Monday, June 15, 2015

What if no one will buy the CO2 of Kemper?

Reporter Eddie Curran produced a bang-up story for about the Kemper project and presented a troubling scenario: What if no one will buy the carbon dioxide purchased by the Kemper plant? Mr. Curran reported:

The success of Mississippi Power’s Kemper Plant rests in part on the assumption that there will be one or more buyers for some 3 million tons of CO2 generated each year as a byproduct of the plant’s revolutionary coal gasification process.

Now that assumption appears imperiled, and with it the fate of the troubled $6.2 billion power plant.

A review of public filings and court records suggests the two oil-drilling companies are no longer contractually bound to purchase the CO2.

Just as troublesome, Denbury Onshore and Treetop Services LLC may no longer have the financial resources to use – much less purchase – the tremendous amounts of CO2 the Kemper contracts require them to buy.....
The Kemper plant was supposed to cost $2.4 billion and begin producing power and capturing CO2 by May 2014. The projected final cost is now up to $6.2 billion and the projected completion date is some point in the first half of 2016.

The contracts with Denbury Onshore and Treetop Services contained provisions that protected Mississippi Power in the event that either refused to accept its allotment of CO2.

But the contracts also contained termination clauses – deadlines after which the parties could cancel the arrangements without penalty if the Kemper Plant was not yet complete.

In its recent financial disclosures with the Securities Exchange Commission, including a filing in late April, Mississippi Power warned that delays in completion of the plant had imperiled three key contracts.

The company noted that the cancellation of either of those deals could have serious consequences for the financial viability of the project.....Rest of article. There is more, much more good information to read.


Anonymous said... one in a position of authority asked for copies of the agreements that make the numbers work?

Because if they did and saw the non-completion clause in each one, that should have been a red flag.

How many construction projects of this magnitude are finished on time?

And, there's data on the average time over runs that could have been had as well to make sure that any non-completion dates were well outside maximum limits.

And, they could have checked on the financial health of these companies buying the CO2.

Doesn't anyone do due diligence anymore?

ButlerSnizow said...

Uh oh

Anonymous said...

This has been a F'ing circus from the beginning.... Boss Hog should be ashamed of himself.

Anonymous said...

I am sure Barbour can make sure that billion dollar dismantle contract will land in good hands. Probably has Josh Gregory and frontier on

Anonymous said...

@7:28 "Doesn't anyone do due diligence anymore?"

Answer: Obviously, Treetops Services and Denbury Onshore handled their due diligence quite well. Props to their legal counsel.

Anonymous said...

If MPC is unable to sell the CO2 from Kemper over the $106 million pipeline to the Denbury and Tullos fields, and can't operate the lignite burning plant as designed to run on syn gas, then their current standard rate case filed May 15 also must fail. The rate case must fail because, as Justice Pierce points out in his concurrent opinion denying MPC's case for rehearing (pp. 23-24), the standard rate statutes allow only rates to cover investment that can be "used and useful" as designed. (Secs 77-3-33 and 77-3-43). If the plant cannot be used or useful as intended, the current rate request for the plant must be rejected by law. So the Eddie Curran article has HUGE current implications for the recently filed MPC rate case.

Anonymous said...

8:24am...I am sure Yates is happily awaiting on "GO" to begin the demolition. Bill is the construction wing of the Barbour group. No telling how many million upon millions Yates has bilked out of this thing.

Anonymous said...

Sorry, that's Tellus, not Tullos for Treetop Services LLC.

Anonymous said...

Interview w/ Blanton from this past weekend.

Anonymous said...

Not necessarily Yates. Barbour and Butler Snow will be receiving lobbying fee/bids to determine who will get the demolition contract. Yates is the front runner to get your tax money but it will be hotly contested.

"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.”
― Alexis de Tocqueville

Anonymous said...

10:05am....Wanna bet? Hotly contested? Do you mean Bill and Boss Hog will be fighting it out for the last filet to come off the grill? That is about the only thing that gets hotly contested when there are big time construction profits to be made in this state. The only real decision there is to be made is if Boss' payoffs will be in cash or free work at a location of the Boss' choosing.

Anonymous said...

Anyone else tired of Butler Snow running our government?

Anonymous said...

Kuddos to Eddie Curran and for a really, really important article.

Anonymous said...

There are no serious requirements to be a Public Service Commissioner. Boss Hogg certainly deserves some of the heat, but the fault is in US. We should demand two things:

1) Public Service Commissioners should, at a minimum, be CPAs or have advanced degrees in accounting, and

2) candidates for the Legislature should not be allowed to take campaign contributions from power companies or PACs funded by employees of power companies.

Every effort should be made to prevent power companies from having ANY financial influence over members of the Legislature or the PSC.

You simpletons who think Boss Hogg is the problem while refusing to look into the mirror are not helping. Boss Hogg is simply making a living exploiting OUR failures as citizens.

Anonymous said...

This is yet another surprising development in the continuing saga.

Can't some way be found for someone to sell some more bonds to cover this latest setback? That would help keep BS happy. They do work hard for their money.

Too bad it's CO2 they're looking to sell and not unicorn farts. The market for unicorn farts is always strong.

Anonymous said...

I bet you will not see this article in the newspapers around the state that depend on MPC and SO for significant advertising.

Anonymous said...

Can't really see decommissioning the plant as an option. Either convert to natural gas or since there is a pipeline in place heading west, find a salt dome or pressure depleted field close to the line and petition the state oil and gas board for a storage project. They might have to leave the gas in the ground for a couple of years until oil prices recover to the point where Tertiary Flooding makes economic sense again. Both of these options are capital projects but hey they are in up to their eyeballs in this albatross so why not. They could probably sell a storage project to one of the mlp companies after the demand for CO2 returns.

Anonymous said...

I thought I had mentioned something like this issue before.

Anonymous said...

MIT reports on a operational plant.

Kemper ratepayers and stockholders better hope Kemper is at least as successful as this plant. Ratepayers and stockholders better hope the Kemper CO2 contracts aren't adversely affected by falling oil prices.
December 12, 2014 at 12:22 PM

Basic premise still holds I think. If oil prices hadn't tanked, then the argument would be about contract adjustments for late delivery of the CO2 and the losses the CO2 buyers had incurred from the late delivery.

Like the Curran article says:

Oil drillers pump CO2 – odorless, colorless gas – into otherwise dormant fields to force hard-to-reach oil to the surface.

The success of such techniques has led to a worldwide boom in oil production – and a precipitous drop in oil prices. The drilling activities of such firms, and so their need for CO2, have diminished substantially since 2011, when the price of oil was high – and when Denbury and Treetop signed CO2 purchasing agreements with Mississippi Power.

Anonymous said...

MPC has been running the plant on natural gas and will probably continue to do so as long as they do not have a buyer for the CO2.

That does not solve their problem which is that they can't put the cost of the plant on the back of the consumers above the cost of a standard, off the shelf NG plant ($800 mil or so), until this issue is resolved because the extra investment ($5.4 Bil) can't be put into the rate base until it is shown that it will be within a reasonable period of time "used and useful".

Anonymous said...

12:52 good points on the article you cite about the Canadian facility where some of the CO2 is piped to an oil field and the rest of it put underground. The storage underground strikes me as expensive. The article notes of the Canadian storage:

"At the SaskPower site, a wellhead delivers carbon dioxide to its resting place, a saline aquifer 3.4 kilometers underground."

Not sure that is possible in Kemper County. If it is, it will take even more money to implement than the expensive pipeline already built.

Anonymous said...

Does MPC have enough to absorb the loss that will ensue if pretty much any of these scenarios come true? Who's going to absorb the cost of this mess if they go belly up over it, and how much will the electric bills - and taxes - go up at that point?

Anonymous said...

5:09. No, MPC As the Supreme Court pointed out, never has had the funds alone to build Kemper. MPC has been funded throughout by Southern Company (SO) which is a much larger holding company with the assets of MPC, AL Power, Ga Power and part of FL. MPC is by far the smallest unit. MPC will do whatever it takes to fund MPC, including selling more SO stock if necessary. Don't feel sorry for them. SO and MPC made all these mistakes and should pay for them. Instead we have to protect the innocent ratepayers in Mississippi who did not make all these mistakes. The ratepayers should only pay the cost of a NG fired plant, about $800 Million. SO should eat the rest. The price of NG had already crashed below $6 (less than $3 today) when MPC started construction in July 2010. It has never been the $11 to $12 MPC predicted since they started construction.

Anonymous said...

There is no need for a PSC commissioner to be a CPA. They can hire a couple of those. Why not merely refuse to vote for any member of the Good-Ole-Boys club or those who are in the pockets of the utilities? An engineering, law, or solid business background may be helpful. A consumer advocate or a populist would top my list. All commissioners should treat as suspect anything that the PR machines of The Southern Company, Entergy, or the Rural Electric associations put out. I plan to vote for Brent Bailey in the central district. His qualifications exceed those of any other candidates in any of the three districts.

Anonymous said...

Thanks, 7:25, but you still didn't answer the question. What happens to the plant if MPC goes bankrupt and walks away? Whose money is lost, and how will that affect the ratepayers and taxpayers? This has trouble written all over it.

Anonymous said...

12:43: I do not expect a bankruptcy. However, if it all went bad and there were a Chapter 11 reorganization, MPC would continue to own the plant. But unsecured creditors likely would get a percentage haircut on what they are paid on their claims. Also, even secured creditors might find they were going to be paid on debts otherwise due now over time, like 5 years under a proposed reorganization plan. SO and MPC would lose credibility big time, so I would think SO would sell more stock before resorting to a bankruptcy. Also, Kemper is not Southern's only unit with problems. GA Power has the nuclear plant problems of Vogtle. SO will probably look at system wide adjustments from selling stock to re-fill coffers rather than let MPC go into bankruptcy.
Probably too late for SO to do what it should have in the first place, make Kemper a system-wide plant to spread the risk. The other state PSCs probably would not allow that now.

Anonymous said...

Another great article has been posted on the Watchdog site about Kemper and how the possible future PSC members will view this debacle. No doubt in my mind Ms.Power is going to have a much more difficult time going forward. Southern Company will be cancelling the dividend they have been paying for so long which can more than cover the losses of this failed project. As Blanton said in the posted interview prudency can not be proven until the plant is 100% operational as proposed and that will be 7-8 years down the road based on information provided by Ms.Power. If all of the secret agreements and secret meetings were illegal why are the participants from the PSC not charged with a crime or at least being sued individually? I want my refund and I want it now.

Anonymous said...

Looks like time and delay have produced the Achilles heal of Kemper in the CO2 contracts issue. If the breakeven point for Denbury's production is $71 oil, Houston we have a problem.

Anonymous said...

Have you seen Curran's latest article about Blanton's scheme to use his public office to drive MPCo into bankruptcy for his own financial gain?

Suscribe to latest on JJ.

Recent Comments

Search Jackson Jambalaya


Subscribe to JJ's Youtube channel

Who is the hottest reporter?


Who is the Hottest Reporter in Jackson?

Trollfest '09

Trollfest '07 was such a success that Jackson Jambalaya will once again host Trollfest '09. Catch this great event which will leave NE Jackson & Fondren in flames. Othor Cain and his band, The Black Power Structure headline the night while Sonjay Poontang returns for an encore performance. Former Frank Melton bodyguard Marcus Wright makes his premier appearance at Trollfest singing "I'm a Sweet Transvestite" from "The Rocky Horror Picture Show." Kamikaze will sing his new hit, “How I sold out to da Man.” Robbie Bell again performs: “Mamas, don't let your babies grow up to be Bells” and “Any friend of Ed Peters is a friend of mine”. After the show, Ms. Bell will autograph copies of her mug shot photos. In a salute to “Dancing with the Stars”, Ms. Bell and Hinds County District Attorney Robert Smith will dance the Wango Tango.

Wrestling returns, except this time it will be a Battle Royal with Othor Cain, Ben Allen, Kim Wade, Haley Fisackerly, Alan Lange, and “Big Cat” Donna Ladd all in the ring at the same time. The Battle Royal will be in a steel cage, no time limit, no referee, and the losers must leave town. Marshand Crisler will be the honorary referee (as it gives him a title without actually having to do anything).

Meet KIM Waaaaaade at the Entergy Tent. For five pesos, Kim will sell you a chance to win a deed to a crack house on Ridgeway Street stuffed in the Howard Industries pinata. Don't worry if the pinata is beaten to shreds, as Mr. Wade has Jose, Emmanuel, and Carlos, all illegal immigrants, available as replacements for the it. Upon leaving the Entergy tent, fig leaves will be available in case Entergy literally takes everything you have as part of its Trollfest ticket price adjustment charge.

Donna Ladd of The Jackson Free Press will give several classes on learning how to write. Smearing, writing without factchecking, and reporting only one side of a story will be covered. A donation to pay their taxes will be accepted and she will be signing copies of their former federal tax liens. Ms. Ladd will give a dramatic reading of her two award-winning essays (They received The Jackson Free Press "Best Of" awards.) "Why everything is always about me" and "Why I cover murders better than anyone else in Jackson".

In the spirit of helping those who are less fortunate, Trollfest '09 adopts a cause for which a portion of the proceeds and donations will be donated: Keeping Frank Melton in his home. The “Keep Frank Melton From Being Homeless” booth will sell chances for five dollars to pin the tail on the jackass. John Reeves has graciously volunteered to be the jackass for this honorable excursion into saving Frank's ass. What's an ass between two friends after all? If Mr. Reeves is unable to um, perform, Speaker Billy McCoy has also volunteered as when the word “jackass” was mentioned he immediately ran as fast as he could to sign up.

In order to help clean up the legal profession, Adam Kilgore of the Mississippi Bar will be giving away free, round-trip plane tickets to the North Pole where they keep their bar complaint forms (which are NOT available online). If you don't want to go to the North Pole, you can enjoy Brant Brantley's (of the Mississippi Commission on Judicial Performance) free guided tours of the quicksand field over by High Street where all complaints against judges disappear. If for some reason you are unable to control yourself, never fear; Judge Houston Patton will operate his jail where no lawyers are needed or allowed as you just sit there for minutes... hours.... months...years until he decides he is tired of you sitting in his jail. Do not think Judge Patton is a bad judge however as he plans to serve free Mad Dog 20/20 to all inmates.

Trollfest '09 is a pet-friendly event as well. Feel free to bring your dog with you and do not worry if your pet gets hungry, as employees of the Jackson Zoo will be on hand to provide some of their animals as food when it gets to be feeding time for your little loved one.

Relax at the Fox News Tent. Since there are only three blonde reporters in Jackson (being blonde is a requirement for working at Fox News), Megan and Kathryn from WAPT and Wendy from WLBT will be on loan to Fox. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both and a torn-up Obama yard sign will entitle you to free drinks served by Megan, Wendy, and Kathryn. Get your tickets now. Since this is an event for trolls, no ID is required. Just bring the hate. Bring the family, Trollfest '09 is for EVERYONE!!!

This is definitely a Beaver production.

Note: Security provided by INS.

Trollfest '07

Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

There will be a hugging booth where in exchange for your young son, Frank Melton will give you a loooong hug. Trollfest will have a dunking booth where Muhammed the terrorist will curse you to Allah as you try to hit a target that will drop him into a vat of pig grease. However, in the true spirit of Separate But Equal, Don Imus and someone from NE Jackson will also sit in the dunking booth for an equal amount of time. Tom Head will give a reading for two hours on why he can't figure out who the hell he is. Cliff Cargill will give lessons with his .80 caliber desert eagle, using Frank Melton photos as targets. Tackleberry will be on hand for an autograph session. KIM Waaaaaade will be passing out free titles and deeds to crackhouses formerly owned by The Wood Street Players.

If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

Note: Security provided by INS