Port of Morrow Says No to $65 Million for Red Rock Biofuels in Lakeview.

Lake County Examiner story is here.

"Port of Morrow Exec. Dir. Ryan Neal said there were concerns by the Board and the Port staff that the project was in financial distress. Work on the project had recently stopped completely as Red Rock Biofuels looks for ways to raise the financing needed to complete it."

My previous blog posts can be found here.

Originally created and posted on the Oregon Housing Blog.

Lake County Examiner: Red Rock Biofuels Out of Money, Looks to Bonds.

Story HERE. One paragraph: 

The company also kept about 30 employees on payroll while operations were paused. “For about six months we were paying hourly employees to sit at home and not train. We had run out of training material,” Roberts said. The thought behind that decision was, “If we lose 30 employees, how are we going to get 30 employees back when this starts up,” he noted. The company decided to take that risk at the time, but word came sometime in March that there was no more money. The Examiner was previously unable to reach Red Rock about the status of the project.

My prior posts HERE. 

Originally created and posted on the Oregon Housing Blog. 

 

Recent Red Rock Biofuels Bond Sale Prices Are Concerning to Me.

I'm by no means an expert on revenue bonds or bond pricing but recent trades on Red Rock Biofuel bonds are of concern to me. 

For a bond that was issued with a 2031 maturity and a coupon rate of 6.5% the most recent sales prices for $21 million in bonds in April were in the 14.75% -21.25% range. 

This means that the yield of these bonds must be substantially above 6.5%. 

I calculate yield to maturity of well over 30% but as I mentioned I am not an expert and I encourage you to do your own assessment and calculation. 

The EMMA Oregon State Business Development Department Issuer page can be found HERE.

Originally created and posted on the Oregon Housing Blog.  

Port of Morrow Red Rock Circuit Court Petition Has Their Rationale for $65 M in Bonds for Red Rock Biofuels Project, 370 Miles Away.

I have posted previously about the Red Rock Biofuels Project in Lakeview; my most recent post is HERE.

In the latest development via a public records request I received from the Circuit Court in Heppner a copy of the Port of Morrow petition asking the Court to validate the issuance of $65 million in additional bonds for the Lakeview Red Rock Biofuels project. [ A public record shout out to the Court; I got the case record as a PDF file within a day, for $3]. 

I have attached the petition along with the Port Resolution and Notice of Publication in a bookmarked PDF file I created HERE. 

Justification, according to the petition: 

1. $10 Million would revert back to state. 

2. It's in the public interest and our commercial interest too.

1. The first justification is that if the Port doesn’t use $10 million in tax exempt bond authority for the wastewater facility for which it was authorized (and is no longer needed) the $10M will revert back to the state Private Activity Bond Committee. 

To my knowledge Oregon Private Activity Bond Committee rules do not contemplate that when it allocates tax exempt bond authority for a specific project that the recipient is free to decide to reassign that authority to another project 370 miles away. 

ORS 286A.615 (5) requires that unused allocations come back to the Committee for reallocation. "Unused allocations are not transferable among issuers but are available for reallocation."

The Private Activity Bond Committee administrative rules related to allocations are HERE. 

2. The petition says that enabling authority in state law allows ports to “take other actions that tend to promote the maritime shipping, aviation, and commercial interests of the Port.”

The petition also says that the Port of Morrow has determined that Red Rock Biofuel project “will promote the general welfare of the public and the commercial interests of the Port, and thus is in the best interests of the Port." 

It also states the bonds should be issued because of the " Port's vital commercial interest in sustaining the environment and overall ecosystem in which the Port conducts its business operations through the development of sustainable fuel products and the reduction of risks related to forest fires,"

It appears that the Port believes that it has the authority to issue bonds for any facility within Oregon which promotes the general interest of the public and the broad commercial interest of the port.

One of the unstated “commercial interests of the port" in the petition is that the Port would earn money from the bond issuance.

1st Year Revenue to the Port: >$400,000.

The resolution adopted by the Port, included as an attachment to the petition, fills in some details. It says that the Port will receive 1/2 of 1% of the bond issuance if the bonds are issued. For a $65 million issuance that’s $325,000 and they would also annually receive 1/8th of 1%, $81,250 . So, in the first year alone the Port would would receive $406,250. 

Plus Expenses (And There Could be a Lot of Expenses).

The resolution also says that Red Rock is responsible for reasonable and necessary expenses and expenses for the bond counsel, counsel to the Port, and to their financial advisor.  These are in addition to the above fees. 

In a prior proposal to the Oregon Private Activity Bond Committee in January of 2020, bond issuance costs for $95 million in bonds were given at nearly $3.2 million.  (See page 64 in the package of that meeting HERE). 

It’s not yet clear when the Circuit Court will act on the petition. 

Originally created and posted on the Oregon Housing Blog. 

Red Rock Biofuels Project Public Financing Up to $421 Million, After $65 Million Sought From Port of Morrow, 370 Miles Away.

In 2014 the US Agricultural secretary was Tom Vilsack. The Defense Production Act was used as a justification for approval of a September 2014 $74 million Defense Department grant for a biomass facility in Lakeview Oregon. 

The announcement projected a 30 month development cycle which would have meant the project would come online in the spring of 2017.

The project broke ground in July of 2018. 

It’s 2 3/4 years after ground breaking and 6 1/2 years past the initial announcement and still no completed project. Tom Vilsack is back as the Agriculture Secretary, and we've heard a lot about the Defense Production Act because of COVID-19.

In the latest twist I recently discovered that the project partners in November 2020 sought an additional $65 million bond commitment from the Port of Morrow, some 370 miles away from Lakeview.  

According to reporting from the Lake County Examiner the commitment made is subject to approval from the Morrow County Circuit Court. The  minutes from the Port Commission meeting are HERE. 

The project has previously received $356 million in public financing from multiple sources: 
$74 million from the Defense/Ag Departments
$  2 million from Energy Trust of Oregon
$ 280 million from private activity bonds from both Business Oregon and Oregon's Private Activity Bond Committee. 

$65 million in additional bonds are now tentatively being added (from the Port of Morrow) 

$10 million in tax exempt private activity bonds

$55 million in taxable revenue bonds

That brings the total to $421 million in public financing--about $51,000 for each person in Lake County.  

In an Energy Trust Board Meeting document HERE from June 2018 [just prior to ground breaking in July] the TOTAL projected cost was substantially less-- $337 million, including $10.9 million in contingency. 

And There's More.
I recently also discovered that project sponsors had received a Paycheck Protection Program loan  in April 2020 for $394,900 (You can see all the federal grant and loans for Red Rock Biofuels LLC from USAspending.gov HERE). 

The construction contractor for the project "IR1 Group LLC" has also received a PPP loan of  $210,000. 

VELOCYS is the reactor supplier to the project . USAspending.gov reports they have received a total of $3.3 million in grants and a PPP loan of $721,552. 

It's possible that other participants in the Lakeview project have also received PPP loans or other federal funding. 

It appears to me that the Red Rock site is likely located in a federal opportunity zone and in a state enterprise zone. These provide tax incentives that are are difficult to quantify and opaque to the public. 

Finally, biofuel tax credits may be available for the projected annual 15 million gallons output, should the project become operational. At the previous rate of $1 per gallon, that would be a continued federal subsidy of $15 million annually. 

Red Rock Lakeview Under Construction Fall 2020

Business Oregon Meeting Public Record Request Pending

I made a public records request  more than a week ago to Business Oregon for meeting materials from a Finance Committee meeting held on February 12; an update on Lakeview project was on the agenda.

As more information becomes available I will update this post. 

Originally created and posted on the Oregon Housing Blog. 

Oregon Private Activity Bond Committee Allocates More than Requested to OHCS Rental Projects, 1/3rd of Request from Lakeview Biomass Plant, and Kills Portland MCC Homebuyer Program.

At the Wednesday meeting of the PABC the Committee made the following 2019 Carry Forward allocations:

• 100% ($248M] of 2019 carryover funding to OHCS for rental housing. This was actually more than the $225M OHCS requested. (The 2019 Oregon legislature also directly allocated to OHCS another $250 million in PAB bonds for the biennium. OHCS also has additional GO supported biennium bond allocations of $200+ million for the LIFT progam and permanently supported housing).
• 0% of the requested $40M to the Portland Mortgage Credit Certificate homebuyer program (which Portland Housing  Bureau staff said accounted for half of new home owners helped by the Portland Housing Bureau). This effectively kills the Portland MCC program.

PABC Allocated $15M to the Lakeview Red Rock Biomass Plant, 1/3rd of Their $45M Request
After an executive meeting closed to the public the PABC allocated $15M from the 2020 allocation to the Lakeview Red Rocks Biomass plant instead of the $45M requested.

Coupled with the $20M recently approved by the Business Oregon Department from their 2020 allocation the total PAB add for Red Rock for 2020 is $35M, instead of a total request of $65M.  [The Red Rock request showed a projected total increase of $95M in uses, so it is not clear what the impact will be from approval of only $35M in total additional PAB sources will be].

Adding to the $245M in prior PAB and Business Oregon Department bond allocations, Red Rock's total PAB allocation is now $280M. [More discussion about the Red Rock project, ,including other subsidies, can be found in my prior post HERE].

The January 22 PABC meeting audio should be posted shortly on the web page HERE.

Originally created and posted on the Oregon Housing Blog.