State representative: Lack of wood preventing sale of Katahdin mills

Though the word is that a deal to buy two Katahdin region paper mills is being held up by a lack of softwoods, industry insiders believe that the lack of wood at the right price is the real impediment. Here Treeline Inc. woodyard foreman Robert Bailey cuts tree trunks with a slasher at the Lincoln business on Friday, June 24, 2011.
Though the word is that a deal to buy two Katahdin region paper mills is being held up by a lack of softwoods, industry insiders believe that the lack of wood at the right price is the real impediment. Here Treeline Inc. woodyard foreman Robert Bailey cuts tree trunks with a slasher at the Lincoln business on Friday, June 24, 2011.
Posted June 24, 2011, at 6:07 p.m.
Last modified June 24, 2011, at 7:13 p.m.
Treeline Inc. woodyard foreman Robert Bailey takes a break from work at the Lincoln business on Friday, June 24, 2011. Bailey had spent much of the day cutting tree trunks with slasher, the large machine behind him.
Treeline Inc. woodyard foreman Robert Bailey takes a break from work at the Lincoln business on Friday, June 24, 2011. Bailey had spent much of the day cutting tree trunks with slasher, the large machine behind him.
With the April announcement by Meriturn Partners LLC that the company will not purchase the pictured East Millinocket mill, along with the mill in neighboring Millinocket, Gov. Paul LePage stated late last week that Brookfield Asset Management Co. will not begin dismantling and liquidating the properties, thus extending the opportunity to find new interested buyers for the mills.  Photo taken on Tuesday, May 3, 2011.
Kate Collins | BDN file
With the April announcement by Meriturn Partners LLC that the company will not purchase the pictured East Millinocket mill, along with the mill in neighboring Millinocket, Gov. Paul LePage stated late last week that Brookfield Asset Management Co. will not begin dismantling and liquidating the properties, thus extending the opportunity to find new interested buyers for the mills. Photo taken on Tuesday, May 3, 2011.

MILLINOCKET, Maine — A lack of wood is one of several logjams preventing a Chinese investor from buying both Katahdin region paper mills for $1, one of the area’s state representatives says, though industry insiders say the wood’s affordability might be the real issue.

Rep. Herbert Clark, D-Millinocket, told the Town Council during its meeting Thursday that International Grand Investors Corp. of Delaware wasn’t finding enough wood in the area to make the purchase agreeable.

“We are being told that they are negotiating,” Clark said during a meeting intermission, “and that [the lack of wood] is a problem, but that is now being addressed. A lot of smart people are working on this. I am pretty sure that it is going to be resolved soon.”

As to the likelihood of a mill purchase being consummated by IGIC, Clark said, “If I were a betting man, I would give it 60-40,” or a 60 percent chance of happening.

Town Manager Eugene Conlogue told councilors that negotiations with a mill buyer were continuing.

“We have run into a couple of snags this week, but I don’t think it is a fatal delay,” said Conlogue, who added Friday that state officials have generally kept him informed as to their progress in finding a buyer for the mills.

Adam Fisher, a spokesman for Gov. Paul LePage, declined to comment Thursday and Friday. Scott Beal, a spokesman for Woodland Pulp LLC of Baileyville, an IGIC subsidiary, did not return several messages left Friday and earlier this week.

IGIC’s standing as a possible Katahdin mill operator surfaced on June 14 when Dan Whyte, vice president of Brookfield Asset Management, the current owner of the East Millinocket and Millinocket mills, told the Bangor Daily News that talks “are in progress” to sell the facilities to the Delaware-based investor.

Part of a Hong Kong-based holding company, IGIC is a company registered for business in Delaware that represents international investors in pulp trade and imports.

If the sale goes through, it would be IGIC’s second major mill acquisition in Maine since September, when the firm purchased the former Domtar pulp mill in Baileyville for $64 million.

Conlogue estimated that the restart of the Katahdin Paper Co. LLC mills would restore about 600 jobs to the region. East Millinocket’s mill employed about 450 people when it shut down on April 1, prior to a potential deal with a San Francisco investor falling through. Millinocket’s paper mill closed in September 2008, idling 150 workers.

Others close to the deal estimate that about 400 jobs are more likely to be created if the mills restart.

State legislators helped the deal along by passing a bill earlier this month authorizing the state to acquire an East Millinocket landfill owned by Brookfield, but some lawmakers compared that arrangement to “corporate blackmail.”

Buyers were leery of assuming liability for the landfill, and Brookfield told state officials that if the state could not assume ownership of the landfill, Katahdin Paper, their subsidiary, would permanently dismantle the mills to pay for the closing and remediation of the landfill.

The idea that Maine lacks enough wood to make a restart of the mills achievable drew skepticism Friday from two industry insiders.

Keith Van Scotter, co-owner of Lincoln Paper & Tissue LLC., and John Williams, president of the Maine Pulp & Paper Association, said it is more likely that available wood stocks might be priced too high for a potential investor’s taste.

“The wood is there. It is obvious that there are plenty of allowable cuts available,” Van Scotter said Friday. “The issue is the cost. Wood prices continue to move up in an environment where our product prices are not.”

“The supply in Maine has been increasingly tight in hardwoods and softwoods. It means there is wood out there but there is less wood readily available,” Williams said. “It is really not a lack of wood. That is particularly true in softwoods. The problem is getting softwoods to markets. There are not as many loggers as there used to be and we have very high fuel prices.”

Softwoods would most likely be the primary resource of the Katahdin mills, Van Scotter said.

Wood prices, Van Scotter said, have generally increased by 50 percent since he and business partner John Wissman revitalized the Lincoln paper mill in 2004. Maine also had a longer, snowier winter and an extended rainy spring and mud season this year, though Van Scotter dismisses those factors as “more of an excuse than a reason” for any recent price spikes.

Landowners are driving up wood bidding prices, and “the consequence is that it squeezes their customers,” he said.

Van Scotter suspected that landowners might drop their prices to help re-establish two paper mills. Letting the deal die is “a bad strategy,” he said.

SEE COMMENTS →

ADVERTISEMENT | Grow your business
ADVERTISEMENT | Grow your business

Similar Articles

More in Penobscot