Railroad Commission Lets Luminant Expand Coal Mines Even as Bankruptcy Looms

Categories: Biz

luminantmining.jpg
Flickr user wccnds
Dallas-based Energy Future Holdings, Texas' biggest power generator and utility, is in danger of going bankrupt, and some believe it's quite possible that the Texas taxpayer will get left with the tab. As we noted last month, the Railroad Commission of Texas allowed EFH's subsidiary, Luminant Mining, to post what's known as a "self bond" toward the reclamation of its vast East Texas strip coal mines.

Coal mine operators are required to post bonds to cover the expected cost of land reclamation. A self bond is basically a promise to pay backed by the company's own assets. They're usually offered to financially robust companies.

That's the problem.

Luminant Mining's self bond is guaranteed by its sister company, Luminant Generating, which is facing a veritable army of lenders and investors waiting to lay claim to the company's assets, possibly as soon as November. Opponents of Luminant have pondered the accounting wizardry by which a company with $30 billion in debt was able to qualify for a self bond. It must be at least one of the reasons why the Railroad Commission is concerned enough that it's requiring guarantor Luminant Generating to submit unaudited, quarterly financial reports.

But apparently none of it is stopping them from allowing the company to expand a mine near tiny Tatum, near the Louisiana border. It's self bonded, of course. Luminant has told us not to worry; it isn't "contemplating selling off our assets or walking away from them."

A Moody's analyst told The Associated Press, though, that it might not be up to company executives. Lenders and investors will become the primary stakeholders following any restructuring of the company, and if they want to, they could decide to close aging, coal-fired plants that are no longer as profitable as they once were. They could decide that the cost of retrofitting them to comply with federal air pollution limits is too great. And if the plant goes, so does the lignite coal mine supplying it.

Luminant may fully intend to honor its obligations, but there's no predicting whether the money men will choose to shoulder a burden the Railroad Commission estimates could cost $910 million. If they don't, taxpayers will.

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3 comments
kimfeil
kimfeil

I have blogged about the risk Luminant/Glen Rose nuclear plant has in that it relys on the Brazos water flow to supply Squaw Creek which is used for cooling purposes....it also desn’t help that fracking occurred near the Squaw Creek dam....in this drought and seismic increase in our areas...why would we think Luminant is so “stable”?

Gangy
Gangy

Thanks for alerting us to this typical, yet outrageous behavior of the Texas RR Commission.  Members of the Commission who are seeking another public office should be considered looking to advance in the kick-back business.  Candidates for a seat on the Commission should be scrutinized for their connections to industry.

ThePosterFormerlyKnownasPaul
ThePosterFormerlyKnownasPaul topcommenter

@Gangy  

Pal, take it up with your legislator and get the law changed.  The RRC cannot enforce something that the enabling legislation does not allow them to do.

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