EDITORIAL

Katahdin mills’ not so golden road

Robert F. Bukaty | AP
Posted April 14, 2011, at 10:01 p.m.

Gov. Paul LePage and his administration have been criticized for not doing enough to broker a deal for the purchase of the mills in Millinocket and East Millinocket. At the same time, some blame the towns for not giving in to large tax breaks for a potential buyer, while others blame the mills’ owner for being greedy.

Last week, talks between the mills’ current owner Brookfield Asset Management and the would-be buyer Meriturn Partners broke down. Meriturn blamed the slow pace of the process. The company sought to buy the mills for $1 and asked for $48 million in tax breaks from Millinocket and East Millinocket town officials.

The situation is much more complex — and dire — than most realize.

Here are the basics: Making paper, under any circumstances, is a capital-intensive process. Doing it at mills with expensive fuel sources and big capital investment needs adds to the cost.

Because of its unsustainable energy costs, the Millinocket mill closed in 2008. The East Millinocket mill was temporarily shut last month, a closure now extended by the failure to reach a deal on its purchase. The shuttered Millinocket mill has no customers; those that buy paper from East Millinocket — including the Bangor Daily News — now have to find an alternate supplier.

Selling mills that need tens of millions of dollars worth of improvements and have no customers is a task that verges on the impossible. Yet, Gov. LePage, like Gov. John Baldacci before him, is trying to make it happen.

There are good reasons for this. Namely, preserving 450 existing jobs (600 if you add in those who were employed at the Millinocket mill) is easier than creating 450 new ones.

But, as recent history has shown, “saving” such jobs is only temporary.

One of Gov. John Baldacci’s most dramatic white-knight efforts was on behalf of the Georgia-Pacific Corp. paper mill in Old Town, which employed more than 450 people when it was closed in 2006. It now operates as Old Town Fuel & Fiber, owned by flamboyant billionaire Lynn Tilton, and employs about 200.

Likewise, the former governor is credited with saving the Millinocket mill — twice. Yet, today it sits idle, employing no one.

The biggest success is the mill in Lincoln, which was restarted under new ownership and has carved out its place in a niche market.

Replicating that success has been elusive in the Katahdin region. The mills’ current owner, Brookfield Asset Management, apparently is now entertaining offers to buy mill equipment as scrap. If this is allowed to happen, there will be no future for these mills.

The one promising path, which Gov. LePage highlighted, is to bring natural gas to the mills to lower their energy costs. This would require extending the existing gas line by about 20 miles. If this option is seriously considered, getting gas to the Lincoln mill as well should be part of the discussion.

Like it did to preserve rail service to northern Maine, the state could use a bond to raise some or all of the money for this work. In both instances, however, there is no guarantee of economic viability or that jobs will be maintained.

The situation with the mills is devastating to the Katahdin region. Sadly, there are no easy answers.

SEE COMMENTS →

ADVERTISEMENT | Grow your business
ADVERTISEMENT | Grow your business

Similar Articles

More in Opinion