Oak Ridge biofuel plant six months behind on lease payments
By JAKE MUONIO
Updated: 06.11.09
Since its inception in 2007, the biofueled power plant located in Oak Ridge North has generated its share of accolades to go along with the electricity it produces.
Touted as the first entirely biofueled electricity generator in the United States to sell wholesale electricity, the plant, located at 321 Alana Lane, once received a congressional commendation.
Now, Biofuels Power Corporation — which operates the ORN plant, as well as several other facilities in the Houston area from its headquarters at 25211 Grogan’s Mill Road in The Woodlands — is at least six months behind on its rent payments, in default of its $3,500 a month lease.
The biofuels facility was ordered locked down Monday with a vote of the Oak Ridge North City Council. ORN Mayor Fred O’Connor, who is the CEO of Biofuels Corp., did not vote.
The action came after Councilman Steve Holcomb questioned city staff about giving preferential treatment to BFC, including allowing the lease to remain past due for as long as it did.
Holcomb also raised issue with several of the company’s filings, made both with the city and the U.S. Securities and Exchange Commission.
ORN Police Chief Andy Walters said the city’s police department, the Montgomery County District Attorney’s Office and the U.S. Attorney’s Office have been investigating the issue for more than a year.
In relation to the lease, ORN City Attorney Scott Bounds said in a June 5 memo to the council that he wasn’t yet able to issue an opinion on the legality of four possible leases and subleases on the property.
“Without additional information related to the City Council’s approval and funding of the lease agreements ... I am unable at this time to determine the validity of those agreements,” Bounds said.
Biofuels Power Corporation
The Biofuels Power Corporation evolved from two other companies, Texoga and Safefuels, which in the early 2000s were involved with a project to create a safer fuel tank for military vehicles using biodiesel.
After failing to land a military contract, the concept was abandoned, with the focus shifting to renewable fuel-related energy production. On Sept. 12, 2005, the ORN City Council voted to participate in such a project.
Later that month Safefuels (which ultimately created the Biofuels Power Corporation in 2006) entered into a memorandum of understanding with ORN, in which the city agreed to help facilitate the acquisition of some equipment and property on behalf of the company.
ORN helped secure the lease of a property that was suitable for the site in 2005, and subleased the property to Safefuels. In addition, the city used the Texas Building and Procurement Commission’s Surplus Property Program to acquire generators and a forklift for the plant.
Holcomb also has questioned the legality of those purchases, since the agency’s offerings are restricted to use by government agencies and non-profit organizations.
The City Council’s decision to give notice of default to Biofuels Power Corporation didn’t extend as far as Holcomb proposed in his initial motion, which was to begin the eviction process for the company and terminate the lease agreements on the properties.
“The actions that I have taken and will take in the future, are and will be, in my opinion, for the best interest of the citizens of Oak Ridge North,” Holcomb said. “… I am not pleased at the events that have occurred in the past, and I will continue to pursue these issues until a resolution is made.”
Moving forward
The ORN City Council will discuss and possibly vote on whether or not to terminate the lease agreements it has for the property.
“I think the company is taking the position, after last night, that Oak Ridge doesn’t want (the facility) there anymore,” said Steven McGuire, a founder and former Biofuels Power Corporation CEO. “If that’s the position, we’ll move it.”
The plant came online in August 2007, and was profitable for its first three months, primarily due to low fuel costs and soaring prices for natural gas.
McGuire said the plant operated some in early 2008, but the economic downturn has affected the company, much the same as with renewable fuel-powered generation sites all across the United States. In the case of BFC, one factor was sharply increasing prices for soybean oil, which the company uses to power its facility. At the same time, the price of natural gas, which is used in most electricity generation in Texas, plummeted, lowering the wholesale price of electricity.
In the months since the economic collapse, BFC has been looking for alternative fuel sources for the generators. If a suitable fuel source is found and the defaulted lease is taken care of, the facility could begin producing power again this summer, McGuire said.
