Beneficiary of Billion Dollar Green Fuels Program Files for Creditor Protection

Today, the Environmental Protection Agency (EPA) released its final ruling on blend volumes of renewable fuels for the calendar years 2014, 2015 and 2016. The challenge for the EPA is the lack of advanced biofuels to meet obligated minimum levels. The Energy Independence and Security Act of 2007 (EISA), mandates an increasing blend of renewable products into our domestic fuel supply. The Renewable Fuel Standards (RFS) provisions require non-food based cellulosic biofuels to be increasingly introduced into commercial gasoline. Called “2nd generation”, cellulosic ethanol, unlike 1st generation corn-ethanol, is derived from wood chips, grasses, corn cobs and other biological material. The problem is the congressionally mandated product is simply nonexistent.

Industry discussions, analytical reviews, and organizational rationalizations toss out phrases such as immature technology, steep learning curve, and of course, more federal funding. The issue is complicated, yet, not complicated. Producing 1st generation ethanol is much simpler than taking a cellulosic material and transforming it into a viable fuel source suitable for commercial use. Of course, we all knew this going into the program. Unfortunately, after pouring billions of dollars into this boondoggle we have done nothing more than successfully proven cellulosic ethanol is not a practical endeavor.

Even more so, with one of only four cellulosic ethanol production plants possibly set to shut its doors, Abengoa, a Spain-based sustainable energy development company, has filed for creditor protection one day before Thanksgiving, and less than a week before the EPA is expected to release the blend levels of renewable fuels. After the U.S. taxpayers invested billions of dollars towards the building of a massive biofuel facility, not to mention the world’s largest solar farm and wind farms, the company is teetering like a giant, green energy Jenga tower.

Abengoa is an international, mega-corporation founded in 1941. Its near certain investment losses to taxpayers’ dwarfs those of the Solyndra fiasco. Aside from perks and discounts for federal land use, employment credits and special tax incentives a quick search discloses only some of the federal dollars pumped into Abengoa and yet we still have no 2nd stage biofuels to meet program goals.

  • $1.45 billion loan guarantee to Abengoa Solar, Inc. for construction and the start-up of solar energy plant in Solana, AZ — 2010
  • $1.2 billion loan guarantee to Mohave Solar, LLC. for the construction & start-up of Mohave Solar Project plant in San Bernardino County, CA. — 2011
  • $133.9 million loan guarantee for biofuel plant Hugoton, KS — Department of Energy – 2011
  • $97 million federal grant, Hugoton, KS — Department of Energy — 2011
  • $4.03 million in grants and federal contracts for 2015 alone

Beyond the amounts presented here, millions more U.S. dollars have rolled into Abengoa and its many subsidiaries. With its announcement in Spain yesterday and today being Thanksgiving, American stock values for the company have not yet reacted. The protection filing gives the company four months to find a solution before creditors can force a full bankruptcy. But, many employees of U.S.-based projects may still be unaware.

It is likely by the end of next week, Abengoa will be a household name. The failure of Abengoa, along with the failure of the Renewable Fuels Standard program, will hit jobs, stock values, the banks and the federal budget. All this, and we still have no cellulosic ethanol to meet the mandates of the Renewable Fuels Standard.

Comments (6)

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  1. Francisco Machado says:

    The Renewable Fuel Standard was initiated under threat of diminishing petroleum stock supplies, the threat of running out of oil. There is now so much oil on the market to threaten the profits of producers and there is already a foreseeable supply availability of hundreds of years. Everything is wrong with alcohol fuels, from nitrogen fertilizer runoff to increased pollution to energy and cost inefficiency. Why are we now dealing with this drive to increase the ethanol percentage in motor fuels?

  2. Belinda Silva says:

    Hello Francisco,

    Thank you for reading and commenting. In the beginning, many thought it a good idea. Consumer groups, environmentalist, and the farming community were loving the idea. Me, not so much. But here we are in a very difficult situation. Billions of taxpayer money spent on research and development, plants, infrastructure, equipment, marketing, and employee training.

    The government created an unsustainable industry that is now using its size (capital investments and jobs) to argue for continued government support. In other words, “too big to fail”.

    It is undeniable that it would cause great harm to abruptly cut federal dollars and repeal the RFS. The best alternative to continuing to feed the beast is to phase out the program over a period of time. It needs a well-considered exit strategy.

    The exit plan should announce a timeline for incremental cuts to the federally mandated blends until the government is no longer dictating ethanol usage. But, do it without “buy-outs” or “transition payments”.

  3. John Stone says:

    Belinda,

    This appears to be a bit of an unfair hit piece attempting to discredit green energy. While it is true that Abengoa looks headed for bankruptcy, that appears to be a corporate liquidity issue brought on by poor financial management of their balance sheet, NOT inherent problems with green energy. This is completely different from Solyndra, which was an expensive and uncompetitive technology that appears to have been funded through political connections.

    A review of Abengoa’s financial statements shows that the company is profitable, but has excessive debt on its balance sheet. A restructuring of that debt is all that is required. While is is possible the Kansas cellulosic ethanol plant isn’t profitable, you have offered no evidence of this. Assuming it is and continues in operation, the taxpayers will have been well served by the grant. The larger solar projects you identify sell power via long term contracts, are profitable and represent no risk to the taxpayers.

    In short, Abengoa doesn’t appear to be a significant risk to taxpayers – only to foolish investors who invested in an over levered company. This happens every day in capitalism.

  4. noel mellen says:

    John,
    I see it differently. The plant related additives to fuel do incredible damage to cars and truck and anything that touches that form of fuel. On boats it is even worse, plus your mileage versus fuel use suffers also. I see about a 10% drop in my mileage use with bio fuels of any kind. With the extreme amount of energy we have today switching when possible back to straight fuel make the motor run more evenly and all around better.
    I have not seen anything here that addresses for any reason the end users. We don’t get Federal grants for our end and repair and cost is ridiculous. You have a system that is not profitable, doesn’t work well and you want to fund the turkey for a number of years more of running at a loss. Its a sad statement you back such waste in the name of green operations. People will back things that work and support a government that requires accountability. So should you unless you have something invested in the Abengoa project. Just reading yours and Belinda’s answers would turn off many possible supporters of green energy.

  5. Belinda Silva says:

    John Stone, i haven’t forgotten or ignored you. Your comments regarding the appearance of unfairness towards green energy lead me to write another blog regarding the importance of sustainable, market driven, practical renewable energy.

    I will post a link here when it is up.

    I do appreciate your input, and value your opinion to be sure. My response however, is delayed so as to provide solid, verifiable data to support the position that free-market policies offer a much better outcome.

    Respectfully,

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