Investors refocus on idled ethanol plant

New life breathed into former project as other Port Westward plans hit snags

Two years after an economic report projected Columbia County would have trouble meeting this year's loan repayment schedule for the Port Westward urban renewal district, without a sizable push in new development, the county is looking ahead optimistically at potential projects at the Clatskanie-based industrial area.

Most notable among developments is the possible reboot of the erstwhile Cascade Grain facility, a bio-fuel refinery that was beset by problems nearly as soon as it began operation in 2008. Less than a year after it went on line, the facility shuttered its doors amidst reports that its ethanol was tainted.

The plant quickly filed for Chapter 11 bankruptcy protection, and its contractor - JH Kelly Construction of Longview, Wash. - successfully bid for its ownership at a late 2009 auction.

After more than a year of dormancy, there's a movement to reopen the biofuel refinery. Last week the facility, now called Columbia Pacific Bio-Refinery, set aside $3.5 million for new site modifications to bring it in line with enterprise zone requirements.

A JH Kelly representative said he hopes to reopen the facility by the end of the year.

Re-opening the facility would be a step in a positive direction for the county, which was already forced to reamortize its loan agreements with the state.

As it stands, the Port Westward urban renewal district comes with a cap on its maximum indebtedness, against which the county can borrow. Property tax increment obtained through new development is used to pay off the debt.

But no development means there's also no tax increment.

The county has already borrowed more than $28 million to pay for infrastructure at Port Westward.

'We're now good in the short term, though. It sounds like there are some possibilities for development that will help us move forward,' said Jennifer Cuellar-Smith, the county's tax collector. 'If [Columbia Pacific Bio-Refinery] came back, that would put us back on a medium path.'

The total expected capital outlay to make the facility operational will fall between $5 and $15 million. Another $20 to $25 million will be needed to start sourcing corn for ethanol production to make the facility viable again, said Mark Fleischauer, a vice president of JH Kelly.

The financial margins on ethanol would allow the facility to operate without any changes, Fleischauer said. Nonetheless, changes in transport technology at the port, along with expansions to the CO2 emissions and corn oil markets, are also expected to help the facility's survival chances in the future.

'These were all projects that were identified, but the previous owner couldn't move forward because of the lack of capital,' Fleischauer said.

JH Kelly is also currently engaged in ongoing litigation with the Oregon Department of Energy in Marion County Circuit Court over $16 million in business tax credits company officials say belong to the Port Westward refinery.

Until projects such as the Columbia Pacific Bio-Refinery become operational, the county will hold off on other projects at Port Westward, said County Commissioner Tony Hyde.

Specifically, the $3.5 million Hermo Road project, envisioned as a second access road to the site, will be suspended until more development takes place.

'We just aren't comfortable with that now,' Hyde said.

Port Westward prospects pull out

Last year, the Port of St. Helens expected to secure deals with two power companies - Community Energy Systems LLC (CES) and an undisclosed company - for projects at its Port Westward property.

But due to changes in biomass project incentives and problems with securing capital, both companies backed out, said Paula Miranda, the port's business development manager.

Although CES had not signed a lease, it had signed a letter of intent to lease the property and had been in discussions with the port for several years. But after being unable to secure enough funding for the more than $100 million project, CES president Brett KenCairn said they had to table the project - at least for now.

'The timing isn't right…considering the downturn and considerable contraction of the capital markets,' KenCairn said. 'We've decided to focus on other technologies that have lower initial capital costs.'

Colorado-based CES develops renewable energy projects in Western states using newly emerging technology, he said.

The more than $100 million, three-phase sustainable energy project was planned to sprawl over 64 acres and employ more than 85 people at the Port of St. Helens-owned Port Westward Energy Park.

The company aimed to ultimately convert wood byproducts to biodiesel at the site. Initially KenCairn expected to secure government incentives to help fund the project, but after continuing concerns about whether or not biomass plants were carbon-neutral, the incentives decreased.

Although KenCairn said that project is currently on hold, the company is still mulling other opportunities in the Portland metropolitan area.

Miranda said the other undisclosed biomass company faced the same problem. 'There have been a lot of changes in biomass and biofuel,' Miranda said. 'Some of the incentives became unavailable...[other] incentives weren't as strong as expected.'

Moving forward, Miranda said the port is working on developing a master plan for Port Westward as well as all of its other land holdings. Currently, she said the port has been negotiating with several companies that are working on projects that could provide anywhere from 80 to 100 jobs, but declined to provide further details..

'We're crossing our fingers and moving forward,' Miranda said.