The Cost of Ethanol: Bad Faith, Broken Promises and a Plan up in Smoke

by Joel Wittnebel (The Oshawa Express) The shroud of secrecy at Oshawa’s waterfront is starting to lift, and it tells a troubling tale of mismanagement, failed investments and poor decisions that not only led to the end of the proposed ethanol plant, but now has the Oshawa Port Authority staring up at a more than $4 million debt.

After obtaining a copy of the arbitrator’s ruling in the case between FarmTech and the Oshawa Port Authority (OPA), a decision that has been denounced with confusion by the OPA, The Oshawa Express is now able to piece together a portion of what really happened that eventually led to the end of the ethanol project and provide the reasoning for what the port now owes the would-be operators of the defunct plant.

“Ms. Taylor (Donna Taylor, port of Oshawa president, CEO and harbourmaster) and the (Harbour) Commission were interested in leasing the undeveloped Crown lands to maximize the economic benefits from the property for the Commission and the local community.”

And while a lease wasn’t officially signed until 2013, well after the project was made public, much to the chagrin of residents and those at city hall, it appears that the ethanol project was almost a go right from 2007.

Documents presented in court show a number of annual option letters signed by the Oshawa Harbour Commission and eventually the OPA that state FarmTech “was given, and continued to enjoy, an option to lease certain port industrial lands for the purpose of constructing a biofuels facility.”

O’Connor (FarmTech president Dan O’Connor) notes that due to the 2008 recession, acquiring the proper financing for the ethanol plant was made difficult and while significant efforts were undertaken, including trips to Europe, Hong Kong and China, no financing was secured prior to the signing of the lease in 2013.

O’Connor also blames the transition of the Oshawa Harbour Commission to the Oshawa Port Authority as part of the problem, and also points to the strong local opposition as scaring off potential investors.

The path forward following the termination notice was written in the stars. Or rather, it was written into the lease agreement, which noted that should such a disagreement arise that couldn’t be settled between the two parties, it would immediately trigger arbitration.

And while the eventual outcome of the arbitration is already known, with the OPA owing $4,189,965.25 to FarmTech, it could have been worse for the OPA.

While the arbitrator eventually settled on making the award based on the lost time FarmTech spent in court, it spared the OPA the alternative, which would have been an amount based on the lost potential revenues over the course of the 40-year lease of the ethanol plant, estimated at upwards of $65 million.

The OPA argued that without the proper insurance in place, they were liable for anyone getting hurt on the property, a growing concern due to the amount of people starting to protest the proposed development at the time.

However, Judge found that the OPA overstated the importance of this issue, noting that along with the option put forward by FarmTech for a temporary exemption, the OPA also had the choice, under the lease, to acquire their own insurance policy for the land and bill the cost back to FarmTech.

On the other hand, this all seems beside the point as the OPA’s own insurance coverage protected them in the event of someone getting hurt on the land.

With that aside, the OPA did not provide due consideration to FarmTech’s proposal, which acting under good faith in the lease, they were obligated to do, Judge states. READ MORE