Mississippi’s Lead Role in the New Frontier of Clean Coal & Update on Gulf Oil Spill Issues John...

Mississippi’s Lead Role in the New Frontier of Clean Coal

& Update on Gulf Oil Spill Issues

John A. BruniniBrunini Grantham Grower & Hewes, PLLC

2011 Mississippi Bar Convention

SONREEL Section Annual Meeting

Mississippi’s Lead Role in the New Frontier on Clean Coal

• Mississippi has extensive coal reserves – OSM estimates five billion

tons in Mississippi– All Mississippi coal

is lignite


What Is Lignite?• Lignite is young coal

• Very high moisture

• Low energy value or “Btu” content

• Only economical to transport short distances


• The North American Coal Corporation currently operates the Red Hills Mine– Choctaw County, Mississippi– Appx. 6,000 life of mine acres– Co-located lignite fired power plant operated

by GDF Suez– Forty year contract to sell power to TVA


• The North American Coal Corporation is the largest lignite miner in the U.S.

• Lignite Mined by Surface Mining Methods


• Mississippi Power is currently constructing the Kemper County IGCC Facility

• IGCC stands for IGCC stands for “Integrated Gasification Combined Cycle”– IGCC is a combined-cycle power plant and a

coal-gasification plant designed specifically to work with each other

– There are currently only two coal based IGCC plants in the U.S.

Meridian

Liberty



• Kemper County IGCC Plant is being constructed near Liberty

• Approximately 20 Miles North of Meridian

• Co-located with 12,000+ acre lignite mine (“The Liberty Mine”)

• To be operated by The North American Coal Corporation


What Does an IGCC Plant Do?

• IGCC is a combined-cycle power plant and a coal-gasification plant designed specifically to work with each other.

• There are currently only two coal based IGCC plants in the U.S.


– Lignite is introduced into a “Gasifier”– The fuel is subjected to high temperature

and pressure with limited air (or oxygen)– Chemical reaction resulting in the

formation of a synthesis gas or “syngas”– Gasification is not combustion


• Combined Cycle Power Generation

– Power is generated by combusting fuel in a Combustion Turbine

– Hot exhaust gas from the turbine discharges to a Heat Recovery Steam Generator (HRSG)

– Steam raised in the HRSG is expanded through a Steam Turbine which generates additional power

– Very efficient method of power generation


• Advantages of IGCC– Fuel diversity – Potentially wide range of feed stocks

– More efficient than traditional pulverized coal technology

– Improved NOX, SO2 and Mercury removal than traditional pulverized coal technology

– Lower CO2 than traditional pulverized coal technology, with greater potential for future CO2 capture

– Marketable byproducts


• Disadvantages of IGCC - $$ - High Initial Cost

• Kemper County IGCC Receiving Multiple Federal Financial Incentives

• Some Incentives through US Clean Coal Power Initiative– Loan Guarantees– Tax Incentives– Grants


• Environmental Permitting – IGCC required PSD permit, 401 Water Quality

Certification, 404 wetlands permit, and stormwater permit prior to construction

– All have been issued– Sierra Club challenged MDEQ issuance of

PSD Permit at evidentiary hearing– Sierra Club noticed intent to appeal Permit

Board ruling at conclusion of evidentiary hearing


• Environmental Permitting– Lignite Mine required 401 Water Quality

Certification, wetlands permit, NPDES permits, and state surface coal mining permit prior to any construction activities

– Gulf Restoration Network requested hearing on permit board issuance of 401 Water Quality Certification, then dismissed request


• IGCC Construction began in fall, 2010

• Lignite Mine hopes to receive surface coal mining permit in early 2012

• IGCC plant scheduled to begin operation in 2013

Gulf Oil Spill - UpdateApril 21, 2010

Update on Gulf Oil Spill Issues

• Deepwater Horizon oil well blowout– Blowout resulted in an uncontrolled release of

crude oil and natural gas– Blowout preventers failed– Drilling rig was situated approximately 40

miles southeast of Louisiana coast


• Deepwater Horizon rig Owned by British Petroleum– NOAA estimates release of 4.9 million barrels– Equates to release of 205,800,000 gallons


• Spill Response Data as of June 15, 2010:– More than 8100 vessels responding– 64.4 miles of shoreline affected by oil– 78,000 sq. miles closed to fishing– 500,000 bbl recovered– 1.28 million gallons of dispersant applied– More than 205 controlled burns– Federal response costs over $212 Million


How does this Event Compare?

Exxon Valdez Oil Spill Occurred in 1991

• Total discharge estimated at 10.8 million gallons (250,000 bbl)

• Settlement in that case totaled $900MM with a reopener for an additional $100MM

Gulf Oil Spill – Natural Resource Damages

• BP has accepted its role as “Responsible Party in this matter

• BP has also indicated intent to sue other entities, including – Transocean (Drilling Rig Operator)– Halliburton (Service Provider)– Cameron (Manufacturer of Blowout Preventer)– Hyundai (Manufacturer of rig)– Others?


• Types of Legal Claims– Private Claims

• Common law suits for damages to industry and commerce

– Wrongful death, business impact for fishing, shrimping, travel, hospitality, etc.

– Shareholder derivative suits– Legal battle among BP, Transocean, Halliburton,

Cameron, Hyundai, etc.


• Types of Legal Claims (Continued)– Criminal Charges

• A number of statutes provide potential criminal liability, including:

– Oil Pollution Act– Clean Water Act– National Marine Sanctuary Act– Endangered Species Act– Clean Air Act


• Types of Legal Claims (Continued)– Government Claims

• Civil Penalties/Fines arising out of regulatory violations

• Response/Cleanup costs• Natural Resource Damages Claims


• On June 16, 2010, President Obama announced that BP agreed to establish a $20 billion fund to pay claims for damages– Economic Claims– Natural Resource Damages– State and Local Response Costs


Natural Resource Damages Claims• Oil Pollution Act § 1002(a) states:

[E]ach responsible party for a vessel or facility from which oil is discharged…into navigable waters…is liable for removal costs and damages…

– Covered damages include:

Damages for injury to, destruction of, loss of, or loss of use of, natural resources, including the reasonable costs of assessing damages, which shall be recoverable by a U.S. Trustee, a State Trustee, or a Foreign Trustee.

Gulf Oil Spill – Natural Resource Damages


• What is a “Natural Resource”?

– OPA § 1001(20) defines Natural Resources as:

“[L]and, fish, wildlife, biota, air, water, ground water, drinking water supplies, and other such resources belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States, any State or local government or Indian tribe, or any foreign government


• In short, a trustee (usually the head of an environmental agency in the case of a State Trustee) may pursue a claim against a responsible party for damages to natural resources caused by discharges of oil.

• The measure of natural resource damages is the cost of restoring, rehabilitating, replacing, or acquiring the equivalent of the damaged natural resources; the diminution in value of those natural resources pending restoration; plus the reasonable cost of assessing those damages.


• What is the process for assessing a claim for natural resources?– Preassessment– Restoration Planning– Restoration Implementation


• Preassessment– Notice to Trustee– Establish Jurisdiction

• Is it an OPA Incident?• Determination of whether a trustee’s natural

resources have been or are likely to be injured

– Evaluation of Feasible Restoration Activities– Data Collection; Administrative Record;

Coordination; Emergency Restoration– Decision to Initiate Restoration Planning


• Restoration Planning– Conduct Injury Assessment

• Highly technical, scientific process with complicated formulae, data modeling, etc.

– Develop Draft Restoration Plan & Publish• Plan must comply with NEPA if NEPA triggered

– NEPA applies if there is a major federal action significantly affecting the quality of the human environment

– After publication, comment, and revision, proceed to Final Restoration Plan

– Issue Demand to Responsible Parties


• Restoration Implementation– Proceed with implementation of Final

Restoration Plan• Corrective Action• Monitoring


• Posturing on Natural Resource Damages began early: – “Everything we can see at the moment

suggests that the overall environmental impacts will be very, very modest.” - BP CEO Dr. Tony Hayward.


• Issues, Complicating Factors, Politics– Minerals Management Service granted a categorical

exclusion to BP’s activities, allowing it to avoid performing an Environmental Impact Statement as required by NEPA.

– Therefore, there was no detailed environmental study performed prior to drilling that would have established significant baseline information on species, risks, other threats to ecosystems, etc.


• Issues, Complicating Factors, Politics– Assessment process has no distinct timeframe, which

leads to tremendous uncertainty for Responsible Party and creates leverage for Trustees

– Very difficult to draw line between immediate response required in wake of spill and natural resource damages. All response costs are covered by Responsible Party, but NRDs are subject to caps.

– There also exists a possibility of double-dipped damages - Responsible Party could pay governmental claim for damage to a natural resource (e.g., fish), then be subject to a claim from a private party for loss of subsistence use of resource (e.g., fishermen)


• Issues, Complicating Factors, Politics– NRD Claims rely heavily on accurate baseline

data because a goal of the process is to implement a restoration plan that returns the damaged resource to its pre-injury condition.

• Without accurate baseline data, there could be a battle over specific level of restoration required.

• Some experts claim that without baseline and knowledge of other threats to or pre-spill changes in deep sea organisms and ecosystems, accurate assessment is impossible


• Early Restoration Framework– Agreement between Trustees for the

Deepwater Horizon Oil Spill and BP• Trustees are representatives for AL, FL, LA, MS,

TX, Dept. of Interior, and NOAA

– BP provides $1 Billion for “Early Restoration Projects”


• What is an Early Restoration Project?– Trustees are continuing process of Natural

Resource Damage Assessment– May take many more years to fully

comprehend long-term injury– Early restoration projects allow for present

implementation of projects that restore, rehabilitate, repalce or acquire the equivalent of injured natural resources and services


• Early Restoration Framework– Each state may select and implement $100

Million in projects– NOAA and DOI select and implement $100

Million in projects– Remaining $300 Million to be used for

projects selected by NOAA and DOI from proposals submitted by State Trustees


• Early Restoration Framework– Proposed projects must:

• Address specific injury associated with incident• Seek to restore natural resources, habitats or

services of the same type/quality• Be consistent with anticipated long-term

restoration needs and anticipated final restoration plan

• Be feasible and cost effective

– Trustees also seeking proposed early restoration projects from the public

Examples of Proposed MS ProjectsLiving Shorelines – Wetlands Restoration

Description: Oyster-based living shoreline structures placed would be placed along eroding marsh shorelines in MS Gulf waters.

Would prevent further erosion and accrete sediments, leading to recreation of lost marsh habitats

Examples of Proposed MS ProjectsMississippi Coast Wide Seagrass Conservation Project

Would address damage to seagrass beds by providing public awareness to prevent damage from prop-scarring from recreational and other boating activities

Examples of Proposed MS ProjectsHabitat Restoration with Artificial Reefs

Includes restoration and enhancement of 140 existing offshore reefs covering 70 acres and 67 existing inshore reefs covering 3 acres. Artificial reefs provide habitat and foraging sites for numerous species

Examples of Proposed MS ProjectsRestoration of Beach – Hancock County

Would restore 4.5 miles of beach in Hancock County through nourishment with sand. Project would provide potential habitat for onshore and nearshore species and recreational benefits

Examples of Proposed MS Projects• Other potential projects include:

– Restoration and enhancement of costal marsh and traditional forests in coastal MS

– Sub Tidal oyster reef restoration– Using living shorelines to mitigate effects of

hardened shorelines– Preservation of private coastal lands– Ocean Expo Learning Center/Aquarium– Native plant nursery for restoration– Restoration of oyster reefs in MS Sound

Update on Gulf Oil Spill IssuesFuture Forecast on Gulf Oil Spill• NRDA process likely to continue for years to

come• Due to size of the spill, the size of the Gulf, and

lack of knowledge of deep sea environments, scientific analysis and evaluation of impacts has been more challenging than prior oil spills

• Parties have worked cooperatively so far but many potentially divisive issues still remain


• Quote from Trudy Fisher:“Since the day of the oil spill, our goals have been to make Mississippi whole and to assure that our coastal area completely recover. (The early restoration framework” agreement is an important first step, but is only the first step. Mississippi will continue its work and will count on our many interested citizens to contribute their ideas and input as we all work to define the scope of these early restoration projects and develop other restoration projects. Our goals have not changed. We will remain actively engaged in these and other projects until the Gulf is restored and our state is made whole.”


THE END

John A. Brunini

Brunini, Grantham, Grower & Hewes, PLLC

[email protected]

(601) 973-8712

Mississippi’s Lead Role in the New Frontier of Clean Coal & Update on Gulf Oil Spill Issues John...

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