Kemper vs. the Beef Plant: boons then boondoggles

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Almost 20 years before the Kemper County energy facility saga came to a head, there was another Mississippi plant proposing to use state-of-the-art technology and be a boon to the state’s economy.

By all accounts, that project — the Mississippi Beef Processors plant — ended up being a boondoggle.

Government-waste watchdogs have decried the Kemper plant, which will cost at least $7.5 billion, as a second coming of that failed beef plant in Yalobusha County, built with $55 million in loan guarantees from the state.

The Kemper plant was not built with taxpayer funds, but customers of Mississippi Power Co., which broke ground in 2010, could be on the hook for billions of dollars in construction costs.

Members of the Mississippi Public Service Commission plan to issue an order addressing the future of the Kemper County facility at the agency’s July 6 meeting.

Original plans for the Kemper County facility called for burning lignite coal, which is abundant in the region, to produce a synthetic gas. After massive cost overruns and multiple delays, the Public Service Commission announced June 28 that Mississippi Power Co. would suspend lignite coal gasification operations but would continue operating as a natural gas plant.

Meanwhile, Mississippi Public Utilities staff, Mississippi Power and other parties continue their settlement negotiations, according to a statement from the agency.

Charles Grayson, a director of Bigger Pie Forum, a free-market think tank and opponent of the Kemper plant, said the beef plant case offers at least a surface-level understanding of the Kemper plant debacle.

“This is like 10, 12 or 15 beef plants,” Grayson said. “The gasifier portion is very analogous to the beef plant, with the exception that a beef plant is not really new technology. It’s very tried and true, so this had the added feature of not only being way more expensive, but also a much higher risk.”

Here’s how the two projects stack up:

Beef Plant

Price tag: $43.5 million

Location: Yalobusha County, near Oakland

Financing: $55 million in loan guarantees from the state of Mississippi

Scale: 40,000 square feet

The Plan: The plant was to have the capacity to process at least 1,000 head of cattle, weighing about 1,000 pounds each per day. A 2001 Mississippi State University study estimated the project would cost about $21 million.

Key Players: The biggest boosters of the plant were former Republican Agriculture Commissioner Lester Spell, then-Mississippi House Speaker Billy McCoy D-Rienzi, and current Reps. Steve Holland, D-Plantersville, and Tommy Reynolds, D-Charleston.

The Controversy: The cull cow market was known to be highly volatile and make very little profit. Other mishaps included installing nearly half the plant with used equipment in poor condition that did not function properly. The plant experienced significant mechanical problems that affected its production rate.

Legal disputes: Mississippi Beef blamed Smyrna, Ga.-based The Facility Group, which handled design and construction of the plant, and North Carolina equipment dealer Anco-Eaglin for problems that led to the shutdown of the plant.

Anco-Eaglin Inc., which installed equipment in the plant, said Mississippi Beef Processors allegedly failed to pay the subcontractor $170,000, a remaining portion of its $1.7 million contract.

The fallout: The plant closed in November 2004. Frozen-foods firm Windsor Quality Foods bought the plant in 2007.

In 2008, federal grand jury indictments resulted in six Facility Group executives serving prison time, including the company’s Chairman and Chief Executive Officer Robert L. Moultrie, Chief Operating Officer Nixon E. Cawood and Executive Vice President Charles K. Moorehead. The indictment alleged a conspiracy to corruptly influence and reward a public official and a scheme to defraud numerous individuals, entities and the State of Mississippi.

Cawood pled guilty to giving illegal campaign contributions to an unnamed Mississippi public official. Moultrie and Cawood contributed $45,000 dollars to then-Gov. Ronnie Musgrove’s re-election campaign, according to media reports. Musgrove has never been charged and admits to no wrongdoing.

The state recovered $556,804 from the investigation. Funds were paid by Facility Management Group, Richard Hall, Sean Carothers and James Draper following their sentencing in 2008, according to the Mississippi Office of the State Auditor.

Mississippi in 2012 settled its 2007 lawsuit against the firms alleging that Facility Construction Management Inc., a subsidiary of the Smyrna, Ga., Facility Group, kept the project going even after executives knew it was doomed, so the company could keep bilking the state out of money, according to a report from the Jackson Free Press.

The suit involved charges of fraud and negligence in the design and completion of Facility Construction Management Inc.’s Oakland plant. Mississippi taxpayers received $4 million from a settlement.

Kemper Plant

Price tag: $7.5 billion

Financing: The Mississippi Legislature passed the Baseload Act in 2008, which would allow utilities like Mississippi Power to raise customers’ rates while a power plan is still under construction. The federal government also kicked in $682 million in subsidies.

Location: Kemper County, near DeKalb

Scale: Capacity of 582 megawatts, or power 190,000 homes, generating electricity from lignite; 100,000,000 tons of lignite stored nearby.

The Plan: Mine abundant lignite coal and burn it to produce electricity. Capture CO2 to sell to companies that would inject the gas into fallow fields to recover hard-to-reach oil.

Key Players: Former Gov. Haley Barbour, whose lobbying firm represented Mississippi Power’s parent company, Southern Co., aggressively promoted the project that broke ground and began construction in 2010.

The Controversy: The original plans for Kemper called for lignite coal, which is abundant in the region, to produce a synthetic gas. Mississippi Power kept running into issues with the technology, mainly with the plant’s gasifiers, meant to produce the synthetic gas. The result has been years’ worth of delays and cost overruns.

Legal disputes: The plant’s delays and added costs have sparked lawsuits against Mississippi Power, as well as a U.S. Securities and Exchange Commission investigation into the plant’s cost and schedule.

One of them included a six-year battle with the Sierra Club, with whom Mississippi Power reached a multi-million-dollar settlement in 2014.

Per the settlement, Mississippi Power converted to natural gas or retired several coal-fired plants. It also set up a $15 million fund to help low income rate payers of Mississippi Power make their homes more energy efficient.

Elsewhere in the state, Island View Casino Resort, Biloxi Freezing & Processing Inc. and John Carlton Dean of Gulfport filed a lawsuit against Mississippi Power on March 2, 2016, seeking to have the company refund all charges for the plant, claiming it was a fraud to the two companies and Dean, according to the Sun Herald.

In June 2016, Treetop Midstream Services, a Mississippi-based oil company, filed a lawsuit against Mississippi Power Co. and Southern Co. over the cost Treetop 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.

In March, Alan Nussbaum, an investor in Atlanta-based Southern Co., asked a Delaware court for documents to determine whether Southern Co.’s officers and directors mismanaged the company, committed fraud or breached trust between the company and its stockholders.

The fallout: Mississippi Power Co. suspended its lignite coal gasification operations at the Kemper County energy facility on June 28, according to the Mississippi Public Service Commission.