Southern Company sued by former CO2 customer over Kemper Project delays

According to the lawsuit filed in the State Court of Gwinnett in Georgia, Atlanta-based Southern Company “intentionally misrepresented and concealed construction delays at the facility in order to remain eligible for hundreds of millions of dollars in federal tax credits and to prematurely and unjustifiably increase the rates they were charging customers.”

Kemper was originally scheduled to be fully operational by May 2014 and will be more than two years behind if it goes online as the company now says in the third quarter of this year.

There were two companies that signed CO2 contracts with Mississippi Power: Texas-based Denbury Onshore and Treetop, a Ridgeland-based subsidiary of the Tellus Operating Group. The difference between the two contracts was in the amount of CO2 — Denbury was to receive 70 percent of it and Treetop receiving the remaining 30 percent — and in who paid for the CO2 pipelines. Mississippi Power paid $141 million to build a 61-mile CO2 pipeline to Denbury, while the lawsuit says Treetop paid nearly $100 million for the construction of its pipeline.

The two companies were to pump CO2 into old oil fields to tap previously economically unfeasible supplies.

Jeff Shepard, Mississippi Power spokesman, said the company cancelled its contract with Treetop on June 3 and that Denbury will be buying 100 percent of Kemper’s CO2.

The Kemper Project is designed to convert high-moisture lignite coal mined on site into a natural gas-like substance called synthesis gas to fuel its electricity-generating turbines. The problem for Treetop is not that the plant isn’t generating electricity, but that it is using natural gas rather than synthesis gas. Kemper is designed to remove 65 percent of the CO2 from the synthesis gas stream and with no gasification occurring, there is no CO2 to be sold to either party.

MS Watchdog