Coal Clean Up, Texas Style

Amid a wave of historic coal bankruptcies, states like Texas have taken proactive steps to make sure coal companies are on the hook for their future cleanup costs.

By Leigh PatersonAugust 22, 2016 9:30 am| ,

From Inside Energy:

Travis Brown has some ideas. He drives down a quiet country road in Elgin, Texas, a small town about 25 miles east of Austin. A dark, open pit coal mine peeks through the trees. The Three Oaks Mine is owned by Luminant, the largest coal company in Texas, is permitted to operate on nearly 16,000 acres.

“It’s an amazing operation. It’s hard not to be impressed by the technology and what they do here. If you don’t focus so much on the devastation it causes, it’s pretty amazing,” Brown said.

Brown works for the Department of Agriculture but fights coal companies in his spare time, as the head of Neighbors for Neighbors, a community watchdog group. A few years ago, Neighbors for Neighbors along with other environmental groups, like the Sierra Club, started raising red flags about Luminant’s mines, including Three Oaks.

Their concern? That there wouldn’t be funds available for future coal mine clean up if Luminant went bankrupt (which it did). Brown explains:

“In Texas, as in so many states, they had what they called self-bonding. If this operation shut down… all they had was basically a promise from Luminant, that said ‘Oh yea, we’ll clean it up. We’ll promise to do it.’ Obviously, that’s not enough,” Brown said.

A self-bond is backed by a company’s financial strength, not real money. In 2014, Luminant had over $1 billion in future cleanup costs, held in self-bonds.

On April 29th of that year, Luminant’s parent company, Energy Future Holdings, and 70 affiliated companies, did indeed file for bankruptcy. The company is still working through that process. On May 16th, Luminant asked regulators to approve replacement bonds. On June 17th, regulators approved the plan for Luminant to replace the total value of its self-bonds with a collateral bond. That bond is backed by its parent company’s assets and would be one of the first debts to be paid back.

That is exactly what is supposed to happen.

The state of Colorado and Peabody Energy made a similar, much smaller deal in April of this year. But it hasn’t happened anywhere else on the same scale.

So why did it work in Texas? Travis Brown, and other environmental advocates I talked to have a theory. Brown thinks this situation was a political liability for Texas regulators.

Read more.

Inside Energy is a Public Media collaboration focused on America’s energy issues.