Lincoln paper mill prepares to anchor proposed gas pipeline

By Nick Sambides Jr., BDN Staff
Posted Nov. 18, 2011, at 9:09 p.m.

LINCOLN, Maine — Lincoln Paper & Tissue LLC co-owner Keith Van Scotter will spend about $2 million creating something Gov. Paul LePage wants to see more of — a large Maine manufacturer preparing to use a natural gas pipeline, and doing so with its own money.

Though an enthusiastic backer of LePage’s push to extend pipelines throughout Maine, including to his mill, Van Scotter is not banking on it, he said Friday. He is taking advantage of the 30 percent savings natural gas delivered by truck will provide him over his costs for the No. 2 and No. 6 heating oil his mill burns to make business-card paper and party goods.

Trucking in liquid natural gas “is kind of a bridge for us in between using oil and getting natural gas via pipeline,” Van Scotter said. “It is going to require some capital on the plant side, but obviously we think it’s worth it. It is a big cost reduction. It’s not like pipeline gas, but it is still a big reduction.”

“Our two biggest competitive disadvantages in Maine are location — namely transportation costs — and energy,” Van Scotter added. “We can’t change our location, but we can save on our energy costs. If we get access to pipeline natural gas, it gives us better prospects long-term to survive. Business today is really about survival and it might also put us in a position for further expansion. Without that, it is not likely. With that, it is possible.”

His plan calls for delivered liquid natural gas, or LNG, at the plant next year. Lincoln Paper & Tissue invested $1 million installing natural gas-compatible burners in its two tissue machines in September and will do the same for its biomass boilers, and spend another $1 million, in January, Van Scotter said.

The LePage administration is helping natural-gas suppliers and Maine businesses prepare to run a branch line, or six- to eight-inch pipe, about 60 or 70 miles from the Old Town or Bangor areas through Lincoln and into the Katahdin region, where it would supply the two Great Northern Paper Co. mills, said Ken Fletcher, director of the state’s energy office.

Private investors would build the branch sometime in 2013. It would extend from Maine’s largest natural gas conduit, the Maritimes and Northeast Pipeline, which stretches from Halifax and Point Tupper in Canada to Portland. It is among three main pipelines in Maine, Fletcher said.

LePage critics such as Environment Maine say that natural gas comes with a host of its own problems and believe the state could do more to reduce oil dependency through home weatherization and stricter automotive fuel standards without it.

State leaders want to limit public funding for a natural gas pipeline as much as possible. They prefer that the state act as a guarantor of loans for pipelines statewide, Fletcher said.

“Our primary role at the state level is to provide good information, bring people together and ensure that we communicate how it [natural gas pipelines] fits with our energy policy,” Fletcher said.

State leaders want to help extend pipelines wherever possible, Fletcher said. Besides providing large savings, natural gas burns more cleanly than oil and in the highly volatile world of energy and commodities investment, looks like a relatively stable source of energy, Van Scotter and Fletcher said.

“I think the LePage administration’s and the federal government’s support are going to increase the chances of it [a natural gas pipeline] happening because it increases the prospects of the mills down the valley,” Van Scotter said. “All the smart people I talk to think that natural gas will be a significant cheaper fuel for many more years.”

Natural gas lines need companies such as Lincoln Paper & Tissue, Fletcher said — round-the-clock users that draw enough fuel to make the investment worthwhile. It’s almost a formula. Investors must balance the cost per mile of pipeline construction and maintenance against the potential savings natural gas provides and the time it would take for those savings to recoup the initial investment. Under present conditions, a 60- or 70-mile line through northern Penobscot County “is justifiable,” Fletcher said.

“A 20-mile line is a no-brainer,” he added.

Van Scotter said he supports the LePage initiative and efforts by U.S. Sen. Olympia Snowe to broaden the use of federal energy development funding in rural areas to encompass natural gas pipelines. Snowe is pressing U.S. Department of Agriculture officials to sign an executive order broadening the criteria for energy aid in rural communities to natural gas lines.

“The state government or the feds may not have to provide much money, but they have to provide the backstop,” Van Scotter said. “A company like mine can sign a long-term agreement to buy gas, which we will do, but what the state and feds can do is provide the kind of loan guarantees to help get one of these projects financed.”

Pipeline deals can collapse and existing lines can create heavy financial losses if line anchors such as Lincoln Paper & Tissue shut down or move, but lines are also powerful lures for new and existing business investment and expansion, Fletcher said.

“We’re in constant conversations with people about it,” Fletcher said. “If we can get the infrastructure in, that provides the basis for much more economic development. That is what we were thinking of. It lays the groundwork so that if somebody wants to expand, they will look where the natural gas is.”

To view a map of the natural gas pipelines in Maine and Canada, click here.

http://bangordailynews.com/2011/11/18/business/lincoln-paper-mill-prepares-to-anchor-proposed-gas-pipeline/ printed on December 25, 2014