Legal challenges facing an Idaho wind energy company are mounting, after a contractor building one of its projects in Minnesota went to court asking a judge to hand over control.
Fagan Inc. says it’s entitled to ownership of the 18-turbine “Big Blue Project,” near Blue Earth, Minn., on grounds that Exergy Development Group hasn’t repaid a $11.4 million loan.
Granite Falls, Minn.-based Fagan says Exergy disputes ownership of the project, causing confusion that’s threatening the entire undertaking’s survival.
“Because time is of the essence in the continuing construction of the project, and because defendants’ actions jeopardize the project itself, the harm resulting from defendants’ breach of contract is massive, immediate and irreparable,” Fagan wrote in documents moved to U.S. District Court in Minnesota on Oct. 23.
The lawsuit names Exergy owner James Carkulis and his top executive, Elizabeth Woolstenhulme.
Neither returned an email message Oct. 25 seeking comment on Fagan’s legal action.
Exergy already faces a $37.9 million civil suit from a turbine owner in Pennsylvania that says it hasn’t been paid.
The Boise-based company has also suspended more than $300 million worth of projects in its home state and has struggled to pay some of its other bills.
But in August, Carkulis had maintained that the Minnesota project was one of its bright spots, offering it as a reason for why his company would survive any current turbulence.
A Fagan spokeswoman, Taunja Kelvington, didn’t immediately comment on the lawsuit Oct. 25.
But in court documents, the contractor — which describes itself as a builder of facilities for manufacturers, agricultural and alternative energy producers — says a February pact it struck with Exergy gives it control of the Big Blue project because the Idaho company hasn’t come up with an $11.4 million loan repayment.
On Feb. 29, Exergy transferred 99 percent of ownership of the project to the contractor, in exchange for reducing Exergy’s loan obligations to Fagan, according to the documents.
Subsequently, Exergy had the option to repurchase ownership by June 29.
Failure to do so would give Fagan 100 percent ownership, the documents contend.
“Exergy failed to exercise its purchase option,” Fagan’s lawyers wrote. “As a result … defendant Exergy is no longer a member.”
The problem now, Fagan contends, is that Carkulis and Woolstenhulme are still insisting they are in control of the project.
That’s complicating efforts to have the turbines up and spinning by Dec. 31, an event that would result in the Big Blue project missing out on federal tax grants worth $22 million.
“If the Big Blue project doesn’t become operational by Dec. 31, 2012 … the Big Blue project may fail irrevocably,” Fagan wrote.
In the separate legal fight over the turbines from Pennsylvania, Carkulis is accused of failing to pay for 32 turbines due to be transported to Idaho, according to the complaint filed by a company owned by Virginia-based energy giant AES Corp. in August.
In that case, Exergy maintains it shouldn’t have to fulfill its contract with AES, in part, because Idaho’s biggest utility, Idaho Power Co., has been fighting wind projects and made it impossible for them to be completed.