Bioversel sues GreenHunter for breach of contract

By Anna Austin | September 16, 2008
Web exclusive posted Oct. 1, 2008 at 11:27 a.m. CST

Bioversel Inc. has filed a lawsuit against GreenHunter Biofuels LLC, a subsidiary of Grapevine, Texas-based GreenHunter Energy Inc., alleging the company failed to fulfill its obligations regarding a biodiesel tolling agreement and addendum contracts. The lawsuit was filed Sept. 25 in the 55th District Court of Harris County, Texas.

The company alleged that GreenHunter Biofuels breached the contract when it refused to perform under contract terms-and as a result Bioversel alleges it sustained actual damages in excess of $14 million dollars.

Under the contract terms, Bioversel was to establish sources of feedstock and arrange the supply of feedstock to GreenHunter Biofuel's biodiesel facility. As well it was also expected to introduce the company to feedstock suppliers to secure a continuous stream of feedstock. Bioversel agreed to purchase 100 percent of the converted feedstock meeting ASTM and EN 14214 (European) biodiesel standards from June 1, 2008 to May 31, 2010.

The lawsuit also alleges that GreenHunter Energy has misled the investing public-by providing misleading statements regarding the production capabilities at its Houston facility, failing to provide the investing public information regarding its inability to deliver biodiesel under the terms of the Tolling Agreement it signed with Bioversel, and failing to produce biodiesel that meets American or European standards.

In a statement released on Sept. 29, GreenHunter Biofuels denied the allegations made by Bioversel. The company stated that it denies making any statements intended to mislead the public, and will pursue any and all legal remedies against parties issuing such statements intended to harm the company's reputation for whatever reason.

"GreenHunter BioFuels had previously contracted with a foreign entity to purchase feedstock supply and sell finished product of biodiesel," GreenHunter stated in the Sept. 29 press release. "This entity was notified immediately after the hurricane of a force majeure, as called for under the contract. GreenHunter management believes that this entity has subsequently breached the terms and conditions of this contract. Additionally, this entity has recently issued a press release with certain allegations that the company vehemently denies."

On Sept. 11, GreenHunter Biofuels reported it had achieved 66 percent of its 105 MMgy nameplate capacity. According to the company, the facility is currently idle because of structural damage received from Hurricane Ike. On Sept. 15, GreenHunter Biofuels officials estimated the facility would be idle for six to eight weeks. (To read Biodiesel Magazine's "Hurricane Ike damages GreenHunter facility" story, visit

The company's statement on Sept. 29 also addressed its reparations progress. "The water surge created by Hurricane Ike reached levels exceeding twelve feet within the refinery complex," the company stated. "GreenHunter's biodiesel refinery took almost a direct hit from the eye of the hurricane. The storm surge that flooded the refinery was exacerbated due to the timing of the hurricane strike, which happened at high tide."

The majority of storm damage was the result of floodwaters. The company said damage occurred to some storage tanks, certain tanks were punctured, subsequent feedstock and chemicals were disposed of, office buildings were completely destroyed as were many electrical panels, pumps and motors.

Although damage assessments are still ongoing, GreenHunter estimates total reparation costs to be approximately $22.4 million, most of which will be covered by existing property and casualty insurance, along with business interruption insurance. To view images of the damage sustained by GreenHunter Biofuel's facility, visit
The company said it hopes to resume operations by Oct. 31.

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