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Documents show questions raised about failed plant

posted on September 7, 2012


ATLANTA (AP) — Government officials who approved financing for a failed south Georgia ethanol fuel plant that cost taxpayers at least $75 million did so despite repeated warnings and strong opposition by some of the federal overseers who reviewed the projected.

The Atlanta Journal-Constitution (http://bit.ly/OIbiRu) reported Sunday that documents obtained under a Freedom of Information Act request show the doubts that were surrounding the Range Fuels plant at Soperton, Ga., before it obtained government backing.

Located about 80 miles west of Savannah, the Range Fuels operation was proposed to transform wood chips into ethanol fuel, but it closed last year without producing any usable ethanol. Taxpayers lost at least $75 million in loan guarantees and grants.

The newspaper reported that Hosein Shapouri, a senior economist with the U.S. Department of Agriculture in Washington, in late 2008 issued a critique that called the proposed Range Fuels plant "a high risk venture" that should raise "a red flag." Three weeks later, top USDA officials approved the guarantee anyway; in all, it received access to some $162 million in government money, including $6.2 million from the state of Georgia.

The documents show that three USDA officials who vetted the project approved it, and three opposed it. Three others who made critical comments about the proposal had their opinions redacted.

Shapouri, now retired, said decision-makers dismissed Range's many, easily detectable faults.

"Nobody ever expected them to produce anything," he said in an interview. "I told them not to finance it. They didn't listen to me. They decided to rush, rush, rush and give them the money."

Federal officials say they learned from the Range Fuels collapse and have established safeguards to prevent recurrences.

"While the Agency is disappointed that this one company did not succeed . it is important to remember that USDA has a long history of successful lending that supports rural homeowners, business owners, utilities and cooperatives," the agency said in a statement to the newspaper. The agency said the delinquency rate on more than 1 million loans is a scant 2.16 percent, although relatively few involve alternative energy.

Government support for alternative energy has become a hot-button political issue, pitting the promise of energy independence against the prudent use of tax dollars. Both the Bush and Obama administrations strongly supported Range Fuels, which was expected to showcase the feasibility of cellulosic ethanol, as did politicians of both parties keen to bring jobs to Georgia.

Washington continues to hand out grants and guarantees for the commercially unproven technology which attempts to turn wood pulp into fuel for cars and trucks. Last month, USDA approved a $99 million loan guarantee for a North Carolina grass-to-fuel factory.

Opponents criticize giving taxpayer dollars to deep-pocketed corporations and entrepreneurs like Vinod Khosla, the billionaire co-founder of computer giant Sun Microsystems and primary financial backer for Range Fuels. They liken the Range fiasco to the failure of Solyndra, the solar energy project that received $535 million in federal guarantees and produced only political heat for the Obama administration.

"Solyndra had a lack of due diligence just as Range Fuels did," said Sam Shelton, founding director of the Strategic Energy Institute at Georgia Tech. "It really hurts me to see Energy and Agriculture department moneys poured down the drain. Government should be involved in a lot of things, but commercialization of technologies isn't one of them."

Another alternative energy company — also backed by Khosla, who declined comment to the newspaper — bought the foreclosed Range Fuels factory for $5.1 million and plans to produce ethanol using a different method. Williamson said the new company - which is using the taxpayer-funded machinery, but not getting additional aid - expects to one day honor the job-creation goals that triggered Georgia's grant to Range Fuels.

The breakdown of taxpayer losses includes $43.6 million from DOE and $32 million from USDA. Georgia's loss is $6.2 million - unless the factory's new owners succeed

USDA now requires more technical and financial information before, and after, approval of a loan guarantee.

"Obviously, hindsight is perfect," said Brian Williamson, deputy commissioner of the Georgia Department of Community Affairs. "If we got the same deal tomorrow, we would use what we experienced from Range and learn from it."


Tags: agriculture biorenewables economy ethanol Georgia lawsuits news Range Fuels Wood chips