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Biodiesel producer using canola seed goes bankrupt

Federal subsidy aimed to spur crop-based fuels

One of the region’s first producers of biodiesel from canola has filed for bankruptcy, leaving more than $3.8 million in debts, court records show.

Inland Empire Oilseeds LLC, which began producing biodiesel in 2009 in Odessa Wash., closed its doors in December and filed for Chapter 7 reorganization in the Eastern District of Washington bankruptcy court.

At one point, Inland Empire Oilseeds was crushing 80 tons of canola seed per day, according to Keith Bailey, the manager of two agriculture cooperatives that were majority investors in the company: Odessa Union Warehouse Cooperative and Reardan Grain Growers.

The venture was funded in part with a $1 million Energy Freedom Loan through the state of Washington. That loan was managed by the Odessa Public Development Authority, which owns the production facility.

The operation also received more than $2 million in loans from the U.S. Department of Agriculture.

The goal was to produce 8 million gallons of biodiesel per year.

As the plant began operations, the federal government provided a $1 per gallon subsidy to spur the production of crop-based fuels. In mid-2010 that subsidy was eliminated, and Inland Empire Oilseeds closed its doors.

In 2011, the government restored that subsidy and the company was restructured, with the two co-ops moving to a minority stake.

The majority stake – roughly 75 percent – was taken by two new Inland Empire Oilseeds managers, Joel Edmonds and Wally Kempe.

The co-ops and other investors, including Avista Corp., own the remaining 25 percent, according to court records.

Attempts to reach Edmonds and Kempe were unsuccessful.

The bankruptcy documents list assets of about $1.67 million. The $3.8 million in liabilities consists of debts of $2.6 million to unsecured creditors and $1.2 million to secured creditors such as the co-ops.

The growers invested in the business because it provided farmers more crop options and new ways to diversify their markets, Bailey said.

Canola seed came to the plant from Eastern Washington, Idaho, Montana, North Dakota and Canada, Bailey said.

Bailey said there’s a possibility the plant can be reopened, as the Odessa Public Development Authority has issued a request for proposals to reopen it.

“There’s a possibility, but I can’t say how good it is,” Bailey said. “I hope so, because that’s better for us than total liquidation.”