Katahdin officials encouraged after meeting with LePage

The paper mill sits idle in Millinocket, Maine
Robert F. Bukaty | AP
The paper mill sits idle in Millinocket, Maine
Posted April 11, 2011, at 8:18 p.m.
Last modified April 11, 2011, at 11:59 p.m.
The Millinocket mill sits idle in early March.
Robert F. Bukaty | AP
The Millinocket mill sits idle in early March.

AUGUSTA, Maine — Katahdin region representatives left a meeting with Gov. Paul LePage on Monday feeling encouraged about the prospects of finding a new buyer for two idled paper mills three days after a potential deal fell through.

Town officials from Millinocket and East Millinocket acknowledged that there were no solid prospects lining up to purchase the two Katahdin Paper Co. mills that were once the backbone of the region’s economy.

Nonetheless, several of the people involved in the closed-door meeting in the governor’s Cabinet Room said they were pleased with LePage’s response and were guardedly optimistic about the mills’ future.

“I think the governor has stayed right on top of this and I think there is going to be a concerted effort on his part to go ahead and make this viable to work for the communities,” said Michael Madore, a Millinocket town councilor. “I think he realizes the devastation in our part of the region” if the mills are not reopened.

Negotiations broke down last Friday between the two towns and Meriturn Partners LLC, a San Francisco-based firm looking to buy the mills for $1. Meriturn had sought $48 million in tax breaks from the towns over 10 years as well as other conditions.

“I think LePage is blunt and to the point,” said Mark Scally, chairman of East Millinocket’s Board of Selectmen. “He said that these people [Meriturn] obviously did not have the pockets to pull off what needed to be done.”

Phil Congdon, commissioner of the Maine Department of Economic and Community Development, said he believes the state might be able to help in two areas affecting the mills’ sale, namely electricity costs long term and any future owner’s liabilities for an old landfill.

But Congdon said he was hesitant to make people too hopeful about a new buyer before he and others meet with potential suitors.

“I continue to work it and a number of other people continue to work it,” Congdon said. “It is No. 1 on our list of things we are trying to do.”

On Monday, it was clear that town and state officials were moving on from Meriturn.

“I think everybody is of the opinion … that Meriturn is no longer a player in this game,” Madore said.

Lee C. Hansen of Meriturn confirmed by email Monday that no one had contacted him since Friday.

On Friday, Hansen announced that Meriturn was forced to withdraw from the deal due to slow negotiations over the various conditions Meriturn needed to close the deal and the fact that some customers of the East Millinocket mill had lined up other newsprint producers because they feared the sale’s collapse.

Millinocket Town Manager Eugene Conlogue said the issue of property tax breaks — which would have slashed tax revenues flowing to the towns — was only one of several factors in Meriturn’s decision to end negotiations. The company also had sought a biomass cogeneration facility at the Millinocket mill, contracts with the mills’ labor unions and relief from any liability associated with an old mill dump in the Dolby section of East Millinocket.

Asked how he was feeling about the mills after meeting with the governor, Conlogue replied simply: “Guarded.”

“When you have a buyer who has canceled out on a deal, it is a little bit disconcerting,” he said. “But we’ll get through it. We’ll figure it out.”

During Monday’s meeting, LePage reportedly pledged to talk with the mills’ current owner, Brookfield Renewable Power Inc., about a possible extension of its original April 22 deadline for closing the East Millinocket mill as the state renews discussions with other potential buyers.

Given the concessions offered, Scally wondered why Meriturn didn’t buy the mills and speculated that the San Francisco firm was merely a stalking horse for other buyers. “Why,” he said, “would Brookfield even entertain these people?”

“Now,” Scally said, “that Hansen has done all the dirty work and gotten from us all these concessions, maybe some other people will come back and see what kind of a deal they can get from us, which was probably the plan all along.”

Meriturn had set an April 29 deadline to complete the sale. Katahdin Paper Co. had hoped to restart the idled East Millinocket mill Tuesday, but that plan fell apart when negotiations with Meriturn collapsed, leaving roughly 450 jobs in limbo. The Millinocket mill has been shut down since 2008.

State and local officials have been marketing the Millinocket and East Millinocket mills as a package deal. Madore said Monday that, despite the most recent setback, local officials will continue to seek a single buyer for both because the mills depend on each other to be cost-competitive.

“We’re in this together,” he said.

Meriturn’s offer could have protected the 450 jobs in East Millinocket and potentially led to the restoration of 120 to 150 jobs in Millinocket. But the company’s request for $48 million in tax breaks would not have come cheaply for the towns.

Tax revenues paid to East Millinocket from the mill would have declined from $2.1 million to about $46,800 beginning next fiscal year while Millinocket’s tax revenues would have fallen from $2.6 million to about $50,000.

Meriturn had sought ways to add a biomass cogeneration plant in Millinocket. But Congdon said he and the governor believe extending natural gas lines to the mills — as well as others in the area — would be a better and cheaper solution over the long run.

Congdon also said state officials are exploring the option of the state shutting down the old landfill and then acquiring it. But that would require legislative approval, something that he and others in the administration are working to secure.

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