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Delays and added costs to get Mississippi Power Co.’s $6.7 billion Kemper County Energy Facility running have sparked another lawsuit against the electric utility company and its Atlanta-based parent company, Southern Company.
Treetop Midstream Services, a Mississippi-based oil company, filed a lawsuit June 9 against Mississippi Power Co. and Southern Company over the cost it incurred for building a $100 million pipeline and other damages. In the suit, Treetop claims fraudulent misrepresentation, concealment, civil conspiracy and breach of contract by the power companies.
Treetop claims in the lawsuit that the companies “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.”
Attorney George W. Finkbohner III of the Mobile law firm Cunningham Bounds LLC, which is representing Treetop, said the pipeline constructed by Treetop under a contract with Mississippi Power is waiting in the ground, where it has been since fall 2013.
“We abided by everything in the contract,” Finkbohner said. “We did everything we were supposed to do. We did it based on a series of lies. We were not told the truth. After we had made the complete investment, and waited for years, they cancelled the contract.”
Mississippi Power Co. spokesman Jeff Shepard said in a statement that Mississippi Power plans to vigorously defend the allegations listed in the lawsuit and will respond to the complaint within 30 days.
The pipeline was to serve an extension of the plant that was scheduled to start generating power from coal in May 2014. According to the Associated Press, Mississippi Power Co. has most recently pushed back the completion date for the entire project to Sept. 30.
While the natural gas portion of the plant began operating in 2014, harsh weather and other delays kept the extension from being completed, Shepard said. Other issues at the plant included difficulties operating several rotary valves/airlocks for unloading coal and gasifier refractory issues at high temperatures.
According to the lawsuit, Treetop formed an agreement in 2011 to purchase 30 percent of carbon dioxide captured at the Kemper facility. Denbury Onshore, another oil producer, was to purchase 70 percent of carbon dioxide captured at the facility.
The carbon dioxide was to be used for enhanced oil recovery in Denbury and Treetop’s oil fields, the lawsuit says.
As part of Treetop’s agreement, the company was required to pay for the construction of a pipeline that it would later use to take and transport the facility’s carbon dioxide.
Treetop said in its lawsuit that it negotiated several parameters into its agreement to be “certain that the … Facility was on schedule, substantially completed, and capable of delivering C02 to Treetop.”
In the parameters, Mississippi Power Co. was to provide Treetop with monthly estimates of the facility’s start date; Treetop would complete construction of its pipeline six months before the facility’s start date; and Treetop could terminate its agreement without liability of Mississippi Power Co. failed to deliver the carbon dioxide to them by May 11, 2015.
“The timing clauses in the Treetop Offtake Agreement afforded Treetop the right to walk away from the contract without expending any capital in the event that the construction and development of the Kemper IGCC Facility was substantially delayed or if the project proved infeasible,” the lawsuit states.
However, it says Treetop’s ability to exercise that right was also dependent on truthful disclosures from Mississippi Power Co. and Southern Company on the progress and start date of the plant.
The lawsuit says Southern Company intentionally concealed construction delays and forced Treetop to unnecessarily spend nearly $100 million on its pipeline and other equipment, then terminated its agreement with Treetop.
Treetop claims in the lawsuit that Southern Company robbed them of their termination rights under the agreement.
According to Shepard, Mississippi Power cancelled on June 3 its contract with Treetop Midstream Services that would have allowed Treetop to purchase a 30 percent portion of the carbon dioxide to be captured by the Kemper County energy facility.
Denbury Resources Inc. is now under contract to purchase 100 percent of the carbon dioxide from Kemper, Shepard said Monday.