Is the Kemper Project going to get a fresh round of federal subsidies?

By   /   November 17, 2016  / www.MississippiWatchdog.org

U.S. taxpayers could be joining Mississippi Power ratepayers on the hook for the soaring costs of the Kemper Project clean coal power plant.

A joint report by the environmental group Friends of the Earth and the anti-government waste group

Photo by Mississippi Power MORE FEDERAL HELP? According to a report from Taxpayers for Common Sense and Friends of the Earth, the Kemper Project clean coal power plant could be in line for a massive infusion of federal subsidies.

Photo by Mississippi Power
MORE FEDERAL HELP? According to a report from Taxpayers for Common Sense and Friends of the Earth, the Kemper Project clean coal power plant could be in line for a massive infusion of federal subsidies.

Taxpayers for Common Sense says that the Kemper Project could receive as much as $4.5 billion in federal subsidies over the 40-year life of the plant.

While none of the legislative proposals the group cites are likely to become law in the waning days of the 114th Congress, similar measures are likely to reappear next year. And they might find an ally in President-elect Donald Trump, who declared during the second presidential debate that “we need much more than wind and solar. . . . There is a thing called clean coal. Coal will last for a thousand years in this country.”

Kemper is supposed to transform lignite coal into a natural gas-like substance called synthesis gas to fuel its electricity-generating turbines and remove part of the carbon dioxide from the gas stream, but is more than three years behind schedule and more than $5 billion over cost.

Three bills are alive in the lame duck session of Congress that could extend the carbon capture and storage credit that was part of the Emergency Economic Stabilization Act of 2008, better known as the Wall Street bailout. The provision — known as 45Q and named for the section of federal tax code  — allows utilities to claim a tax credit for every ton of CO2 captured. The utility receives $20 per ton if the CO2 is permanently stored and $10 if it is used, as intended with the Kemper Project, for enhanced oil recovery where the CO2 is injected into older oil fields.

The credit was to sunset after 75 million credits were issued and the U.S. Treasury Department estimates the credit will expire in 2019.

Related: Kemper Project delayed at least until end of year; costs increase another $25 million

Three measures introduced in 2016 would extend the credit or add to it:

A measure by Texas Republican Rep. K. Michael Conaway would allow Kemper to collect $789 million in tax credits over the next decade by making the tax credit permanent, lifting the 75 million credit cap, increasing the credit to $30 per ton for both underground CO2 and enhanced oil recovery, and establishing that any facility that came online after 2015 would be eligible for the credit.

Conaway’s bill would allow Kemper to collect $4.5 billion over its 40-year life, according to the report by Friends of the Earth and Taxpayers for Common Sense.

An amendment by Democratic Sen. Heidi Heitkamp of North Dakota would leave in place the 75 million credit cap, but only for existing facilities. It would increase the credit to $30 per ton for both underground storage and enhanced oil recovery between 2016 and 2025. It would also allow new facilities to claim the credit and would define a new facility as one that came online after the bill became law.

According to the report, Heitkamp’s amendment would give Mississippi Power $695 million over the first decade Kemper is in service.

A bill authored by Heitkamp and Rhode Island Democratic Sen. Sheldon Whitehouse would leave in place the cap, but increase the subsidy to $35 per ton for enhanced oil recovery and $50 for underground storage. It would allow new facilities to collect the credit 12 years after coming online and would define a new facility in the same manner as Heitkamp’s amendment.

The measure would give Kemper $1 billion in tax breaks over the first 12 years it was in operation, according to the report.

Even if the carbon capture and storage tax credit isn’t extended, the report says, Kemper would be eligible for the expiring version of the credit, which would be worth $102.8 million between 2017 and 2019.

That would be on top of the millions in tax credits and U.S. Department of Energy clean coal grants the utility received to build the plant. The DOE awarded Mississippi Power $270 million in clean coal grants in 2004 to help build Kemper. Sen. Thad Cochran (R-Mississippi), who chairs the Senate Appropriations Committee, included another $137 million for the plant from $160 million in DOE clean coal funding in a spending measure enacted at the end of the first session of the 114th Congress.

The joint report from Friends of the Earth and Taxpayers for Common Sense was likely intended to put budget hawks on guard against the possibility that a similar end-of-session spending spree could provide another boost to Kemper.

Kemper’s price tag is up to $6.9 billion in capital costs and the plant is supposed to be fully operational generating electricity on synthesis gas by Dec. 31. If the plant fails to become operational by that date, Mississippi Power could lose $250 million in tax incentives. The company recently admitted in a filing with the PSC that the plant could cost $1 billion to operate in its first five years in operation, a 288 percent increase over the original estimate.

http://watchdog.org/281935/kemper-project-29/?roi=echo3-40002496948-38812167-827045f978be7b07efd88f0923def8f3

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