Closed ethanol plants got millions of dollars in incentives

Source: By Mike Iuenm KAKE • Posted: Thursday, December 10, 2015

WICHITA, Kan. (KAKE) — This week KAKE News reported two ethanol plants would close their doors and lay off workers.

The Spanish company Abengoa received more than $200 million in subsidies and grants.

And while the vast majority of that came from the federal government, some came from the state of Kansas.

Falling gas prices have not helped Abengoa. At one time, it was riding high when ethanol demand was high. But now the company is in a tailspin despite all of that money.

Abengoa operated two ethanol plants in Kansas. One in Colwich and a new facility in Hugoton. Both used crops or crop residue to produce biofuel. The company also has alternative energy facilities in other states. Now the company is in trouble. In the U.S. it has filed for bankruptcy protection. The company received $132.4 million in loan guarantees and a $97 million grant to build the Hugoton plant.

“There are some incentives that area a necessary evil that you need to have in our tool box because we know every other city in the region has that,” said Kansas Senator Michael O’Donnell, Republican from Wichita.

O’Donnell said only $4.5-million came from Kansas over seven years for Abengoa. And it’s cases like this that have made him skeptical of economic incentives.

“Because we do see scenarios where companies come in, they bilk the system, the taxpayers, and then they leave,” O’Donnell said.

WSU Professor Ken Kriz said sometimes the incentives produce jobs that don’t last.

“Whenever you get into a strong competition there are incentives to do things which in the long run are not necessarily productive,” Kriz said. “But they produce a short term victory.”

Kriz says instead of incentives states need to consider improving the quality of the state’s workforce, or quality of life.

“What else could we have done with our money,” Kriz said. “So instead of providing a tax break could we have put in an infrastructure investment that might attract a business that is very infrastructure intensive in terms of what the business processes are.”

Abengoa was eligible for another $3.5 million in tax credits but did not apply for the money. The company’s stock has taken a beating and the Abengoa is being investigated by the Department of Labor for it’s operations in two other states. I’ve called Abengoa for their response. So far there has been no call back from the company.