2021-001 Gibbons Creek Q and ADate: January 8, 2020 Report No.
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Provide staff responses to City Council questions regarding the potential sale of Gibbons Creek
Steam Electric Station and related assets
BACKGROUND:
During the January 5, 2021 City Council meeting, staff presented a work session report regarding
the potential sale of Texas Municipal Power Agency’s Gibbons Creek Steam Electric Station and
related assets in Grimes County, Texas including a review of the economics of the sale, the key
provisions of the proposed Asset Purchase Agreement (APA) and the associated risks.
Prior to and following that presentation, members of the City Council requested information
related to the work session report. This Informal Staff Report combines all of those questions and
staff responses into a single location. Responses to any outstanding questions will be provided in
a subsequent report prior to January 26th when the City Council is scheduled to consider approval
of the APA.
Council question: What are the current TMPA plans/prospects for sale of the remaining 10k acres
of Gibbons Creek land? What is TMPA's current perspective on proposals to create a regional
park?
Staff response: The TMPA board authorized staff to issue an RFQ for brokers for the project last
year. Qualifications were submitted but the final broker(s) have not been selected. TMPA has
retained a ranch and large land real estate expert to provide consultation on when the best time is
to enter the market, who the property should be marketed to and the strategy to bring the land to
the market. The TMPA board has not authorized the sale of the mine properties but have provided
guidance to staff to make all preparations necessary for a sale. The TMPA board has not provided
direction and there have been no discussions by the board of the potential to dedicate any of the
mine lands to parks or other recreational uses over the last 18 months.
Council question: Can staff look over this article and summarize why we would or would not be
vulnerable to the same problems? https://www.texastribune.org/2019/10/30/how-texas-lets-coal-
companies-leave-behind-contaminated-land/?fbclid=IwAR2od7Quq-dG0xN4buz-
ET_VIwB07FZDRQk4pTUKQvoSAQViC3X_koq-X7I
Staff response: Mining and reclamation in Texas are regulated by the Texas Railroad
Commission. The lignite mine adjacent to Gibbons Creek Steam Electric Generation Station
ceased operation in 1996. TMPA has competed 95% of the reclamation activities and has placed
performance bonds against the properties as required by Texas RR Commission. TXRR
Commission is releasing the remaining performance bonds associated with the competed
reclamation this month. The sale of the plant site (6200 acres) does not include any mine
property. Ash from the combustion of lignite and coal was never disposed of in the mine. TMPA
Date: January 8, 2020 Report No.
placed the ash in engineered landfills during the operation of the Gibbons Creek plant. Landfill
site A and F are where the disposal occurred and are part of the sale transaction. The disposition
of the mine property is not part of the posting that will be discussed with the City Council on
January 5, 2021.
Council question: What future earnings does a company, like Charah, see in cleaning up and
redeveloping this site? Are they earnings that the City or any of the four cities could be missing
out on?
Staff response: Charah is being paid by TMPA to clean up the site and any sale of property and
redevelopment revenues they may gain will be based upon how well they clean it up. TMPA is
paying them $36 million. The remediation of coal combustion waste sites is a core competency
of Charah who has a stable of project managers and contractors who have expertise in this
area. Were TMPA to self-perform the decommissioning and remediation, our engineers have
estimated the cost to be as high as $108 million over the next 30 years. TMPA does not know the
economics that Charah believes they can achieve for the redevelopment and sale of the
property. However, the TMPA board, in consultation with the member municipals, outside
environmental counsel, real estate experts and legal counsel believe that the risk/reward trade off
of the proposed sale is in the best interest of the member cities. As shown in the ISR, AIS and the
presentation, the value of the plant site is projected to be $24 million after the site is remediated.
If we assume this price for the sale of the remediated site then Charah’s economics would see
revenues of $36 million plus $24 million = $60 million. TMPA’s self-performance cost (option
3) has net costs of $86.3 including the sale of the property for $24 million. These economic
differences are compelling.
Council question: Is there a correlation between this sale and any potential major coal ash
deregulation?
Staff response: These coal ash regulation (CCR) have been in development for over 10 years at
the federal level. The request by TCEQ to take primacy for the federal regulations is the normal
course of action for federal regulations. By law, when Texas takes primacy for the federal CCR
regulations, the TCEQ will enforce these federal regulations and, if TCEQ determines that
additional requirements are needed that are more stringent than the federal CCR rules, they can
promulgate such new regulations for public comment and subsequent adoption. Rules adopted and
enforced by TCEQ cannot be less stringent than the federal regulations. Thus the public is
protected to the same level as if the USEPA had primacy if not more so.
Council question: What are the implications of the City keeping this land, which includes land
along the Navasota River, to create recreational and environmental opportunities? Additional
information about the Park development can be found here:
https://urldefense.proofpoint.com/v2/url?u=https-
3A__drive.google.com_file_d_1SfLbhj4Fsyb5g8l6ElQnogGSC2YwvJ12_view-3Fusp-
3Ddrivesdk&d=DwIFaQ&c=PGEdd_LbwtbJ8FAF3ggtJmXVn0VbaqibWUEPk1jFH8E&r=Tf2-
aWcRRWU5hq8tLvKU338qZx1unG1Gth0vpYVcEBs&m=Y9-YMW-
Date: January 8, 2020 Report No.
IPs3bZ63BMjeAsCSoeCAZwtSOYMjOO4dI-B4&s=b98jlR89ReP0jfxMzLAdCRmybV8lV3Uj-
oD9gnryt_M&e=
Staff response: Were TMPA to keep this property in the public domain and set it up as a park or
natural area, there would be significant ongoing operating and maintenance costs. 24% of those
costs would be the responsibility of Denton and it is not likely that Dentonites would see the benefit
of this parkland due to it distance from Denton. The linked paper does not make any reference to
the statement.
Both Staff and TMPA are unaware of any agreements for this to be converted into a regional public
park. In 2007/2008 The Conservation Fund and the cities of College Station and Bryan, along
with several other entities approached the TMPA board with a proposal to purchase the mine
properties. The TMPA board choose not to pursue such a transaction at the time.
Council question: Does the sale include land that is considered part of the Navasota Ladies’
Tresses orchid?
Staff response: TMPA staff is aware of the presence of the Navasota Ladies’ Tresses. The
population of these orchids are on properties that are not part of the plant sale. They exist only on
the mine property.
Council question: Are there any conservation easements, specifically figure 6 in the report?
Staff response: There are no conservation easements on the plant property that is part of the
sale. Figure 6 in the report depicted areas where the protected orchids are known to exist on the
mine property. There are five (5) conservation easements on the mine property that TMPA
monitors the orchids on. Three of these conservation easements are on leased land that will revert
to the landowner. Two conservation easements are on mine land owned by TMPA. Those parcels
will likely be deeded with restrictions to keep the conservation easements in place.
Council question: The contract and associated documents mention that the EPA has finalized
Coal Combustion Residuals (CCR) rules and therefore clean-up expectations. What happens if a
new Federal Level administration increases the regulatory and clean-up requirements of CCR
waste? Are there any provisions in the contract that address this issue?
Staff response: Charah is required to obtain “closure” as defined by the applicable regulations
and to meet any performance bonding requirements imposed by EPA or TCEQ. This contractual
covenant protects TMPA and the member cities from changing regulations and definitions and
requires the Buyer to achieve whatever level of closure required when the remediation is
completed.
Council question: Is there anything in the contract that specifically assures that fossil fuel
extraction processes or processes that entail fossil fuel combustion as a primary aspect of their
operation or for power production will not be done at the site?
Date: January 8, 2020 Report No.
Staff response: No. However, under current EPA and TCEQ regulations, the permitting of a coal
fired power plant anywhere in the United States is virtually impossible. Under the terms of the
Asset Purchase Agreement, no limitations are placed upon the use of the property with the
exception of the remediated CCR units for which there are restrictions.
Council question: Are there provisions that prevent activity at the site that poses potential public
health risks and negatively impacts quality of life for those in the surrounding area, such as toxic
waste, air pollution, and greenhouse gas emissions?
Staff response: Any future land use, including the development of manufacturing industries will
be subject to the applicable TCEQ and Grimes county regulations. TECQ and USEPA regulations
are developed to be protective of human health and the environment.
Council question: The current contract seems to give freedom to the buyer for 7 of the 10 plots
of land in terms of what they could plan for future development. Are there any provisions in the
contract to assure that the recreational opportunities for camping, fishing and hiking are maintained
or even expanded?
Staff response: No. The APA does not place any contractual covenants to continue the
recreational use of the property.
Council questions: Under the current agreement, the surrounding 10,000 acres owned by TMPA,
which contain previously mined areas and sensitive ecosystems, are not a part of the acquisition.
Would TMPA and the four cities explore retaining the remaining acreage under a conservation
easement?
Staff response: The ultimate fate of the mine properties will be determined by the TMPA board of
directors. The proposed Asset Purchase Agreement in no way reduces the options available to
TMPA relative to the mine properties.
STAFF CONTACT:
Terry Naulty
Assistant General Manager of DME
Terry Naulty@cityofdenton.com
(940) 349-7565
REQUESTOR: Council Member Davis
PARTICIPATING DEPARTMENTS: DME, City Manager’s Office
STAFF TIME TO COMPLETE REPORT: One hour