly the current situation with Comanche Peak Nuclear Power Plant near Glen Rose in Somervell County, southwest of Fort Worth.

In recent social media posts and comments in news stories, there are facts ignored, distorted or misinterpreted. Let’s fill in the entire record for what’s going on and why Comanche Peak’s value is much lower than it used to be due to low wholesale power prices caused by inexpensive natural gas and subsidized wind generation.

Luminant’s goal from the outset has been to determine Comanche Peak’s taxable value for 2015. As a longtime corporate citizen, we’re committed to pay our fair share and are pursuing the process available to any taxpayer. Any opinions contrary to our stated goal are misinformed.

After the Somervell County Appraisal District assessed Comanche Peak’s 2015 value at $2.2 billion, we appealed to the county’s Appraisal Review Board which agreed with the assessment. We then turned to the courts, as provided by law, and in March, the state district judge for the 18th Judicial District, who’s elected from Somervell and Johnson counties, sided with the appraisal district.

Luminant believes the court decision doesn’t reflect the 2015 taxable value of Comanche Peak given the market conditions, $949 million. On this undisputed amount of assessed value, we already paid Somervell County taxing jurisdictions almost $16 million in taxes. We have appealed the district court’s decision to the Tenth Court of Appeals in Waco.

But how we got to this point is just half the story. The other half is why. And the reason is pretty simple for those who accept the clear hard fact that markets go up and they go down. When prices were higher, Comanche Peak’s value was greater and it paid more in property taxes. But power prices are now at historic lows and when Comanche Peak makes less revenue, its value as an income producing asset must follow.

How steep have power prices fallen? In 2008, average annual wholesale power prices in ERCOT were more than $63 per megawatt hour. In the first quarter of 2015, wholesale power prices averaged $26 per megawatt hour and they were about $17 per megawatt hour in the first quarter of this year. That’s a 35 percent drop in just the last year.

As power prices plummeted and especially in the past two years, we informed the Somervell County Appraisal District and county officials of our firm determination to arrive at a fair taxable value for Comanche Peak. So, we’re confident they’ve been aware for some time of how long this process may take.

We’re certainly aware of Comanche Peak’s impact on the school and county governments in Somervell County that decided to structure their budgets so that more than 70 percent of their total property tax revenue comes from the plant.  During the process to reach a 2015 taxable value for Comanche Peak, those local governments that passed solid prudent budgets with adequate reserves are fully capable of evaluating their options.

Luminant and Comanche Peak are longtime members of Somervell County communities so, of course, we remain concerned about their overall success. With all the facts known, we’re also hopeful people will understand the importance of determining what’s fair in this sustained low power price market.

When Neighbors Ask - 2016


Luminant Joins State of Texas, other Generators in Court Challenges to the EPA’s Regional Haze Final Rule

Luminant has filed a motion at the U.S. Fifth Circuit Court of Appeals to stay the Environmental Protection Agency’s Regional Haze Federal Implementation Plan final rule for Texas and Oklahoma. Along with two other power generators, Luminant is asking the court to stop implementation of the final rule while under legal review because the rule is causing irreparable harm to businesses and communities across Texas.

Luminant filed a petition for review challenging the EPA Regional Haze FIP on Feb. 29.  The state of Texas, other power generators and the Utility Air Regulatory Group have also filed petitions for review, and all petitions have been consolidated into a single case.

The EPA proposed this rule in 2014 and we laid out our serious concerns on our POV blog and in comments filed. The final rule was issued in January.

As these legal cases get underway, what’s important to remember is that the Regional Haze Rule under the Clean Air Act is not a health-based program. It’s designed to improve visibility over decades at national parks. Environmental activists and some in the media often mislead on this point by trying to connect the rule with health effects to garner support for yet another government regulation. Indeed, under the EPA’s final rule, Texas is unlawfully burdened with unnecessary regulations and costs while visibility is improving under the Texas State Implementation Plan.

At Luminant, we’re proud of our environmental record of meeting or exceeding the laws and rules of our nation and state. We’re Texans and we want clean air, water and natural resources for generations to come.

Some background: regional haze is the impairment of visibility at national parks caused by many sources, such as vehicles, windblown soil and power plants, but also emissions and smoke blown in from Mexico. These rules require each state to prepare what’s called a state implementation plan, or SIP, to gradually improve visibility over decades at national parks inside their borders and those in other states impacted by their emissions.

Texas’s Regional Haze SIP—submitted to the EPA in 2009—covers Big Bend and Guadalupe Mountains in West Texas and the Wichita Mountains in Southern Oklahoma.

The CAA requires states to consult each other on emission reductions needed to achieve progress. And Texas and Oklahoma did that. They went through extensive, mutual consultations on the Wichita Mountains prior to each state submitting their respective plans to the EPA.

But, when the EPA announced its proposed rule in November 2014, it rejected the cooperation between Texas and Oklahoma. For the first time in history, the EPA disapproved a consultation between two states over regional haze plans. In a move that ignores the CAA’s direction for the state to be the primary author of its own plan, the EPA substituted its own judgment for that of the state via a federal implementation plan, or FIP, for Texas.

In doing so, the EPA invented new requirements in this federal plan for the three parks that, in effect, treat Texas differently than all other states. The agency even concedes that what it has cobbled together for Texas is “without…prior precedent.”

In his comments to the EPA, Texas Governor Greg Abbott underscored the EPA’s arbitrary view of the Texas SIP compared to other states. While the Texas plan proposed to eliminate regional haze at Big Bend and Guadalupe Mountains by 2155, Abbott pointed out the EPA gave California until 2307 to restore visibility at two national parks, almost 300 years from now.

Relying not on real world data but instead on computer modeling and non-statutory factors, the EPA is ordering additional emission reductions and unlawfully picking the specific plants where those reductions must be made, which has never been done before in this way.

The results for Texas under the EPA’s demands would be harsh:

  • More than $2 billion in unjustified costs for new upgrades by 2019 and retrofits by 2021 to further control sulfur dioxide at 14 Texas coal units, nine of them Luminant’s, all of which are hundreds of miles from these parks.
  • A risk to reliable electric power in Texas cited by ERCOT if coal plants are forced to retire prematurely.
  • No detectable change in visibility at Big Bend, Guadalupe Mountains and Wichita Mountains since the improvement projected by the EPA is so small it could not be detected by the human eye.

That last point demands some explanation. Regional haze is measured by deciviews. The human eye can only detect a change of 1.0 deciview or more. Yet, as the foreword in our comments points out, the EPA’s plan would, at most, improve visibility in 2018 at the parks by significantly less than that.

Further, visibility has improved beyond what even the EPA would require in this proposal that relies on computer models. Based on real world data, not models, from federal monitors at these three parks, visibility has surpassed the levels that EPA asserts are necessary by 2018.

Incredibly, the EPA wants to unload severe costs on Texas for no perceptible improvement and while federal monitors show visibility already improved beyond the 2018 goals set in the final rule.

Luminant and other generators will be forced to spend billions of dollars in non-recoverable costs while this case is being decided because of a rule that is manifestly illegal.

Two of Luminant’s plants, Big Brown and Monticello, would be required to install SO2 scrubbers for more than $1 billion, as estimated by the EPA. Our company’s 10-K disclosure filed with the SEC March 1 laid out the risk that new scrubbers “would likely challenge the long-term economic viability of those units.”

With the EPA unyielding, the time has come to let the courts decide.

Our official statement can be found here.


Luminant Response to EPA SO2 Designations


Luminant’s Monticello, Martin Lake and Big Brown power plants are operating in compliance with all the environmental rules and laws of our state and nation.

The proposed SO2 designations by the EPA are based on computer modeling funded by environmental groups. We firmly believe these models do not accurately predict actual emissions measurements and that these designations should be determined by real-world emissions data from air quality monitors. We are in the process of evaluating the EPA’s technical support documents.

Should the EPA finalize these designations as proposed, the state will begin the process to evaluate whether potential control or operational changes, if any, may be necessary to demonstrate attainment.