Energy Roadmap

THE MISSISSIPPI ENERGY POLICY INSTITUTE

A Roadmap for Mississippi’s Energy Future

2010 Priority Goals and Policy Recommendations

An Initiative of Momentum Mississippi

“Here in Mississippi we want to be seen as an energy reliable state where businesses want to locate because they know they will get a reliable supply of energy at the lowest possible cost.”

Governor Haley BarbourThe Clarion Ledger

“When it comes to greening the world’s energy supply, technology is not a substitute for policy.”

The Economist October 10-16, 2009

TABLE OF CONTENTS

PAGE Letter from Governor Haley Barbour 3 Executive Summary 4 PART ONE: MEPI Organizational Structure 7 PART TWO: Priority Goals and Recommendations

13

Developing and Deploying all of Mississippi’s Natural, Nuclear, and Renewable Resources for the Future in an Environmentally Responsible Manner

14

Expanding Mississippi’s Carbon Capture and Sequestration Industry

15

Encouraging Energy Efficiency and the Smart Grid in Mississippi

16

Preparing Mississippi’s 21st Century Workforce for Existing and Emerging Energy Sector Needs and Innovation

17

Supporting the Development of Energy Infrastructure and Advanced Energy Sector Manufacturing in Mississippi

18

Assessing the Impact of Federal and State Regulatory Proposals

19

PART THREE: Backgrounder 20 PART FOUR: Policy Positions 31 Next Steps 34 MEPI Participants and Members 35

A Roadmap for Mississippi’s Energy Future 2


Mississippi is positioned to be a national and world leader in energy related economic development. Our state is rich in natural resources such as heavy crude oil, lignite coal, and natural gas. Its political geography and the emergence of new innovations create distinct economic advantages in critical infrastructure. New technology is enabling environmentally responsible, clean coal fired plants to add energy to the grid and encourage industry and jobs. With its nuclear power plant and pro-growth policies in place, Mississippi is enthusiastically in position to realize the benefits of the Nuclear Renaissance such as new component hub manufacturing. Mississippi is at the convergence point of three of the nation’s largest utilities creating new partnership opportunities related to energy efficiency and conservation and the development of the Smart Grid. Multiple renewable biomass energy sources are available and world class university research facilities are partnering with different layers of government and the private sector to take this science to new heights. Both natural and manmade infrastructure from the Gulf Coast and the Mississippi River to the state’s highly accessible highway and rail system have enabled the state to literally be at the crossroads of transportation opportunity and growth. Private investment in infrastructure and federal support in research and development in the state has seen dramatic increases as policy and vision have come together.

To encourage current and future economic development trends in this sector, Mississippi’s political and business leadership has embraced pro-growth policies. While these policies have been effective in facilitating the growth of private market sectors such as carbon capture and sequestration and enhanced oil recovery, a coordinated approach to state level energy policy will surely pay even greater rewards.

Mississippi’s Energy

Infrastructure and Natural Resources

____________________

Major oil refineries and pipelines

Power plants fired by coal, nuclear, and natural gas

Coal Lignite gasification Coal to Liquid Nuclear Enhanced oil recovery Synthetic crude Liquefied Natural Gas Forestry-based carbon crediting Renewables Ethanol Cellulosic Animal waste production Biodiesel Bio-oil Other potential yet unrealized sources such as Solar, Wind, and Hydroelectric

Executive Summary


The Mississippi Energy Policy Institute (MEPI) began meeting in July 2009 as an initiative of Momentum Mississippi, Governor Haley Barbour’s long term economic and education plan developed from the Mississippi Economic Council initiated Blueprint Mississippi study. One of Momentum Mississippi’s high priority goals is to diversify and improve Mississippi’s economic base. With the state’s abundant, diverse resources, well-established infrastructure, and significant, increasing energy investments, Mississippi is poised to capitalize on the development of its energy resources and supportive policy environment. In so doing, Mississippi can realize its full economic development potential. The Mississippi Energy Policy Institute has been established to address this challenge of developing a coordinated approach to the state’s energy policy development, reflected in its mission statement below. Mission Statement of the Mississippi Energy Policy Institute:

The Mississippi Energy Policy Institute’s Mission is to conduct research and develop coordinated state level policies that support a reliable and expanding energy portfolio that is environmentally responsible; to understand and engage in the national energy debate; and to take advantage of the market opportunities ensuring Mississippi’s economic development competitiveness.

The Mississippi Energy Policy Institute seeks to build a coalition of varying approaches in the state’s energy sector and coordinate policy development in a strategic way. The alignment of varied energy policy and research using a public-private partnership model is the basis of MEPI’s work. The overall objective of the Mississippi Energy Policy Institute is to position the state as a global leader in environmentally responsible production and use of energy. Adherence to the mission and these principles will be guided by the following objectives: Objectives of the Mississippi Energy Policy Institute:

• Development of policy recommendations that will enhance the energy infrastructure and industry in Mississippi

• Fostering innovation in energy production and use that will enhance the economic vitality of Mississippi and provide national energy solutions

• Supporting educational initiatives to meet the present and future workforce needs of the Mississippi energy infrastructure and industry

• Communicating Mississippi’s commitment to national leadership through responsible energy production and use

Beginning in July 2009, over 100 private companies, state agencies, and post secondary institutions have been represented among nine policy committees formed to begin this process of a coordinated approach. These committees include the Nuclear; Smart Grid; Workforce Needs; Carbon Capture, Sequestration, and Storage; New Automotive, Aerospace, and Defense Technologies; Energy Efficiency and Conservation; Renewable Energy Sources; Inventory of Infrastructure and Resources; and Mississippi and National Policies Impact Committees. Natural Gas has been added for 2010.



Since its first organizational meeting, these committees have met numerous times by conference call, in person, and using internet based web conferencing to develop the mission statement, objectives, and scores of specific recommendations around the following six strategic goals. The culmination of this work and the work that is immediately ahead can be summarized in the following goals of MEPI. Goals of the Mississippi Energy Policy Institute:

• Developing and Deploying all of Mississippi’s Natural, Nuclear, and Renewable Resources for the Future in an Environmentally Responsible Manner

• Expanding Mississippi’s Carbon Capture and Sequestration Industry • Encouraging Energy Efficiency and the Smart Grid in Mississippi • Preparing Mississippi’s 21st Century Workforce for Existing and Emerging Energy

Sector Needs and Innovation • Supporting the Development of Energy Infrastructure and Advanced Energy Sector

Manufacturing in Mississippi • Assessing the Impact of Federal and State Regulatory Proposals

By continuing a sustainable public-private partnership among Mississippi’s business, governmental, and education leaders through the pursuit of these goals, Mississippi can be put in its best energy policy position to realize significant economic development opportunities. Report Outline The first section of this report, which is entitled, “A Roadmap for Mississippi’s Energy Future”, describes the initial organization structure of the Mississippi Energy Policy Institute: the MEPI Board of Directors, the Mission Statement, Objectives, Goals, and a description of each of the committees and its leadership. The next section of the report lists the Priority Goals of MEPI, which are the focus of its work. There were literally scores of recommendations that were developed over the course of the year. While all policy recommendations are under consideration for the future work of MEPI, the recommendations presented her are the priorities for each Priority Goal for their potential immediate impact. This is the immediate work of MEPI. The third section is a backgrounder of energy policy as it relates to Mississippi and is based on committee discussions. This section will help make the case as to how many of the goals and recommendations were formed. The fourth and final section details the specific policy positions developed by the Mississippi and National Policy Impact Committee. On the last two pages of the report there is a short note about next steps and a list of participants in the process and members of the Mississippi Energy Policy Institute. It is important to note that while there have been hundreds of hours of work done to develop these recommendations, the very nature of the energy issue suggests that this report is a work in progress. This is beginning of a long-term process to continue to conduct research and position Mississippi to have a more competitive energy future.

Mississippi Energy Policy Institute Organizational Structure

MEPI Board

of Directors

Smart Grid

Workforce Needs

Energy Efficiency

and Conservation

Mississippi and National

Energy Policy Impact

Inventory of Resources

and Infrastructure

Carbon, Capture,

Sequestrationand Storage

NewAutomotive,Aerospace, and DefenseTechnologies

Renewable

Energy Sources

NaturalGas

Nuclear

MEPI GOVERNANCE STRUCTURE

MEPI Board of Directors Composition Policy Committee Chairs

At-large members appointed by the Governor

MEPI Membership 100+ Members each represented in committee structure

BOARD OF DIRECTORS

Name Company MEPI Affiliation

John Palmer GulfSouth Capital, Inc. Interim Chairman Randy James Pruet Oil Company Vice Chairman Chip Morgan Delta Council Renewables Don Horsley Mississippi Power Energy Efficiency Donna Jacobs Entergy Nuclear Nuclear Gray Swoope MDA Auto/Aerospace/DefenseGreg Schnacke Denbury Resources Carbon Capture Mark Keenum MSU MS and National Policy Michael Callahan EPA of MS Workforce Needs Reuben Anderson Phelps Dunbar Smart Grid Roland Kell Chevron Inventory Anthony Topazi Mississippi Power At-Large Barry Weiss General Electric At-Large Bruce Alt MS Forestry Association At-Large David Gates Stephen Johnston

Atmos Energy SmartSynch

At-Large At-Large

David Waide Farm Bureau At-Large Dennis Turner Weyerhaeuser At-Large Dr. Alice Clark MS Research Consortium At-Large Haley Fisackerly Entergy Mississippi At-Large Kenneth Breeden TVA At-Large Matt Holleman Galaxie Corporation At-Large Mike Thomas North American Coal At-Large Richard Mills Tellus At-Large John Milner Brunini Law Firm Legal Barry Cannada Butler Snow Legal


MEPI MISSION, OBJECTIVE, AND GOALS

MISSION STATEMENT The Mississippi Energy Policy Institute’s Mission is to conduct research and develop coordinated state level policies that support a reliable and expanding energy portfolio that is environmentally responsible; to understand and engage in the national energy debate; and to take advantage of the market opportunities ensuring Mississippi’s economic development competitiveness. OBJECTIVES The overall objective of the Mississippi Energy Policy Institute is to position the state as a global leader through an environmentally responsible production and use of energy. Adherence to the mission and these principles will be guided by the following objectives:

• Development of policy recommendations that will enhance the energy infrastructure and industry in Mississippi

• Fostering innovation in energy production and use that will enhance the economic vitality of Mississippi and provide national energy solutions

• Supporting educational initiatives to meet the present and future workforce needs of the Mississippi energy infrastructure and industry

• Communicating Mississippi’s commitment to national leadership through responsible energy production and use

GOALS The mission and objective of MEPI will be pursued in the near term by focusing on the following Priority Goals:


• Expanding Mississippi’s Carbon Capture and Sequestration Industry • Encouraging Energy Efficiency and the Smart Grid in Mississippi • Preparing Mississippi’s 21st Century Workforce for Existing and Emerging Energy

Sector Needs and Innovation • Supporting the Development of Energy Infrastructure and Advanced Energy

Sector Manufacturing in Mississippi • Assessing the Impact of Federal and State Regulatory Proposals

Mississippi Energy Policy Institute Committees

____________________

Smart Grid Energy Efficiency and Conservation Workforce Needs Mississippi and National Policy Impact Carbon Capture, Sequestration, and Storage Inventory of Resources and Infrastructure Renewable Energy Sources Nuclear New Automotive, Aerospace, and Defense Technologies Natural Gas

SMART GRID Chair: Reuben Anderson; Senior Partner, Phelps Dunbar LLP Vice-Chair: Stephen Johnston; CEO, SmartSynch Description: Smart Grid is an emergent form of energy demand and operational control that utilizes smart meters, transformers, one and two way consumer/provider communication networks, and other methods to facilitate more efficient uses of electricity and more dynamic grid operations. This committee will examine the existing and potential opportunities from product manufacturing to practical application. ENERGY EFFICIENCY AND CONSERVATION Chair: Don Horsley; Vice President for Customer Services & Retail Marketing, Mississippi Power Description: Energy efficiency and conservation are important components of a reliable and sustainable energy future. To support the State of Mississippi's efforts in energy efficiency and conservation in the areas of residential, commercial, and industrial applications as well as in the transportation sector, this committee will: Investigate the present status of energy efficiency and conservation efforts within the state of Mississippi; review best practices adopted by other states; identify gaps between Mississippi's current practices and its potential for implementing cost effective energy efficiency and conservation practices; recommend public policy opportunities that will allow the State to improve its energy efficiency and conservation performance; measure the economic cost and benefit of our existing energy efficiency and conservation programs and the cost and benefit of adopting the proposed public policy recommendations

MEPI Committees



WORKFORCE NEEDS Chair: Michael Callahan; Executive Vice President and CEO, MS EPA Vice-Chair: Dr. Jesse Smith; President, JCJC Description: Having a trained workforce that is ready for the global economy is among the most important things Mississippi can do to prepare for economic prosperity. The needs and level of changes are as diverse as the sectors that are represented. This committee will examine current workforce system policies, economic indicators of workforce needs related to the energy sector, and the alignment of our education and other state and private institutions to meet this demand. MISSISSIPPI AND NATIONAL ENERGY POLICY IMPACT Chair: Dr. Mark Keenum; President, Mississippi State University Description: Assessment of state and federal level policy proposals is needed to ensure that Mississippi fully and thoughtfully realizes its potential as a state with reliable and affordable energy. This committee will assess the impact of energy policy proposals on the overall economy of the state in order to better inform elected officials and the public of these proposals’ effects and to positively influence the ultimate policies adopted. CARBON CAPTURE, SEQUESTRATION, AND STORAGE Chair: Greg Schnacke; Director of Government Relations, Denbury Resources Vice-Chair: Kim Flowers; Vice President, Generation & Senior Production Officer, Mississippi Power Description: Mississippi is blessed with many natural geologic formations suitable for storage of carbon dioxide, oil, gas and other substances. As utilities in the Southeast find ways to equip generating facilities to capture CO2, Mississippi could play an important and economically advantageous role in its sequestration. The state also has an abundance of oil fields that through enhanced oil recovery techniques using CO2 can increase oil production and be an acceptable means of storage as well. This committee will research the potential opportunity this affords the state. INVENTORY OF RESOURCES AND INFRASTRUCTURE Chair: Roland Kell; General Manager, Chevron Pascagoula Refinery Description: Mississippi is the home to major energy resources such as lignite coal deposits, oil and gas reserves, a network of natural gas pipelines, and oil refineries. Adding to this advantage is a distribution network comprised of a system of roads, airports, sea and river ports, and railways designed to move these assets where they need to be quickly and in an efficient manner. This committee will examine ways the state can not only better capitalize on its proven natural resource potential but to also


prudently expand our energy infrastructure to take full advantage of these economic opportunities. RENEWABLE ENERGY SOURCES Chair: Chip Morgan; Executive Vice President, Delta Council Description: Developing sustainable and affordable renewable energy sources is important to our energy future. The state is blessed with an abundance of biomass and agricultural byproducts that, along with some potential for landfill methane, wind, solar and hydro-kinetic energy, give Mississippi an opportunity to develop a potentially diverse portfolio of renewable energy supply. This committee will assess the potential and help bring together needed research with the private and public sectors to develop a strategy for the state. NEW AUTOMOTIVE, AEROSPACE, AND DEFENSE TECHNOLOGIES Chair: Gray Swoope; Executive Director, Mississippi Development Authority Description: Advanced manufacturing will be a major driver of Mississippi’s economy of the future. Two major footholds that have already been established include our leading position in both automotive, aerospace, and defense manufacturing. These industries will be heavily involved in energy related technology advancement opportunities, from composite materials for lighter more efficient vehicles and planes to new electric vehicles and other alternative energy sources. This committee will look at opportunities for innovative economic development and high level research. NUCLEAR Chair: Donna Jacobs; Senior Vice President for Policy, Planning and Oversight, Entergy Nuclear Incorporated Description: Nuclear energy is a critically important asset already in the State of Mississippi energy mix and its future role is critical to our energy future. This committee will look at the conditions, policies, positions of the state to encourage further nuclear development and to potentially attract nuclear component manufacturers. NATURAL GAS Chair: TBD Description: Creation of a Natural Gas Committee was recommended. This committee would need to be populated with members of MEPI and spend the first part of 2010 organizing priorities for the consideration of the Board.


PRIORITY GOALS OF MEPI

The Priority Goals of MEPI are the focus of its work. Recommendations synthesized from the committee process and prioritized for immediate impact have been added to guide the immediate focus of MEPI.


• Expanding Mississippi’s Carbon Capture and Sequestration Industry

• Encouraging Energy Efficiency and the Smart Grid in Mississippi

• Preparing Mississippi’s 21st Century Workforce for Existing and

Emerging Energy Sector Needs and Innovation

• Supporting the Development of Energy Infrastructure and Advanced Energy Sector Manufacturing in Mississippi

• Assessing the Impact of Federal and State Regulatory Proposals


GOAL: Developing and Deploying all of Mississippi’s Natural Nuclear and Renewable Resources for the Future in an Environmentally Responsible Manner

Recommendation: Form a Natural Gas committee and develop recommendations for MEPI action Recommendation: Position Mississippi to be a leader in the nuclear renaissance

• Develop and support policies that encourage the development of existing and future design nuclear power plants

• Position the state as a domestic and international hub for nuclear component manufacturing

• Develop and train the future nuclear workforce to support construction, manufacturing, and operations

• Longer term priorities should include consideration of used fuel storage and recycling

Recommendation: Develop a strategy to maximize use of all Mississippi’s energy resources

• Promote the use of Mississippi based resources for energy related uses through incentives that are advantageous to existing business as well as serving to attract new energy production business and investment.

• During 2010, MEPI should develop specific recommendations for incentives that will enhance the further production and use of renewable energy, MS heavy crude, natural gas, lignite, nuclear, and all other economically competitive types of energy.

• Determine how Mississippi’s energy portfolio can supply the national demand for renewable fuels to meet the national renewable fuels standard

Progress Metrics

• Natural Gas Committee formed and recommendations produced in the first quarter of 2010

• Expanded production of nuclear energy • Secure manufacturing project related to nuclear component manufacturing • Reports Due:

o Determination and report of how to measure increased quantities of Mississippi oil, gas, and coal produced and used here in Mississippi

o Listing of energy incentives in Mississippi used to attract business o Specific recommendations for incentives that will enhance the further

production and use of Mississippi’s economically competitive types of energy


GOAL: Expanding Mississippi’s Carbon Capture and Sequestration Industry

Recommendation: Develop model Carbon Sequestration and Storage legislation or regulatory policy to make Mississippi an attractive hub for the emergent industry which possibly could include:

• Identify and monitor barriers in Mississippi associated with commercial scale deployment of CCS at the state and federal level;

• Mississippi should consider state regulations establishing pore space ownership and addressing long term duties for containing CO2 as what is in play in other states

• Identify issues that involve leveraging interstate cooperation that would facilitate near-term deployment of CCS (issues include pore space, pipeline transport, UIC permitting, EOR and EGR)

Recommendation: Create a forum to provide communication regarding state and national issues related to CCS potentially including

• Outreach such as an annual conference, newsletters, and email updates • A key function of this will be helping communicate the opportunities available for

commercial uses of CO2

• Support for federal tax incentives for voluntary capture, transportation, storage, and sequestration of CO2

Recommendation: Study and report other states’ efforts of agricultural and forest carbon sequestration and determine what methods of sequestration are of special interest to Mississippi (e.g. terrestrial, geologic, and off-shore geologic) Recommendation: Study and report infrastructure pipeline incentives and issues in other states Progress Metrics

• Model Carbon Capture and Sequestration legislation ready for consideration by the Mississippi Legislature in 2011

• Regular marketing and issue update of the CCS industry through MEPI media outlets

• Reports Due: o Infrastructure pipeline incentives in other states o Agricultural and forest carbon sequestration incentives in other states


GOAL: Encouraging Energy Efficiency and the Smart Grid in Mississippi

Recommendation: Building Energy Code—Adopt a building energy code for residential, commercial, and industrial buildings that is comparable to that of neighboring states upon further evaluation of the costs and benefits of adoption and enforcement. Recommendation: Establish energy efficiency requirements for state buildings when new buildings are built and existing buildings are refurbished. These standards will be determined based upon further evaluation of costs and benefits. Recommendation: The process to create a statewide functional standard to address the Smart Grid’s regulatory needs should be started in 2010 by the appropriate regulatory agencies. Additionally MEPI can study and report on smart grid public and private incentives in other states and how it is funded Recommendation: Low Income Home Energy Assistance Program (LIHEAP)

• Maximize number of houses to be weatherized utilizing LIHEAP, Weatherization Assistance Program, and federal stimulus funds

• Communication Plan that coordinates and implements a strategy containing educational components to better inform the public regarding ways to weatherize their homes and businesses and the various incentives that are available

Recommendation: MEPI can partner with Mississippi Development Authority (MDA) to:

• Develop new demand side management programs and increased leveraging of existing utility programs and education/outreach initiatives;

• Find corporate partners to market the concept of the Smart Grid as it relates to generation, transmission, distribution, and end-user efficiencies. This should include helping consumers be more actively involved in their energy purchasing and utilization and better understand opportunities, costs, and impacts of employing Smart Grid infrastructure

Progress Metrics

• Development of Building Energy Code legislation • A completed Smart Grid state standard or in progress • Development of Mississippi Development Authority partnerships • Reports Due

o Comparative analysis of smart grid development in similar states o Impact of energy efficiency related federal stimulus funds o Mississippi Development Authority: How much money was spent and how

many business/state buildings improved energy efficiency by utilizing federal stimulus funds State Energy Plan funds and the Energy Efficiency and Conservation Block Grants?

o Low Income Home Energy Assistance Program: How much money is spent and how many homes are weatherized using LIHEAP funds and stimulus weatherization funds?


GOAL: Preparing Mississippi’s 21st Century Workforce for Existing and Emerging Energy Sector Needs and Innovation

Recommendation: In partnership with the Mississippi Department of Education, work can be done to include energy related training in the High School Redesign effort currently underway Recommendation: MEPI can partner with the Institutions of Higher Learning (IHL) based Mississippi Research Consortium to understand current and potential capacity of university research that promotes economic development. Components may include:

• Tech transfer and commercialization should be a major objective • University research agendas should pursue automotive, aerospace, and defense

related technologies such as batteries for hybrid vehicles, electric cars, hydrogen fuel cells and should be coordinated

Recommendation: The State Board for Community and Junior Colleges, the Mississippi Department of Employment Security, and the State Workforce Investment Board should develop workforce policies that support training of energy sector workers including the automotive, aerospace, and defense sectors. Policies should focus on placing training in regions of the state that have practical, justifiable, and data-supported and opportunity to develop these sectors Recommendation: Working with state entities such as Mississippi State University’s National Strategic Planning and Research Center (nSPARC), and the Mississippi Department of Employment Security, the Mississippi Energy Policy Institute can produce a report showing energy workforce needs categorized by sector Progress Metrics

• Evidence of education policy alignment that specifically reflects Mississippi’s energy workforce needs

• Quantitative evidence of workforce development dollars used to prepare Mississippi’s workforce for energy related jobs

• Reports Due: o Workforce training funds currently used for energy sector jobs o Energy Workforce Needs


GOAL: Supporting the Development of Energy Infrastructure and Advanced Energy Sector Manufacturing in Mississippi

Recommendation: Promote policy development of a more strategic effort to better utilize the significant capacity in the natural gas interstate pipeline system, to encourage natural gas storage projects through more favorable tax policies, and to support the expansion of gas distribution lines to industrial plants through public/private partnerships. Recommendation: Develop strategic plan leading to the expansion of onshore crude oil pipeline system to benefit existing infrastructure and promote the development of new infrastructure Recommendation: MEPI will seek to partner with MDA, MDES, MSU CAVS, the Center for Manufacturing Excellence at Ole Miss, and other entities to develop an economic development strategy that supports the following goals:

• Enhanced technology development of hardware and software advanced manufacturing opportunities (e.g., Smart Grid components)

• Recruit new and support existing Mississippi advanced battery technology companies not only in the automotive and aerospace industries, but also those engaged in electric transportation, consumer and industrial electronics, and energy storage.

• Continue to support the vertical integration of Mississippi’s composite industry by recruiting makers of resins and polymers that would supply both automotive, aerospace, and defense industries.

• Develop and promote public infrastructure to support the electric and hybrid car

Progress Metrics

• Natural Gas pipeline policy development • Crude oil pipeline system strategic plan • Establish partnership approach for recruitment of advanced energy sector

manufacturing facility


GOAL: Assessing the Impact of Federal and State Regulatory Proposals

The Mississippi and National Policy Impact Committee spent time developing positions for adoption by MEPI. The following is a summary of those positions related to Federal and State Regulatory Proposals and therefore will receive assessment priority:

Issues:

• Cap and Trade–Punitive policies to reduce CO2 emissions should be avoided and incentive based policies should be considered.

• Renewable Energy Mandate–The State of Mississippi supports renewable

energy incentives that enhance and promote renewable energy sources that are inherent to our area.

• Mississippi should focus on furthering energy research utilizing federal funding

sources

• Mississippi should encourage research into and development of all its available natural resources as fuel sources for energy production

• Mississippi should work to ensure the Goals and Recommendations of MEPI are

thoroughly evaluated when legislative proposals advance and oppose those policies which are punitive and restrict the use of our energy sources

Progress Metrics Timely, accurate, and consistent communication to MEPI membership and larger Mississippi audience as how these issues impact the State of Mississippi

MEPI PRIORITY GOALS

________________________

Developing and Deploying all of Mississippi’s Natural, Nuclear, and Renewable Resources for the Future in an Environmentally Responsible Manner Expanding Mississippi’s Carbon Capture and Sequestration Industry Encouraging Energy Efficiency and the Smart Grid in Mississippi Preparing Mississippi’s 21st Century Workforce for Existing and Emerging Energy Sector Needs and Innovation Supporting the Development of Energy Infrastructure and Advanced Energy Sector Manufacturing in Mississippi Assessing the Impact of Federal and State Regulatory Proposals

Whether it is enhanced oil recovery, an abundant supply of lignite coal, nuclear energy, natural gas, or the potential to develop a diverse renewable energy portfolio, there is an enormous amount of attention focused upon energy in the State of Mississippi. Economists, business, education, and political leaders have acknowledged this and suggested that a coordinated energy policy should be a primary focus of the state’s leadership to prepare for the coming years. Given this long term focus, our natural resources, existing incentives, private sector investments, and favorable regulatory policy that is already in place, Mississippi is truly in a unique and advantageous position to promote and expand this vital sector of its economy. In addition to longer term outcomes, there are many energy related policies that can be addressed immediately as this issue continues its rise as a predominant public policy matter. With this welcome attention being given energy policy and economic development projects, efforts could be enhanced through tighter cooperation. There is strength in individual effort and diversification of ideas, but there is also bound to be wasted resources—both natural and man-made. Opportunities for scalability and access to scarce resources may be lost through duplicated efforts, research, or lack of coordinated state policies. The Mississippi Energy Policy Institute (MEPI) was developed through the leadership of the state’s businesses, state agencies, universities and community colleges to develop, coordinate, and communicate state level energy policy. The explicit purpose of this energy policy development is to place the state in its best position to realize economic development opportunities as they present themselves. One way that MEPI proposes to keep moving Mississippi forward in energy policy development is to

Background


assess the impact of federal and state regulatory proposals. By observing and reporting on legislation and/or regulatory policy being discussed at different levels of government, the Mississippi Energy Policy Institute can help the state’s business, education, and governmental leaders make informed decisions and take appropriate positions. An example of how the Mississippi Energy Policy Institute has already had communications on an important issue affecting Mississippi businesses and its energy sector is the cap and trade discussions currently taking place in the United States Congress and in the Obama Administration. This year, there have been many different attempts at creating federal cap and trade legislation by Congress or through regulatory policy by the Environmental Protection Agency. No matter the source, the economic principle behind this policy is the same: to create an enforceable aggregate “cap” on levels of hydrocarbon fossil fuel emissions set by the federal government using a system of permitting applied to numerous sources such as electric utilities, industrial facilities, and commercial properties among others. The levels set are too low for some emitters necessitating the purchase of credits, called offsets, from those sources emitting less carbon. This transfer of permitting is the “trade” part of the theory and suggests emissions would be lowered using free market concepts of penalty and reward. During the committee process of developing policies, the Mississippi and National Policy Impact Committee took the position that: Punitive policies to reduce CO2 emissions should be avoided and incentive based policies should be considered. In addition to monitoring federal and state energy policy, developing policy recommendations that will enhance the energy infrastructure and industry in Mississippi. When it comes to fuel, the United States has rich supplies of coal found in 38 states, including Mississippi. Mississippi has 5 billion tons of minable lignite coal which can support a number of long term major energy projects. The economic benefit of this commodity is that when used in an environmentally responsible manner, there is enough untapped lignite coal to serve as a reliable fuel source for future generations. This availability of lignite coal in Mississippi means that not

Mississippi’s Lignite Coal Deposits

only will electricity prices remain affordable for residents, its abundance and affordability can position the state to be an attractive place to establish or expand future business prospects. As Governor Barbour stated in a recent Washington Times article, “A policy of more American energy will result in more abundant, more reliable and lower cost energy, and because it's all American, it will reduce our reliance on foreign oil even


more than efficiency and conservation, as important as they are”. While there exists great opportunity in Mississippi to produce electricity from lignite coal in an environmentally responsible way using advanced technology, nuclear energy is another vital source providing nearly 20% of Mississippi’s energy. The Grand Gulf Nuclear Generating Station, a 1,210-megawatt boiling water GE design, began commercial operation in 1985. It comprises about 2,300 acres and is situated near the Louisiana and Mississippi border, approximately six miles northwest of Port Gibson and about 25 miles south of Vicksburg. The plant is owned by System Energy Resources Inc., an Entergy subsidiary (90%), and South Mississippi Electric Power Association (10%). The Mississippi River serves as a cooling water source via a natural draft primary cooling tower. Beginning in 2002, a forced draft auxiliary cooling tower is used in parallel

during the summer to increase efficiency and output. According to an Economic Impact Study conducted by the Nuclear Energy Institute in 2006, the economic and fiscal impacts of Grand Gulf are substantial. During the committee process, the Nuclear Committee determined that Mississippi’s pro-nuclear energy environment puts the state in a strong position to expand production of nuclear energy and be the domestic and international hub for nuclear component manufacturing. Renewable resources for electricity generation vary greatly by geographic location. For example, geothermal resources (underground sources of very hot water or steam) are concentrated in the West as seen in the map below. The state of Mississippi currently ranks 34th in the country in total renewable net generation, according to the Energy Information Administration (EIA). Current renewable energy

Source: U.S. Geothermal Resource Map from DOE

rankings are almost completely due to the hydroelectric resources that have been installed in a state as hydroelectric power currently represents over 80% of renewable generation in the U.S. However, policy initiatives that seek to incentivize additional renewable energy are focused on other renewable generation resources namely geothermal, wind, and solar (as well as smaller-potential like tidal power).


Mississippi and the Southeast do not maintain wind speeds necessary to generate electricity economically. However, even in areas with sufficient wind speeds, wind generation only has a capacity factor of about 34%, according to EIA’s early release of the 2009 Annual Energy Outlook (AEO). Capacity factor is the percentage of time an electricity-generating resource is available to generate power. This low capacity factor makes wind an unreliable electricity source and requires the presence of backup generation from conventional baseload (coal, natural gas, or nuclear) generation. The Southeast, compared to other regions, also maintains poor solar resources, making the generation of solar electricity uneconomic. Similar to wind, solar photovoltaic generation maintains a capacity factor of about 22%, and solar thermal generation (concentrating collectors) is about 31% according to EIA. Both technologies, due to their associated capacity factors would require backup generation from conventional baseload generation. Mississippi does have an abundant supply of biomass or forest resources, which can be used to generate electricity. Biomass generation maintains, according to EIA, a capacity factor of 83%, which is adequate for baseload generation. Biomass can play a role in renewable electricity generation in Mississippi but may be limited. For instance, one constraint on the use of biomass for electricity generation is the fact that transportation by truck over distances longer than about 100 miles may not be economical. The map below shows forest residues in America:

Source: National Renewable Energy Laboratory


Carbon Capture and Sequestration (CCS) is a “broad term that encompasses a number of technologies that can be used to capture CO2 from point sources, such as power plants and other industrial facilities; compress it; transport it mainly by pipeline to suitable locations; and inject it into deep subsurface geological formations for indefinite isolation from the atmosphere” (World Resources Institute). The basic principles of Carbon Capture and Sequestration are shown in the flow chart below:

This flow chart also shows the processes of Enhanced Oil Recovery (EOR) which is the process of pumping CO2 into the reservoir to improve the flow of remaining oil through the pore space. After the oil-CO2 mixture reaches the surface, the CO2 is separated from the oil and recycled back to the reservoir. A side-effect of enhanced oil recovery is that a portion of the CO2 that was used to force oil out of the formation is sequestered in the reservoir’s pore space. CO2-EOR has been used by the oil and gas industry for over 30 years. It now accounts for more than 4% of the Nation’s oil production (Department of Energy). The EOR process can be adjusted to maximize the amount of CO2 that is permanently sequestered in the geological formations, which make it a natural entry way for the geologic sequestration needed for CCS. Below is a map showing the potential for CO2

storage in saline formations in the southern part of the United States:


The term energy efficiency is traditionally defined as implementing cost-effective ways to reduce energy use without sacrificing other features of a product or service. For example, in many applications compact fluorescent light bulbs use less energy to produce the same amount of light as a standard incandescent bulb would and cost less over their lifetime. Achieving such cost-effective energy savings increases energy efficiency. While this is the traditional definition, and certainly is the goal of many existing energy efficiency efforts, energy efficiency should better be defined as all efforts that improve output for a certain level of input. If a manufacturer can install a more efficient machine than the one presently used, thereby producing more widgets with the same amount of energy, this is energy efficiency, too. Also, if an electric company can reduce losses in its transmission and/or distribution system and thereby deliver more energy to its customers for the same megawatt of power generated, this is energy efficient.

Theoretically, there is great potential for increased energy efficiency in the U.S. economy. In fact, many people state that energy efficiency in the end-use of electricity can completely substitute for the need for new electric generating resources. While it is true that optimistic calculations can yield such results, significant costs, regulatory issues, and other barriers that limit efficiency’s contribution. Although we have many more uses of electricity today, the way that electric energy is

Source: U.S. Energy Information Administration (2008) delivered to the consumer has not fundamentally changed in 100 years. Bringing the delivery and consumption of electricity into the 21st century is the goal of the “Smart Grid”. The Smart Grid would incorporate new information sharing and communications technology into every aspect of electricity generation, delivery and consumption in order to:

• minimize environmental impact, • enhance markets, • improve reliability and service, • reduce costs and improve efficiency

Initially, many electric utilities are installing technologies and improving the use of


available information to better deliver electricity and give customers options on how they use electricity. Smart Grid envisions graphical transmission and distribution control systems that bring together real-time information on system conditions and outages, while also allowing for system stability planning scenarios. It allows for viewing of wide area interconnection conditions while enabling line switch control – all on one screen, used by a single transmission or distribution operator. It envisions self-healing networks, intelligent electronic devices, the use of dynamic line ratings, and the use of remote equipment and power quality monitoring. It will facilitate better asset management and maintenance while also ensuring that the electric system is secure from cyber attacks. Below is a chart produced by the U.S. Department of Energy showing the potential applications of the Smart Grid:

Through Smart Meter technology, electric utilities can read customers’ meters and generate bills without visiting the property, as well as remotely check to ensure the meter is working properly. There are also environmental benefits. Since in–person meter readings are not required, the number of vehicles on the road is reduced. Eventually, with Smart Metering, two-way communications systems will serve as a gateway for utility/customer interaction. Smart appliances will enable customers to participate in a variety of current and future programs for conservation, peak demand reduction, load shifting, and carbon footprint reduction. Any discussion of energy policy in economic development terms must also include a discussion of the capacity of a state’s critical public infrastructure. From its river and coastal ports, international airports, rail system, and highly accessible four lane highway system, Mississippi’s political and natural boundaries have placed it in position in America to move commodities quickly.


The maps below illustrate Mississippi’s public infrastructure assets:

Source: Mississippi Development Authority While a highly developed, intermodal system of transportation is advantageous, Mississippi’s geographic position relative to the rest of the country provides it enormous opportunities in the energy sector and its physical assets.



Below is a partial listing of some of Mississippi’s most important energy infrastructure assets:

• Major natural gas interstate pipelines transport Mississippi and interstate natural gas to large populations of U.S. customers. This large resource available in Mississippi can be a marketing strong point for companies who use natural gas in their process to locate in the State. Mississippi also has significant current storage capacity and the natural resources to significantly expand that storage volume should the need arise. The existing infrastructure will support continued natural gas exploration due to new discoveries not being far from existing lines which provide access to the market. Natural Gas gathering lines support production and continued development within given fields.

• Refineries such as Mississippi’s Chevron Pascagoula Refinery, as well as two smaller boutique refineries make our state a vital element in international oil trade and the development of fuels.

• Mississippi ranks twelfth in annual oil production among the producing states. It ranks twentieth in natural gas production. As a significant producer the state has developed support services and infrastructure to sustain future exploration and development. The state has a significant tertiary oil recovery effort underway which is reviving many of the larger fields.

• Petroleum and petroleum products pipelines such as the Colonial and Plantation pipelines not only supply Mississippi with major quantities of petroleum products but they are also vital to southeastern and east coast markets.

• Mississippi is one of a handful of states that has CO2 pipelines which carry CO2 for enhanced oil recovery. The existing specialized infrastructure creates an opportunity for the state, should large scale carbon capture and geologic sequestration become a national mandate.

Natural Resources for large scale energy production currently are oil, natural gas and lignite. Future development of biomass fuels and electrical generation will be an opportunity for Mississippi to develop this energy sector. As already mentioned above, Mississippi has 5 billion tons of minable lignite which can support a number of long term major energy projects. The state has an abundance of forest resource base generating more than $1 billion of harvested forest products annually. The total (direct and indirect) output for aggregated forest-related sectors, including value added products, was approximately $13.4 billion in 2001. Additional revenues from state forests will be generated in the future through increasing demand for bio-mass to produce bio-fuels, bio-chemicals, and other bio-products. Although industry has not yet established successful shale gas in Mississippi, the associated technology is evolving rapidly and the potential for shale gas exist. The naturally occurring CO2 near the Jackson Dome is allowing significant enhanced oil recovery from some of the state’s oil fields. Significant geothermal resources exist and future development may become possible.

The map below shows Mississippi’s energy sector infrastructure, renewable energy generation, and natural resources:

Mississippi’s Energy Infrastructure

There are many energy related economic development projects currently announced or underway in the state that directly leads to more jobs and higher per capita income in the state. According to a recent Pew Charitable Trust Report, job growth related to the energy industry grew faster than the overall job between 1998 and 2007. Mississippi’s average annual growth rate of energy related jobs in 2007 was among the highest in the country. The Mississippi Energy Policy Institute’s Workforce Needs Committee concluded that the development of coordinated workforce development and economic policy, the state will attract energy sector business leading to higher employment and higher paying jobs. Through the committee process, the following vital MEPI Goal was developed: “Preparing Mississippi’s 21st Century Workforce for Existing and Emerging Energy Sector Needs and Innovation”. To achieve this, work must be done to align the state’s educational infrastructure to meet the demands of the energy sector. This can begin in partnership with the Mississippi Department of Education working to include energy related training in the High School Redesign. Another way to achieve this goal is for MEPI to partner with the IHL based Mississippi Research Consortium and work together to find strategic collaboration opportunities between research universities, businesses, and state policy around energy related research. The economic part of this can be ties to the



development of patents and the ability of our state’s talented faculty members developing research to market and commercialize their work. There are already well established relationships between the State Board for Communtiy and Junior Colleges, the Mississippi Department of Employment Security, and the State Workforce Investment Board that connect business training needs with state resources. The Mississippi Energy Policy Institute can enhance this through the development of policies that support training of energy sector workers including the automotive, aerospace, and defense sectors. Working with these state entities and the private sector, MEPI can also produce a report showing energy workforce training as well as needs categorized by sector.


MEPI POLICY AND POSITION STATEMENTS

Further development of the State’s existing energy resources

Mississippi is an important energy state because of both the significance and diversity of our energy assets and energy infrastructure. In terms of energy production, transportation, refining, processing, generation and transmission, the energy industry’s total economic impact is among the largest in the state; and the industry’s annual and historical level of capital expenditures is perhaps the largest in the state. A Mississippi strategy which helps to produce more American energy will result in more abundant, more reliable and lower cost energy solutions.

1. Position Mississippi to be a regional and national leader for emerging Carbon Capture and Sequestration technologies with a strong emphasis on enhanced oil recovery , nuclear and renewables

2. Focus on expanding and enhancing our refineries, pipelines, and power plants 3. Train workforce to meet the needs of a growing energy sector 4. Continue to diversify energy based economy by developing automotive,

shipbuilding, aerospace and other growing industry sectors with further emphasis on composite technologies

5. Enhance and promote all oil and natural gas exploration, production and development in an environmentally sensitive manner encouraging increased investment resulting in additional revenue to local and state governments

Expansion of Nuclear Power in Mississippi

Mississippi should advocate for a new nuclear facility because nuclear power is an inexpensive reliable source of energy. Nuclear power is also a carbon free way of producing energy. The promotion of nuclear energy development enhances national security and can help to ensure US competitiveness in the world economy.

1. Build or expand a nuclear facility within Mississippi 2. Establish vendors and supply industry to support nuclear development 3. Further evaluate the viability of nuclear fuel reprocessing as an industry in the

state Implementation of Energy Efficiency and Conservation Measures

Mississippi’s utilization of energy efficiency and conservation measures can help to cut costs, minimize environmental impact and reduce our dependency on foreign energy.

1. Develop Smart Grid technologies to enable energy efficiency in Mississippi 2. Implement energy reduction measures for state owned buildings and develop

purchasing criteria to buy energy efficient technology


3. Incentivize and adopt a statewide building energy code to help reduce costs for Mississippi homeowners while ensuring that it is not to the detriment of materials or products produced in Mississippi

4. Better utilization of LIHEAP funding for energy efficiency and weatherization 5. Maximize energy related stimulus funding for energy efficiency and conservation 6. Create awareness for the public as to energy efficiency incentives that are

available 7. Pursue the development and implementation of demand side management and

energy efficiency programs in a manner that benefits consumers and encourages utility investment

8. Development of workforce to implement energy efficiency measures Further Renewable Energy Development The nation and the world are searching for new energy solutions. Population growth and economic expansion help to drive the demand on current energy supplies. At the same time, the U.S. is becoming more dependent on foreign sources of oil, which can directly compromise national security. Mississippi can play a part in developing alternative energy sources by further researching and developing resources that are inherent to the state.

1. Mississippi should focus on developing a range of renewable energy sources that are inherent to our area, accessible and economically viable for the state.

2. Develop a program to position Mississippi as a national leader for renewable biofuels

3. Utilize Incentives instead of mandates to increase renewable production 4. Ensure that Mississippi is a national leader in the area of biomass inventory, geo-

spatial technology, economic development and venture capital for renewable development

5. Increase research and incentives to enhance waste conversion into viable energy sources

6. Investigate institutionalizing a “clearing house or one stop shop” to house, promote and market Mississippi’s renewable capabilities

7. The potential role of Distributed Generation or on-site generation should be evaluated to increase the use of home grown energy in Mississippi. Additionally, a methodology needs to be developed to determine the monetary value of the renewable energy placed on the grid.

Evaluation of the Impact of Federal and State Policies

The Policy Impact committee should regularly evaluate the present major energy issues and develop position statements. For example:

1. Cap and Trade – Punitive policies to reduce CO2 emissions should be avoided and incentive based policies should be considered.

2. Renewable Energy Mandate – The State of Mississippi supports renewable energy incentives that enhance and promote renewable energy sources that are inherent to our area. Mandating the usage of renewable energy sources that are


not readily available, accessible and naturally occurring in the state is economically detrimental. Mississippi should advocate for realistic goals in a renewable portfolio standard that are consistent with our natural resources recognizing regional differences in potential in alternative energy production

3. Mississippi should focus on furthering energy research utilizing federal funding sources

4. Mississippi should encourage research into and development of all its available natural resources as fuel sources for energy production

5. Mississippi should work to ensure that principles set forth in this document are thoroughly evaluated when legislative proposals advance and oppose those policies which are punitive and restrict the use of our energy sources

Miscellaneous Committee Policy Positions

1. Definition of a “Smart Grid” for working purposes:

A smarter grid applies technologies, tools and techniques available now to bring knowledge to power–knowledge capable of making the grid work far more efficiently: Ensuring its reliability to degrees never before possible; Maintaining its affordability; Reinforcing our global competitiveness; Fully accommodating renewable and traditional energy sources; Potentially reducing our carbon footprint; Introducing advancements and efficiencies yet to be envisioned (Source: the Department of Energy)

2. Mississippi should position and market itself to be a regional and national leader for emerging CCS technologies

3. Enhanced oil recovery is a centerpiece technology 4. The ideas of terrestrial and underground sequestration should both be discussed,

but should be recognized as separate 5. Consideration of trucking/truck manufacturing as well as shipbuilding should be

included as a focus of the Automotive, Aerospace, and Defense Committee’s work

6. Mississippi should expand nuclear power electric generation as most viable non-carbon-based option

7. Mississippi’s delegation and state leaders should recognize the punitive effects of “The Employee Free Choice Act” on economic development in the state


NEXT STEPS

The Priority Goals and their associated Prioritized Recommendations found on pages 13-20 of this document are the immediate focus of the Mississippi Energy Policy Institute’s work. These particular recommendations were chosen for their potential for immediate impact on energy policy development and were developed after numerous MEPI committee meetings and hundreds of hours of work. It is important to note that during these discussions, scores of recommendations were adopted for consideration. As this organization begins its work, all committee recommendations will continue to be considered for future action. It is also important to note that the nature of the energy issue means that this is a continual work in progress. As the science changes, as the political environment changes, and as economic opportunities present themselves, the Mississippi Energy Policy Institute will remain flexible on its positions and work to be done. The Mississippi Energy Policy Institute’s committee and Board of Directors will continue to meet throughout 2010 with regular reports and updates on the progress of the Goals and Recommendations. This is beginning of a long-term process to continue to conduct research and position Mississippi to have a more competitive energy future. /Members


Mississippi Energy Policy Institute Participants

25x'25 International Paper Pinnacle Consulting, LLC

Advance Mississippi Jackson State University Plum Creek Timber Company

Alcorn State University Johnson Controls Port of Greenville

Assoc. Builders & Contractors Lowndes County Port Authority Port of Pascagoula

Assoc. General Contractors Magnolia Energy, LLC Pruet Companies

Atmos Energy Corporation MS Dept. of Ag and Commerce Public Service Commission

Audubon Mississippi MS Dept of Environmental Quality RAND Gulf States Policy Institute

Aurora Flight Sciences MS Dept. of Transportation Raytheon

Boardwalk Pipeline Partners, LP Mississippi Corn Promotion Board Sanderson Farms

Brunini Law Firm Mississippi Development Authority Scott Petroleum Corporation

Butler Snow Law Firm Mississippi Economic Council Severstal

Catfish Farmers of Mississippi Mississippi Farm Bureau Siemens

CAVS—MSU Mississippi Forestry Association Signal International

CenterPoint Energy Mississippi Poultry Association SmartSynch

Chevron Products Company Mississippi Power Company SMEPA

Colonial Pipeline Mississippi Public Utilities Staff Southern Strategy Group

David Smith Builder, Inc. Mississippi Railroad Association Spectra Energy

Delta Council Mississippi Research Consortium Spooner Petroleum

Denbury Resources Mississippi State Port Authority Stennis Space Center

Dillard & Company, Inc. Mississippi State University Sustainable Energy Research Ctr

Entergy Mississippi, Inc. Mississippi Technology Alliance Tellus Operating Group

EPA of Mississippi MS Manufacturers Association Tennessee Valley Authority

Ergon Nissan North America The Bufkin Company

Farm Bureau North American Coal The Holden Project

Galaxie Corporation Northrop Grumman Corporation Toyota

General Electric NUCOR Steel Jackson, Inc. U.S. Oil and Gas Association

Georgia Pacific, LLC Office of Cong. Gene Taylor University of Mississippi

Gulf LNG Energy, LLC Office of Governor Haley Barbour University of Southern Mississippi

Gulf South Capital, Inc. Office of Senator Roger Wicker Utility Management Corporation

Hancock County Port Office of Senator Thad Cochran Warren County Port Commission

Hayes Dent Public Strategies Office of Lt. Governor Phil Bryant Weyerhauser

Homebuilders Assoc of MS PACCAR Engine Company Wildlife Mississippi

Howard Industries Phelps Dunbar LLP Yellow Creek Port Authority

Hughes South Corporation Phillips Brothers Farm

Documents

Energy Roadmap