Mark Mathis was looking pretty smart in early 2008.
He was harvesting Colorado beetle-kill and converting the state’s flood of dead trees into pellets for affordable home heating. Then the price of oil collapsed — falling by more than $100 a barrel in a year — and suddenly, pellets were no longer the inexpensive option for heat. Mild winters further eroded pellet demand, and Mathis’ once-boundless plan withered along with the entire biomass and alternative-energy industries.
Five years later, Mathis’ Kremmling-based Confluence Energy is surging with a new mission.
“We are taking on kitty litter,” he said.
Mathis is doubling down on his plan to capitalize on environmental concerns, this time with a biodegradable beetle-kill product that cleans up oil, gas and solvent spills better and cheaper than the widely used clay-based products, such as cat litter. The company’s Eco-Sponge is becoming popular with oil and gas operations across the country, and strong sales — already passing the company’s heating pellets — have enabled Confluence to acquire its competitor, Rocky Mountain Pellets in Walden, doubling its capacity and making Confluence the largest pellet maker in the West.
Mark Mathis, founder and CEO of Confluence Energy, stands at a pellet-making plant that the firm recently bought in Walden. Confluence Energy makes absorbent pellets from beetle-kill trees. (RJ Sangosti, The Denver Post)
Mathis’ Eco-Sponge aims to end the reign of clay-based absorbents in environmental cleanup work with its simplicity. Where those clay bits need to be removed once they absorb oil, gas or benzene spills, Eco-Sponge’s patented army of microorganisms consume the hydrocarbons and can be left on site as an inert material.
Mathis calls it “a composting process on steroids.”
“How often in life do you get to offer solutions for cleaning up an environmental mess like the pine beetle while making a renewable energy source and cleaning up another environmental issue? And make money doing it?” said Mathis over the din of the Walden plant’s maze of pellet-making machines.
The Eco-Sponge takes the pine-beetle business “to the next level,” Mathis said.
Thefuture wasn’t so bright in 2010. Demand for pellets wilted as the price of oil plummeted. Prices for pellets fell from around $200 a ton to $130 a ton. It wasn’t profitable to cut down dead lodgepole, ship the trees to Kremmling, convert the timber to pellets and distribute them across the country. Mathis missed an important debt payment. An equity holder tried to force Confluence into involuntary Chapter 11 bankruptcy. Mathis cut his Kremmling staff from 34 to eight and huddled with hundreds of tons of pellets.
Things began to improve. Mathis and bondholders fought the push into Chapter 11 and won. Mathis last fall landed a 10-year, $4.75 million contract to harvest beetle-kill lodgepole from 1,000 acres a year in the Medicine Bow-Routt National Forest in Colorado and Wyoming. And his team found opportunity in the West’s oil-and-gas boom.
Today, he’s offering 14 products, six of them a variation of the Eco-Sponge. Confluence is vertically integrated, meaning it harvests and hauls its raw product, converts, sells, packages and distributes the end product and now even offers cleanup and remediation services at oil and gas spills. The biodegradable mix in Eco-Sponge is used in another filtration product that cleans subground and surface water. The company makes a pellet-based product that helps slow fluid loss for drilling operations in porous layers. It makes pet bedding and soil amendments. And the company’s several brands of heating pellets will be available in Home Depot stores this year. Mathis said he expects to double his business this year.
Anadarko, the world’s largest independent oil-and-gas production company, started using Eco-Sponge a few months ago with promising results. Not only is it environmentally friendly, but the ability to leave the mixture in the ground means less traffic for waste-hauling trucks, which is “a goal we have had an unwavering focus on as part of our commitment to the environment,” said Anadarko spokeswoman Robin Olsen.
“We recognize our industry must hold itself to the highest possible standards, and Anadarko is constantly looking at new technologies that can help reduce our footprint,” Olsen said.When it was just making pellets, Confluence used only the lodgepole trunk, leaving limbs and slash piles. Today, that slash is making Confluence money. The plant at Walden reveals the new spanersity, with piles of limbs and trunks abutting mountains of shredded white wood. Even the sticks pursued by Chase, Mathis’ Labradoodle, who darts nimbly through the woody piles, are now valuable.
“We have a market now for every twig, stick, stem and piece of bark,” Mathis said.
In March, Mathis secured a $6.5 million industrial-development bond that enabled the purchase of Rocky Mountain Pellets, which opened within months of Confluence Energy in 2008 and competed with Confluence. The investment is funding a roughly $1 million retrofit of the Walden plant to make it more efficient and able to develop a growing array of products.
Mathis said the 22 employees in Walden were working part time last year. He gave each worker a 10 percent raise and increased their hours. Confluence now has 48 employees, and Mathis expects to employ 68 by year’s end.
Residents are hopeful that Confluence’s broader uses for beetle-kill will spark economic growth in rural Jackson County. The decline in the biomass energy market pinched the Walden plant’s previous owners just as it did Mathis. The downturn seeped into the area’s logging industry, which provides beetle-kill lodgepole to the plant.
Confluence could add jobs not only at the pellet plant but across other industries. The company’s focus on oil and gas cleanup could revive the local logging market, said Jamie Brown, director of the North Park Chamber of Commerce and a former logger.
“They will be a huge boost to our economy. We are thrilled to have a new owner to add some positive influence to our community,” she said. “They are giving loggers a whole new market. They are definitely more spanersified.”
That new job creation and Confluence’s expansion into new business opportunities helped glean the $6.5 million bond from the Colorado Housing and Finance Authority. The authority issued a similar, privately backed $7 million bond to Confluence in 2007 to help fund its Kremmling plant.
“CHFA’s mission is to support economic development and job creation in Colorado,” said Masouda Omar, manager of business-finance loan production for the authority.
Omar said Confluence’s acquisition of the Walden facility “will preserve a number of jobs in the community.”
The authority’s review of Confluence showed a solid business plan, Omar said.
“They demonstrated an ability to expand their business into other areas,” she said.
“We’ve already taken lemons and turned them into lemonade,” Mathis said. “Now we are making lemon slushies, too.”