How Energy Future Holdings emerges from one of the largest corporate bankruptcies in American history holds major implications for Texas ratepayers and the electric grid. That’s gotten plenty of attention, and for good reason.
But as Texas’ biggest power company continues what it hopes will be the final leg of proceedings that have stretched some 18 months in a Delaware bankruptcy court, a recent dispute with the federal government highlights just how far a mammoth corporate reorganization can reach — in this case, to a corner of New Mexico littered with uranium mining’s toxic legacy.
Late last month, the U.S. Department of Justice filed an objection to Energy Future’s proposal to settle its debts, saying the plan could leave taxpayers on the hook for millions of dollars to clean up long-shuttered uranium mines in northwest New Mexico that one of its subsidiaries inherited.
Energy Future’s reorganization plan, the department argued on behalf of the Environmental Projection Agency, would free some of the conglomerate’s offspring from liabilities — the cleanup costs, in this case — without earmarking money to address them. The end result, the filing argued, could present “a danger to public health and safety and the environment.”
In a response last week, Energy Future asked U.S. District Judge Christopher Sontchi to overrule the department's objection and dismiss the claim for cleanup costs. The company does not own the land, its attorneys argue, and the uranium’s toxic footprint spread decades before the Chapter 11 bankruptcy began.
“The company continues to work toward resolution of the matter with the EPA,” Energy Future told The Texas Tribune in a statement.
The back and forth in bankruptcy court highlights the difficulties of holding shape-shifting companies responsible for pollution that often stays put.
Plans allowing companies to skirt environmental obligations are a “real, ongoing problem” in the bankruptcy world, said Jay Westbrook, an expert on bankruptcy law at the University of Texas at Austin.
“That certainly sets up the possibility for abuse — there’s just no question about it,” he said. “Every dollar that isn’t paid by Energy Future — new, old or whatever — is going to be paid by the taxpayers.”
While the energy giant holds hundreds of millions of dollars in other environmental obligations, the feds' concerns center on one area in particular: four abandoned uranium mines in New Mexico's McKinley County, active for various stints in the 1970s and 1980s, that have left local land and water highly radioactive, according to environmental studies.
Two companies that no longer exist produced thousands of tons of uranium ore at the mines: Texas Utilities Fuel Company (later named TXU Fuel Company) and Chaco Energy Company, TXU's New Mexico subsidiary. Both companies were Energy Future Holdings properties when they dissolved last decade, shifting their liabilities to the conglomerate, the feds argue.
Environmental regulators have documented scattered waste piles at the site and high readings of radioactivity on land and in the water. Water samples at nearby livestock wells showed uranium levels as high as four times the federal limit, according to court filings. And an EPA aerial survey of the mines showed higher-than-normal gamma radiation.
Some homes are just 1 to 3 miles away from the four sites in question, the filings said.
They are just a few of the hundreds of discarded uranium mines across New Mexico, Arizona and Utah that have poisoned thousands of people in Navajo communities for years, leading to abnormally high rates of cancer and birth defects.
The EPA has mapped 521 such Navajo Nation sites in recent years, conducting 45 detailed assessments of those most likely to harm the public and environment.
The agency has spent at least $20,000 on the mines it links to Energy Future and estimates it will cost $23 million to fully clean them up — a price tag those familiar with uranium mine cleanups said looked surprisingly low.
“$23 million for four sites doesn’t sound like an awful lot,” said Eric Jantz, a staff attorney for the nonprofit New Mexico Environmental Law Center, adding that federal estimates of mine cleanup costs “almost always” lowball reality.
So much uranium waste still litters the region, Jantz said, because mining companies so often changed hands — or simply went under — after unearthing tons of the silvery-white metal, requiring intense corporate forensic work to hold anyone accountable.
“That’s sort of the SOP — the standard operating procedures — for a lot of the uranium miners in this industry,” he said. “This confusion is often by design in order to avoid liability.”
In court filings, the Department of Justice initially raised concerns that Energy Future would dodge environmental liabilities beyond the New Mexico mines, but the company added language to its amended reorganization plan in September that ameliorated those fears.
The Justice Department has filed two other “proofs of claims” — amounts creditors say they are owed during bankruptcy — against Energy Future affiliates on behalf of the EPA. They are to cover alleged Clean Air Act violations at Luminant Generation’s Big Brown and Martin Lake coal plants (the violations are the subject of ongoing litigation).
The Justice Department has not suggested that the proposed bankruptcy settlement will jeopardize these claims.
The dispute over the uranium mines comes as activists are calling on Energy Future to retire or retrofit its oldest coal plants to improve air quality as part of its bankruptcy.
Last month, the Dallas County Commissioners Court unanimously approved a resolution urging the retirements.
Energy Future, saddled with more than $42 billion in debt, kicked off hearings on its reorganization plan this week, hoping to exit a bankruptcy that continues to rack up about $1 million per day in legal fees.
Disclosure: The University of Texas at Austin is a corporate sponsor of The Texas Tribune. Energy Future Holdings was a corporate sponsor of the Tribune in 2012. A complete list of Texas Tribune donors and sponsors can be viewed here.