City sues failed Osage ethanol plant

By Holly Jessen | November 18, 2011

The city of Hopewell, Va., has moved forward with a court case against Osage Bio Energy LLC and its wholly owned subsidiary, Appomattox Bio Energy LLC, after the company failed to meet a deadline to post a $5 million letter of credit. The 65 MMgy barley-to-ethanol plant was mechanically compete in August but never achieved full production. In May, it was announced that the plant was for sale.

In exchange for property Hopewell sold to Osage, the company signed an agreement to post a $5 million letter of credit, from which the city could immediately draw $1 million. The letter of credit is a guarantee that the city will receive tax revenue it expected to collect from the ethanol plant.

After the deadline to post the letter of credit passed, Hopewell filed a lawsuit in Hopewell Circuit Court Nov. 1, said city attorney Thomas Lacheney. The city is asking the court to require Osage to immediately post the letter of credit, plus prejudgment interest, as well as granting further relief that the court deems proper.

From the date served, Osage has 21 days to file a response with the court. “So I figure the answer will have to be filed sometime at the end of this month or the beginning of December,” Lacheney said.

Requests for additional information to Brian Autry were not immediately returned. Autry, of Nexsen Pruet LLC, attorneys in North Carolina and South Carolina, is listed as special counsel to Osage on the plant website and as president of Osage and Appomattox in court documents.

In its May press release, Osage said the plant wouldn’t reach full production and was being sold due to unfavorable market conditions. It did not reference a September 2010 explosion at the plant. Repairs to the plant’s regenerative thermal oxidizer took longer than expected. The company did say it would immediately lay off workers effective May 25, but that it would retain “a core team of employees” to maintain the plant and facilitate the sale.