CalPlant I, LLC, which took 25 years to develop and build a rice straw-based medium density fiberboard plant and produce its first board late last year in Willows, Calif., has voluntarily filed for Chapter 11 bankruptcy protection and intends to conduct a court-supervised sale process.

The company has entered into a Plan Support Agreement (PSA) with its senior bondholders, which provides for a comprehensive financial restructuring of the company’s debt and the investment resources to complete the commissioning of the manufacturing facility en route to the sale of the operation.

The company states it will continue to operate without disruption to its vendors, customers or employees, and will have sufficient liquidity to meet its financial obligations throughout the restructuring process.

Jeffrey Wagner, Cal­Plant Executive Chairman, comments, “The road to fully commissioning our plant has not been smooth. We started commissioning our facility in early March 2020, then the pandemic hit. Suddenly, the usual challenges and delays associated with a startup were compounded with navigating a startup using first-of-its-kind technology during a global pandemic. Still, our team remained dedicated, resilient and ready to pivot to continue our momentum towards completion.”

CalPlant is located in the Sacramento Valley, an area estimated to have an annual quantity of more than 1.5 million tons in rice straw waste. Once operating at full capacity, the company expects to process around 280,000 tons of otherwise non-recyclable rice straw from its surrounding regions per year to produce 150MMSF of MDF product. The pioneering operation was founded upon eliminating the need for post-harvest flood­ing, thus reducing water usage and methane emissions, en route to becoming the world’s first commercial-scale manufacturer of no-added-formaldehyde, rice straw-based MDF, a product line which it eventually started calling “Eureka.”

“We are confident that leveraging the benefits of the Chapter 11 process will allow us to emerge with a stronger financial structure that enables us to continue leading the manufacturing industry with innovative sustainable MDF,” Wagner adds.

The company states it has secured commitments for up to $30.1 million in Debtor-in-Possession (DIP) financing from certain of the company’s senior bondholders to support the business during the Chapter 11 process. Subject to court approval, CalPlant estimates that substantially all trade vendors who will have an ongoing business relationship with the company will be paid for goods and services in the normal course of business without interruption.

CalPlant expects that the deadline to submit qualified binding bids will be established at a later date pursuant to bidding and sale procedures to be approved by the court.

CalPlant and its predecessor company, CalAg, LLC, spent many years and millions of dollars researching, developing and patenting a process to make high-quality MDF using annually renewable rice straw as the feedstock, the disposal of which had posed environmental issues in California for decades. The post-harvest rice straw was burned at a nominal cost to farmers until California banned the burning due to air quality concerns, leading to greater expense for farmers to dispose of the straw.

CalPlant secured it raw material needs by executing long-term fixed price rice straw supply contracts.

The project went through a series of unsuccessful efforts to pull together funding, and then in June 2017 closed the deal with $92 million in equity from a small consortium of investors and $225 million in tax-exempt bonds issued via the California Pollution Control Financing Authority and subsequently sold to qualified institutional investors.

Following a separation with the initial general contractor, CalPlant began coordinating with machinery manufacturer Siempelkamp to complete construction of the plant, including the installation of a ContiRoll continuous press 10 ft. x 117 ft. However, in addition to scheduling issues caused by the pandemic, the plant ran into issues in the refiner system, according to a bankruptcy declaration by the company. The mill reportedly continues to wrestle with some front end issues but the remainder of the plant is reportedly running well, while areas of operation continue to be optimized or modified. “Plant acceptance” may be achiev­ed early next year, but full operating capacity is not anticipated for a while.

A source close to the operation reports the mill produced 3MMSF (3⁄4 in. basis) in September but struggled with uptime, averaging 40-45%. As of early October it had 700 truckloads in the market and the board is said to be performing well in the applications in which it is being used. Reaching 8MMSF month­ly at year end is a possibility and could entice an investor or industry company to come in and ramp it up to its full potential. The inventory of straw on the yard is said to be substantial.

A May monthly bondholder report pointed to lack of available liquidity and increased expenses such as with MDI re­sin. The project had taken on additional funding beyond the original financing. Reports of non-payment of scheduled interest began surfacing late last year.

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NewLife Forest Restoration has ramped up production at its new engineered wood products plant in Bellemont, Ariz., while also increasing forest restoration work in service of its 4 Forest Restoration Initiative (4FRI) Phase 1 Forest Service stewardship contract that seeks to thin and treat more than 300,000 acres at risk of wildfire on the Kaibab, Coconino, Apache-Sitgreaves and Tonto national forests.

At Bellemont, the operation is currently processing low-grade cants into 1 in. lumber that’s chopped and fingerjointed and a portion is edge-glued and/or face-glued, while using structural and non-structural glues depending on the application, according to Ted Dergousoff, CEO of NewLife. They are presently using cants because the sawmill with log breakdown hasn’t been built yet.

The EWP plant is part of a much larger 425,000 sq. ft. formerly vacated facility (10 acres under one roof) that NewLife purchased in 2020. It is divided into three sections—one for the currently operating EWP plant, and the other two for the sawmill and planer mill to be built. Dry kilns will also be located on the grounds. The operation has rail access and is situated on I-40, a major truck route.

NewLife has designed the scale of the plant to accommodate upgrading products, not just from its own mills, but also from other operators in the area. In this way, many parties can work together on forest restoration, enabling the industry to scale up in the state.

Dergousoff expects NewLife’s multiple operations to be fully built by the end of 2022. The sawmill will have an annual production capacity of 120MMBF, 100% ponderosa pine, with emphasis on boards (both solid and engineered) and low-grade specialty solid items.

The sawmill will handle a mix of large and small logs, and its plan to maximize value will help offset costs incurred processing and handling the large amounts of biomass the contract is generating.

Awarded the Phase 1 contract in 2013, NewLife had struggled initially considering the state’s timber infrastructure had almost disappeared following federal timber sale cutbacks in the 1980s and ‘90s, and the company was starting from scratch in setting up harvesting and processing capacity. New Life had initially planned a greenfield sawmill at a site in Williams, Ariz., but switched to Bellemont after a large former paper products finishing plant industrial building became available.

The sawmill will handle a mix of large and small logs, and its plan to maximize value will help offset costs incurred processing and handling the large amounts of biomass the contract is generating.

NewLife has tripled the size of its forest restoration operations in light of these developments with three forest thinning crews now active and a fourth crew mobilizing. Each crew is capable of restoring 2,000-2,500 acres per year. NewLife plans to gradually increase to 25,000-plus acres of restoration capacity over the next 18-24 months as it completes installations at Bellemonte.

NewLife and its partners are operating a total of nine harvesting crews in Arizona with a combined capacity of 20,000 acres per year. In 2023, they will ramp up to more than 17 forest restoration crews with more than 40,000 acres per year of restoration capacity. The company and its partners plan to hire more than 300 skilled workers across manufacturing and forest harvesting in the next 12 months.

The 4FRI is a groundbreaking forest health effort seeking to reduce wildfire risk on 2.4 million acres across four Arizona national forests. A larger Phase 2 contract covering the restoration of up to 600,000 acres over 20 years is expected to be awarded soon. NewLife is reportedly one of several entities interested in gaining the contract.

“I do think that the only way that forest restoration can work is with a vertically integrated process,” Dergousoff says, emphasizing NewLife’s capabilities “to make it all work in unison with a goal to maximize value.”

The same labor availability issues that have plagued forest products manufacturers since the COVID pandemic began are also plaguing builders as the economy seeks to rebound. According to a survey of more than 2,000 construction companies, both hourly and salaried employees are currently very hard to find—a sentiment shared by many employers.

In an August survey, the trade group Associated General Contractors of America (AGCA) surveyed more than 2,100 construction firms around the country and found 91% were having trouble filling construction trade craft positions, while almost as many (87%) said salaried employees were hard to find as well.

The situation is ongoing for builders who have already been beset by materials price increases and availability in addition to labor issues since the COVID pandemic began. According to the survey, 88% of firms are experiencing project delays.

Three-quarters of builders cite longer lead times-material shortages for project delays, 61% cite labor shortages for and 57% said delivery delays compounded project problems.

Labor and materials issues surrounding the construction industry have broader implications since resulting delays act as a drag on the U.S. housing market and plans for large federal infrastructure projects.

According to the federal Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS) for July, the number of unfilled construction positions is going down slowly, but 321,000 construction industry jobs remain unfilled.