A $4.89 million federally funded economic recovery grant from Business Oregon is headed to the Ochoco Lumber Co. of John Day.

Gov. Ted Kulongoski announced Tuesday the funding will construct a

wood pellet fuel facility, helping support the retention of 80

full-time jobs and creating 11 new ones in the community.

The grant opportunity was made possible by the U.S. Forest Service and funded by the American Recovery and Reinvestment Act. Malheur National Forest officials worked in conjunction with Business Oregon staff to make the pellet fuel project possible.

“This project will save and create jobs in an industry hit very hard by the current recession,” Kulongoski said. “It will not only have a huge impact on the local community, but will also have a profound impact on the health of our forests.”

The Recovery Act grant will allow Ochoco Lumber, doing business in John Day as the Malheur Lumber Company, along with its partner Bear Mountain Forest Products, to produce pine fuel pellets for retail sale in the Pacific Northwest as well as Bear Bricks, a compressed fuel product.

Bear Mountain Forest Products, founded in 1988 and based in Portland, operates manufacturing plants in Brownsville and Cascade Locks and sells its products to more than 400 retailers in the western United States, according to the governor’s announcement.

“We are very excited about this project,” said Ochoco Lumber President Bruce Daucsavage. “This is going to mean good things for this community.”

The new facilities will utilize biomass harvested from private lands as well as nearby U.S. Forest Service and Bureau of Land Management lands. The plant will produce pellets for bulk delivery to fuel pellet boilers in hospitals, schools and other commercial and government buildings in the region. The company also hopes to significantly increase production by providing fuel pellets to large industrial users such as utility companies.

The recovery funds will help the company purchase and install a new drying system, two pellet-making machines and the infrastructure necessary for the boiling and drying processes. The governor’s office reported that the company plans to have the pellet-making operation up and running by the end of next summer.

Baker County woodland owners and economic development officials are still waiting for a response to a similar request submitted for federal funding under the recovery act, according to Gene Stackle, business development manager for the Baker City/County economic development team.

However, he said with the closures earlier this year of some of Northeastern Oregon’s last remaining lumber mills in John Day, La Grande and Enterprise, projects that expand markets for wood products, including biomass for wood pellets and other products, is good news to area woodland owners and the regional economy

“We haven’t heard anything, but we haven’t given up,” Stackle said.

He said the approval of recovery act funds for the biomass project in Grant County renews hope that some of the recovery funds may yet be headed to Baker County for woody biomass project.

In the meantime, he said Elkhorn Biomas of Baker City is continuing their self-funded firewood processing and woody biomass projects.