Transformation Mediation May Have Led To A Greener Buyout Of A Texas Utility

INTRODUCTION


The thin envelope of air that surrounds our planet is a mixture of gases, each with its own physical properties. Global warming is when solar radiation in the form of light waves passes through the atmosphere and heats up the earth. Most of this radiation is absorbed by and warms the earth, some of it is reradiated back into space by the earth in the form of infrared radiation, and some of the infrared radiation is trapped by this layer. The problem is the thin layer of atmosphere is being thickened by pollution (greenhouse gases, predominately anthropogenic CO2) and it thickens this layer with more of the infrared being trapped. The result of which is global warming. [1]



The earth’s climate has changed over the last century and a report from the Intergovernmental Panel on Climate Change (IPCC), composed of hundreds of scientist from dozens of countries, concluded that there is new and stronger evidence that most of the warming observed the last 50 years is attributable to human activities. [2] This is mostly in the release of heat-trapping gases (CO2) from smokestacks, tailpipes, and burning forests. The gases add to the planet’s natural greenhouse effect, allowing sunlight in, but preventing some of the resulting heat from radiating back to space. [3]After millions of years of remaining constant, greenhouse gas levels, particularly CO2, started to climb sharply at the beginning of the industrial revolution. Rising CO2 levels has been positively correlated with rising temperatures. [3], [4] The ten hottest years ever measured-all occurred in the last 14 years, the hottest year being 2005. We are just beginning to see results of increased CO2. The Columbia Glacier in Alaska is disappearing, the polar ice cap is melting and Patagonia’s vast expanse of ice is now gone. America contributes 30% to global warming, more than South America, the Middle East and Asia, combined. Until recently, most of us assumed that since Earth was so big, how could humans possibly have any lasting impact on the environment? However, the most vulnerable part is the atmosphere, because it is so thin compared to the earth itself. [5]


About a year ago, the giant Texas power company, TXU, announced plans to build 11 coal-fired powered, CO2 belching, pollution emitting power plants, before legislation was passed to protect the climate and reduce carbon emissions. [6] Coal and gas are relatively cheap, but pollute the air and contribute to global warming. In Texas’s grid, 91 percent of the power comes from gas and coal. That means that when you crank down your air conditioner a few degrees, you are electing, de facto, to hasten global warming and add to the air you will breathe small but ineradicable amounts of sulfur dioxide (which contributes to acid rain), nitrogen oxide and particulate matter (which results in smog and can lead to respiratory illnesses, lung cancer, and heart attacks), and mercury (nerve poisons which settle in our waters and expose fish). Together, the seventeen proposed plants would more than double Texas’s reliance on this problematic fossil fuel, and make Texas the seventh largest contributor to global warming in the world.


Texas Governor Rick Perry’s executive order fast-tracking the permitting process for the 11 coal-fired plants, enraged prominent business leaders, Texas mayors, and the general public. [6] Environmental groups such as Environmental Defense (ED) and the Natural Resources Defense Council (NRDC) got involved by building a national constituency opposed to the deal. This uproar by the public led to a loss of consumer confidence in TXU which resulted in a 20% drop in the price of its stock and motivated TXU to sell. [7]


One stipulation the impending buyers had was the deal had to have the blessing of environmentalists. It was the first time environmental experts were called to the table to help shape this pioneering environmental accord. It set a new benchmark in energy business strategy that will reverberate across the industry and throughout the corridors of Washington, according to experts from the Natural Resources Defense Council (NRDC), who were the first environmental advocates called to the bargaining table to help shape the environmental accord. The firms Kohlberg Kravis Roberts (KKR) and Texas Pacific Group (TPG) teamed up to offer to buy TXU in February for $45 billion. However, they did not want to take over a company that was in war with environmentalists. So they asked ED and NRDC to be involved in the negotiations.


Reducing CO2 emissions would mean making changes in the way we live — it would make energy more expensive, switching to renewable forms of energy and conservation. Until recently, Americans did not want to be inconvenienced with such things, nor did they not want to deal with the increased expense. This is a highly emotional issue, and if the issues are not on the tips of their constituents tongues its easy for politicians to ignore. However, climate is not a political issue, it is about the choices we make. It is a moral issue, if we allow this to happen it would be deeply unethical.


The deal they struck will result in significant reductions in greenhouse gases. However, there was plenty of room for improvement. This paper will discuss how introducing transformation mediation into the negotiations would have resulted in a “greener” outcome to the negotiated deal.



THE DEAL


Parties at the negotiating table:


Jim Marston, ED Texas Regional Director
A representative from KKR
Three representatives from TPG
There were others connected by phone, including Fred and David Hawkins from NRDC.



Noticeably missing from the negotiating table was Dallas Mayor Laura Miller and Houston Mayor Bill White who assembled the Texas Clean Air Cities Coalition, a group of Texas cities that became one of the major forces in galvanizing statewide and national opposition to TXU’s previous $10 billion plan to build 11 coal-fired plants. [8] Both have been on the front line of this controversy and are the most knowledgeable about Texas utility companies and the effect of coal-fired plants on greenhouse gases and air pollution.


Rumors before the negotiations began indicated that TXU was considering scaling back on its plans to build the 11 plants, but KKR and TPG were willing to offer more, such as a pledge to drop plans to build other coal-fired power plants outside of Texas. [6] They also said they would not do this deal without the blessing of their climate plans by ED and NRDC. [7]


After 10 days of negotiation, with the final session lasting 17 hours, the following points were agreed upon: [9]


  • Both environmental groups gave their seal of approval to the Dallas-based utility’s $45 billion sale to TPG, and KKR.
  • The private equity group agreed to cut the number of new TXU plants from 11 to three. Two of them will be experimental-less polluting, although commercially less proven gasification technology, intended to capture CO2 before it escaped into the atmosphere. The third plant would be an old-fashioned, traditional coal-fired plant.
  • The private equity group would support a U.S. cap on greenhouse gas emissions and cut TXU’s emissions to 1990 levels by 2020.
  • TXU would commit $400 million into energy-efficiency programs and double its purchase of wind power.
  • A pledge was made to cut emissions of regulated pollutants, such as nitrogen oxides and sulphur dioxide by 20% on the three plants.



In return, the ED and NRDC blessed the deal, and Perella Weinberg Partners was hired to negotiate the “fine print”.


The following was left (or not discussed) at the bargaining table:


In press releases before the sale, TXU had frightened the public into believing that without the 11 new plants, Texas would run out of electricity to meet the state’s needs by 2009, which could result in rolling blackouts. The truth of the matter is, none of the eight proposed coal plants that were dropped by the buyout would have been operational by 2009. [10] Therefore, three new coal-powered plants was actually a victory for TXU.


Even with eight plants off the table, the coal controversy continues. TXU buyers proposed building three coal plants, one of which will use Texas lignite coal. Coal is the dirtiest of all fossil fuels, and Texas lignite is the most pollution-intensive coal. [11] Other utilities in the state are seeking permits for at least five more coal units. The new plants will be located in central Texas which is bad news for the citizens of the Austin and Dallas-Ft Worth area who will have breathe dirtier air. Mayor Miller, who was not involved with the negotiations, is blunt about the deal: “PG says they will be cleaner and more transparent. If you’re putting out the green welcome mat, then you have to act green.” [7] The Texas Clean Air Cities Coalition acknowledges that the new plants will be cleaner than the old plants; 90 percent or more clean, in terms of emissions of regulated pollutants (not CO2, because technology has not been developed to dispose of the CO2 once it is removed). The objection is that, with this older technology, the plants will not be as clean as they could be. The remaining power plants in Texas will continue to pulverize dirty lignite coal. Just switching to cleaner, more expensive Wyoming coal, for example, would remove more than 90 percent of the pollutants generated from the old plants; [6] however, it would also remove a lot of the profits from the pockets of corporate stockholders.


How the deal could be better: The role of transformation mediation


Americans believe it is their God-given right to cheap, plentiful energy. In politics, today, holding down the cost of power is the key to success (which is measured as staying in office). The reemergence of coal is, in the history of electricity generation, astounding. After being absent for nearly a quarter-century, coal is once again the fuel of choice for electric power. Today, coal accounts for 52 percent of our power, almost all of which comes from plants built a half century ago. One hundred fifty four coal-fired power plants are on the drawing boards in the United States. [6] Three years ago there were none. Globally, some one thousand new coal plants have been proposed. They produce the overwhelming majority of the power-plant pollution in this country. Although America accounts for only 5% of the world population, we are the largest contributor to global warming. [3],[5], [6] That this is taking place just as global warming is gaining popular acceptance is one of the great environmental ironies of the twenty-first century. [12]


With the technological advances over the past 25 years, the world has become a much smaller place; we have become one Global Community. Americans have finally begun to realize that old habits (e.g., no regard to conservation, gas guzzling SUVs, etc) combined with new technologies can dramatically affect our environment in a negative way, and it is time to change our thinking about energy. Europeans have realized this for a long time; just look at their gasoline prices and the requirement that vehicles achieve 45 mpg.


Two steps to a “greener” outcome would have been accomplished by adding Mayor Miller, who has been at the forefront of the fight for cleaner air for Texas, to the negotiation table along with a mediator with expertise in transformation mediation techniques to facilitate the negotiations. Transformation mediation emphasizes the importance of empowerment and recognition in the negotiation process. [13] The decision making is in the hands of the parties, with the mediator helping each party better understand the other’s positions (recognition). The goal of transformation involves changing not only situations, but people, themselves, which ultimately results in changing society as a whole. [13] It aims at creating a better world. Only a changed world of changed people can satisfy peoples’ needs and reduce unfairness. If all sides of this conflict were made aware our moral obligation and, therefore, our common interest to increase public health and protect the planet for our children, there may have been an opportunity to reduce emissions and pollution, further, while putting a serious effort into energy efficiency, and the use of alternative and reusable forms of energy. America is ready for this challenge.


Americans see themselves as independent and individualistic, apart from society (this is the “spirit” that helped found our nation). [13] Independent cultures, as ours, are interested in processes, such as adjudication and problem-solving mediation, which insist on due process to achieve satisfaction of our own needs and desires, focusing on solving problems and getting settlements. [13] These individualistic attitudes do not play well in today’s global community. It is perceived by interdependent societies, who work to create harmony within society, as arrogant and insensitive, unwilling to bend because of “principal”. [13] A case in point was President Bush’s decision in 2001 to renege on the Kyoto Accord, the international treaty where countries agree to reduce the amount of greenhouse gases they emit if their neighbors do likewise. [14] Interdependent cultures value alternative dispute resolution processes that restore social harmony. We must change our attitudes if we as a society are to survive on this planet. Transformation mediation can reframe the conflicts we have with energy as mutual problems and find optimal solutions to these problems. [13] Such a framework is what is meant by worldview [13] Human nature and social structure are important.


Another goal of transformation mediation is the premise that human beings want more than self satisfaction; we have a moral consciousness. [13] It is our moral responsibility to our fellow citizens of the world to do our part to clean the air we breathe. I believe we all have a common goal to make our existence meaningful. Finally, the transformation story conveys that transformation of human moral awareness and conduct are more important than satisfaction and fairness. [13] After all, what is the point of inexpensive energy if we do not have a planet that sustains life? The value of transformation mediation is that it leads to construction of one world view, with a relational worldview; a particular view of the importance of human nature, society and social institutions. [13] If we are going to build new coal plants, let’s build the cleanest coal plants we can, even if they are more expensive. “We are burning dirty fuel with nineteenth-century technology,” says Mayor Laura Miller. “It is going up a smokestack and into the air that we breathe, and the whole state needs to find a better way to do this”. Transformation mediation would have resulted in a cleaner TXU buyout for Texas and the global community.


REFERENCES:


1 Cycles of the Earth and Atmosphere-Module Overview. www.ucar.edu/learn/1.htm.


2 Intergovernmental Panel on Climate Change. “Climate Change 2007” The IPCC 4th Assessment Report. www.IPCC.ch.


3 Global Warming. The New York Times. March 24, 2007.


4 Stocker, T.F., Tabacco, I.E., Udisti, R., van de Wal, R.S.W., van den Broeke, M., Weiss, J., Wilhelms, F., Winther, J.-G., Wolff, E.W. and Zucchelli, M. 2004. Eight glacial cycles from an Antarctic ice core. Nature 429: 623-628.


5 Recent Warming of Arctic May Affect World Wide Climate. NASA October 23, 2003.


6 Gwynne SC. Coal Hard Facts. Texas Monthly. January 2007.


7 KKR and Texas Pacific in Record 45bn TXU Buyout, Times Online February 26, 2007.


8 Green H. Why the TXU Buyout Faces More Opposition. Yahoo Finance. March 5, 2007.


9 A Green Deal on Coal. New York Times editorial, February 27, 2007.


10 Alvarez R. Insatiable Demand? Viewpoints, Dallas Morning News, March 22, 2007.


11 Don’t Let Up, editorial, Dallas Morning News, March 18, 2007.


12 Taming Fossil Fuels, Editorial, The New York Times.


13 Baruch Bush, R.A., Folger, J.P. The Promise of Mediation. Responding to Conflict through Empowerment and Recognition. San Francisco, CA: Jossey Bass, 1994.


14 Europe Backs Kyoto Accord, BBC News, March 31, 2001 [1] 1

                        author

Jeffrey Kreisberg

Dr. Kreisberg was a Professor for 26 years at the University of Texas Health Science Center in San Antonio, where he did seminal studies on the pathogenesis of diabetic nephropathy. His research led to an appointment as Senior Career Scientist for the Department of Veteran’s Affairs. In addition to his… MORE >

Featured Mediators

ad
View all

Read these next

Category

Taming Chaos: The Dynamics of Narrative and Conflict

"This article originally appeared in Track Two (Vol. 8 No. 1 July 1999) , a quarterly publication of the Centre for Conflict Resolution and the Media Peace Centre (South Africa)."...

By Lesley Fordred Green
Category

Make the Most of your Mediation: The Employment Case

JAMS ADR Blog by Chris Poole Mediating employment disputes before legal action is filed gives parties an opportunity to settle their differences before incurring impressive attorney’s fees and expending valuable effort....

By Lynn Duryee
Category

Hot off the press – the Draft Mediation Bill 2012

Kluwer Meditation Blog.As I sat down at my desk the other day to think about what to blog about this month, e- mails and text messages suddenly started pinging into...

By Sabine Walsh

Find a Mediator

X
X
X