Ten stories to understand Mississippi’s Kemper Project “clean coal” boondoggle
Thursday, July 7th, 2016
Mississippi’s Kemper Project entered the world with the highest hopes of the Obama Administration: that coal could be cleanly processed even while serving as a power source. The first-of-its-kind integrated-gasification power plant functions by converting lignite coal to natural gas-like synthesis gas, which fire its 582-megawatt turbines, capturing and storing carbon much better than traditional coal-fired plants.
A recent investigation from the New York Times has drawn national attention to the travails of Kemper, finding that the plant has been plagued by technical problems, cost-overruns and blame-shifting. The Times’ findings that Kemper has failed to live up to its billing, however, should come as no surprise to readers of Mississippi Watchdog, which has been covering the plant’s travails every step of the way for more than two years running.
Here are the ten Mississippi Watchdog stories you need to read to understand the history of this “clean coal” boondoggle:
Red flags surrounding Mississippi Power’s Kemper Project started to become painfully apparent in the summer of 2014, when delays in the plant’s construction began stretching so long that it cost the Southern Company $133 million in federal investment tax credits. At this point the plant’s estimated cost had risen from $2.2 billion when it was initially proposed in 2009 to $5.53 billion. To help pick up the tab for rising costs, local ratepayers were slammed with an 18 percent increase on their utility bills.
Concerns over the plant’s viability became more founded a few months later when Mississippi Watchdog covered a report on Kemper from POWER Burns & Roe — an engineering firm that specializes in building utility projects. At this point the cost of the plant had risen to more than $6 billion. The report highlighted three problem areas with the coal-gasification plant that were largely to blame for the delays and cost increases:
- Safety issues caught late in the project and fixed at great cost
- Major delays in acknowledging cost increases and delays in plant startup when the causes for those delays were apparent early in the process
- Poor project management
As a point of reference to the travails of the Kemper Project, which seeks to harness a relatively new technology, consider the experience of the nation’s oldest integrated coal gasification power plant: Tampa Electric’s Polk Power Station. Like Mississippi Power’s Kemper Project, this older and simpler plant uses a gasifier to turn coal into synthesis gas, and it, too, was beset by problems. A report by the Department of Energy in 2002, four years after the plant went online, found a raft of technical problems that eerily foreshadowed the difficulties the Kemper Project was to face.
By July of 2015, the cost of the Kemper Project had ballooned to $6.229 billion and implementation of its gasification technology had dragged two years behind schedule. Instead of using the gasifier to transform the abundant lignite coal mined nearby into synthesis gas, as Kemper was designed, Mississippi Power began using natural gas to fuel the turbines of the combined cycle plant. Yet even as a natural gas plant, Mississippi Watchdog pointed out, the plant was still about $300 million more expensive to build than an equivalent conventional combined cycle natural gas plant powered by the same fuel.
Once the Kemper Project started operating with natural gas, Mississippi Power began labeling it a “dual fuel” power plant capable of generating electricity from natural gas or synthesis gas made from lignite coal by the gasifier. This represented a major shift in the company’s tone from earlier documents authorizing construction that insisted the Kemper Project was intended to run on lignite coal as an environmentally friendly way of achieving “fuel diversity.” Mississippi Power CEO Ed Holland tried to spin this as a positive development, saying “the opportunity is there because gas prices are much lower than anyone predicted at the time the Kemper Plant was built.”
The image problems at Kemper went from bad to worse last fall when Mississippi Watchdog reported that Mississippi Public Service Central District commissioner Lynn Posey was accused of illegally receiving campaign funds from contractors on the Kemper Project. It is unlawful under Section 77-1-11 (1) of the Mississippi Code for a PSC commissioner to accept any gift, pass, money or campaign contribution from any person or entity of a utility under the regulatory authority for the PSC. The violations allegedly took place two years earlier at a pair of simultaneous fundraising dinners at Tico’s Steakhouse in Jackson and Weidmann’s in Meridian.
If there are any common threads running through the Kemper saga, they can be summed up in two words: overruns and delays. That was the conclusion, at least, of Don Grace, an accountant and subcontractor working for the Public Utilities Staff who told the Mississippi Public Commission last October that Mississippi Power invested in only “minimal design” to determine its original cost estimates and operating schedule. The result was cost overruns and construction delays that Grace predicted would delay Kemper’s startup date in the second quarter of 2016, potentially leading to rate hikes and the loss of more federal tax breaks.
For those keeping score at home, at this point the cost of Kemper had risen to $6.267 billion, and the plant was still two years behind schedule.
Yet another bombshell fell on the scandal- and schedule-plagued power plant in February when a former project manager at the then-$6.36 billion plant ended his company-ordered silence. Brett Wingo, who previously worked as an engineer for Southern Company Services, told Mississippi Watchdog that the company lied to regulators about the Kemper Project’s construction schedule in an effort to hang onto more than $234 million in federal tax credits. Wingo said he went all the way up the company’s chain of command in 2014 after he started to suspect impending delays two years earlier, but his pleas were ignored at every turn. Wingo was placed on administrative leave in August 2014.
The Kemper Project has yet to generate any power from its integrated coal gasification technology, but it has generated one thing in bunches: lawsuits. The latest was filed in March by three plaintiffs — a Biloxi seafood processing firm, Island View Casino and a Gulfport resident — claiming Mississippi Power Co. damaged its roughly 186,000 ratepayers by avoiding accountability for “fraud and mismanagement while fleecing the public in the interest of profits” in building the “goliath” Kemper Project power plant. The suit takes a different legal route than some of the previous lawsuits filed against Mississippi Power in that it does not seek to change the utility’s rates. Instead it isseeking economic losses, punitive damages, attorney fees and court costs.
At this point, the cost of the plant had ballooned further still – to $6.644 billion.
Several months into 2016, Mississippi Power has yet to get its act together concerning the Kemper Project. According to a report in March from AECOM, an engineering firm that independently monitors and supervises the construction of the Kemper Project, the facility might not make its scheduled start date in the third quarter of this year. Randall Hodges, who leads the monitoring team, said that progress “will have to improve to meet the reported operational date of third quarter of this year.” He added that if Mississippi Power continues its startup progress of about 1 percent per month so far this year, it will take another 13 months to finish, pushing the in-service date into 2017.
Any delays beyond the end of August – the company’s projected commercial operation date – could cost the company up to $30 million per month.