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BISMARCK — North Dakota's Public Service Commission plans to seek permission to go ahead with a state insolvency case against an ethanol factory that is under bankruptcy protection from its creditors.
The commission, which licenses and regulates grain elevators, wants a federal bankruptcy judge to allow it to be appointed trustee of VeraSun Energy Corp.'s grain storage facilities at Hankinson, in southeastern North Dakota. The grain elevator was used to store corn that the plant made into fuel.
VeraSun's bonding company, Liberty Mutual Insurance Co., of Boston, has resisted the move. But Public Service Commissioner Tony Clark said the company recently agreed to back the commission's request if the PSC agreed not to make an immediate claim on the plant's $380,000 bond.
The commission on Tuesday ordered its attorneys to work out the agreement's details. Clark said the agreement would allow his agency to administer the insolvency case and advertise for possible claims against the bond. It would not yet provide money for farmers awaiting payment for corn they supplied to VeraSun.
"It allows us to really get all of our information in order, so that we know how much, ultimately, that producers are to be paid," Clark said. "It lets us move the ball down the field, but it will not, at least at this time, allow us to release money to producers."
Two farmers already have filed claims against VeraSun, saying the company owes them money for corn deliveries to the ethanol factory.
The Public Service Commission normally takes control of a grain elevator if it is notified that the storage facility cannot pay its suppliers. The agency files a request in state district court to become the elevator's trustee, meaning it controls the elevator's business affairs.
The process gives farmers and other creditors a chance to make claims against the elevator's bond, which is a state-required insurance policy that comes into play if the elevator goes broke.
VeraSun, an ethanol manufacturer based in Sioux Falls, S.D., filed for Chapter 11 bankruptcy protection in October 2008. At the time of the filing, it owned 16 ethanol factories in eight states. The company has since sold seven of the factories to a subsidiary of Valero Energy Corp., of San Antonio.
