Oregon ethanol plant prepares to restart; idled 2 years

By Holly Jessen | February 16, 2011

The owner of a 108 MMgy ethanol plant in Clatskanie, Ore., is preparing to restart the facility. “We fully anticipate that the plant will be ready to start by late spring or early summer,” said Mark Fisler, partner and managing director of Ocean Park Advisors, retained to develop strategic alternatives for the facility.

Purchasing the bankrupt plant, the new company, Cascade Kelly Holdings LLC, is a subsidiary of JH Kelly Holdings LLC. A maintenance crew that has been working since the facility was idled two years ago. Improvements and upgrades to the plant’s water treatment facility are under way as well as minor repairs. “It’s not a really long list,” Fisler said. He confirmed that the company would like to sell the plant at some point but added that isn’t the immediate concern. “Their primary goal today is to do the minor repairs and start the plant up and operate it.”

The former Cascade Grain Products ethanol plant was built for about $190 million and operated for about six months in 2008 before shutting down, Fisler said. The company filed for Chapter 11 bankruptcy in early 2009, which was later changed to a Chapter 7 bankruptcy. A year later JH Kelly LLC Ethanol, a joint venture between The Industrial Company and JH Kelly, successfully bid for the plant in a U.S. Bankruptcy Court auction. TIC and JH Kelly were contractors that worked to build the Delta-T designed plant, and creditors once it entered bankruptcy. Today, JH Kelly is the sole owner of the ethanol plant.

The reasons for the bankruptcy were several, Fisler said. The first was volatile commodities and tight margins—the same factors that hit the entire ethanol industry hard. “That in combination of lack of available working capital to the company conspired to kind of bring them into a shut down mode,” he told EPM.

It’s not yet known when the plant might be processing ethanol again. The owner is currently in the process of hiring executive management. “The intent here is that once the plant general manager is on board, some final decisions will be made with respect to the repair plan and the implementation of it, and that will be followed by a potential start up of the plant,” he said.

Another factor in whether the plant will be restarted is if it will continue receiving Oregon’s Business Energy Tax Credit given to companies that invest in energy conservation, renewable energy and “less polluting” transportation fuels. The company is in talks with the state about that now, Fisler said.

Corn to produce ethanol is brought in by rail and products are sent out by barge. The company has deep water access to the Pacific via the Columbia River. It also has about 9 million gallons of fuel storage capacity. To explore the option of increased fuel terminal business, engineering services have been commissioned to look into expanding fuel storage and transload capacities.