Poet awaits arbitration in $33 million ethanol dispute

Source: By Jonathan Ellis, Sioux Falls Argus Leader • Posted: Friday, February 23, 2018

Ethanol giant Poet has dismissed a federal lawsuit it filed last year and will instead arbitrate more than $33 million in damages against a company hired to design a system to convert biomass into ethanol.

The decision comes after Andritz Inc. argued in court filings and a separate arbitration hearing that Poet’s contract required that disputes be settled in arbitration rather than litigation. Andritz has also asserted counterclaims against Poet worth $7 million.

Poet first hired Andritz, an international engineering company, to design a system for its Emmetsburg, Iowa plant to convert corn stalks, husks, leaves and cobs into ethanol. In a second contract in 2012, Andritz won the rights to supply and construct the system, which Poet dubbed Project Liberty.

Supporters of cellulosic ethanol hope that biomass can provide a reliable source of the alternative fuel, but that goal has proven to be elusive. The $250 million Emmetsburg plant opened in 2014 but almost immediately ran into trouble.

In its filings, Poet alleges that Andritz’s treatment system for biomass could not operate at a scale to make it commercially viable. Poet says it put the company on notice in 2014 and gave it multiple opportunities to get the system up to expectations.

But Andritz has argued that Poet failed to meet design and performance obligations it was required to make before Andritz was required to meet performance guarantees spelled out in the contract.

“Poet completely failed to satisfy these conditions precedent,” Andritz asserted in a court filing. “Andritz incurred millions of dollars in costs attempting to achieve the performance guarantees despite Poet never satisfying its contractual preconditions.”

Matt Merritt, Poet’s director of public relations, said in an emailed statement that Poet voluntarily dismissed its federal lawsuit without prejudice, meaning it can be refiled at a later date. The dismissal will allow Poet to pursue its claims in the related American Arbitration Association proceeding.

“Poet intends to vigorously pursue its claims – including claims for breach of contract, misrepresentation and fraud – in the context of the AAA arbitration,” Merritt said. “As the matter remains in active litigation, Poet does not have any further comment at this time.”

An arbitration hearing scheduled for April was canceled. A new hearing date has not been scheduled.