SACRAMENTO (CN) – California sued a bioenergy company, claiming it improperly spent as much as $1.7 million in public money targeted for equipment purchases for a project to refine sugar beets into ethanol fuel.
The State Energy Resources Conservation and Development Commission sued Mendota Bioenergy LLC on April 8 in Superior Court on five counts: negligent and intentional concealment and misrepresentation and breach of contract.
The commission helps fund alternative fuels projects by reimbursing grant recipients as they buy equipment and technology they need to develop, improve or produce alternative fuels. Its competitive Alternative and Renewable Fuel and Vehicle Technology provides as much as $100 million annually in public funds obtained through vehicle fees.
In the United States, most ethanol is made from corn. Mendota Bioenergy was set to construct the nation’s first commercial-scale bio-refinery to turn beets into biofuel. Europe already has several such plants, with France, Germany, Belgium and Greece leading production.
Beet crops nearly vanished in California when sugar prices collapsed. They can deliver ethanol yields twice those of corn per acre because of their higher sugar content, according to some researchers.
The biofuel is produced from so-called energy beets, which are genetically bred specifically for making renewable fuels and are not meant for human consumption.
In March 2013, the commission and Mendota entered into a grant agreement under which Mendota initially pledged to construct and operate a demonstration plant that would convert 10,000 tons of beets into 285,000 gallons of 200-proof (100%) ethanol.
Once everything was in place at a demonstration plant, and its operation supported commercial implementation, Mendota’s plant could be used to construct a larger one.
The agreement was amended several times, and ultimately they agreed that Mendota was to use equipment it obtained from subcontractor Easy Energy Systems to build a demonstration plant that would convert 2,400 tons of beets into approximately 60,000 gallons of ethanol, the state says.
The commission agreed to provide just under $5 million as reimbursements, and Mendota agreed to provide the remaining $6.5 million for the $11.5 million project, the state says.
In late 2013, Mendota submitted two separate requests to the commission for reimbursement of equipment expenses, along with invoices from Easy Energy for approximately $1.77 million, according to the complaint.
“Relying on Mendota’s certification of its reimbursement and the Easy Energy invoices, the commission believed that Mendota had actually incurred those expenses, and believed Easy Energy had delivered the equipment or was going to deliver the equipment to Mendota,” the state says.
But nearly a year after reimbursing Mendota, the commission says, it learned that the equipment never was shipped and that Mendota used the money at least in part for expenses that were not allowed under the grant agreement.
Instead of informing the commission about its problems with Easy Energy, Mendota misled the commission into believing that Easy Energy was performing its obligations and the project was progressing, the state says.
The commission says: “Mendota encountered other significant issues that affected the project’s budget and timeline, but Mendota concealed this information in order to continue its business operations with public funds, in violation of the grant agreement.”
When Mendota’s general manager informed the commission in November 2014 that the company had paid Easy Energy only $750,000 of the $1.77 million it had claimed as reimbursement, the commission requested immediate repayment of the remaining $1 million, the state says.
Mendota paid only $300,000 and failed to account for the remaining money, the state says.
An audit in early 2015 revealed that Mendota spent the reimbursement money on purposes not allowable under the grant agreement, according to the complaint.
The commission voted in December 2105 to terminate the grant agreement with Mendota. It seeks the return of the public funds and punitive damages.
A commission representative told Courthouse News the commission “is taking this action to ensure public funds are spent properly.”
Mendota did not immediately respond to a request for comment.
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