Sierra Club cheers & claims “victory” at news of 500 lost jobs

This article from the Hill.com reports on how Texas-based utility, Luminant is being forced to endure the closure of two coal-fueled plants and as many as two additional mines due to extreme environmental regulations and unreasonably short compliance windows being mandated by the EPA.

The article reviews the reasons behind Luminant’s decision, describes how the regulation-forced closures will cost as many as 500 jobs, and then notes that “Eva Hernandez, a coordinator of the (Sierra Club’s) Beyond Coal campaign in Texas” and her employer “cheered” Luminant’s announcement” and claimed it as a “victory for all Texans who care about clean air.”

Of course the employees of the Sierra Club’s anti-coal campaign can smugly claim this victory given that, as the recipients of Bloomberg’s recent $50 million dollar handout, they all remain very secure and cozy in their homes and jobs. 500 Luminant employees, however, will soon be out on the street looking for work during what many economists are forecasting to be the second of double dips in this nation’s faltering economy.

Cheering and claiming victory over the loss of 500 permanent, full-time careers in the midst of a worldwide economic downturn borders on inhuman. One is forced to wonder how Ms. Hernandez and her compatriots sleep at night.

21. September 2011 by Jason Hayes
Categories: Environment, EPA, Marketplace Information, Utilities | Tags: , , , , , | 19 comments

Comments (19)

  1. Hi, I don’t agree with You in 100% but very good post I think.

  2. +1 on that. Thanks for posting!

  3. Luminant is one of the biggest air polluters in the country. Buy air scrubbers and efficient burning coal. You’ve had enough deferrals already.

    Luminant threatens to 500 employees because they don’t want to follow the law. That’s blackmail.

    Successful businesses plan for changes in their industry. Luminant has seen this coming for six years and done nothing.

  4. John,

    Your claims that Luminant has “done nothing” is demonstrably false. A 5 minute search of their site shows multiple millions on environmental upgrades and voluntary efforts on their part to address environmental concerns.

    Having discussed the upcoming regulations with many in the industry, most are saying that the timelines are the biggest issue. No one is arguing the fact that we need to continually press for better environmental performance. There are some concerns over the extent of the reductions demanded. However, that is fodder for another post. But the regulations that are being pushed right now are expecting that utilities can spend billions and make all these changes in a few months. If one understands anything about operating these types of businesses, they know that getting the permits alone (let alone hiring building contractors, etc.) can take years.

    Again, the timelines are simply unrealistic.

  5. “If one understands anything about operating these types of businesses, they know that getting the permits alone (let alone hiring building contractors, etc.) can take years.”

    That’s my point. They weren’t paying attention or planning ahead. Did they think they could run the old plants forever without any regulation?

    I would also like to point out that this situation allows Luminant to claim drastically lower property tax rates (by millions of dollars) in the rural counties the plants are located in. If they can just tie this up until December 31st…

  6. I’ve already debunked your assertion that Luminant has “done nothing” to address changing environmental regulation. Changing the wording a bit and then repeating it over again does not make for a strong argument.

    Additionally, you appear to be prone to making bold but completely unsupportable assertions. This latest statement, “Did they think they could run the plants forever without any regulation?” does nothing to bolster your argument or your credibility.

    I’m quite confident that the people at the EPA and TCEQ would dispute your claim that there isn’t “any regulation” governing the operation of utilities in Texas.

    Lastly suggesting that Luminant (or any business for that matter) betters their economic outlook by closing doors and laying people off is nonsensical. It may be that the closures might allow them to write off some assets at tax time – I don’t know and would need to check with Luminant on that one – but I guarantee that if we contacted Luminant, they would rather keep the plants and mines open and continue to pay those taxes, provide those jobs, and keep producing energy for the people of Texas.

    Unfortunately, you may not have realized that your tax argument actually provides further reasons to question the rationality of forcing the closures in this manner. If the EPA would work with the state and utilities in Texas, then those property taxes would continue to flow into the state, counties, and municipalities. Those taxes would continue to fund much needed infrastructure (roads and hospitals), education programs, etc. Instead, the EPA and the environmental industry is pushing to stop these vital industries and is harming those who can least afford the added expenses at this time.

    So I am forced to reiterate my previous statement. I wonder how you can sleep at night, cheering the loss of jobs, tax revenues, and essential services like this. Sad.

    • I’ve already debunked your assertion that Luminant has “done nothing” to address changing environmental regulation. Changing the wording a bit and then repeating it over again does not make for a strong argument.

      — Fair enough. I should have said “not done enough.”

      Additionally, you appear to be prone to making bold but completely unsupportable assertions. This latest statement, “Did they think they could run the plants forever without any regulation?” does nothing to bolster your argument or your credibility.

      — Fair enough. I should have said “Did they think they could run the plants forever without any new regulations?”

      Lastly suggesting that Luminant (or any business for that matter) betters their economic outlook by closing doors and laying people off is nonsensical. It may be that the closures might allow them to write off some assets at tax time – I don’t know and would need to check with Luminant on that one – but I guarantee that if we contacted Luminant, they would rather keep the plants and mines open and continue to pay those taxes, provide those jobs, and keep producing energy for the people of Texas.

      — Companies do this in all sectors. Other Luminant facilities will become more profitable by closing these plants.

      Unfortunately, you may not have realized that your tax argument actually provides further reasons to question the rationality of forcing the closures in this manner. If the EPA would work with the state and utilities in Texas, then those property taxes would continue to flow into the state, counties, and municipalities. Those taxes would continue to fund much needed infrastructure (roads and hospitals), education programs, etc. Instead, the EPA and the environmental industry is pushing to stop these vital industries and is harming those who can least afford the added expenses at this time.

      — You are talking about the 500 Luminant workers and the counties they are located in, and assuming that Luminant CEO’s in Dallas care about them.

      So I am forced to reiterate my previous statement. I wonder how you can sleep at night, cheering the loss of jobs, tax revenues, and essential services like this. Sad.

      — I lose no sleep at all over Luminant’s poor management decisions. I do feel bad for those workers and communities who are hurt by them, since Luminant is the major employer in these counties and are using them as bargaining chips in their fight against the EPA.

  7. “– Companies do this in all sectors. Other Luminant facilities will become more profitable by closing these plants.”

    You seem to have missed the fact that they’re closing because an administration that promised to “bankrupt the coal industry” is living up to that promise by crushing businesses under billions in added expenses, not because tossing away billions in capital investments is good business.

    “– You are talking about the 500 Luminant workers and the counties they are located in, and assuming that Luminant CEO’s in Dallas care about them.”

    And you’re falling back into your bad habit of making completely unsupportable assertions. This time about the character and intent of Luminant officials.

    “– I lose no sleep at all over Luminant’s poor management decisions. I do feel bad for those workers and communities who are hurt by them, since Luminant is the major employer in these counties and are using them as bargaining chips in their fight against the EPA.”

    It’s hardly poor management to be forced into cost cutting mode when government promises you that you won’t be impacted by regulations and then suddenly changes their mind and informs you have only a few months to come up with several hundred million in added expenses.

  8. How come other companies are able to manage these EPA rules and this company can not?

  9. It’s hardly just Luminant that is suffering.

    Several other companies are being forced into the exact same position. Conservative estimates indicate that the coming EPA regulations – CSAPR and MACT- are going to cost the country some 1.44 million (net) jobs lost.

    Additionally, I’ve posted several notes here describing how utilities across the country are being forced to implement renewal portfolio standards, as well as shutting down coal-fueled capacity. Those utilities are now requesting approvals for rate increases over the next few years that run from 10% up to 40%+. That means that the people in the worst economic shape will be seeing substantial electricity rate increases – primarily due to the incoming EPA regulations.

    There’s no escaping the facts. These new policies and regulations are causing electricity rates to “necessarily skyrocket”. http://youtu.be/J6TbGCRevas

    • ” 1.44 million (net) jobs lost.”

      So how many millions of Americans work in the utilities industry?

      • Bls.gov lists notes that there are over 500K employees in the utility sector. I’m guessing that you’re trying to make a statement that there aren’t 1.44 million people working in the utilities industry. However, you must remember that getting coal from the mine to the utility/steel mill/industrial plant involves people who work in the mining sector, the rail sector, barging, ports and terminals, utilities, energy trading, ocean going shipping, industrial sectors, chemical sectors, manufacturing, milling, allied support industries (tire manufacturing and sales, etc.), and many more. Those would be the direct employment numbers. Then you move on to the indirect employment numbers and a conservative multiplier for the mining and utility industry is 4.4 (meaning every direct job provides 4.4 additional jobs in local restaurants, grocery stores, car dealerships, accountants, government, etc.). Add those lost jobs together and you easily can arrive at 1.44 (and once again, these are *net* jobs, so they already account for the so-called green jobs that are tossed around so freely today).

  10. EPA not responsible for Luminant’s problems

    By TOM SANZILLO

    Updated 09:23 p.m., Friday, September 30, 2011

    On Sept. 12, Luminant announced it will idle two generating units at its Monticello Coal Plant and lay off 500 workers, claiming this is necessary to comply with newly announced Environmental Protection Agency clean air safeguards. In all the coverage following this announcement, I’ve witnessed a debate about facts as simple as the correct deadline for compliance with the new safeguard, but I have not seen the financial side of the story addressed in depth.

    Luminant would tell you the cause of its problems is EPA regulations. In truth, its miserably poor financial choices, made worse by lower natural gas prices, and rising competition from renewables, made business tough for Luminant. Its problems have exactly nothing to do with common-sense clean air protections.

    In my years serving as first deputy comptroller and then acting comptroller for the state of New York, I managed the world’s largest public pension fund. I’ve seen deals like the one made in the 2007 buyout of TXU time and time again. Luminant and parent company Energy Futures Holdings (EFH) are in a financial mess of their own making. EPA’s Cross-State Air Pollution Rule, in the works since the Bush administration and set to take effect on Jan. 1, 2012, will require Luminant to either run existing scrubbers on its three largest Texas plants, or install new pollution controls. The truth is that Luminant has neither the cash nor the credit to make these much-needed upgrades, so the company is trying to shift the blame to the EPA. This is politically convenient, but is also irresponsible.

    During the TXU buyout in 2007, Energy Futures Holdings made a losing bet on coal-fired power. When the price of natural gas plummeted and coal power became more expensive, they were stuck with old, outdated coal plants and declining profit margins.

    Last quarter Luminant paid 77 cents of every dollar of revenue to interest on borrowed money. All utilities across America last year paid only 6.3 cents for every dollar they took in on borrowed money. Most utilities borrow money to create electricity and move it to their customers. EFH borrowed tons of money to move it to shareholders and bankers, producing very little electricity. Imagine if your household had to pay 77 percent of your earnings to service credit card debt; bankruptcy wouldn’t be far behind.

    As I documented in a report earlier this year, the finances of the corporation never worked; they fell apart almost immediately. The company has been considered a financial basket case by the credit markets since day one – long before EPA announced the Cross-State Air Pollution Rule would apply to Texas polluters. The primary investors have stated earlier this year they lost more than 70 percent of their money, and things have only gotten worse.

    Luminant/EFH has the worst credit standing in the country: a CCC+ rating. This cannot be blamed on new EPA safeguards that other utilities are reporting they can comply with. Just last week, Luminant filed suit to re-evaluate its property tax obligations in Titus, Rusk and Freestone counties, the sites of its three largest plants.

    In these troubled economic times, most utilities are paying their local property taxes, complying with environmental, health and safety laws, paying their workers and borrowing carefully where necessary to keep their business running. There are 45 utilities in this country with solid investment-grade credit ratings. Luminant’s CCC+ rating puts it in stark contrast to these other financially healthy utilities.

    The investors know they won’t make their money back on Luminant’s debt. Berkshire Hathaway, KKR and TPG are all on the record saying as much. A Brattle Group analysis from earlier this year says Luminant “fails to pass a basic profitability test.”

    EFH and its management should take steps to have its debt formally written off and retire these old coal units.

    This is the only way EFH will be healthy enough to protect its employees and customers and work as an equal partner with other energy stakeholders to remain part of the Texas economy. The blame game currently under way won’t rewrite the past.

    http://www.chron.com/opinion/outlook/article/EPA-not-responsible-for-Luminant-s-problems-2197300.php

    • Not at all surprised that a fellow who has worked closely with legal/environmental groups like “Plains Justice” to create an financial logic for blocking the construction of coal – something he refers to as a “dinosaur” fuel – is inserting himself into the Luminant discussion in this fashion.

    • From someone with a little more direct experience with ERCOT and Texas energy than Mr. Sanzillo.
      ____________________

      EPA rule would imperil energy reliability
      Sam Jones, Local Contributor

      Published: 7:27 p.m. Monday, Sept. 12, 2011

      To paraphrase a legendary Texas meteorologist, all Texas summers are hot some are just hotter than others. And some, like the current blistering season, are killers and a sobering reminder that we depend on a reliable, continuous supply of electricity to help keep us safe and cool.

      But a new Environmental Protection Agency rule will put electric reliability and Texans at risk.

      Electricity consumption has soared this summer as air conditioners battle the heat. Consumers of Electric Reliability Council of Texas, the state’s primary electric grid, which I used to manage, set records for May, June and July. And the all-time peak demand was broken repeatedly in August, blasting away the old record set last year by 4 percent. The new peak is almost 25 percent higher than it was a decade ago and at levels not expected until 2013.

      This summer’s demand for electricity has strained power resources and used much of the reserve margin, which, for a power grid, is like the safety cushion you keep in the bank for the unexpected. Thanks to consumers’ conservation efforts, ERCOT has so far been able to maintain reliability — but just barely. If only a few large generating units had been forced out of service during the hottest afternoons, the outcome would likely have been rolling blackouts to prevent the entire grid from collapsing. The cost would have been more than just inconvenience and interrupted air conditioners. In busy metropolitan areas, such outages are estimated to cost the economy many millions of dollars per hour.

      Yet that’s what the EPA’s new Cross-State Air Pollution Rule threatens.

      Texans face the possibility that as many as eight coal-fueled units, among the largest and most dependable in ERCOT, might have to shut down or limit operations by Jan. 1, when the regulation goes into effect. This rule will imperil electric reliability across Texas because there are no replacement units available.

      The EPA rule is designed to reduce power plant emissions from states whose emissions are said to impair the ability of other states to meet federal clean air standards. This time last year, our state was not included in the proposed rule’s annual program. But in a surprise move in July, the EPA added Texas, giving the generation owners affected just five months to make drastic cuts in air emissions on top of what they have already achieved or to curtail operations.

      Surprises and electric reliability do not go hand in hand. Grid operators plan for system reliability years in advance, and generation owners need a reasonable lead time to make prudent operational and equipment changes. Five months is barely enough time to study the 1,300-page rule and make crucial decisions about a significant portion of the state’s coal generation, which provided 40 percent of the electricity consumed in ERCOT last year.

      In a report issued earlier this month, ERCOT concluded that the EPA rule “implementation date does not provide ERCOT and its resource owners a meaningful window for taking steps to avoid the loss of thousands of megawatts of capacity, and the attendant risks of outages for Texas power users.”

      Some have suggested that Texas generation owners can simply switch to a different type of coal or build replacement plants. Even if adequate supplies of the right kind of coal can be quickly procured and transported to Texas, installing the equipment necessary to use the new fuel takes several years. Constructing new generation can take five or more years. At a minimum, both options require engineering and design, permitting, equipment procurement, and delivery, construction and startup testing. And because the rule applies to 27 states, this timeline might be lengthened by the number of projects in competition for the same skilled labor and resources.

      Generation owners in ERCOT must give 90 days’ notice before closing down plants. That means that, as a result of their sudden inclusion in the EPA rule, they have less than two months to make decisions that will affect the electric reliability of 23 million consumers as well as the Texas economy.

      Unless the EPA drops Texas from the rule or gives us more flexibility and time to comply, the reliability of our electricity supply will be severely in question during high-use periods for the next several years.

      Jones retired as president and CEO in 2007. Before joining ERCOT, Jones worked at Austin Energy for 35 years.

      Find this article at:

      http://www.statesman.com/opinion/epa-rule-would-imperil-energy-reliability-1849320.html

      • Not at all surprised that a fellow who worked at Austin Energy for 35 years is inserting himself into the Luminant discussion in this fashion.

      • Heh! Touché. Nonetheless, Jones actually managed ERCOT for years. I’ll take his word on the issue before Sanzillo’s.

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