Troubled ethanol plant looks to sell water for fracking

By Holly Jessen | December 01, 2011

Idled ethanol plant Bionol Clearfield LLC is working to get approval to sell some of the water it would be using for ethanol production to sell to the natural gas extraction industry for “fracking.”

Bionol, a 110 MMgy ethanol plant located in Clearfield, Pa., went into hot idle and applied for Chapter 7 bankruptcy protection in June, indicating the plant was for sale. As of late August, Fred Giuliano, a Chapter 7 bankruptcy lawyer for Bionol, said employees were still working at the plant. However, multiple recent attempts to speak to Giuliano or plant management have been unsuccessful.

In an apparent effort to bring in revenue while idle, the ethanol plant has filed an application with the Susquehanna River Basin Commission to modify its 2.5 million gallons a day withdraw permit to allow it to sell water drawn from the West Branch of the Susquehanna River. If the permit is modified it would not increase the permitted amount, said Chris Toms, supervisor of surface water project review for SRBC. It would only allow the company to sell a portion of that water to the natural gas extraction industry. “We still haven’t finalized the amount of that 2.5 million gallons a day that they would be permitted to sell but they requested 800,000 gallons a day,” he told EPM.

In order for the permit modification to go through, Bionol will need to demonstrate there is a need for the change. The company will also need to complete all public notice steps and other application requirements. Finally, the request must go before the SRBC at a commission meeting. “It’s possible that the project could be approved at the commission’s December meeting,” he said, adding that, if not, the next meeting isn’t until March.

Bionol has identified a contract dispute with Getty Petroleum Marketing Inc. as the source of its financial troubles. In late August, the company won an arbitration case with Getty and was awarded $47 million in damages incurred to-date and more than $180 million in future damages. The companies had a five-year off-take agreement with a commodity-based pricing formula. Getty challenged the pricing mechanisms of the contract after the plant came online in early 2010, following a drop in the commodities market. Court documents show legal wrangling between Bionol and Getty is ongoing.