The Cascade Grain ethanol plant near Clatskanie will be sold off to pay the company’s debts, according to JH Kelly, a Longview contractor that built the plant and is one of its largest creditors.

Interested buyers have approached JH Kelly about buying the plant at auction, and it could restart next year, Mason Evans, JH Kelly president, said in a written statement issued Monday morning.

“We were very disappointed when Cascade Grain succumbed to the downturn in the ethanol market, as did many ethanol plants across the country, but we know the plant is well-built and is capable of producing high-quality product,” Evans said.

Cascade Grain took out a $20 million loan from the Oregon Department of Energy to help build the $200 million plant. It owes the state and other lenders about $124 million, according to Cascade’s attorney.

JH Kelly says it’s still owed as much as $33 million for construction of the plant, though Cascade disputes part of that claim. In addition, Cascade owes at least $3.6 million to 20 other creditors, according to court documents.

Plant owners filed for Chapter 11 bankruptcy in January in hopes of restructuring the business and reopening. Creditors had initially approved a restructuring plan earlier this month that would have given creditors, including the state of Oregon, a 20 percent stake in the business.

However, the company was unable to raise $25 million in loans to operate as the bankruptcy court judge ordered, said Portland-based attorney Doug Pahl, who represents the company.

The judge ordered the company be placed in Chapter 7 bankruptcy Monday. A federal trustee is in charge of liquidating assets.

Creditors are unlikely to get all their money back under liquidation. Pahl estimated the plant would sell for $15 million to $40 million. Oregon would be among the first creditors paid out of any money raised through liquidation.

The plant only operated at full capacity for about 20 days after it went online in June of 2008. It had at least two significant design defects and other deficiencies that any new owner would need to fix before restarting, Pahl said. Laboratory tests revealed defects in the finished ethanol.

The plant shut down in January after losing money daily. It has lost $19 million in potential revenue during in the last six months alone, according to Kelly’s attorneys,

The plant processed corn to produce ethanol for use as a gasoline additive. Cascade Grain had hoped to produce 113 million gallons of ethanol annually.

The Clatskanie area had high hopes the plant would give the local economy a big boost with its 60 jobs, Mayor Diane Pohl said.

“As a community, we were disappointed because we’re always looking for family-wage jobs,” Pohl said.

She added that she doesn’t think the plant is dead. Oregon passed a law in 2008 that all fuel must have at least a 10 percent ethanol blend, so a market is there for a manufacturing plant, she said. Other states, including Washington, have ethanol mandates on the books as well.

“I believe it’s viable,” Pohl said.