Taxpayers on Hook for Failed Ethanol Plant

Published February 6, 2012

A highly touted cellulosic ethanol venture has been sold for pennies on the dollar after failing to produce a single drop of ethanol. The cut-rate sale of Range Fuel’s cellulosic ethanol factory in Soperton, Georgia to New Zealand investors marks another stinging defeat for much-ballyhooed alternative energy technologies.

Promises Broken
In 2007 venture capitalist Vinod Khosla predicted great things for cellulosic ethanol and the Soperton factory owned by his Range Fuels company. “We need to declare a war on oil,” said Khosla. “Cellulosic ethanol is the weapon we need.”

Alternative energy advocates shared Khosla’s optimism. In 2008 the Soperton project was awarded the North American Fuels Technology Green Excellence of the Year Award. Heavily forested Georgia was to be the home of the nation’s first wood-chips-to-fuel plant, providing jobs in an economically depressed small town and paving the way for similar alternative-energy facilities across the United States.

It didn’t turn out that way. The project raised $320 million, largely in the form of federal, state, and local subsidies, but the plant never produced a drop of ethanol. Nor did the factory ever hire the 50 to 70 permanent employees its promoters had promised. On Jan. 3, Range Fuels finally sold the factory to New Zealand-based LanzaTech for a mere $5.1 million. Taxpayers and private investors are left on the hook for most of the remaining $315 million.

Taxpayer Fortune Squandered
The Bush administration’s Energy Department originally approved a $76 million grant for Range Fuels, and the Bush Agriculture Department came up with another $80 million loan guarantee for the venture. The state of Georgia, through its OneGeorgia rural development fund, gave the company $6.2 million to set up shop in Soperton. All told, taxpayers are out $162.2 million.

Lanza Tech, which purchased the facility at a cut-rate price, lists Khosla as a “key investor” and a member of its board of directors.

Khosla made a fortune as one of the cofounders of Sun Microsystems and has been an outspoken proponent of alternative fuels. In Georgia, the Range Fuels fiasco has not earned Khosla many friends.

“He takes government money, builds the place, and takes the money and runs, … and now he’s double-dipping on government money for round two,” Jeb Simons, an engineer in Savannah, told the Atlanta Journal-Constitution. “That’s taxpayer money that could go towards schools or hospitals or be given back to taxpayers.”

Private Investor Funding
“Range Fuels shows once again why the federal government shouldn’t be in the finance business,” said Daniel Simmons, director of state affaris at the Institute for Energy Research. “It doesn’t matter if it’s Republicans or Democrats—both parties make bad investments when trying to promote energy.”

“It would be much better for taxpayers if the government left business finance alone and let private citizens risk their money on speculative energy schemes,” Simmons explained.

“Range Fuels first received money from the Bush administration, and the Obama administration has expanded Washington’s role in favoring certain companies and energy sources over others,” Simmons added. “After the failure of Solyndra, Range Fuels, and other companies, let’s hope the next administration pulls back from this risky use of taxpayer dollars.”

Bonner R. Cohen, Ph. D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.