Range Fuels biorefinery in foreclosure

Effort to transfer ownership fails

hduncan@macon.comDecember 2, 2011 

AgSouth Farm Credit, the bank that loaned Range Fuels $80 million to launch its Soperton ethanol plant, is foreclosing on the plant.

That leaves taxpayers on the hook for the $64 million portion of the loan that was guaranteed by the U.S. Department of Agriculture.

AgSouth advertised the foreclosure sale of the plant in Thursday’s Soperton News.

Repeated phone calls to Range Fuels over several days were not returned. The company’s website disappeared in October.

Justin DeJong, a spokesman for the Department of Agriculture, said in a statement Thursday night: “We are disappointed that this company did not succeed, and we will be working on behalf of the American people to protect the federal government’s interest in the loan.”

In its statement, the Department of Agriculture said it had worked with AgSouth “on options to revive operations, but on October 27th notified the lender that it was moving forward with liquidation, because liquidation is seen as the best way to preserve U.S. assets and reclaim funding.” The department said it anticipates that there are “a number of companies” that could be interested in the site.

State and federal documents show that a new corporation has been seeking to take over the Range Fuels plant and its loan guarantee. But that effort seems to have fallen through.

In 2007, the Colorado-based Range Fuels was awarded a $76 million grant from the U.S. Department of Energy under the Bush administration, plus the loan guarantee and a state grant, in order to build and start operating the country’s first cellulosic ethanol plant. Cellulosic ethanol is made from the woody or fibrous plants -- in this case wood chips -- rather than from food crops such as corn.

But the plant, which was scheduled to open in 2008, never scaled up to full operation and shuttered early this year after making one test batch of fuel. About 30 workers were laid off, said John Lee, executive director of the Treutlen County Development Authority.

Range officials said they were seeking a new infusion of capital in order to continue.

The Department of Energy suspended payments on its grant at that time, and in August the department and Range terminated their investment agreement, Jen Stutsman, press secretary for the Department of Energy, said in an e-mail. She said the department spent $43.6 million on Range over the course of the grant, which began in 2007.

Stutsman said in an interview that the agreement with Range included no final performance requirements that would require the company to pay back any of the money.

Recently, Range Fuels has been seeking to shift its federal loan guarantee and a $6.25 million state grant to LanzaTech Freedom Pines LLC, which was incorporated in Georgia in September.

An agreement negotiated with Georgia and the Treutlen County Development Authority indicates that Range Fuels planned to transfer some of its assets, including its interest in the Soperton project, to LanzaTech Freedom Pines. The new company’s president and CEO, as listed on its Georgia incorporation records, is the same as the CEO of LanzaTech, a New Zealand-based company with offices in Illinois. LanzaTech was listed by Biofuels Digest as one of the “top 10 hottest companies in bioenergy” for 2011-12.

But Laurel Harmon, LanzaTech’s vice president of government relations, said Thursday that the company no longer has any relationship with Range Fuels.

“We were exploring an opportunity to do something with that site, but we are no longer involved in that site,” she said.

Agreement never signed

An environmental document created by the USDA in September indicates that LanzaTech Freedom Pines proposed to use some of the initial Range process -- gasifying wood chips -- then use its own patented biofermentation process to produce ethanol and butanediol, which can be used as a fuel additive or in plastics, Lycra and spandex, fine chemicals and solvents.

It would have produced a tenth of the 20 million gallons of ethanol a year that Range had promised when it sought the USDA loan guarantee in 2009, according to a USDA “finding of no significant (environmental) impact” document.

LanzaTech’s primary funding comes from the same venture capitalist behind Range Fuels, Vinod Khosla, who was a co-founder of Sun Microsystems. Lanzatech Freedom Pines had negotiated a draft agreement with the Georgia Department of Community Affairs and the Treutlen County Development Authority in October, allowing the new company to take over the OneGeorgia grant. It would have also assumed Range Fuel’s obligation to invest $225 million and create 69 permanent, full-time jobs.

That agreement was never signed because the Lanzatech Freedom Pines plans were put on hold when USDA wouldn’t agree to transfer the loan guarantee, Lee said.

Asked if that was the deal breaker for LanzaTech, Harmon said she was uncomfortable sharing specifics about the failed deal, “but we were unable to make that work.”

The Department of Energy will not transfer or reactivate the remainder of the Range Fuels grant, Stutsman said Thursday. She said the department is working with Range to analyze data “that will detail the lessons learned on the project to date.”

But it will be hard to know if American taxpayers will benefit from those lessons. The final technical report will not be released publicly because it will contain proprietary information, she said.

Stutsman added in an e-mailed statement: “The department has already begun to integrate the lessons learned and best practices from this project into our programs as we continue our work to develop next generation biofuels that will help reduce America’s dependence on foreign oil and create new industries here in the U.S.”

To contact reporter S. Heather Duncan, call 744-4225.

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