Kaiser-Mead deal falls through

A Tacoma developer with plans to turn part of the former Kaiser Aluminum Corp. Mead smelter into a tire-recycling operation is the fourth would-be buyer of the property to come away empty.

Since St. Louis-based Commercial Development Company Inc. (CDC) bought the 196-acre industrial site in north Spokane in 2004 for $7.4 million, three other would-be buyers have made offers on the land but never finished deals, said Earl Engle, a broker with Tomlinson Black Commercial Inc., the owner’s agent.

Engle said the recent purchase offer by Tacoma businessman Bill Rose — which ended after a court battle with the property’s owner — “was the nearest we came” to a deal that would have brought in new investment and produced new jobs at a sprawling industrial site that has gone unused since early 2001.

Rose is the principal partner in DARB Organic Energy Conversion Co., which hopes to generate money transforming solid waste into reusable products.

DARB signed a contract with CDC’s principal owner, Michael Roberts, to buy the 196 acres for about $9.8 million. The contract specified that DARB needed to close the sale by March 2006.

The closing date passed without a sale, and Rose later sued in Spokane County Superior Court, alleging that Roberts and CDC “unilaterally” changed the terms of the contract. The suit also claimed CDC representatives impaired DARB’s ability to conduct due diligence by failing to provide full access to the site.

Superior Court Judge Neal Riellyrecently ruled that the contract between the parties was void, due to DARB’s failure to complete the purchase by its closing date and failing to convince CDC to change the terms of the contract.

DARB’s attorneys have scheduled a Sept. 7 hearing to ask Rielly to reverse that ruling. If that fails, Rose also said he might file an appeal to keep alive the chance to force the sale of the property to DARB.

The site once housed Kaiser’s behemoth smelter operation in north Spokane and produced molten aluminum that was later hauled to Kaiser’s Trentwood rolling mill.

Kaiser closed the Mead smelter during a market downturn, at a time when electricity prices were spiking.

When CDC bought the property, it did not buy about 400 adjoining acres still owned by Kaiser and likely to be sold to developers. Another 38 acres of contaminated Superfund site next to the smelter is under the control of a state-appointed trustee, and was not sold to CDC.

Rose said CDC’s failure to allow full site inspection kept him from satisfying a group of investors willing to front the purchase price.

“I don’t have the money to just write a check” for the property, he said. Michael McCartney, general counsel for CDC in St. Louis, said the problem, as Rielly noted in his court ruling, was that the contract’s terms were not met.

“This sale did not close because DARB clearly did not meet the obligations of the contract,” McCartney said.

Now that the court has ruled in favor of CDC, the company will move forward with selling the property, said McCartney. “There are two offers that (our) company will review accordingly,” he said.

Despite the court setback, Rose vows to pursue the Mead site purchase, insisting that he can still round up the amount Roberts and CDC want from the sale.

“This has been a real hokey deal,” said Rose, “and I’m not sure why I ever got into it, except I’ve got contracts to take care of.” Asked to clarify, Rose said state officials are eager to find companies that can tackle the growing problem of waste tire stockpiles across Washington.

DARB has yet to launch any tire-recycling operations in the state, Rose said. Even so, he insists the process is economically feasible.

The process DARB would use, he noted, is called pyrolisis, which involves heating large volumes of discarded tires under carefully managed conditions. The produce produces diesel oil and reusable carbon, said Rose.

Rose said the tire recycling operation would only need about half of the CDC site; he would lease out the other half for commercial or industrial use.

State ecology department officials said they have not reviewed DARB’s proposal or the basic pyrolisis technology.

Millions of tires are now stockpiled in landfills or at holding sites across Washington. Companies that now recycle used tires convert them into rubber byproducts that are turned into road surfaces, or bale them and use the blocks as construction materials.

Because of the huge volume of water used at the smelter, a key asset included in any site sale would be CDC’s water rights on the 196 acres, said Rose.

Department of Ecology officials say CDC holds six water certificates for the former smelter site, which come to roughly 20,000 acre-feet of water available. Since CDC bought the property, it uses nowhere near that volume of water, said Keith Stoffel, regional manager of water resources for the state DOE.