Controversial Oregon dairy retains bankruptcy protections

The Lost Valley Dairy outside of Boardman. A judge has decided against lifting bankruptcy protections for Lost Valley Farm of Boardman, Ore., which means the controversial dairy won't be forced to liquidate its cattle.

The Boardman dairy facing a slew of financial and regulatory problems won’t be forced to auction off its cattle and will instead seek to sell the animals together with the facility and land.

U.S. Bankruptcy Judge Fredrick Clement has decided against lifting bankruptcy protections for Lost Valley Farm, effectively forestalling a liquidation sale sought by Rabobank, the dairy’s main creditor.

Rabobank sought to foreclose on the herd to repay some of the $67 million it had loaned to the dairy, but owner Greg te Velde filed for Chapter 11 bankruptcy, automatically protecting against such actions while he restructures debt.

His bankruptcy filing canceled a liquidation auction of Lost Valley Farm’s cattle in April, but Rabobank has since argued the dairy shouldn’t be shielded from foreclosure because it’s being mismanaged.

Rabobank argued that Columbia River Processing, a subsidiary of the Tillamook County Creamery Cooperative, had terminated its contract to buy milk from the dairy and would cease accepting it after May 31.

Patrick Criteser, Tillamook’s CEO, submitted a declaration the contract was terminated because the dairy wasn’t paying its debts and had violated quality standards more than 60 times by supplying milk with high bacteria levels.

The bank also claimed that Lost Valley Farm is out of compliance with its “confined animal feeding operation” permit, which regulates wastewater, despite a settlement with the Oregon Department of Agriculture.

Correcting wastewater management problems at the dairy will require expensive remediation, such as emptying and rebuilding manure lagoons, at a cost of nearly $400,000 that’s not in the company’s budget, according to Rabobank.

Te Velde’s “substance abuse problem” also weighs against his continued operation of the dairy, since his “half-baked, slapdash approach” to complying with wastewater regulations is “just the latest manifestation of his drug problem,” the bank said.

In court documents, te Velde disputed the contract with Columbia River Processing was terminated, saying that “my special counsel and I continue to assert there is a scheduled, valid, executory contract and we are prepared to litigate any act by CRP to discontinue receiving our milk product.”

It’s true that ODA has threatened to “hold a contempt hearing” due to alleged violations of the dairy’s wastewater settlement, but the facility will comply with regulations by spreading wastewater on a forage crop to increase open capacity in its manure lagoon, he said.

Te Velde also claimed he will soon begin work on lining another lagoon and upgrading a wastewater conveyance system but “there is no immediate danger of the lagoons overflowing.”

While acknowledging his drug problem, te Velde said he’s enrolled in a “recovery program” and will return to residential treatment for up to three months once his business operations are stabilized.

“It should be noted that while Rabobank has pointed out my substance abuse problem, it does not contend that I have cheated, lied or stolen,” he said.

Capital Press was unable to reach an attorney for Rabobank.

Riley Walter, an attorney representing te Velde, said he wouldn’t characterize the judge’s decision as a victory but simply a recognition that lifting bankruptcy protections now would be premature.

“It’s the way Chapter 11 should work,” Walter said. “The debtor is entitled to a reasonable breathing spell to get his house in order.”

Rising milk prices bode well for the dairy’s finances, as every $1 increase in price per hundredweight translates to a $130,000 boost in its monthly revenues, he said.

Te Velde’s request to hire a real estate broker to market the Lost Valley Farm property is still pending, but he continues to believe the operation is worth more if it’s not sold piecemeal, Walter said.

The broker would try to sell the property and cattle for $109 million, according to a court document.

“I don’t think it’s true he will sell at any price, but he will sell if he gets his price,” Walter said.

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