Don’t make assumptions that biofuels are always good for farmers. Check out this story from AP

Associated Press — BILLINGS, MONT. — April 22, 2009 — A Montana biodiesel company, which has received more than $1.6 million in grants and loans from the state and a regional economic development corporation, owes farmers in Montana and North Dakota $1.2 million for crops grown last year.

Sustainable Systems LLC and a parent company agreed Wednesday to sign a consent agreement allowing the Montana Department of Agriculture to sell crops, seed and processed cooking oil held at several Montana locations and distribute a $113,000 surety bond to pay part of what is owed to Montana producers.

“We plan to work through this in an orderly process that maximizes the value of assets for the benefit of growers. Our first priority is to get producers paid,” Director Ron de Yong of the Montana Department of Agriculture said in a statement Wednesday.

A separate process is occurring in North Dakota. The state Public Service Commission will consider a motion next week to ask a judge to declare the company insolvent and to appoint the commission as a trustee, Licensing Director Sue Richter said Wednesday.

“Once we get further along in the process, the commission will publish a notice for anybody that may be a claimant to file claims,” she said.

Richter said a list so far indicates about a dozen North Dakotans may have claims, but that could change.

An official with Sustainable Systems did not immediately return a phone message Wednesday seeking comment.

The company contracted for oilseed in 2008 at rates far greater than current values and was unable to obtain bank loans to pay for seed and remain operational, according to the annual report Sustainable Systems’ parent company, New York-based Greenshift Corp., filed on April 16.

According to the company’s records, Sustainable Systems owes 54 safflower growers in the two states a total of $1.2 million for delivered crops.

In addition, the company signed 2008 contracts with about three dozen other safflower and sunflower growers who have not delivered the seed. The company has agreed to work separately on contract issues with those growers, Agriculture Department officials said.

Last month, the company voluntarily relinquished its license to purchase agricultural commodities and has cooperated with the investigation and planned liquidation to pay growers.

“The voluntary cooperation should speed up the process of getting money to growers and allowing future development of the bio-products industry in Montana,” de Yong said.

The company’s Culbertson oilseed processing plant has been in existence since 1956, and produced safflower cooking oil most recently under the Montola brand. At full production, 19 employees crushed and refined oil from crops. The plant now sits idle.

State officials said Sustainable Systems has not repaid about $124,000 in Growth Through Agriculture Loans dating back to 2002. All loans were deferred in 2006 and will be due in 2011.

In 2005, the company received a $760,000 loan for working capital through the Great Northern Development Corp., a regional development corporation in northeastern Montana. Sustainable Systems also received a $50,000 Growth Through Agriculture grant for engineering at the Culbertson plant that went through the GNDC.

In 2006, Montana awarded Sustainable Systems a $700,000 Workforce Innovation in Regional Economic Development grant. The terms of the grant, used for training and grower outreach, were satisfied, said Nancy Guccione, manager of the WIRED Program through the state Commerce Department.