Sunday, 11 August 2013 16:10

Franklin plant with McAuliffe ties under a campaign spotlight

For more than two years, talk of a new wood pellet plant has dangled the promise of jobs and new business in the rural town of Franklin.

pellets home

More recently an associated storage and export facility announced late last year offered hope of a long-term tenant at a mostly vacant state-owned shipping terminal in Portsmouth.

Now that Terry McAuliffe, a business partner involved in the deals, is running for governor, the projects have become fodder in a slash-and-burn political campaign. Most recently the group Citizens United produced a 29-minute film portraying McAuliffe as a serial exaggerator in his business life and asking Franklin residents, "Where are the jobs?"

Though neither site is in service, interviews, public documents released by the Virginia Port Authority and a recent article in the trade publication Biomass Magazine all suggest progress is being made toward a pellet operation, albeit at a slower pace than was originally anticipated by a McAuliffe business partner and a Houston-based energy company involved in the deals.

Peter O'Keefe, the McAuliffe business associate, told the Daily Press in April 2011 that "if all goes well, we will be up and running in about 18 to 24 months" — or by April 2013.

He said Friday it has taken longer to finance the projects because utility companies in the United Kingdom are waiting on two much-delayed regulatory decisions before they enter into new long-term contracts to buy American wood pellets.

"They're more than a year behind where we thought they would be (on the ruling)," O'Keefe said of the U.K. Department of Energy and Climate Change. But with "the way those decisions are expected to come down, the outlook is bright."

Citing confidentiality agreements, O'Keefe said he could not go into any level of detail about negotiations with International Paper over a lease site for what's called Franklin Pellets.

McAuliffe declined to discuss the wood pellet project, saying they would be better addressed by O'Keefe. But a McAuliffe spokesman rebutted several of the points made in the Citizens United film.

Pellet plants pulverize a variety of forms of wood, including waste byproduct from lumber facilities, and produce pellets that can be burned as a supplement to or substitute for coal at power plants.

The Franklin initiative is one of a number of prospective wood pellet plants that have sprouted up across the southeastern part of the country. Existing pellet plants and the prospective new facilities seek to take advantage of a European Union subsidy program that created a hunger among British and European utility companies for U.S. and Canadian product.

The partnership with McAuliffe ties is hoping to build a plant called Franklin Pellets on land leased from International Paper, which runs a large campus that is now home to a fluff-pulp mill and a recycled tissue company. Using a separate corporation, the group is more than 11 months into a lease negotiation with port officials.

There are several indicators that there's been progress on both sets of negotiations, according to three sources familiar with the talks who all declined to speak on the record citing the confidentiality agreements.

"They're trying to make a go of it and get the (Portsmouth Marine Terminal) lease together," one source said.

The 20-year lease includes a six-month interim early termination period that gave CMI and MultiFuels an opportunity to walk away. That period expired Feb. 28. The Daily Press obtained a copy of the lease from the port authority

"There's no effective date yet as far as occupancy goes, but they did not walk away from it," the source said. "They're trying to finalize the lease and an occupancy agreement but they have to find a buyer (for their pellets)."

That would put Franklin Pellets in the same position as numerous other would-be pellet operations.

Seth Ginther, a Richmond lawyer and head of the U.S. Industrial Pellet Association, said the financing for a wave of new wood pellet developments are on hold pending an environmental policy decision in the U.K. that's expected to stoke more demand for U.S. pellets.

"If you're a developer in today's market for export to Europe you're constantly juggling three different balls — European policy, raising money for a project for when the policy gets in place, and also logistics," Ginther said.

"Once you have that policy certainty, you finance your facility on the back of that off-take agreement," he said, referring to a contract, typically with a utility, to ship a certain amount of pellets from a manufacturing plant.


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