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.