A much-hyped but yet-to-be-completed aviation biofuels refinery in southern Oregon appears to be headed for foreclosure after backers failed to make principal and interest payments on some $300 million in debt.
Red Rock Biofuels launched efforts nearly a decade ago to build the cutting-edge facility in Lakeview but repeatedly ran into obstacles, even as project skeptics questioned its feasibility.
The project has now accrued an additional $56 million in interest owed to private investors who bought bonds to fund the project, according to a four-page notice of sale first published Dec. 21 in the Lake County Examiner newspaper. The notice said the property would be auctioned to the highest bidder on Feb. 9 if the project’s owner didn’t pay the entire amount due to date and cure any other default by five days before that date. It’s not clear how far behind backers are in making payments.
The potential foreclosure is the latest turn in the long and troubled saga of Red Rock Biofuels, a project touted as an economic home run for the remote southern Oregon town and an environmental boon for the aviation industry, which has long sought a means to reduce its massive carbon footprint.
Chip Cummins, a restructuring specialist who was named interim chief executive of the project after a leadership change last year, did not respond to emails or calls seeking comment about the potential foreclosure
It’s not clear if a buyer would seek to complete the facility, repurpose it or deconstruct the equipment and use it elsewhere.
Lake County Commissioner James Williams said he believed the firm that had taken over management of the project was still actively seeking potential investors, but he acknowledged that it had not recently communicated with county officials.
“We would obviously like to see them succeed,” Williams said.
The project was originally slated to come online in 2017, converting woody biomass such as slash from logging and forest thinning projects in the area into jet-grade liquid fuel that could be used as a substitute for the fossil-based fuel currently used to power the nation’s aviation fleet.
But backers didn’t break ground until 2018, and more than four years later, the refinery remains incomplete and construction has been halted for more than a year. Pictures on the company’s website show a sizable collection of refinery equipment, though it’s unclear how much of the project remains to be completed.
Its development was supported by a $75 million funding award from the Department of Defense; fuel purchase commitments from FedEx and Southwest Airlines; more than $2 million in infrastructure improvements funded by the town of Lakeview and Business Oregon; and about $300 million in tax-exempt economic development bonds issued in 2018 through the state of Oregon.
Eric Engelson, a spokesperson for the Oregon Treasury, said in an email that the bonds were purchased by private institutional investors, and the state has no obligation to repay them. Such bonds are typically tax exempt, which allows the borrower to take advantage of lower interest rates. The foreclosure notice said they bore interest rates between 6.5% and 10.5%.
Nathan Buehler, a spokesperson for the state’s economic development agency, said Business Oregon never made any recommendation on whether Red Rocks was a viable project, but simply evaluated its eligibility for the bonding based on state and federal requirements. He said Business Oregon had funded two related projects for the town of Lakeview: one to extend water and sewer to the industrial site and another to build a cooling system for the plant using town wastewater.
The town has about $2 million in debt related to the projects, and another $146,000 grant that will convert to a loan if the project doesn’t create 31 full-time-equivalent jobs by July, Buehler said.
Michele Parry, Lakeview’s town manager, said in an email that “there is no comment from the town at this time.”
The Energy Trust of Oregon had also committed up to $2 million in energy incentives to help fund the project, but the agreement was structured so they would be paid only after related energy savings had been achieved and verified. That hasn’t happened, so Energy Trust hasn’t provided any incentives.
The project has been delayed numerous times due to cost overruns, re-engineering of its production technology, the bankruptcy of a supplier, COVID-related delays, and a lack of financing. In late 2020, backers approached the Port of Morrow, nearly 400 miles away, to use some of the Port’s special activity bonds to help complete the facility, according to the Lake County Examiner. The Port’s board initially approved the project but reversed the decision a few months later.
“He has supported efforts to this point on the biofuels project,” Stern said in an email. “And new leadership has been transparent in its communication with our office about the financial challenges facing the project.”
Skeptics have long maintained that it was a technological unicorn, relying on a fuel production process developed in the 1920s in Germany that has never been successfully deployed at scale.
“We see on repeated occasions different projects celebrating the fact that they refined a small batch of fuel and maybe even used it in an airplane, but there’s never been a successful project where they started to produce at scale,” said Gary Hughes of Biofuelwatch, an advocacy group focused on the impacts of bioenergy development.
He says the only way such projects have been able to scale up production is by falling back on the use of commodities that contribute to deforestation and escalating food prices, such as palm oil, soy and other vegetable oils.
“We don’t think it’s feasible,” he said of the Red Rock project. “Someone may come in and try and keep it going, but in our view they’d be just trying to access more public money.”
Chris Zinda, a former Lakeview resident and longtime critic of the project, said federal regulations prohibit the project from sourcing wood waste off federal land, and a feasibility study was never conducted to determine if there was an adequate supply of woody biomass in the region to feed the plant.
Wyden and U.S. Sen. Jeff Merkley introduced legislation in 2019 to allow the use of biomass from federal lands in the production of renewable fuels, saying it would lead to healthier forests, more carbon sequestration and cleaner transportation fuels. Many environmental advocates fundamentally disagree with that premise, but Stern said Wyden intends to introduce an updated version of the bill in the new Congress. Recent megafires such as the Bootleg fire, meanwhile, have consumed big swaths of the forestland the legislation might provide access to.
“Are they going to continue to pour money into it?” he asked of the project. “Is it too big to fail?”
Wyden invited Cummins, Red Rock’s interim CEO, to address a virtual town hall meeting for Lake County residents in September. Cummins offered no specifics on the project’s status at the time, but repeatedly thanked Wyden and other government officials for their support.
“Doing what we’re working there in Lakeview to do, it’s difficult,” he said, according to a recording of the meeting on Facebook. “The road’s been challenging. All of these energy transition type projects have unique challenges, but we’re working hard to face those and we’ve built a lot of great value in Lakeview. … We look forward to being a vibrant part of the community for many years to come.”
--Ted Sickinger; tsickinger@oregonian.com; 503-221-8505; @tedsickinger
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