On February 12, David Hawkins, the director of NRDC's climate center, got an unlikely telephone call. Bill Reilly, head of the Environmental Protection Agency from 1989 to 1992 and a longtime acquaintance of Hawkins's, was on the line, wondering what it would take for NRDC to publicly support a plan for a leveraged buyout of TXU, the Texas-based utility giant. TXU was then under fire from environmental and community groups for its plans to build 11 coal-fired power plants in the state. Reilly's private equity firm, the Texas Pacific Group, and other financial institutions wanted to buy TXU, but they didn't want to inherit its environmental troubles. In an unprecedented move, they turned to NRDC and another organization, Environmental Defense, for help.

After two weeks of talks, NRDC and Environmental Defense persuaded the new buyers to scrap eight of the eleven planned plants and to lobby the federal government in support of mandatory limits on global warming emissions -- agreements that for TXU were part damage control, part environmental stewardship, part savvy investing.

For years, power companies staunchly resisted addressing global warming, but the likelihood of carbon regulations has pushed many to reconsider that position. As a result, the smart money -- the TXU deal was financed by the investment banking powerhouses Goldman, Sachs; Morgan Stanley; and Lehman Brothers, for example -- is beginning to question dirty coal, turning instead to cleaner and less financially risky technologies.

It's a trend we have seen before. "Back in the 1970s and 1980s, more than 100 nuclear plants were cancelled because utilities and the financial community lost confidence in them. My prediction is that the same awaits most of the 150 conventional coal plants now on the drawing board in the United States," says Ralph Cavanagh, co-director of NRDC's energy program.

In buying TXU, the new owners -- a group led by the Texas Pacific Group and Kohlberg Kravis Roberts with the financial backing of the major investment banks -- wanted to minimize the risks of their investment. It takes 10 years to finance and build a coal-fired power plant and an additional 15 to 20 years to pay off the initial investment. During that time, new carbon regulations will likely change the economics of coal. It is too soon to predict exactly how operational costs for these plants will change, but given that they emit more carbon pollution per unit of energy than any other power source, the risks are greatest for them.

When the previous TXU owners hatched the plan to build 11 giant coal plants, they were gambling that they wouldn't have to confront carbon regulations for years to come. The landscape has changed more quickly than they anticipated. In 2006, California passed two groundbreaking laws: One will slash global warming pollution in the state by 25 percent by 2020, and the other prevents power companies from making long-term energy investments in power sources with high rates of global warming pollution. That means California money -- a dependable pool of cash for power companies -- will no longer finance conventional coal plants. With similar legislation now enacted in Washington State and making the rounds in Congress, not to mention the recent creation of a special House committee to address global warming, it appears that the rest of the nation is ready to follow.

The deal reached between the environmental groups and TXU's new owners may not have been perfect, but it goes a long way in remaking a company known as a laggard on climate protection into one that can be seen as a true leader. In addition to canceling the eight plants, the new owners agreed to invest $400 million in energy-efficiency measures to meet a portion of the demand as well as to accelerate renewable energy development and to build new power plants using advanced technologies for capturing and storing carbon dioxide.

"These are savvy investors," Hawkins says. "They believed, as we do, that having a strong environmental profile is actually a better business proposition. They understand that the best strategy for a power company is to confront global warming and come up with a proactive plan for dealing with it."
-- Emily Cousins

This past spring, the U.S. Fish and Wildlife service proposed to strip the gray wolf of its endangered species protections in the northern Rockies region, including Idaho, Montana, Wyoming, and parts of Washington, Oregon, and Utah. It was just 11 years ago that the gray wolf was intentionally reintroduced to the area, having been hunted to near extinction in the early twentieth century. Today the wolf helps maintain a natural balance in the northern Rockies by forcing elk to vary their grazing patterns, which allows crucial streamside vegetation to stay robust; and by keeping the coyote population in check, which in turn benefits the pronghorn antelope and the red fox. If dropped from the endangered species list, wolf protection would fall into the hands of the states, most of which favor liberal hunting policies. NRDC studies indicate that if Wyoming alone were to allow year-round hunting of the wolf, some two-thirds of the Yellowstone-area population could be killed. NRDC staff and members attended public hearings to speak out against the delisting proposal. The public comment period is over, but NRDC intends to fight for the protection that the gray wolf deserves.
-- Raluca Albu