The fortress of steel and concrete towering above a pine forest is a first-of-its-kind power plant that was supposed to prove that “clean coal” was not an oxymoron — that it was possible to produce electricity from coal in a way that emits far less pollution and to turn a profit while doing so.
The plant was not only a central piece of the administration of US President Barack Obama’s climate plan, it was also supposed to be a model for future power plants to help slow the dangerous effects of global warming. The project was hailed as a way to bring thousands of jobs to Mississippi, the nation’s poorest state, and to extend a lifeline to the dying coal industry.
However, the sense of hope is fading fast. The Kemper coal plant is more than two years behind schedule and more than US$4 billion over its initial US$2.4 billion budget, and it is still not operational.
Illustration: Mountain People
The plant and its owner, Southern Co, are the focus of a US Securities and Exchange Commission (SEC) investigation, and ratepayers, alleging fraud, are suing the company. Members of US Congress have described the project as more boondoggle than boon.
The plant’s backers, including federal energy officials, have defended their work in recent years by saying that delays and cost overruns are inevitable with innovative projects of this scale.
In this case, they say, the difficulties stem largely from unforeseen factors — or “unknown unknowns,” as Southern chief executive officer Tom Fanning has often called them — like bad weather, labor shortages and design uncertainties.
Many problems plaguing the project were broadly known and had been occurring for years. However, documents and recordings provided to the New York Times by a whistle-blower — an engineer named Brett Wingo — and interviews with more than 30 current or former regulators, contractors, consultants or engineers who worked on the project, show that the plant’s owners drastically understated the project’s cost and timetable and repeatedly tried to conceal problems as they emerged.
The system of checks and balances that are supposed to keep such projects on track was outweighed by a shared and powerful incentive: The company and regulators were eager to qualify for hundreds of millions of dollars in federal subsidies for the plant, which was also aggressively promoted by Haley Barbour, who was Southern’s chief lobbyist before becoming the governor of Mississippi.
Once in office, Barbour signed a law in 2008 that allowed much of the cost of building any new power plants to be passed on to ratepayers before they are built.
In their recorded conversations with Wingo, at least six senior engineers from the plant said that they believed that the delays and cost overruns, as well as safety violations and shoddy work, were partly the result of mismanagement or fraud.
Officials from Southern and Mississippi Power, which is a Southern subsidiary, said that they could not comment on Wingo’s allegations, but that all decisions about cost and budget projections were made by consensus.
They also said that Wingo’s accusations had previously been investigated by the company and could not be substantiated. Wingo was fired in February, a move that the US Occupational Safety and Health Administration later ruled illegal.
Former Mississippi Power chief executive officer Ed Holland added that one of the project’s biggest mistakes was to start construction with little of the plant designed.
“We still believe that from our investors’ standpoint, this was a wise investment to prove the technology,” he said in an interview.
In the end, the Kemper project is a story of how a monopoly utility, with political help from the Mississippi governor and from federal energy officials who pressured state regulators to support the project, shifted the burden of one of the most expensive power plants ever built onto the shoulders of unwitting investors and some of the lowest-income ratepayers in the country.
Kemper’s rising price tag and other problems will probably affect the US Environmental Protection Agency’s (EPA) proposed rules on new power plants and also play into broader discussions about the best way to counter climate change. EPA regulations in effect require new coal plants to have carbon capture technology, but are being held up in federal court partly by arguments that the technology is not cost-effective.
“The big question with clean coal has always been whether it’s a moonshot or a money pit,” said Charles Grayson, the director of the Bigger Pie Forum, which advocates fiscal conservatism in Mississippi. “The Obama administration and my state made a really bad wager in trying to use Kemper to make the economic argument for this technology.”
Southern proposed a promising idea with the Kemper project. Providing a cleaner way to use coal, which is cheap and abundant, the plant also offered the means to preserve fast-disappearing coal-mining jobs.
The plant, which broke ground in 2010, would run on lignite, a type of coal that is plentiful, but difficult to process. Most of the carbon dioxide produced by the plant would be captured, compressed, sold and piped to oil fields. There, it would be pumped underground in a process known as enhanced oil recovery, to help push up previously unrecoverable oil to levels where it could be reached.
Although carbon capture technology is proven and widely viewed as a potentially important tool to slow global warming, the question has been whether it can be scaled up affordably.
By 2012, “Miss Power,” as locals called the state utility, was facing mounting criticism about the plant. In May of that year, after the utility said that the Kemper project was US$366 million over budget, it announced a plan to raise its customers’ rates by 13 percent.
In increasingly testy meetings and e-mails over succeeding months, Wingo told his supervisors that scheduling information that Mississippi Power and Southern were providing to the public was infeasible and misleading.
In February 2014, an argument erupted at the plant. Engineers told upper-level managers that the company should not promise to regulators and investors that the project would be done before the end of the year, e-mails and recorded calls show.
Weeks later, the company did so anyway.
The next day, the owner of the project’s scheduling firm sent an e-mail saying that he could not in good conscience continue to work on a project that did not “fairly and accurately represent the work that still remains.”
Wingo wrote in a subsequent e-mail to an official at PricewaterhouseCoopers, an auditing firm that was helping to manage the project: “This has really put the entire project at a crossroads.”
The other engineers in his division were in “utter disbelief” that the company had published a false schedule, he added.
On March 10, Wingo called Fanning to ensure the message reached him.
“I’m glad you brought this to me,” Wingo said Fanning told him. “I plan to get to the bottom of this.”
Instead, Southern and Mississippi Power focused in subsequent months at least as much on damage control as they did on rooting out wrongdoing.
In meetings, Wingo and other engineers said that they were told by plant managers that they needed to present an optimistic timetable for the project or the utility risked the “financial Armageddon” of lost tax subsidies, spooked investors, possible bankruptcy and criticism from the news media, regulators and lawmakers.
Wingo, who began speaking to reporters, refused an offer of about US$975,000 from the company to keep quiet, according to interviews and court records.
Southern was then granted a restraining order, later dropped, forbidding him from speaking publicly about the plant, court records show.
What troubled the engineers most was the poor quality of work: leaking gaskets, cracked ductwork and pipes missing inspection records, valves and supports.
Ryan Brown, a plant engineer, said during a telephone call that he was having to “go back and do some sort of repair or rebuild” for every piece of work handed to him by the plant’s construction teams, which were under intense deadline pressure.
Southern sued Wingo in February last year, alleging that he had agreed to a settlement, but failed to comply with its terms, which included keeping quiet about the plant.
Wingo said that he never signed or agreed to any settlement.
In March, the company dropped its case against Wingo.
In February last year, the state Supreme Court ruled that Mississippi Power had to repay ratepayers about US$377 million for increasing rates by 15 percent in 2013 and 3 percent in 2014 without proper approvals.
Utility officials responded that the requirement would bankrupt it, and several months later persuaded regulators to approve a new increase, 15 percent.
Supporters of carbon capture say that Kemper’s problems are not representative of the entire industry, and that one part of the plant — the gasifier that converts cheap coal into synthetic gas — is primarily causing the delays.
However, critics say that the principal challenge of carbon capture is cost, and that the gasifier’s ability to use cheap coal has always been advertised as key to making the project affordable.
In April, Southern informed the SEC for at least the eighth consecutive month of a new delay and cost overrun.
Mississippi Power has said that every month of delay adds more than US$20 million to the overall cost.
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