Abengoa Bioenergy got nearly $230 million in federal loans and grants to build a massive cellulosic biofuel refinery capable of producing 25 million gallons of ethanol every year. The company, however, says it has paid back its federal loans without selling any cellulosic ethanol.
“We have produced enough to sell, but have chosen not to sell any so far and have it stored at the facility,” Abengoa spokesman Chris Standlee told The Daily Caller News Foundation.
The Hugoton ethanol plant in Kansas opened more than a year ago after getting a $132 million loan guarantee from the Department of Energy (DOE) in 2011. Abengoa also got a $97 million grant from DOE in 2007 to build the plant. DOE’s website claims Abengoa fully paid back its loan guarantee in March 2015, despite the facility not selling any of the biofuels it produced.
“Abengoa is a large international company and has elected to repay the DOE loan from other revenues,” Standlee said when asked how Abengoa paid back the loan without selling any ethanol.
Abengoa is a large multinational green energy company based in Spain. The company reported about $8 billion in revenues last year, so it likely has the resources to pay off a DOE loan. However, the company’s decision to not sell any of the fuel is puzzling. The plant isn’t yet at full production, but the company maintains it’s producing enough biofuels for commercial sales.
“The plant construction is complete and the plant has produced significant volumes of cellulosic ethanol,” Standlee said. “We do not disclose exact production rates, but I can tell you that we are not yet at full production rates on a consistent basis.”
Hugoton is the third major cellulosic biofuel plant built in the U.S. and is hailed by the Obama administration as a “milestone” for green energy. The plant produces cellulosic ethanol — that is, biofuels made from the parts of corn people don’t eat.
“As part of the Administration’s all-of-the-above approach to homegrown American energy, the production of cellulosic ethanol creates economic opportunities for rural communities, helps diversify our energy portfolio, and moves us closer to a low-carbon energy future,” Energy Secretary Ernest Moniz said on the plant’s opening in October 2014.
Abengoa’s $132 million loan is only a small portion of DOE’s $30 billion loan program which includes financial support for solar panels, wind turbines, alternative fuel vehicles and nuclear power plants.
DOE’s loan program has been the center of political controversy since the high profile failures of solar panel companies and an electric car company that got hundreds of millions of dollars in federal loan guarantees.
An April 2015 Government Accountability Office (GAO) report found DOE’s loan program will cost taxpayers $2.21 billion over the lifetime of the loans. The failures of Solyndra and Abound Solar in the early days of the loan program increased taxpayer costs by $500 million.
Republican lawmakers attacked DOE’s loan program in 2012 after the failure of Solyndra, a solar company that got $535 million in loan guarantees. DOE temporarily stopped issuing loans, but once again started soliciting loan applications to spend the rest of $24 billion leftover for financing green energy.
The federal government has tried to encourage the use of cellulosic biofuels for years with tax credits and a mandate that refiners blend 16 billion gallons of cellulosic biofuels into the fuel supply by 2022.
DOE support helped pay for more than half the construction of the $400 million ethanol plant, which has a production capacity of 25 million gallons a year and will generate 21 megawatts of electricity — enough to power the facility and sell some extra wattage back to the grid.
But even with generous federal help, cellulosic production is having trouble taking off.
In 2013, a federal court ruled the agency could not mandate cellulosic biofuel blending because there was virtually no production of the fuel in 2012. Since then, the agency has expanded its definition of cellulosic biofuels which artificially inflated production numbers.
Cellulosic production in July 2014 was only 4,156 gallons, but after the EPA expanded the definition of cellulosic biofuels in early August 2014 production jumped to 3,492,106 — virtually all of the increase came from biofuels derived from natural gas.
EPA data shows 87,947,050 cellulosic biofuel credits (a proxy for gallons of fuel) generated have been generated in the U.S., but EPA data shows that 85,008,027 of these cellulosic credits were “used without further blending as transportion fuel.”