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South Sioux City sues Big Ox, claims former plant operator misrepresented its abilities

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Big Ox Energy

The Big Ox Energy plant is shown April 19, 2019, at the Roth Industrial Park in South Sioux City. The now-closed renewable energy company has asked a judge to dismiss claims in a lawsuit filed by the city of South Sioux City.

SOUTH SIOUX CITY -- A new lawsuit filed against the owners of a shuttered biofuels plant in South Sioux City says the company misrepresented its ability to successfully operate the plant and is in breach of contract since its 2019 closure.

The City of South Sioux City is seeking a declaratory judgment to rescind a tipping agreement the city signed with Big Ox and rule that the city does not owe millions of dollars in unpaid monthly fees that lenders are seeking.

The city also is asking that Big Ox be found in breach of contract and ordered to resume operations, including accepting wastewater from the city for treatment.

"The city remains committed to holding Big Ox entities responsible, but it also continues to seek the best path forward for the city, its residents and for the now-idled facility that the Big Ox entities formerly operated," the city said in a news release announcing the lawsuit, which was filed Tuesday in Dakota County District Court.

Big Ox spokesman Kevin Bradley did not immediately return phone or email messages seeking comment.

The city says that Big Ox misrepresented its abilities since it first approached the city in 2012 to develop the plant in the Roth Industrial Park. When announcing its deal with Big Ox in early 2014, the city touted its agreement with the Wisconsin-based company as a green-energy initiative in which the plant would convert organic waste into methane and also pre-treat the city's industrial waste and discharge it to Sioux City's regional wastewater treatment plant.

The Big Ox plant began operations in September 2016 and was soon subject to odor complaints from neighbors. The city said Big Ox began failing to fulfill its promises to the city shortly thereafter, when it stopped accepting certain wastewater in an attempt to reduce odors. The city said that in December 2016, a Big Ox employee drilled a hole in one of the plant's anaerobic digesters, causing an injury to the worker and a release of biogas, methane and/or hydrogen sulfide.

After initially refusing to allow environmental inspectors into the facility in early 2017, the lawsuit said, Big Ox was found in violation of numerous state and federal guidelines when inspectors finally gained access.

Big Ox shut down the plant in April 2019 after Sioux City declined to renew the company's wastewater treatment permit because of nonpayment of outstanding fees, fines and other charges.

In January, Nebraska regulators revoked Big Ox's air and stormwater permits because of a continual failure to comply with state regulations.

Since then, the city says in its suit, Big Ox has made no effort to correct the violations, regain its licenses and resume operations. The city said it believes Big Ox has abandoned the facility and, in turn, its obligations to provide wastewater treatment for South Sioux City.

Because of that, the city said it should not be required to make the $225,000 monthly payments contained in a 2014 tipping agreement, which was an inducement for Wells Fargo Trust Company to provide financing for construction of the approximately $30 million plant.

Wells Fargo has sued the city seeking more than $3.3 million in payments the city has not made since May 2019.

The city in October denied a claim Wells Fargo filed with the city, saying the company could not seek more than $2.6 million in its claim because it was not filed on time. The city also said it was excused from the monthly payments since March 2019, when it placed Big Ox in default of the tipping agreement for failing to operate the wastewater treatment facility in accordance with the agreement.

The city reiterated that claim in the new lawsuit, which also was filed against Wells Fargo and other lenders, and seeks a judge's ruling that the city is not liable for the payments because Big Ox is not performing its wastewater treatment duties.

South Sioux City has moved ahead with plans to build its own wastewater treatment plant at an estimated cost of $45 million. Mayor Rod Koch told the Journal in October that he has heard of buyers' interest in the Big Ox plant, and the city remains open to buying it and seeking a third party to operate it.

Big Ox still faces 15 lawsuits in Dakota County filed by residents living near the plant who said toxic gases from the plant backed up into their homes through the city's sewer system and have caused health problems and property damage. The city of South Sioux City also is named in those suits.

Big Ox also faces a federal lawsuit filed by a former plant neighbor who says the company is partially responsible for her husband's death and that odors and gases from the plant ruined their home, making it uninhabitable.

A federal class action lawsuit in which residents living near the plant accused Big Ox of negligence and causing a nuisance was settled and dismissed in August. Lawyers have not commented on settlement terms.

Judges also have entered at least three judgments against Big Ox for nonpayment of claims to suppliers and others who provided services.

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