The future of the former Blue Heron Paper Co. property in Oregon City and West Linn remains in limbo as bankruptcy proceedings make slow but steady progress.

The mill closed in late February, laying off 175 workers and filing for bankruptcy. It owed about $14 million to creditors at the time.

Helping to pay off that debt is the company's real estate. Blue Heron owned not only the 22-acre mill site in downtown Oregon City, but also nearly 40 acres in West Linn, including a 15-acre lagoon on Volpp Street.

But while those directly involved in negotiating the land sales are mum on the details, rumors abound about potential buyers and projects.

Will a park transform property on both sides of the river, providing public access to Willamette Falls?

Will the land offer a future home for shopping destinations akin to Bridgeport Village, or to a mix of retail and residential development?

Or could a public entity take advantage of the existing lagoon in West Linn for its own wastewater needs, leaving the Oregon City property open for another developer?

The future has implications for both cities' riverside landscapes but also public funds, as both collected property tax dollars from Blue Heron.

Peter McKittrick, a trustee overseeing sales of Blue Heron's assets, said it will be awhile before concrete proposals take shape. He confirmed a mix of potential buyers are interested but declined to give details or to place a value on the real estate.

'It's anybody's guess at this point,' he said, speaking from the shuttered plant in Oregon City, where he was working last week to retain an auctioneer sales agent to sell off Blue Heron's remaining machinery and equipment.

Meanwhile, he's entertaining tentative offers for the company's land.

'We're open to offers,' McKittrick said. 'We don't have any specific deadline or timetable in mind. We're working with the various interested parties and hope to be able to get something going sooner rather than later.'

He said the process for Blue Heron's bankruptcy is similar to most others.

'If someone makes an offer and it is acceptable, I would accept it subject to court approval,' McKittrick explained. 'If accepted, there would be a 45-day approval process when there's an opportunity for others to make competing bids.'

If he received competitive bids during that 45-day period, he would hold an auction. 'Otherwise the buyer would get it based on the terms of a sale agreement,' McKittrick said.

One possible buyer emerged soon after the mill's closure. CenterCal, developer of Bridgeport Village and of a controversial shopping mall called The Rivers proposed in Oregon City, confirmed in March that the company was interested in the waterfront property for a mixed-use development to complement The Rivers. CenterCal tentatively planned to offer $20 million, according to information presented in a bankruptcy court session.

But that might not sit well with neighbors in West Linn. The Willamette Neighborhood Association recently drafted a letter to McKittrick that addressed some concerns for the lagoon on Volpp Street.

Not only is it surrounded by sensitive wetlands, but the area struggles with road access, an issue that could worsen depending on what sort of new development takes shape. They also worry about who is ensuring the lagoon and its systems are maintained as Blue Heron's bankruptcy is worked out, the letter says.

Rob Burkhart, a water quality specialist with the state's environmental quality department, has been keeping tabs on what happens with the detention pond, which until recently served as the final stop for filtering the paper mill's effluent before it entered the Willamette River.

Officials don't believe the pond contains toxins, but converting it to a different use would most likely require filing a clean-up plan with the state.

As for a potential buyer, Burkhart has heard 'rumblings from every which side regarding it.'

'I've heard everything from the whole facility could be turning into a park, it could be renewed as some sort of mixed-use commercial property or commercial and residential property; also, I've heard some people asking about the possibility of it being used for municipal wastewater treatment,' he said. 'But we have not received anything official on any of that.'

Mike Kuenzi is director of business planning and operations for Clackamas County's Water Environment Services, which operates two sewage plants that discharge water into the Willamette River. He acknowledged WES is interested in Blue Heron's former treatment lagoon in West Linn, but he declined to discuss whether and how the agency would use it.

'We're having exploratory talks with (the Department of Environmental Quality) as well as looking at our long-term plans,' Kuenzi said. 'At the end of June, we should have a pretty good idea of the direction we're headed in.

'We're just exploring whether it makes sense for us, and we have not moved forward with any specific plans at this time.'

Blue Heron had a state-issued permit to send effluent into the Willamette River with limits set on the temperature and turbidity of the discharged water.

Without a new permit application in hand, Burkhart, of DEQ, was hesitant to outline steps an entity might have to go through to re-purpose the lagoon - say, for another sort of treatment process.

But it's possible another company or agency could 'inherit' Blue Heron's discharge permit, he said - though he's never heard of that happening before.

'Quite frankly, I've never dealt with anything like that before,' Burkhart said. 'We would have to really examine it closely to make sure we're following the rules and regulations. There's a lot of burden on us and the facility to show everything possible is being done so that degradation (of water quality in the river) does not occur.'

Metro Councilor Carlotta Collette said the regional government is also considering buying some pieces of mill property, although officials are still in the 'thinking about it' stage.

'We certainly are interested in it for natural areas acquisition,' Collette said. 'It's on the main stem Willamette, with the second biggest waterfall by volume in the country. It would be a great acquisition.'

At the same time, she said, the Oregon City side in particular offers an opportunity to bring back jobs.

'I think there are lots of ways to look at the site,' Collette said. 'I think it offers an incredible opportunity. There is obvious historic value there - there's huge heritage there. There is potential for a number of different approaches to future development.'

Still, no money is on the table, and talks are preliminary at this point.

'It's so early,' Collette said. 'But when it starts happening, it sounds like it will need to happen fast.'

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