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Monona biogas facility developers lied about $15 million loan, lawsuit alleges

Investors say developers did not have money for anaerobic digesters

Iowa DNR logo
Iowa DNR logo

A 10,000-head cattle and biogas facility proposed near Monona remains empty, and now investors in the $25 million facility are suing their partners, alleging they lied about having $15 million for the project.

Clayton County residents Michael Walz, Dean Walz and Jared Walz are suing Feeder Creek Energy and its owners, Jon Haman and Heath Kellogg, for theft, breach of contract, fraudulent misrepresentation and other charges.

The Walzes say they invested $10 million and gave land to Haman and Kellogg to build a facility, where cattle manure and food waste would power anaerobic digesters to produce natural gas. According to the suit, Haman and Kellogg said they had secured a loan for $15 million for the project.

Haman and Kellogg, acting as Walz Energy, had built much of the facility’s infrastructure, including six cattle barns, lift stations and roads, by November 2017. But by March 2018, they acknowledged to the Walzes they didn’t have the $15 million to build two anaerobic digesters, the Walzes claimed in their suit.

Haman, who lives in Johnson County, according to the Walz lawsuit, did not return two phone messages Tuesday.

In his and Kellogg’s resistance to the lawsuit, they said the Walzes have interfered with the project, including by making inquiries with the Iowa Department of Natural Resources and making negative statements about the developers to local contractors and residents.

“Defendants remain confident that the entirety of the cattle feeding operation will come to fruition in the event the current litigation is promptly resolved,” Haman’s and Kellogg’s resistance said.

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Northeast Iowa residents have been concerned about the Walz facility since early 2017 because of its proximity to Bloody Run Creek and because the site has karst topography, which is porous and allows pollutants to seep into groundwater.

In April 2017, the DNR told Walz Energy a stormwater discharge permit would be required because Bloody Run is designated an Outstanding Iowa Water, which the DNR defines as a waterway that meets high water quality standards.

The facility had a string of violations based on runoff from construction of the cattle barns. The most recent was in December, when inspectors arrived at the site and found large portions of uncovered soil, flooded stormwater basins, “severe erosion and gully formation,” according to a letter sent to the company at that time.

Walz agreed in August 2018 to pay a $10,000 fine for violations — the largest the DNR can levy. The DNR tried to get the Walz case transferred to the Iowa Attorney General’s Office, which can pursue penalties of up to $5,000 per day, per violation.

Walz representatives appeared before the Environmental Protection Commission in July 2018 pledging to fix problems at the site.

“We’re not here to say no violations have occurred,” Eldon McAfee, a Des Moines attorney representing Walz Energy, said at the time. “They have occurred. We regret those violations.”

The commission sided with the facility owners and said the case should remain with the DNR.

Comments: (319) 339-3157; erin.jordan@thegazette.com

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