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Impact on Comanche Peak, Somervell County remains unclear

Wednesday, November 6, 2013

AMANDA KIMBLE
The Glenrose Reporter

Nov. 1 came and went, and Energy Future Holdings (EFH) did not file bankruptcy. The parent company of Luminant Energy, which operates Comanche Peak Nuclear Power Plant, carries about $40 billion in debt.

As the Nov. 1 deadline to make a $270 million interest approached, experts across the nation began speculating about the company’s future. Locally, Somervell County Commissioners Court held a special meeting, informing employees EHT could expedite the looming Chapter 11 bankruptcy and file the debt restructuring plan rather than make the payment.

Media outlets across the nation, including Bloomberg News, Reuters and The Wall Street Journal reported hours before the deadline the Dallas-based electricity giant would make the scheduled payment.

"As I understand it, discussions with secured creditors have failed," County Judge Mike Ford explained, adding the failure reset debt negotiations. "They are not declaring bankruptcy at this point."

The next payment is due by late February or early March 2014.

While county officials and stock market analysts agree bankruptcy is inevitable, those at home in Somervell are saying while the filing could have a local impact, there is no fear the county’s No. 1 source of tax revenue will go off the grid.

"Closure of Comanche Peak is not what we are talking about," County Auditor Brian Watts said.

Ford agreed.

"The public needs to understand, no matter what happens, the power plant will not shut down," he said. "It is a part of the power grid."
But Watts said there could be an impact to the county.

"There are real fears about when the property tax payment will be made," he said.

And there are a lot of zeros attached to those fears. This year, Luminant’s tax payment is scheduled to bring about $8.8 million to county coffers. The current county budget adds up to more than $12 million, and there is $6 million in reserves.

During negotiations over Comanche Peak’s pending tax payment, the facility was devalued by more than $300 million this year. And officials say there is a real possibility the value will continue to decrease, causing the county to tighten its belt even more. It has also been said if the power plant is sold, the value would likely be less than what is currently on the books.

But Watts said as the county waits to see if the current year’s tax payment will be made, officials realize the ongoing negotiation process is not unprecedented.
"EFH is following what was started by General Motors," he said, referring to pre-negotiated bankruptcy filing.

Watts said the process will allow EHT to "shed bad assets and go forward with good decisions."

"Then they will be able to emerge out of bankruptcy and proceed," Watts said. "It may take awhile, but the secured creditors will get what’s due to them."
EHT was formed from one of the largest leverage buyouts in history – the $45 billion buyout of TXU Corp. in 2007. Watts said investors gambled on the fact that electricity rates – driven by natural gas prices – would remain high.

"They assumed gas prices would remain stable and possibly increase," Watts said, adding when fracking unveiled a wealth of natural gas across the nation, prices plummeted. While it was initially assumed to be a good deal in 2007, it became a bad business move, impacting big power players like Warren Buffet and Berkshire Hawthaway.
But at the end of the day, county officials have only one concern.

"I don’t care about Buffett and Wall Street," Watts said. "I care about Somevell County."

Nov. 08, 2013

BY JIM FUQUAY jfuquay(at)star-telegram.com
Fort Worth Star-Telegram

Dallas-based Luminant Generation has told federal regulators that it will suspend its quest for a license to expand its Comanche Peak nuclear plant in Glen Rose, southwest of Fort Worth.

Luminant, in a letter to the U.S. Nuclear Regulatory Commission, cited a recent decision by its reactor partner, Mitsubishi Heavy Industries, to focus its efforts on restoring nuclear power in Japan, where reactors were idled after the 2011 earthquake and tsunami and Fukushima accident. That will slow Mitsubishi’s work to gain U.S. certification of the new reactor design that was to be used at Comanche Peak.

"As a result, Luminant is suspending work" on adding two new reactors to Comanche Peak "because of its reliance on the design certification," Luminant said in a prepared statement.

The plant currently has two reactors, and Luminant in 2006 announced plans to add two more. After gaining several steps toward obtaining a license for the plant from the NRC, work on the Comanche Peak project stalled as Luminant’s corporate parent, Energy Future Holdings, flirted with bankruptcy and as wholesale power prices in Texas remained low.

"Both MHI and Luminant understand the current economic reality of low Texas power prices driven in large part by the boom in natural gas," Luminant spokesman Brad Watson saud in a prepared release. "Luminant will continue to support nuclear power as part of the solution to Texas electric reliability and will re-evaluate this decision as conditions change," Watson said.

Two Texas opponents of the Comanche Peak expansion said Friday that Luminant’s suspension "shows that the so-called nuclear renaissance has fizzled."

Karen Hadden, executive director of the Sustainable Energy and Economic Development (SEED) Coalition, said the delay "clears the way for safer, cleaner and more affordable renewable energy in Texas."

Tom "Smitty" Smith, director of Public Citizen’s Texas office, said, "It was long believed EFH was keeping these licenses alive because they would be valuable assets in bankruptcy. This stunning decision shows how little bankers on Wall Street value nuclear power."

The letter to the NRC, dated Thursday, said that "while Luminant preferred for MHI to continue" to pursue certification of its reactor, "that alternative does not appear viable given MHI’s other priorities."

The letter goes on to say that Luminant "concluded that it does not make sense to continue to expend Luminant or NRC resources" on the work toward a new license.

Jim Fuquay, 817-390-7552 Twitter: @jimfuquay

Nov. 8, 2013

Contact:
Karen Hadden, SEED Coalition, 512-797-8481

AUSTIN, TX Luminant will end work on their license for two new nuclear reactors at Comanche Peak according to a Reuters report, 11/08/13.

Luminant’s actions show once again that the so-called nuclear renaissance is fizzling out. New nuclear reactors would not produce energy too cheap to meter, but energy that is too costly to sell," said Karen Hadden, executive director of the Sustainable Energy & Economic Development (SEED) Coalition and the leading opponent of the nuclear reactors in Texas. "This clears the way for safer, cleaner and more affordable renewable energy in Texas."

SEED Coalition was the lead intervenor opposing the Comanche Peak reactors, with Robert Eye as counsel. True Cost of Nukes formed in Ft. Worth to oppose the reactors and joined as intervenors, along with Public Citizen.

"The decision to quit Comanche Peak 3 & 4 is a victory for the public’s health, the environment and the economy. Had these reactors been built they would have created a long-term drag on the economy and caused serious public health and environmental problems, and would have wasted vast quantities of precious water," said Kansas-based attorney Robert V. Eye.

It was long believed EFH was keeping these licenses alive because they would be valuable assets in bankruptcy. This stunning decision shows how little bankers on Wall Street value nuclear power " said Tom "Smitty" Smith director of Public Citizen’s Texas office.

Five years ago, eight reactors were announced for Texas, but now only South Texas is still seeking a license from the NRC. SEED Coalition is opposing these reactors as well, and a hearing will be held in Houston on January 6th addressing the foreign ownership and control of the proposed reactors, since Toshiba, a Japanese company, would own the majority interest of two reactors on US soil.

The NRC is in agreement with SEED Coalition on the foreign ownership issue.

Luminant’s decision comes at a time when owners have announced plans to close five existing nuclear reactors, and six more may soon shut down according to Forbes’ report on November 7, 2013.

November 4, 2013

By Bruce Henderson
bhenderson(at)charlotteobserver.com
Charlotte Observer

Anti-nuclear activists and industry employees packed a meeting Monday on whether nuclear power plants can safely store spent fuel between the time plants retire and a permanent federal disposal site opens.

A federal appeals court last year vacated the Nuclear Regulatory Commission’s "waste confidence" rule, in which the agency said used fuel could be safely stored for at least 60 years after plants retire.

The court told the NRC to analyze the environmental harm if the government doesn’t open a permanent fuel disposal site, and to scrutinize potential fires and leaks in on-site storage pools.

The NRC is now taking public comment on a new, proposed rule. It’s relevant to Charlotte, which is bracketed by Duke Energy’s McGuire and Catawba nuclear plants, and to the Carolinas because of the 12 reactors in those states.

The licenses of McGuire and Catawba expire in the early 2040s.

The issue is important to the nuclear industry because the NRC has stopped issuing licenses for new plants, and license renewals, until a new rule is adopted. That’s expected to be next year.

The industry argues that nuclear plants can safely store used fuel on-site in pools of water or in steel-and-concrete casks, and have ample storage space. The Nuclear Energy Institute, a trade association, says operating experience and studies show very low odds of fires erupting in plant storage pools, one of the issues the NRC is to assess.

Decades of U.S. experience storing used fuel, as well as that of other countries, “points to the same conclusion – we can store spent fuel responsibly," said Steve Nesbit, Duke Energy’s director of nuclear policy and support.

"That doesn’t mean we want to," he added, referring to the government’s failure to open a permanent disposal site.

Anti-nuclear forces say the agency should stop licensing any new nuclear plants, arguing that fuel that will remain radioactive for thousands of years can’t be safely stored.

Storing used fuel at plants, they argue, poses risks including security breaches, unstable fuel and deteriorating storage systems.

Nuclear opponents said their numbers at Monday’s meeting were boosted by construction of new nuclear plants in South Carolina and Georgia.

Louis Zeller, executive director of the Blue Ridge Environmental Defense League, said the NRC’s new rule, which would be applied to all nuclear plants, should be canceled because it ignores the differences between individual plants.

Mary Olson, Southeast regional coordinator of the Nuclear Information and Research Service, added that "the only solution for radioactive waste is to stop making it."

After decades without permanent disposal, she said, “We have nothing to do with it except piling it up – it’s piling up where it’s made and if it’s moved, it’s piled up there. That’s all we have to show up for it."

Spent nuclear fuel, which is hot and highly radioactive when removed from reactors, is immersed in large pools of cooling water that also shield radiation. The fuel is sometimes then transferred to the dry-storage casks.

About 25,000 tons of spent fuel is stored in the Southeast, the U.S. Department of Energy reported in January, including 8,300 tons in the Carolinas. Nationwide, the department said, about 74,000 tons of used fuel is stored at 72 power plants.

Jim Little, chairman of the Carolinas Nuclear Cluster, a trade group, said U.S. nuclear plants have more than enough capacity to store used fuel on-site until the government opens a permanent disposal site.

It’s unknown when or if that will happen. The Obama administration stopped work on the Yucca Mountain site in Nevada that Congress approved more than a decade ago.

"It’s not really a technical issue at all," Little, a retired URS Corp. executive, said before the meeting. "It’s a policy issue."

Anti-nuclear advocates, he added, are looking for a reason to shut down the industry "and this seems to be it."

Henderson: 704-358-5051; Twitter: @bhender

Oct. 08, 2013

By Bill Hanna
billhanna(at)star-telegram.com
Fort Worth Star-Telegram

GLEN ROSE — Unlike many rural areas in Texas where residents and revenue have steadily declined in recent years, Somervell County has prospered.

The little county tucked next to Hood and Johnson has more than doubled its population since 1980, to roughly 8,800 residents, and boasts several tourist attractions, such as the Dinosaur Valley State Park and Fossil Rim Wildlife Center.

Perhaps the county’s best-known landmark is the Comanche Peak Nuclear Power Plant, which produces enough electricity annually to power 1.15 million homes — and has provided tens of millions of dollars in property taxes to Somervell’s coffers, a seemingly endless bounty of municipal gold.

As the tax dollars poured in — turning the state’s second-smallest county from property-poor to property-rich — Somervell built the Squaw Valley Golf Club, Somervell County Expo Center and Texas Amphitheatre, adding to its draw as a popular destination with day trippers from throughout North Texas.

But as energy prices have plummeted, so has the worth of the 23-year-old Comanche Peak, which lost about $330 million in value this year. And now Somervell County finds itself in somewhat of a financial meltdown.

Comanche Peak’s parent company, Luminant Energy, will pay the county about $8.75 million in taxes, down about $250,000 from 2012 and $350,000 from 2011. That’s after county commissioners voted to increase the tax rate nearly 4.5 cents to more than 40 cents per $100 of property valuation.

A six-figure drop may not seem large in the world of municipal budgets. But Comanche Peak accounts for more than half of the county’s $16.5 million budget.

"Comanche Peak has been the county’s cash cow for several decades, so this devaluation really hurts," said Kathryn Jones, editor of the digital news site glenrosecurrent.com and a resident of the county since 2005. "And there’s not really much else to fall back on. … Nothing can really take the place of Comanche Peak."

To understand the financial weight of the mammoth plant, which was valued at $2.2 billion this year, consider that all of downtown Fort Worth is appraised at $2.9 billion.

The most valuable single property in Tarrant County is the huge Grand Prairie Premium Outlets shopping center at Interstate 20 and Great Southwest Parkway, which is appraised at $139 million.

Comanche Peak’s decreasing values, coupled with tax increases including those from a new hospital district, have sparked complaints from many residents who argue that the commissioners simply don’t know how to manage assets.

Jim Willis of Somervell County, a steady critic of the way the county has operated, said the loss of value in the power plant has been coming for years.

"It was no surprise to anybody," Willis said. "In my opinion, the cuts out there haven’t started yet. They just got a little taste of it."

The Somervell County Hospital Authority, which was approved in May by two votes, took about $2 million in operating expenses off the county’s books but added a tax rate of 10.5 cents per $100 of valuation. Combined, the county’s tax increase and the hospital district levy add about $150 a year in taxes for the owner of a $100,000 home.

Glen Rose contractor Chip Harrison has helped organize a petition drive to force a recall election to dismantle the hospital district.

"I think our hospital authority board never looked at hiring an outside management company or selling it to someone like Texas Health Resources as Cleburne did," Harrison said. "At this point, I would be willing to just hand over the keys and let somebody have it."

If a recall election is called and passes, it would definitely affect the county budget.

"Frankly, if this is dissolved, it will have a domino effect on the entire county and it will crush us," County Judge Mike Ford said.

Changes at Squaw Valley

Squaw Valley Golf Club, a rolling, 36-hole layout cut through thick patches of oak trees, is considered one of the top municipal courses in Texas.

But the course, which had been operated by a private company since it opened in 1992, has been as much financial drain as recreational destination.

Squaw Valley made money its first three years but has been in the red every year since. For years, the county has kicked in an average of almost $540,000 annually to keep it running.

County commissioners voted this year to take over operations and immediately began looking for ways to increase revenue and cut costs.

Greens fees have been increased for county residents, a longtime golf course mechanic was let go and pay was reduced for seven hourly and two salaried employees.

The county at first considered selling the course, only to learn that an appraiser valued its nearly 500 acres at $2.5 million, far less than the more than $15.7 million the county has spent on it.

"Nobody felt good," county auditor Brian Watts said. "Everybody was reaching for the bottle of Tums when they saw it."

County Commissioner Larry Hulsey said: "It’s kind of like having a swimming pool in your back yard that nobody wants. The land has more value [to a developer] without a golf course than with it."

This year, with the county running the course, the county’s take is projected to increase to $1.6 million. There will still be a deficit, with expenditures projected at just over $2 million, officials said.

"Our expectation is that we will be able to reduce that deficit to below $200,000 with tighter controls and better policies in place," Watts said.

Hope for ‘The Promise’

Officials are still discussing what to do with the Texas Amphitheatre, which costs the county about $100,000 annually for upkeep and utilities.

County officials have warned that the facility could close unless someone else takes over its management.

The amphitheater is home to The Promise, a popular biblical-based musical in its 25th season.

"We love The Promise," Ford said. "We just don’t know if we can afford to keep it open."

Many of those affiliated with the production, which runs from late August through the last weekend in October, say closing the amphitheater would be a big blow to the area.

"It’s an institution," said Travis Tyre of Arlington, director of this year’s production . "People from all over the country and all over the world know about The Promise."

County officials have been in talks with the show’s producers, and both sides express hope that a deal can be reached to keep the amphitheater open.

"I’m having some good conversations with them over management and maintenance," Ford said. "We don’t want to lose the asset."

Philip Hobson, a Weatherford rancher and businessman who is one of the original Promise board members, remains optimistic that something will be worked out.

"We are putting in a proposal that involves relieving them of the expenses involved with the amphitheater," Hobson said. "It’s such an underutilized facility."

Expo center deficits

The Somervell County Expo Center, which is in the same complex as the amphitheater, is used primarily for equestrian events. A weekly barrel-racing series is being held this month, and in November, the center will host the four-day North Texas Arabian Shootout, among other events.

But even with its busy schedule, the expo center is projected to run a deficit of $921,000 in the upcoming fiscal year. That’s almost the entire $1.4 million combined operating budget for the Somervell County Expo Center and Amphitheatre.

Ford doesn’t want to see the expo center close and says county officials will spend much of this year trying to cut expenses for next year’s budget, as they did this year with the golf course. He believes the county can find a way to make it run more efficiently.

"That’s why individuals don’t run these things, because they don’t make money," Ford said. "But it has a multimillion-dollar effect with the hotel-motel taxes it brings in and the visitors from out of town. We have already started the process of looking at personnel structure, our administrative structure, to make improvements."

Comanche Peak’s plans

But the biggest uncertainty the county faces is Comanche Peak.

Numerous media reports have speculated that Energy Future Holdings, the parent company of Luminant, is headed toward bankruptcy. What that would mean for Comanche Peak remains unclear.

Reuters reported last week that Energy Future, which has more than $40 billion of debt, wants to finalize a restructuring plan before $250 million in bond payments are due Nov. 1.

Last month, Moody’s Investors Service said it expects parts of the company to seek Chapter 11 protection before year’s end.

Ford, the county judge, said he tries to ignore the rumors.

"Somebody calls me weekly saying that they’ve declared bankruptcy or the plant’s been sold," Ford said.

For now, county officials aren’t expecting dramatic changes and remain hopeful that the plant’s value won’t drop significantly again.

"I don’t honestly think a bankruptcy will have a big effect on us," Chief County Appraiser Wes Rollen said. "To me, a bad scenario for us would be if it sold at half or 75 percent of what we have it for now on the books."

If energy prices rebound, Rollen said, the value of the plant could increase. As recently as 2007, it was valued at $2.7 billion, he said.

Luminant spokesman Brad Watson said the company does not expect changes at Comanche Peak, which employs 1,200.

"We do not anticipate that any potential restructuring would impact Comanche Peak or any of our operations since it would be a financial, not an operational, restructuring," Watson said.

Preparing for future

Dennis Moore, mayor of the county seat of Glen Rose, said he isn’t a fan of government-run enterprises but said his city has benefited from county facilities that attract tourists to stay at motels and eat at restaurants. Because Comanche Peak is outside the city, Glen Rose doesn’t receive any of its property tax benefits.

"If they had to shut down or cut back on something, it’s going to affect us," Moore said.

Officials with the Glen Rose school district, which also receives money from Comanche Peak, said they are more concerned with state budget cuts than with the loss in property taxes from the plant.

"It’s had an impact on us but how it impacts is much different than with the county," Superintendent Wayne Rotan said said. "The state budget cuts have impacted us the most."

If the plant is further devalued, it could eventually affect the school district, but Rotan said trustees have set aside $20 million in reserves as a safeguard.

Other efforts are underway to bolster the county’s tax base.

George Best, who retired to Glen Rose seven years ago from Coppell, is a member of the recently formed Somervell Economic Development Council, which is working to ensure that the county benefits from the construction of the Chisholm Trail Parkway.

The toll road, which is scheduled to open in mid-2014, is expected to cut about 15 minutes off the hourlong drive from Fort Worth to Glen Rose, Best wrote in an email.

"As a result, we believe our community will experience growth as families discover our hometown atmosphere, low (by Metroplex standards) property taxes and exemplary schools," Best said.

The council also wants find ways to encourage commercial growth and promote the area as a retirement community, he said.

"We want to make sure we are … attracting businesses that are complementary with our current tourism and industrial base, along with our community culture," Best said.

This report includes material from the Star-Telegram archives.

Bill Hanna, 817-390-7698 Twitter: @fwhanna