NASHVILLE, Tenn. (AP) - Some state lawmakers say they were misled in approving $70 million for an initiative to turn switchgrass into ethanol and have delayed approval on part of the project.

The Fiscal Review Committee, a joint House-Senate panel, on Wednesday heard a report on the University of Tennessee's Biofuels Initiative that said the project cannot be self-sufficient as originally promised. The committee delayed its approval of an amendment to a contract on operation of the facility that involves about $11 million of the funding.

Sen. Bill Ketron, a Murfreesboro Republican who chairs the committee, said the project was approved at a time when the state was "flush with cash." Now, the state faces major revenue shortfalls with prospects of state employee layoffs and more budget cuts coming next year.

"This program may need re-evaluation," Ketron said. "We're going to have to turn over every rock to balance this next budget."

The report was presented by Jim White, the executive director of the committee's staff, and included videos of officials describing the plan in 2007, when it was approved at the urging of Gov. Phil Bredesen.

Those statements were contrasted to the status of the project now, which has undergone changes including a new developer and a scaling down of the expected production. The pilot project refinery in rural Vonore, in East Tennessee, is scheduled to open next month.

The original projection of a facility producing 5 million gallons of ethanol per year was based on Department of Energy estimates for the size needed to be commercially viable. Under the current plan, the research refinery will produce about 250,000 gallons of ethanol, enough to determine whether the processes will work for a full-size refinery.

Genera Energy, LLC President and CEO Kelly Tiller defended the changes, which the State Building Commission had approved.

"We became convinced the 5 million gallons was too big to be affordable and operate cost effectively going forward (as a research facility) but not big enough to be a commercial operation in the future," she said.

But lawmakers said they were disappointed by the changes.

"I'm absolutely crestfallen. This is absolutely not good stewardship of taxpayer dollars," said Rep. Tony Shipley, R-Kingsport.

They also questioned whether the development partner, DuPont Danisco, would draw the most benefits from the project.

"It looks like we're just leasing them a building," said House Finance Committee Chairman Craig Fitzhugh, D-Ripley.

Building the plant has already cost $55 million so far for construction and equipment, with $36.7 million coming from the state and the rest from DuPont, the report says.

Tiller said the project has "tremendous potential" and has been integrated into other research and development at UT and Oak Ridge National Laboratory. It has received $15 million in federal funding.

The primary purpose is to generate data for research that leads to a commercially viable industry in the future, Tiller said.

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Information from: The Knoxville News Sentinel, http://www.knoxnews.com

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