Georgians on the hook for failed ethanol facility

Source: Dan Chapman • The Atlanta Journal-Constitution  • Posted: Thursday, January 5, 2012

A major player
Vinod Khosla helped secure government loans for Range Fuels to build its plant. He is the main financial backer of LanzaTech, which bought the plant Tuesday.

APA major player Vinod Khosla helped secure government loans for Range Fuels to build its plant. He is the main financial backer of LanzaTech, which bought the plant Tuesday.

Range Fuels, the failed wood-to-ethanol factory in southeastern Georgia that cost taxpayers $70 million, was sold Tuesday for pennies on the dollar. Its buyer is a company that is backed by the same man who bankrolled and helped secure government loans for Range Fuels before it went bust last year.

California entrepreneur Vinod Khosla is the main financial backer of LanzaTech, the New Zealand-based biofuel company that paid $5.1 million Tuesday for the plant in Soperton.

LanzaTech hasn’t received the same type of federal and state loans as Range Fuels, but the company has received $7 million from the U.S. departments of Energy and Transportation to assist in the development of alternative fuels.

The Range fiasco harkens other, failed renewable energy companies that received major taxpayer funding. California solar panel maker Solyndra got $535 million in federal loan guarantees. Beacon Power of Massachusetts, which makes energy-storage equipment, took in $43 million in federal money. Both filed for bankruptcy last year.

Range cost U.S. taxpayers $64 million and Georgia taxpayers another $6.2 million. Tuesday’s sale netted $5.1 million, which will help offset losses suffered by the U.S. Department of Agriculture. Georgia’s money, which paid for some of the ethanol-making equipment, won’t be recouped outright, but state officials expect LanzaTech to use the machinery.

Jeb Simons, an engineer in Savannah whose family hails from Soperton, doesn’t expect much of the taxpayer investment to be recouped. He blames Khosla.

“He takes government money, builds the place and takes the money and runs,” said Simons, “ … and now he’s double-dipping on government funds for round two. That’s taxpayer money that could go toward schools or hospitals or be given back to taxpayers.”

Khosla, who made his billions as a co-founder of Sun Microsystems, has invested heavily in alternative energies, cellulosic ethanol in particular. Khosla is listed as “a key investor” in LanzaTech and sits on the board of directors, according to the New Zealand company’s website. A call to Khosla Ventures was not returned Wednesday.

USDA spokesman Justin DeJong said, “We are disappointed that [Range Fuels] did not succeed. It’s important to remember that USDA has a long history of successful lending that supports rural homeowners, business owners, utilities and cooperatives, and over 90 percent of USDA’s loans are successfully repaid.”

Sam Shelton, director of research programs at Georgia Tech’s Strategic Energy Institute, was long skeptical of Range Fuels’ plans and technology.

“It was too damn big a risk for an apparently unproven technology, and the due diligence I personally performed on Range would not entice me to invest in it,” Shelton said Wednesday. Shelton was invited by Range a few years back to check out its operation in Colorado where it was based.

“Government should not be in the venture capital business selecting technologies,” he added.

Range was the alternative energy rage in 2007 when then-Gov. Sonny Perdue held a news conference to announce dot-com billionaire Khosla would help finance the $225 million wood-to-ethanol plant in economically depressed Treutlen County, 155 miles southeast of Atlanta.

Later that year, at a groundbreaking in Soperton’s industrial park, Perdue boasted that “Range Fuels represents a new future for our country.” And Georgia, with its 24 million forested acres, would become world renowned for cellulosic ethanol which, conceivably, turns pine trees and scrap into fuel.

The Bush administration’s Energy Department steered a $76 million federal grant to Range. The Department of Agriculture followed up with an $80 million loan guarantee. Georgia officials pledged $6.2 million. Treutlen County, one of the state’s poorest, offered 20 years worth of tax abatements and 97 acres in its industrial park.

Private investors reportedly put up $158 million. In all, the project raised more than $320 million.

Range, unable to turn wood into ethanol, closed its doors a year ago. It never came close to creating the 70 jobs once promised.

The OneGeorgia rural development fund put up the $6.2 million that Range used to buy equipment. Alison Tyrer, spokeswoman for the Georgia Department of Economic Development, said parts of the initial deal with Range may remain in place with LanzaTech. Range had until 2015 to invest at least $150 million, and create at least 50 jobs, before the state would consider “clawing back” the investment.

“The accountability is still there,” Tyrer said. “Technology is almost by definition innovative and with innovation there’s a certain amount of risk. But the state is as prudent as it can possibly be with taxpayer money.”

LanzaTech, according to a spokesman, will use the Soperton site to turn wood residue into fuels and chemicals.

Most of the company’s work, so far, revolves around the conversion of carbon monoxide into ethanol and other “drop-in” fuels. It is developing a low-carbon jet fuel for Virgin Atlantic Airways.