May 02, 2002 11:00 pm

By Ray Linker

Observer Staff Writer

A commercial bioenergy refinery — called the first of its kind in Oregon — took a step closer to reality this week when the Union County Economic Development Corporation sold a 60-acre tract of land at the Baum Industrial Park to a Portland-area man.

Sustainable Energy Development principal Marc D. Rappaport is hoping to break ground this summer to build a plant that will use forest waste material to produce ethanol, with electricity as a byproduct. Rappaport said the plant would turn out 15 million gallons of ethanol a year and generate 15 megawatts of power.

It could also generate $25 million a year in revenue, with up to $7 million of that flowing directly into the local economy. He plans to have up to 75 workers when in full production.

"Employment will fluctuate somewhat. It may be up to 100 at times," Rappaport said.

The local payroll would be in the neighborhood of $3 million a year when the plant is fully operational, Rappaport said.

Local officials are excited about the project's potential.

"It's another step in diversifying our local economy and will have a sizeable impact in terms of jobs it creates at the industrial park and in the woods,'' Union County Commissioner John Howard said. "It will be a huge plus for managers of both private and public lands. It will add a missing element in forest management.''

It will cost $100 million to build the facility, he said. It is the first of its kind in Oregon, he said, because it "marries two developing technologies for the combined production of ethanol and electricity."

Rappaport founded Sustainable Energy Development Inc. in 1997 after serving for eight years as managing general partner in a power producing facility in White City. He is still a minority holder in that operation.

The La Grande area business will do much to alleviate some of the large fuel loads in area forests, thus addressing long-term forest health and stewardship issues, he said. He has been talking to both U.S. Forest Service managers and State Forestry officials about using forest fuels as his raw material.

"I've been involved with the Forest Service and State Forestry residue programs for more than 10 years," Rappaport said.

He will need 300,000 tons of waste wood a year and should have no trouble finding that on the forest floors of the Blue Mountains, where, he said, there are 2 million acres of forests with a history of beetle infestation, drought and disease.

The plant would be adjacent to Highway 82 and the railroad tracks just outside Island City. Engineers are developing a site plan.

"There are several engineering firms that must come together on this," he said. "We're trying to get a handle on this now. These things move slowly, but there's a chance some things could happen on the site by summer."

Included in the development will be a spur from the railroad, Rappaport said.

It could take up to 18 months to construct the refinery. Building could involve up to 250 workers for that period, he said.

Rappaport said both the ethanol and the electricity markets are fluctuating greatly. He plans to sell the ethanol to California firms and the electricity to the Bonneville Power Administration.

The California ethanol market could absorb a billion gallons a year, Rappaport said, because the state has mandated the termination of the use of a gasoline additive known as MTBE by the end of the year. Ethanol is the only available substitute, Rappaport said.

He said the BPA has "indicated strong interest" in a long-term contract for the electricity.

He would pay forest managers from $10 to $20 per ton of wood waste delivered to his plant.

Rappaport predicts it would take 200 workers, earning between $6 million and $8 million a year, in the forest to supply the plant.