Lawsuit: Utility misled company into building $100M pipeline

Jeff Amy, Associated Press

A company that had planned to buy carbon dioxide from Mississippi Power Co.'s Kemper County power plant has sued, alleging the utility misled it into building a $100 million pipeline.

In this Nov. 16, 2015 photograph, employees work along the gas lines of the Mississippi Power Co. carbon capture plant in DeKalb, Miss. Treetop Midstream Services, a company that had planned to buy carbon dioxide from Mississippi Power Co.'s Kemper County power plant is suing the utility. Treetop filed suit in Georgia, June 9, 2016, after Mississippi Power terminated its contract to buy carbon dioxide, claiming the unit of Atlanta-based Southern Co. left Treetop with a “pipeline to nowhere.” (AP Photo/Rogelio V. Solis, File)

JACKSON, Miss. (AP) — A company that had planned to buy carbon dioxide from Mississippi Power Co.'s Kemper County power plant has sued, alleging the utility misled it into building a $100 million pipeline.

Treetop Midstream Services, an affiliate of an oil company that planned to pump carbon dioxide underground to force out oil, sued June 9 in the Atlanta suburb of Gwinnett County, Georgia. Treetop sued Atlanta-based Southern Co. and its Mississippi Power subsidiary after the utility terminated Treetop's contract to buy carbon dioxide on June 3.

Treetop said Mississippi Power lied and concealed delays in Kemper construction. Under terms of its contract, Treetop said it was required to finish a pipeline nine months before Kemper started operating and prepare Mississippi oil fields belonging to Tellus Energy to receive the gas.

"After intentionally misrepresenting and concealing the start date for the facility and forcing Treetop to unnecessarily spend nearly $100 million on a pipeline and other equipment, the Southern Co. defendants have now left Treetop with a pipeline to nowhere that never would have been built but for the fraudulent conduct of the Southern Co. defendants," the suit states.

Treetop wants its money back, plus interest and punitive damages.

Mississippi Power spokeswoman Cindy Duvall said Friday that the utility has yet to respond in court.

"We believe the suit is without merit," she wrote in an email.

The $6.7 billion Kemper plant is more than two years behind schedule, generating electricity now by burning natural gas. But it's designed to burn lignite coal, extracting climate-warming carbon dioxide instead of emitting it into the air, and the company says it plans to begin burning lignite by Sept. 30. But Mississippi Power needs a place to bury the carbon dioxide, which is where Tellus Energy and a larger oil company — Denbury Resources — came in. Both wanted to flood otherwise depleted oil fields with carbon dioxide to force out more oil.

Selling byproducts is one way Mississippi Power plans to pay for Kemper, which is $3.8 billion over budget. The company's 186,000 customers are already paying $126 million a year for the plant, and could be asked to pay as much as $4.3 billion. Southern shareholders have absorbed $2.4 billion in losses.

Treetop and Mississippi Power had long been at odds. A Treetop subsidiary had opposed a December electric rate increase granted to Mississippi Power by state regulators, unsuccessfully appealing it to the state Supreme Court.

Duvall wrote Mississippi Power terminated the contract "because we believed the ongoing discussions with Treetop yielded no beneficial path forward for the company and our customers."

The same day Mississippi Power canceled the Treetop contract, the company signed an amended agreement to sell all Kemper's carbon dioxide to Denbury.

Treetop's lawsuit contains allegations raised by Brett Wingo, a former manager on the Kemper project. Wingo and Southern Co. got locked in a dispute last year after he alleged safety and other violations at Kemper.

The suit says that Mississippi Power should have known by 2013 that it couldn't complete the facility by May 2014, as originally promised. The suit claims Southern Co. faked construction schedules to keep federal income tax credits. The project is likely to forfeit $372 million in tax credits because of delays. The suit alleges that even after Mississippi Power pushed back the start date once, it continued to lie. The suit cites a March 10, 2014, phone call from Wingo to Southern CEO Tom Fanning, saying Wingo warned Fanning against promising that Kemper would be finished by December 2014. Less than a month later, that's what the company told investors.

The U.S. Securities and Exchange Commission is also investigating Southern Co. over the utility's Kemper statements to investors. The company could face civil penalties if the SEC concludes the company engaged in fraud. Fanning and others could face criminal penalties, but such prosecutions are rare.

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