Strickland calls for USDA investigation into Biomass deal

Published 12:00 am Saturday, September 6, 2003

Puzzling. Appalling. Indefensible.

These were some of the words U.S. Congressman Ted Strickland (D-6th) used to describe the United States Department of Agriculture's decision to award a tobacco disposal contract to Biomass Energy LLC.

Based on reports that questioned how the government agency arrived at this decision and a letter from South Point Village Councilman David Classing asking for an investigation, Strickland will request next week that the inspector general of the USDA initiate an investigation.

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"The fact that there seems that there was no attention to see if the company could carry out a contract of this size is appalling," he said.

This issue began in December 2002 when Biomass was awarded a contract to destroy 121,448 tons of surplus tobacco for $19.25 a ton, totaling a $2.33 million deal.

Shipments began this spring but were stopped by the USDA in March after concerns were raised by the Ohio EPA about permits needed for the storage and disposal of the material. The EPA later ordered that the 10,181 tons already received be removed.

All parts of the EPA orders to remove the product were not met on time, so the EPA referred the case to Ohio Attorney General Jim Petro's office on July 22. Representatives for Petro's office are currently in discussions with Biomass to see if the situation can be resolved without litigation.

Because the USDA did not seem to focus on whether or not the Nicholasville, Ky.-based company would have an operable facility in South Point is also "puzzling" and "indefensible," Strickland said.

The Congressman also expressed concerns over the fact USDA officials seemed unwilling or unable to answer questions regarding technical requirements and other issues.

"I think I can guarantee you that they will answer the inspector general's questions," he said.

The inspector general's function is to promote efficiency and effectiveness as well as detect fraud and abuse within the USDA and with non-federal entities working with the agency, Strickland said.

Among the questions the congressman said he would like answered are why would a contract be given to a company with delinquent taxes and where did the government get its tax information that said the taxes were not delinquent.

The Congressman said that he will also ask the USDA to release all relevant documentation about the Biomass contract and will make an official request through the Freedom of Information Act if necessary.

Strickland said he expects to hear something from the inspector general within a few weeks.

Mayor Bill Gaskin agrees that the situation just does not make sense.

"I agree with Mr. Classing that something is just not right someplace," he said. "I am just thankful that the Ohio EPA came in and straightened things out or we would have been in trouble."

Randy Hendricks, vice-president for Montenay Power Corporation, a competitor for the tobacco contract said the USDA should have heeded numerous warnings.

In February, representatives for Montenay wrote a letter to the USDA stating that the Public Utilities Commission of Ohio questioned if the plant would be operational, that the Portsmouth Local Air Agency reported that there was no activity at the site, that the Lawrence Economic Development Corporation doubted if the facility will ever be operational and that Biomass owed thousands of dollars in delinquent property taxes.

The USDA responded to Montenay with a February letter refuting all of the claims and states that "it is the government's understanding that the $30,000 taxes is not delinquent and are due by the end of March 2003."

Biomass owes $107,915 in delinquent taxes for the 2001 and 2002 tax years on 13 parcels of land in South Point, most of which would have been delinquent at the time of the USDA's letter, according to Lawrence County Auditor Ray Dutey.

Biomass has been delinquent on more than $40,000 since Aug. 30, 2001, according to the auditors office.

Steve Freeman, a tobacco specialist for the USDA to whom questions have been repeatedly referred,

said he could not answer any contract questions and did not know where the agency got its tax information.

Hendricks also questioned the feasibility of the time frame. The USDA contract said the tobacco had to be destroyed within 18 months of the December 2002 contract award.

Biomass CEO Mark Harris said previously the company would conduct a $100 million renovation of its plant that would begin in April and would be completed in 12 to 15 months. He later said the start date was October.