ST. JAMES — Partners in a long-running project to build a $1.85 billion methanol complex in St. James Parish have resolved to put behind them a testy legal dispute that had lingered for the last six months of 2020 amid claims of bad faith, cost overruns and construction delays, court records show.
Based on permit records recently made public, it appears the YCI Methanol One project may be taking the first steps toward a production startup that includes firing up one of the boilers in the big complex off River Road in western St. James.
YCI, a partnership of Yuhuang Chemical Industries Inc. and Koch Methanol, plans to make 5,510 tons per day of methanol, a stable chemical building block for a variety of consumer products, but especially plastics.
The plant has already created jobs for 100 permanent workers, including 23 from St. James Parish, and contributed millions of dollars in sales tax revenue, company officials have said.
In July 2014, then-Gov. Bobby Jindal and other state and parish officials hailed the arrival of Yuhuang Chemical Industries Inc., a subsidiary Chinese chemical manufacturer Shandong Yuhuang Chemical Company, Ltd., to a 1,200-acre site in the community of St. James as low natural gas prices continued to draw new investment to the Mississippi River region.
The facility was among the first of several big complexes proposed for the rural west bank and northern east bank of St. James that have stirred now continued opposition from community and local and national environmental groups over the impact of their pollution on primarily African-American communities along the river.
Though construction started in 2017, the project had significant financing out of Chinese and ran into financial headwinds in 2018 until a major influx in capital from Koch Methanol, a subsidiary of Koch Industries. The subsidiary eventually gained a 60% stake with further investment in 2019.
A variety of local and state officials had said this month that they didn't know the status the project's construction and startup, though workers had been seen there in recent weeks and have been visible for months.
Environmental regulators had said they hadn't heard word either and, earlier this month, state economic officials were only able to say that YCI officials had given them an outer boundary to "commence operation no later than May 30, 2021."
But newly public records show the state Department of Environmental Quality issued a six-month permit on Jan. 5 authorizing YCI Methanol to release small amounts of natural gas before a flare that would normally burn up those kinds of gas releases is operational.
The releases are necessary, the company says, to fire up an auxiliary boiler.
"YCI is currently working to get the proposed methanol plan up and running," a Dec. 30 permit request says. "During this period, startup of the Auxiliary Boiler may cause a release in natural gas."
In the past few months, the company has also received critical air permits that were modified after environmentalists challenged them a few years ago and a wastewater discharge permit after some activists had suggested last year that the plant's releases raised concerns about contaminating Mississippi River drinking water systems down stream.
In the final permit decision, DEQ officials defended the discharge testing protocols YCI plans to use as protective of public health.
The signs of startup have come as the project partners have found a way to end litigation in the business friendly Delaware Court of Chancery that that had been simmering since the early summer.
In fact, one day before the air permit request for that boiler was filed with DEQ in Louisiana, on Dec. 29, a Delaware judicial officer dismissed the suit between Koch Methanol and Yuhuang Chemical after they said they had reached confidential settlement.
In the June lawsuit, Yuhuang Chemical had accused Koch Methanol of a bad faith attempt to "usurp" its remaining 40% interest in the project by falsely asserting cost overruns in late 2019 and early 2020 that totaled more than $38 million and twice engaging a self-help loan provision of their contract to pull money out of the project equivalent to those overruns.
Yuhuang alleged the loans endangered their remaining ownership in the project because they required that the company's entire $400 million stake in the project be put up as collateral. Yuhuang had claimed the expenses were Koch's to pay.
"As the majority owner and the party in control of the ongoing operations of the Project, Koch has the requisite information to properly understand and classify these expenses," Yuhuang's suit claimed. "Koch does not do so, because it would rather take advantage of a helpless minority partner instead."
In response, Koch Methanol denied any bad faith attempt to swipe Yuhuang's stake but claimed it has steadily had to take on a greater management and financial role, cutting Yuhuang breaks on its financial obligations and making greater outlays of cash to keep the project from running out of money.
The company also accused Yuhuang of failing to fully disclose the project's financial condition by millions of dollars before Koch Methanol's initial investment in 2018.
It's not clear how the dispute was resolved, what the status of the alleged shortfalls are or what the stakes of the two partners are at this point. Portions of the record in the suit were sealed and even sizable parts of Koch Methanol's responses to Yuhuang's initial allegations are redacted.
Officials with Koch Methanol declined to comment about the status of the project in light of their undisclosed legal settlement between partners. Yuhuang Chemical did not respond to email requests for comment.
Construction of the plant has spurred up to 2,000 temporary construction jobs. Over the next 20 years, even after $300 million in state property tax exemptions, YCI will pay St. James Parish nearly $110 million in property tax revenue, company officials have said.