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Wisconsin leads the country in the number of farm-based facilities, with 35 in operation today, according to the State Energy Office. The office has estimated that seven other sites have shut down, or are no longer operating at full capacity, as biodigesters struggle with lower electricity prices.

More than $4 million in university funds that were used to convert livestock waste into electricity play a key role in exposing the University of Wisconsin-Oshkosh Foundation to potential bankruptcy as rapidly changing markets have dulled the allure for some sectors of renewable power.

The lessons for Wisconsin's third-largest university: Green doesn't necessarily turn to gold, and spending by UW-Oshkosh on private projects could leave taxpayers at risk.

UW-Oshkosh's foundation has spent heavily in recent years on technology that converts manure and other organic material into electricity — a strategy that is both legal and mirrors a trend among colleges of using private foundations to generate revenue.

But the university is running into problems for funneling public money through its foundation for projects, which UW System officials say is illegal.

The funding included the development of a waste-to-energy system at Wisconsin's largest dairy farm, where costs escalated, prompting administrators to divert school funds to help pay for the project, according to court records.

UW System officials filed the suit Jan. 18 against former Chancellor Richard H. Wells and Thomas G. Sonnleitner, the former vice chancellor for administrative services, for tapping school funds that should have come from the foundation.

According to the lawsuit, UW-Oshkosh spent $4.1 million on equipment between 2012 and 2014 for a manure-to-electricity system known as an anaerobic biodigester housed at Rosendale Dairy in Fond du Lac County. The exact costs are unclear, but court records show Sonnleitner issued a university guarantee of $10 million to Wells Fargo for underwriting the project.

Rosendale milks 8,200 cows and the methane captured from the manure is used to generate electricity. The foundation formed a limited liability corporation to build the biodigester and sells the power to Alliant Energy. The farm benefits from a reduction in pathogens and odors in its manure when spread on the land.

The project represents the largest share of $11.3 million in school funds spent between 2010 and 2014 that system officials said should have been made by the university's foundation.

Other projects where school funds were used or guarantees were given included a hotel, a sports complex, a conference center and another biodigester near the campus that gobbles up yard waste and old dormitory food to supply some of the university's electricity needs.

UW-Oshkosh's investments highlight how state universities have turned to foundations — and their ability to raise funds — to send cash back to campuses.

"They were trying to be a player, to be recognized as a contributing entity in the bio-economy," said Timothy Baye, a professor of business development/energy finance with the University of Wisconsin-Extension.

"And, frankly speaking, when you look at renewable resources, we have average wind compared to other places in the country and not even average solar. What we do have is an abundance of biomass."

To that end, Gov. Scott Walker this year is proposing up to $20 million in subsidies for biodigesters. The money would not come directly from the state but from utility customers for energy conservation projects.

Bioenergy projects struggle

Still, some bioenergy projects have struggled.

Citing excessive costs and an untested infrastructure to procure organic material such as waste from farm fields, Walker killed a $250 million project at UW-Madison in 2011 that would have burned biomass to generate electricity.

In another case, a Dane County biodigester that received a $3.3 million state water quality grant to process manure from three farms near Waunakee suffered an array of operational problems, including manure spills and a methane gas explosion in 2014 before the business was taken over by new owners.

Wisconsin leads the country in the number of farm-based facilities, with 35 in operation today, according to the State Energy Office.

The office has estimated that seven other sites have shut down, or are no longer operating at full capacity, as biodigesters struggle with lower electricity prices.

Wisconsin leads the country in the number of farm-based facilities, with 35 in operation today, according to the State Energy Office.

The office has estimated that seven other sites have shut down, or are no longer operating at full capacity, as biodigesters struggle with lower electricity prices.

The systems became attractive after the Legislature in 2006 passed a bill directing utilities to supply 10% of their electricity from renewable sources by 2015. That goal has been met and utilities have won permission from the state Public Service Commission to buy back power at lower, wholesale rates.

Alliant Energy is currently paying an average of 9 cents per kilowatt-hour, the utility said. But for digesters whose contracts expire, generally after 10 years, the going average rate is about 3 cents per kilowatt-hour.

Other factors that made biodigesters less attractive: a drop in natural gas prices and more natural gas and wind power.

Last month, experts at the Midwest Manure Summit in Green Bay said bioenergy producers in Wisconsin would benefit from higher prices, a boost in the renewable energy mandate and a switch to generating natural gas instead of electricity.

"There is a lot of uncertainty," Clint Fandrich, bioenergy analyst with the State Energy Office, told the group.

Neither Wells nor his attorney has responded to the suit, according to court documents.

Rosendale Dairy

But the former chancellor has trumpeted Rosendale and a pair of comparable projects as examples of the university's embrace of real-world training for students in emerging fields of bioenergy.

Students, for example, have had internships at the Viessmann Group in Germany. Viessmann and its U.S. business unit, BIOFerm Energy Systems of Madison, supplied the biodigesters at Rosendale.

In turn, in 2014, the university announced that the German parent's chief executive had funded the first Viessmann endowed chair in sustainable technology at UW-Oshkosh.

An education center slated for Rosendale has not yet been built. And Rep. Amanda Stuck (D-Appleton), a member of the UW-Oshkosh Foundation, says the foundation is considering filing for bankruptcy protection.

Rosendale opened in 2008, and today, with a second expansion, the $70 million farm milks more cows than any in America's Dairyland.

A showpiece of modern farming, Rosendale conducts regular tours and receives a steady stream of visitors, including foreign dignitaries.

Standing in a frigid party tent at Rosendale on Dec. 11, 2013, for the grand opening of the biodigester, Jim Ostrom, a partner in Rosendale, spoke enthusiastically about the project.

"It's going to be a win for the university because I see the training and the enthusiasm towards the program, and it's certainly a win for the farm because we get to be part of a great project," he said.

Under fire

But in addition to the lawsuit by the UW System, the investment at Rosendale is coming under fire by others.

"To take money from our state educational system to build a biodigester that helps Rosendale's bottom line — you can't justify that," said Sarah Geers, an attorney with Midwest Environmental Advocates, a public interest law firm.

"It's essentially serving one for-profit that helps them deal with their waste."

The law firm previously challenged Rosendale's environmental permits with the Department of Natural Resources when it represented a landowner group — People Empowered Protect the Land of Rosendale, or PEPL.

Like some other large farms, Rosendale has generated controversy over odors, truck traffic and the effects of manure spreading.

"The stench was unbearable for years," said Elaine Swanson, a member of PEPL who lives near the farm.

The odors have moderated, but Swanson said the school's arrangement with Rosendale is troubling.

"So taxpayer dollars have been used to financially support an industrial operation we tried to prevent from the beginning?" Swanson said in a subsequent email.

"This is a travesty of the worst kind. I think the foundation's investors and the people have all been duped. Big winner: The CAFO owner."

UW-Oshkosh and the foundation declined to comment.

The university came under scrutiny after the current chancellor, Andrew Leavitt, identified questionable transactions in April 2016, which led system officials to hire a former U.S. attorney to conduct an independent review.

Leavitt says the former administrators "broke a sacred trust" with their deal-making, according to a statement from the system when the lawsuit was filed.

Attorneys for Sonnleitner have responded in court documents that UW-Oshkosh and system officials knew he was using school funds and that members of the UW System Board of Regents were briefed on the matter in February 2013.

The system has questioned that characterization in court documents.

Sonnleitner also said letters to banks were never intended to be guarantees and instead emphasized the financial benefits "usually involving millions of dollars" the school received from the foundation.

The foundation contracted with BIOFerm to build the facility for $6.7 million, according to court records. But costs increased.

Court records don't provide a complete accounting, but they show Sonnleitner agreed to allow the company to charge an additional $1 million for operating the facility, which would allow for a 15% profit on the project, and obligated the school to pay $700,000 annually for the use of Rosendale.

In all, of the $4.1 million from the school to build the energy system, $1.4 million has not yet been repaid, court documents show.

Wisconsin leads the country in the number of farm-based facilities, with 35 in operation today, according to the State Energy Office. The office has estimated that seven other sites have shut down, or are no longer operating at full capacity, as biodigesters struggle with lower electricity prices.

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