Farm Press Blog

Osage Bio: A good idea gone bad


• Like a bad taste that just won’t go away, it now appears the lasting saga of OsageBio will be one of protracted court battles.

For a couple of years the struggle to build an ethanol plant in Virginia seemed like just another ‘us against the world’ struggle by agriculture to dent the high stakes, high risk world of energy production.

After an unsuccessful effort to put the plant in Chesapeake, Va., and a protracted battle with the city of Hopewell, it seemed agriculture had triumphed and upstart OsageBio would in fact deliver on its plan to revitalize the rural economy of southeast Virginia.

What seemed so recently to be one of agriculture’s big wins now seems like one of its worst black eyes. Like a bad taste that just won’t go away, it now appears the lasting saga of OsageBio will be one of protracted court battles.

The most recent salvo comes from Hopewell, Va., City Attorney Thomas Lacheney, who admits the city’s efforts to reclaim $5 million from a Letter of Credit that apparently never existed could be tied up in court for years.

Lacheney says the city’s best hope for recouping any of its lost revenue on the OsageBio project will likely come from selling the facililty for a fraction of the cost used to build it.

"Things are quite nebulous and don't look very promising," Lacheney said. "It looks like this will be in court for a very long time," he said.

Last May Osage Inc., parent company of Osage Bio Energy, announced the company and its Hopewell, Va., plant was for sale. The announcement caught most people in Virginia agriculture and everyone in both the popular and agriculture media by surprise.

I was scheduled for a pre-opening tour of the facility the same week the plug was pulled. I remember thinking how many good people in agriculture would be hurt by the decision.

The whole ethanol from barley idea was a new concept to Upper Southeast farmers, but one that many had accepted as an outstanding opportunity to build into their winter cropping systems. It was also a concept quickly adapted by researchers at Virginia Tech.

With a relatively small investment in research funding, Osage Bio got renewed research efforts in breeding barley for production in Virginia, for use of the crop in rotation systems and even economic comparisons of barley for ethanol versus other traditional fall-planted crops in the region.

Top Virginia Tech researchers like Carl Griffey, added a number of hulled and hull-less barley varieties to his breeding program and Small Grain Specialist Wade Thomason and Soybean Specialist David Holshouser made similar adjustments to their already crowded research and Extension programs to accommodate barley and the rural economic rejuvenation the million gallon per year ethanol plant promised to produce.

Plenty of people and a handful of companies lost a little when Osage pulled the plug on their venture into ethanol production from barley in Virginia. None lost anything compared to Perdue Grains and Oilseeds. The Del Marva-based grain buying company was left holding the bag with several thousand tons of barley contracts.

Selling the barley wasn’t the critical issue. Selling the barley for close to the premium price they paid for it was quite a problem.

Not much good came from any aspect of the Osage Inc. decision to kill the Appamattox BioEnergy plant, but Frank Perdue and his company came out of the whole smelly ordeal with a renewed sense of respect from Virginia farmers.

What they could or couldn’t have done with the OsageBio grain contracts isn’t clear. What they did do, honor every contract, was the right the thing to do, and doing the right thing clearly raised the company’s standing among Virginia farmers.

So, now Osage Bio Energy is just a bad memory for most of us involved in one way or another with the whole halcyon affair — a public black eye of sorts.

For the good people of Hopewell, Va., it’s a great deal more than a philosophic black eye. It’s the loss of real revenue and the hopelessness of getting that revenue back from a big corporate giant that appears quite ready to wash its hands of the whole affair.

The company's failure was a major blow for Hopewell's finances, as the city had considered the $150 million ethanol plant a new source of income with an expected total of $2.19 million in tax revenue every year.

With none of that tax revenue flowing, the city could have recouped some of the potential losses by cashing in a $5 million Letter of Credit. According to the contract with Osage, the city could have withdrawn $1 million to make up for a loss of tax revenue if the plant did not begin producing ethanol for commercial sales within three years after the commencement date — which was Sept. 30, 2011.

Lacheney took steps to sue Osage after a final deadline of Oct. 31. When that date came and went without a reaction from Osage, Lacheney sent certified reminders to 13 addresses associated with Osage, urging them to post the Letter of Credit immediately.

To this date, Osage has not posted the money. "We are currently at litigation with them," Lacheney said during a Hopewell City Council meeting. "We are pressing on, trying to find out some way to collect the $5 million," he said. Lacheney said that Osage is broke — but the plant is debt free. "It could sit there for 20 years and all we could do is collect real estate tax and machinery and tools tax," he said.

As an alternative, Lacheney suggested to Osage's lawyers that the company donate the property with the plant back to the city — a plan that would allow First Reserve Corp., the parent company, to use the donation as a major tax write-off. "They are definitely considering it," Lacheney said. "They are a $40 billion company, and they could use such a write-off."

Sad when a project that held so much hope for farmers and for the rural economy of southeast Virginia comes down to tax write-off.





Please or Register to post comments.

What's Farm Press Blog?

The Farm Press Daily Blog

Connect With Us

Blog Archive
Continuing Education Courses
New Course
The 2,000-member Weed Science Society of America’s (WSSA) Herbicide Resistance Action...
New Course
The course details six of the primary diseases affecting citrus: Huanglongbing (Citrus...
Potassium nitrate has a positive effect in controlling plant pests and diseases when applied...

Sponsored Introduction Continue on to (or wait seconds) ×