KEMPER COUNTY NOT A NATIONAL MODEL FOR CCS: SOUTHERN CO. CEO

Karen Frantz
GHG Monitor
12/20/13

While the Environmental Protection Agency has pointed to Southern Company’s Kemper County pre-combustion carbon capture and storage facility in Mississippi as a model for new rules that would essentially mandate CCS for new coal-fired power plants, Kemper should not be used as a primary basis for the rules, Southern Company CEO, President and Chairman Tom Fanning said late last week. “When we think about a standard that EPA should use for the United States, it should be a technology and a set of circumstances that are replicable across the rest of the United States,” Fanning said during an appearance on Platts Energy Week. “Recall that what we have in Mississippi is mine mouth lignite. We have an industry that lends itself to enhanced oil recovery. Those unique circumstances are not replicable widespread across the United States.”

Fanning also said significant cost overruns at Kemper—totaling about $1 billion—call into question the commercial viability of CCS, and said that industry needs to find a way to bring capital costs down for the technology. “Interestingly, the value of the CO2 is tied to oil price, so there’s an index, which makes sense,” he said. “You’re getting more oil out so therefore the value of CO2 should be tied to that. At 90 dollars a barrel, the energy price coming out of Kemper County facility will be about $1.25 per million Btu. That compares to a nuclear plant at about $1 per million Btu. So the energy net of all the benefits of insulated products like CO2 and ammonia and sulfuric acid and a variety of other things has tremendous value. The energy looks great. We’ve got to get the capital costs down.”

Among the factors that have contributed to the cost overruns at Kemper, according to Fanning, is the fact that when Southern Company entered into an agreement to build the facility it had completed approximately 10 percent of the engineering work. “For the amount of the cap, for the amount of engineering, we didn’t have nearly enough contingency and I wish we had more engineering done and really what we missed was the gas handling system,” he said. But he said that the facility will help produce 2 million barrels a year through enhanced oil recovery and will have “a carbon footprint better than natural gas.”