Lacassine Sugar Mill A Prime Example Why Government Should Butt Out Of Productive Economy
Over in Jefferson Davis Parish, in the little town of Lacassine, there’s an idle sugar mill which serves as an expensive lesson for Louisiana. The mill, built four years ago with $56 million in taxpayer dollars by former Agriculture Commissioner/Democrat Lord Of The Manor Bob Odom, was the source of intense criticism by free market advocates at the time.
The critics were right. It’s a boondoggle, our money was wasted and a mess of nightmare proportions has ensued.
Odom sold the sugar mill as a panacea for all that ailed farmers in the southern part of the state, packaging the Lacassine project with another $135 million facility in Bunkie which would also produce syrup. The State Bond Commission shot down the Bunkie plant amid a huge fracas between the Commission, Odom and then-Gov. Kathleen Blanco. The Lacassine facility made it to completion, though it came in a year late and $11 million over its supposed $45 million price tag.
And no sooner did the mill come online but it rapidly showed itself to be a lemon. From a New Orleans Times-Picayune article from November of 2006 after the facility finally opened…
Plant officials are not providing details about the start-up, but even if the mill can be brought up to full speed for the current cutting season, it faces what is known as a “short crop,” meaning that farmers in the southwest Louisiana region have grown less cane this year than the mill expected to process and sell.
“We would have hoped for more cane,” Lacassine mill administrator Heera Bulkan said.
Sugar cane processing has started and stopped at least twice in the past two weeks as mill officials have grappled with breakdowns of major components. At times, cane deliveries have stacked up at its door front, leaving the mill short of bagasse, the shreddings from cane that are burned to run the plant’s boilers. The mill has taken the expensive step of shipping its cane to other mills to be shredded and then shipping the bagasse back to Lacassine so that the plant would have the fuel to burn.
Media not allowed in
Odom and the mill operators have not yet let members of the media enter the plant. On a recent sunny afternoon in Lacassine, about two dozen trailers loaded with cane sat idle in a long line outside the mill, and no cane trucks entered or left the plant for hours. Operators of other mills, who have been processing cane from other parts of the state since early October, said a mill at this time of year should be busy with traffic from cane trucks….
Shortly after that rocky start, work began on an attempt to make the plant ready to produce ethanol. “Ethanol could be the salvation of Louisiana agriculture,” Odom said.
With engineers from India and a corporate partner, Andino Sugar Development, LLC, based in Colombia, the facility took on the look of a desperate enterprise. Andino’s successor company, Lake Charles Cane-Lacassine Mill, LLC, was fronted by a thirty-something entrepreneur named Alex Santacoloma with a pile of family money from Colomba. Santacoloma signed a deal to purchase the facility from the state for $60 million over 44 years. But the state had to agree to back-load the payments into later years, as he couldn’t come up with the initial payments and never could get the ethanol factory up and running. The sugar mill shut down in 2008.
Meanwhile, last year the state legislature agreed to fund $15 million in debt service so that the state Department of Agriculture wouldn’t be too jammed up to fund some of its other obligations as a result of the Lacassine losses.
And now, a third company fronted by Santacoloma, this one styled Louisiana Green Fuels, is on the hook for a $2 million payment to the state next year despite the plant’s not having produced anything in over two years. They’ve managed to find $100,000 in interest payments to the state for four years under a restructured agreement. When that $2 million comes due, nobody really expects them to have the cash ready. Louisiana Green Fuels has been looking around, with the state’s help, for an equity partner to get the ethanol project going. But nobody is turning a profit on ethanol unless it’s with government subsidies, so there are no takers.
And that will mean the sale of the plant will be cancelled, meaning the state will be left with a $56 million ruin that can’t run at a profit, in a place where there is neither enough sugar cane stock to feed it nor enough demand for its end product to fund its operations. Ultimately, the smart move will be to auction the facility off to the highest bidder, take whatever cash the state can get and absorb the expensive lesson at hand.
The lesson? Never, EVER let the government get involved with what it supposed to be a money-making venture. If such a venture is truly capable of turning a profit and has the brains and brawn in its entrepreneurial core to get it off the ground, then capital will gravitate to it. Government involvement – as defined by the meddling of the ethically-challenged and sinfully arrogant Odom in the Lacassine case – will not only substitute politics for sound economic judgement but will create action based on politics.
Odom should have been shot down on all of his stupid ideas for sugar mills, of which there was no dearth prior to the construction of the Lacassine facility (and the state’s being in competition with the private sugar-mill industry before the Lacassine plant went south ought to particularly offend the nostrils). But he wasn’t, because state legislators from that part of Louisiana saw the mill as a porker’s prize rather than the insult to the marketplace and the threat to the productive sector it truly was.
The Lacassine disaster ought to be the absolute last business venture any department or subdivision of the Louisiana state government enters into. We have spent decades wasting taxpayer dollars on similar projects since the advent of Longite “populist” rule in the 1920′s, and it’s past time that we stop.
There was a pitch by the sugar cane industry to farmers in SW Louisiana about the profitability of cane in the mid 90′s. But there nearest sugar mills around New Iberia. That extra trucking costs money.
It this were a commercially viable location for a mill, private industry would have built one.
I wonder how involved Charlie Boy was in this venture, as a lobbyist for the sugar industry back then?
Charlie Boy had nothing to do with this debacle!
You right. Note that Andino had zero experience in this kind of thing, having been formed from the proceeds of selling their cement business. It also bought up two other LA closed or about to be mills and hundreds of acreage, yet got the state to waive payments on their Lacassine project. See http://jeffsadow.blogspot.com/2010/12/proper-spending-priorities-needed-mill.html.
Jeff Sadow…never misses an opportunity to comment on this blog with a link to his articles. Maybe one day he’ll add to the discussion without having to pimp his own work.
FWIW, Scott’s commentary is much better anyway, which is probably why his site is more successful.
This is a sore point. I was personally involved in attempts to get this plant started up. The noises of deadlines swooping past was deafening. I blogged about some of my experiences back in 2006.
It was poorly engineered. I got involved in some electrical issues and found that the electrical engineer for this project had never visited the site. That whole thing smacked of a little of the “good ol’ boy” Louisiana politics at its best.
Construction quality was shoddy and haphazard. Odom actually raided his state offices and sent his state workers to this project where they managed to pretty much screw up everything they touched. “Odom’s people did that” was a phrase much used as we tried to get things started.
But I did get to see Bob Odom come sweeping through HIS project with a posse of sycophants in trail.
Any body remember Methanol mandated by the Federal Govt. in and then out a few years later – massive stupidity by egos in Washington.
anybody remember the plant the federal government built in New Iberia, right next to the Cajun Co-op mill??!! it was an ETHANOL plant, built to distill molasses, really just a giant whiskey still making moonshine. i know, i helped build that plant. then it sat idle for a few years, NEVER ONCE USED COMMERCIALLY and then dismantled and shipped to Pakistan. IT WAS SOLD TO ADNAN KASHOGI, WHO WAS ON EVERY “LIFESTYLES OF THE RICH AND FAMOUS”, FOR 10 CENTS ON THE DOLLAR!!! AND IT WAS OUR DOLLARS (WASTED) THAT BUILT IT!! HOW MUCH YOU WANNA BET IN 10 YEARS SOME DEMOCRAT WILL SAY “LET’S GET THE TAXPAYERS TO BUILD AN ETHANOL PLANT”????
so now what? eddie’s about to be available for work, so why not let him have it and he can turn it into a casino. give the mill to edwin edwards and stand back.
I, like so many other conservatives, knew this sugar mill was nothing other than something Bob Odom was going to make money from. Bob Odom was a crook, is a crook and in the afterlife will be a crook. He and the devil will make a great partnership.
I opposed this venture on my morning radio show almost every day to no avail. The electorate in Louisiana is the most ignorant in the union. All a politician has to feed the electorate is they will get something for nothing. This is always the mnost distant from the truth in Louisiana. I am surprised Odom didn’t try to build the sugar mill in New Orleans where it would have been met with open arms, ignorance, another governement program for the most worthless part of Louisiana promising something for nothing. It would have thrived there and like New Orleans, produced nothing.
Harry Hoyler
KKAY
Now, you know and I know that Odom ripped the taxpayers off in a large way.
He along with his co-joint cronys have ripped off the tax payers for millions, millions which he and his cronys have benefited personally in a devious plan,
with the co-operation of “”" OUR LEGISLATORS, including GOVERNOR BLANCO “, check his unnumbered Swiss Bank Accounts, the number of furs his wife has and his cronys hidden stash. This Odom is a Prolific Thief, Edwin Edwards was a Pilfering Midget when you compare him to Odom, and when the time comes for Odom to pay the fiddler, He’ll renege and thats all he wrote……..EXISTENTIALIST MAN.
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Lafayette Fiber (City owned Cable, TV and phone service) is also supposed to “make money”. Wonder how it will turn out?