Mill to close Sept. 2

Posted Aug. 26, 2008, at 10:05 p.m.
Last modified Jan. 29, 2011, at 7:25 a.m.

MILLINOCKET, Maine – The Katahdin Paper Co. mill will shut down indefinitely on or about Sept. 2, but will reopen next year with a biomass boiler that will end the mill’s total dependence on oil, Gov. John Baldacci said Tuesday.

Union leaders and management supervisors began telling the mill’s approximately 208 workers of the shutdown Tuesday morning, said Glenn Saucier, the mill’s personnel department director and spokesman.

“We don’t have the orders,” Saucier said. “We will keep it going to fulfill our present orders and we will shut it down.”

Baldacci said officials at Brookfield Asset Management of Toronto, the mill’s owner, have assured him that talks with alternative energy providers will produce a boiler to replace oil in the mill’s production of steam and allow the 2009 reopening.

“You have a company that is committed to reopening this mill,” Baldacci said Tuesday from Denver where he is attending the Democratic National Convention. “Whether people believe it or not, I do. They have a viable business plan, a mill that makes a fine product, and a highly skilled work force.”

“If it weren’t a good business plan here, I would say look, let’s fold our cards and let’s go home, but there is a good plan here,” Baldacci added.

The shutdown is expected to hurt the Katahdin region economy and will also affect the Katahdin Paper Co. LLC mill in East Millinocket, which makes directory paper. Some East Millinocket jobs will be lost due to a management restructuring and “bumping,” a union practice that allows senior workers to keep jobs at either mill.

Exactly how many layoffs will occur is unknown, Saucier said. Management and unions continue to negotiate the layoffs’ impact and management also plans to maintain the Millinocket mill until it restarts with a new power supply.

Mill managers, state officials and biomass firms have been talking about a biomass solution since May 29, when management announced it would indefinitely close the mill and temporarily lay off 208 workers due to the rising cost of oil. The mill burned more than 400,000 barrels in 2007.

The shutdown date has been pushed back repeatedly by strong customer response, vastly improved energy efficiency and government aid with the negotiation. The mill’s No. 11 paper machine — Maine’s newest such machine — is valued at $150 million and has had a loyal customer base that was fronting some money to help keep the mill running, managers have said.

That’s why the abruptness of Tuesday’s announcement seemed to catch everyone, including the governor, by surprise.

Baldacci said he didn’t learn of the shutdown date until Monday, despite his staff’s almost continuous contact with Brookfield officials, who told him “a week or two ago” that they would be reopening the mill but needed an earlier shutdown date than expected.

Baldacci had hoped that the mill would run until December or January and reopen in the spring. The governor wanted more time to announce a reopening plan and timeline and expressed his disappointment to Brookfield CEO Peter Gordon on Monday, he said.

The shutdown “was to be expected but at the same time, I think it could have been handled so much better,” Baldacci said. “I was given an indication they would have an end date sooner and a whole revitalization package to put forward.

“This is still a private business and they are making their decision,” Baldacci said, “but they recognize now that they need cooperation and partnership [with the state]. We have to have these commitments in public and underlined so people know what’s taking place here.”

The mill and its East Millinocket counterpart, which makes directory paper, employ about 625 workers together, Saucier said, making Katahdin Paper the Katahdin region’s largest employer. The Katahdin region economy never really recovered from the closure of the two mills, then owned by the former Great Northern Paper Co., in 2002. The mills reopened in 2003 with vastly reduced work forces.

Brookfield’s abrupt decision means that company workers and officials from the state’s Labor and Community and Economic Development departments have less time to prepare for their unemployment, Baldacci said.

The abruptness led to sour feelings in Millinocket. Some workers said Brookfield failed to inform mill manager Serge Sorokin, who was on vacation last week, of the looming closure until he returned.

Town Councilor Scott Gonya, a senior tech in quality assurance at the Katahdin Avenue mill, disputed that the mill’s lack of a replacement for oil, or a lack of sales orders, prompted the shutdown.

“They are simply closing us because they want to sell power and make more money,” Gonya said Tuesday. “They don’t care about our community. They only care about our stockholders making money.”

The mill’s owners have stopped taking orders from customers so that the company can sell electricity on the New England power grid, Gonya said. Brookfield owns the hydro-electric system that generates about 22 megawatts to help power the mill’s machinery.

Other workers claim that mill customers were quite prepared to guarantee orders well into the winter but Brookfield balked at operating the mill through the winter, when the cold makes the mill’s operation more expensive.

Gonya said that in earnings before interest and amortization, the mill made $973,000 in June; $1.2 million in July; and $800,000 so far in August.

“We can get orders. They just won’t take ‘em,” Gonya said. “There’s no justification for closing this mill at this time.”

Saucier could not confirm or deny Gonya’s statements.

“Maybe Scott knows something that I don’t know. I don’t know that,” he said of Gonya’s claims.

“That’s not what I have heard,” Baldacci said of Gonya’s statements.

Mill engineer Stu Kalgren said that Brookfield is an example of foreign predator companies that buy U.S. property and companies and shut them down.

“You have this state in particular being run by a bunch of environmentalist nuts and I don’t think they want industry in this state, but industry pays good wages and these industries and their workers pay significant taxes,” Kalgren said. “We need to protect these jobs.

“If you get a paper company such as ours that has gone from No. 10 in quality [according to some customer ratings] to No. 1 and from losing a million a month to making a million a month, I think that’s a significant step in the right direction, regardless of oil costs,” he said. “That shows me that someone is doing their job.”

U.S. Sens. Olympia J. Snowe and Susan Collins released a joint statement Tuesday calling the closure “deeply troubling and distressing.”

“We pledge to rally around these displaced employees and continue to work hand-in-glove with Katahdin Paper Co. and Gov. Baldacci to ensure that support and assistance is in place first and foremost to preserve these vital jobs, or help the workers transition to new employment,” the statement read.

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