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MeadWestVaco Says Feds Withholding $47M

RICHMOND, Va. (CN) - The nation's second largest packaging company says in a complaint filed in the U.S. Court of Federal Claims that it invested $291 million in the facility believing it would recoup a sizable portion that amount through cash grants offered through the American Recovery and Reinvestment Act.

Under Section 1603 of the Act, MeadWestVaco says, it is entitled to an amount equal to 30 percent of the qualified cost of the new facility. By that calculation, the Treasury Department should have paid about $85.9 million, the company claims. Instead, it only paid MeadWestVaco roughly $38.9 million.

The open-loop biomass plant uses pulping residues and other wood waste materials to generate electricity, most of which is sold Virginia Electric & Power Co.

"Plaintiff's biomass facility presented the government with a straightforward application of Section 1603's mandate to pay an application 30% of its cost basis in a newly constructed renewable energy facility," the complaint says. "Plaintiff financed and constructed the facility itself, thus its Section 1603 application contained no MeadWestVaco Virginia Corp. claims in a lawsuit that the federal government stiffed it for $47 million in incentives it expected to receive for building a massive biomass plant near its Covington, Va. paper mill in 2013.

third-party developer's fees and no third-party financing complexities.

"Plaintiff's application simply provided documents supporting the costs it had incurred, which were narrowly tailored to include only costs of 'qualified property' under the statute," it continues.

MeadWestVaco maintains the government agreed the biomass facility met the Section 1603's requirements and didn't question any of the company's "qualifying property classifications" or costs.

"Nonetheless, the government refused to pay more than half of the Section 1603 grant amount because Plaintiff's biomass facility, after generating electricity with high pressure steam, makes efficient use of a portion of the lower pressure steam to maintain feedwater temperatures for the biomass facility itself and to provide green heat to its onsite paper mill production activities," the complaint says.

"The government's determination is so erroneous and uninformed that it is entitled to no deference and should be discarded completely," MeadWestVaco says.

The company says that in addition to violating statutory mandates, "the government's adjustment contradicted its own renewable and green energy policies and energy efficiency principles."

Further, it says, the government's "absurd" interpretation of Section 1603, "would require energy facility such as Plaintiff's seeking to qualify for a full grant to discard (i.e. waste) the lower pressure steam and purchase energy instead to replace what the lower pressure steam could have provided."

MeadWestVaco is seeking a declaration that its biomass facility does meet all requirements of Section 1603, and an order directing the government to pay $46.9 million, plus any other "damages, reimbursements or recoupments" the court deems warranted.

The company is represented by Pamela Marple, Jerry Stouch and Michael Pusateri of Greenberg Traurig.

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