City files suit against ethanol plant owners

HOPEWELL, VA (WWBT) - Hopewell files a lawsuit against a company it says breached a multi-million dollar contract. Now, city leaders want a judge to enforce the agreement it has with the owner of an ethanol plant.

Osage Bio Energy and the city of Hopewell entered into a development agreement in 2008. The city sold a 55 acre plot to Osage which constructed an ethanol plant. It was touted to be the first major barley based ethanol plant in the state.

According to a contract between the two -- Osage had until September 30th of this year to post a 5 million dollar letter of credit. Nearly two months after that deadline the city says Osage has not posted the letter of credit. Now, the matter is in court.

"The purpose of that letter of credit is that the city would draw against that for future tax payments. That letter of credit has not been filed yet --therefore the city attorney filed suit," said Hopewell City Manager, Ed Daley.

The city is asking the court to require Osage to immediately post the letter of credit. Once that's done the city can draw one million dollars.

NBC12 reached out to the folks listed as being served with the lawsuit. None of our phone calls were returned. A security officer at the site says the president listed on the document, Brian Autry, is not in the area.

There's not a lot of activity at the ethanol plant. In May, Osage announced it would reduce it's workforce and put the plant on the market. Osage also decided not to start production.

Regardless, the city says Osage must hold-up its end of the agreement. The city manager says not having the funds won't impact the city in the short term.

"It's not a budgeted item. So it won't impact our budget directly but it was in our financial planning for the future," said Daley.

A court date for the case has not been set.

Copyright 2011 WWBT NBC12. All rights reserved.