The sludge-to-diesel partnership between the city of Terre Haute and Powerdyne Renewable Fuels has been put on hold pending resolution of a federal lawsuit against the city related to the project.
Mayor Duke Bennett on Wednesday said that while he has not met with Powerdyne President Geoff Hirson, “We continue to have phone conversations.” Those conversations are being conducted by the city’s Indianapolis law firm, Bose McKinney & Evans, Bennett said.
In April, Hirson sent the mayor a letter declaring Powerdyne’s commitment to provide an advanced payment of $3 million to the city at the time of a groundbreaking for a new sludge-to-fuel production facility, then scheduled for September. Asked if that groundbreaking could still occur, the mayor said he wasn’t sure. “It is hard to tell right now. We are not having that conversation as we are involved in this legal situation’” Bennett said. “Obviously we have to take care of this legal action before we can formalize how we will move forward because we are stuck. We cannot do a new contract [with Powerdyne].”
Bennett said that while the city still has an agreement [with Powerdyne], there is no formal contract. “We were going to work to update contracts anyway, but we don’t have a formal contract until this lawsuit is resolved. We are stuck in between until we figure out what will happen with this lawsuit,” the mayor said. “It is on hold right now.”
A person answering a telephone at Powerdyne’s Newport Beach, California, office said Hirson is on vacation and unavailable for comment for 10 days.
Bennett had based the city’s 2015 budget on revenues that include the $3 million Powerdyne payment. With that payment now in question, the mayor said the city will hold the line on budget expenditures to make ends meet.
“We still have six months in the year and we will see what happens. The lawsuit is a major issue that has lobbed itself in this,” the mayor said.
Bennett said the lawsuit “needs to go away one way or another” before the city can decide what is still possible on the project and for any updated contracts with Powerdyne.
Last month, Highland TH LLC and Overseas Lease Group Inc. filed a federal lawsuit against Terre Haute and other named litigants, including Bennett, contending breach of contract and fraud. Highland/OLG seeks recovery of projected profits — over the 20-year period of the contract, that’s just over $172.6 million — as well as out-of-pocket expenses incurred, previously estimated at $1 million.
Also named in the lawsuit, filed in Indianapolis, are Terre Haute Wastewater Utilities and its director, Mark Thompson, along with the Terre Haute Board of Public Works and Safety, which had earlier approved the contract.
Highland/OLG is requesting the court appoint a receiver over the city or over the city’s sludge-drying portion of the wastewater treatment plant “to manage the facility in the best interest of all affected parties.” It also is asking for an injunction to prevent the removal of sludge-drying equipment, of which it claims ownership, from the plant.
The mayor said attorneys are currently working on a response to the federal lawsuit.
“Right now, our attorneys are formulating a response to the lawsuit. I am sure they [Powerdyne] are continuing to think about the project, but it puts this in a position that legal issues have to be resolved first,” the mayor said.
In an related issue, the mayor said the city in June repaid $750,000 to Noah Sodrel’s company, Terre Haute Dewatering LLC, after the city could not reach a lease agreement for that company to dry the city’s wastewater sludge. The company in late March gave the city $750,000 as a “refundable good faith deposit” to reach an operational lease for the company to dry the wastewater sludge.
Bennett said the city is still moving forward with the intention to dry the wastewater sludge. The city’s original combined sewer overflow plan, which includes an upgraded wastewater treatment plant, was designed for the city to dry the sludge on site.