LINCOLN — What a difference 8½ years make in this Penobscot Valley town, where the local economy took a devastating hit after bankruptcy led the Eastern Pulp & Paper Corp. to close its Brewer and Lincoln mills in January 2004.
Fast forward to September 2012: The local economy is humming, and Lincoln Paper & Tissue President and CEO Keith Van Scotter can look back at the effort made to reopen Eastern’s shuttered Lincoln mill. He can also talk about the facility’s future, a discussion far different from similar discussions in midwinter 2003-04.
Keeping the steam up
After the Eastern mills shut down, a subsequent auction failed to secure a buyer for either facility, and “the assets became technically abandoned,” Van Scotter said.
However, the mills “weren’t [actually] abandoned”; the state government “maintained the heat here and in Brewer for a period of time” to avoid winter-related damage to the two facilities, he explained.
“They would have been damaged beyond repair, and as well there would certainly have been a huge environmental issue associated with that,” Van Scotter said. The state’s action also prevented creditors from liquidating the mills’ assets by selling specific equipment, a step that would likely have left the mills permanently shuttered.
That winter several businesspeople — including Van Scotter and current CFO John Wissmann — “started working to find a way … to buy the Lincoln mill,” Van Scotter said. Backers formed Lincoln Paper & Tissue and “closed the deal” at 4:15 p.m., Friday, May 28, 2004, the “Friday before the Memorial Day weekend,” he recalled.
“The first shift came to work here at 5:30 p.m.,” Van Scotter said.
The biomass boiler started producing steam “within three days, and two days after that we were making our first tissue, on June 3, 2004,” he said. By mid-July, LP&T employees restarted the pulp mill, a second tissue machine, and two paper machines.
The mill started shipping tissue products on June 3. “We were actually calling on customers” before the investors actually bought the mill,” Van Scotter said, and many customers “wanted and needed the product from the mill. I won’t say it was easy getting them back, but they needed us, and we needed them. We actually had orders when we started up.”
Investors negotiated a new labor agreement, established “a new set of work rules,” placed “a stronger focus on safety and job flexibility ,” and banned smoking at all mill facilities, Van Scotter said. “We were a little light on the staffing” as the mill reopened; today, after LP&T installed a new tissue machine in 2006, and today “we’re just a shade under 400” employees, he said.
Lincoln Paper & Tissue operates two fourdrinier paper machines, Nos. 4 and 5; three tissue machines, Nos. 6, 7, and 8 (the newest); and a pulp dryer. The company produces 200-220 tons per day of paper and “around 205 tons a day” of tissue paper, Van Scotter said.
The paper and tissue machines manufacture “parent” (large) rolls that are sold to companies that produce various paper products and, with the tissue, “make kitchen towels or bath tissue or napkins,” he said. Some tissue products feature deep-dyed colors; many tissue products are multiple-ply.
Lincoln-made paper “goes into cards primarily” and “into direct mail for some printing papers,” Van Scotter said. “We also sell heavy-weight envelope stock.
“Our customers … do all the embossing and all the cutting and make all the individual packages for sale,” Van Scotter said.
Sawdust, chips, and “a very nice product”
In 2005, when LP&T had only two tissue machines, the mill made 100 more tons of pulp a day than it could use. Selling the excess pulp elsewhere “was not a good business proposition,” Van Scotter said. “We believed that there would be a demand for additional parent rolls of tissue that would make it worth the investment to install Tissue Machine 8, which we did.”
Known in the industry as “a crescent former,” the high-speed, twin-wire No. 8 tissue machine “is a technology that has been around about 20 years, but it’s state of the start for making tissue,” he said.
To make its products, Lincoln Paper & Tissue utilizes softwood and hardwood pulp in an approximately 50-50 ratio. The company buys sawdust and shavings from Maine sawmills that cut spruce and fir logs; “we probably bring in about … 10,000 to 12,000 tractor-trailer loads a year of sawdust,” including some hardwood sawdust, Van Scotter said.
The sawdust goes into “a special digester,” of which there are “not many in the industry,” he said. Heated inside the digester and blended there with “some cooking chemicals,” the sawdust becomes pulp that “gives the softness and bulkiness that people like in tissue products and in our paper products,” he pointed out.
The company purchases hardwood chips from different sources, Van Scotter noted. “Hardwood [pulp] gives us [a] softer surface” and “improves the feel of the tissue,” he said. “If you want a soft tissue, the hardwood and the [softwood] sawdust together gives us a very nice product.
“For the printing papers, it allows us to have a smoother product as well,” he said.
“Our paper products are bulkier than average, which for certain types of businesses is desired,” Van Scotter said. He displayed several subscription cards typically found in magazines.
“In terms of bulkiness, once you’ve made a sheet of paper, it’s actually thicker. Where it makes a difference is in” such cards, which the Postal Service specifies must be a certain thickness, he explained.
“Our advantage is [that[ we can get the thickness for the lightest weight,” Van Scotter said. “That’s what we mean by ‘bulky’: Our product is thicker for a given amount of weight.”
Committed to a clean environment
As do many American paper mills, Lincoln Paper & Tissue uses chlorine dioxide and oxygen “to make bleached pulp,” Van Scotter said. “From the perspective of cost and environmental quality, chlorine dioxide is an effective bleaching agent.
“It is my belief that we have probably one of the cleanest bleaching processes in the country,” he stated. “Because of our oxygen bleaching, we use less” chlorine dioxide, and “consequently we are [at] non-detect[able levels] even at the bleach plant” for dioxins and other potentially hazardous chemicals.
Company employees take environmental issues “very seriously,” Van Scotter said, stressing that equipment is “operated according to best practices” and that LP&T has an “excellent” relationship with the Maine Department of Environmental Protection.
“It’s interesting; as a company, we self-report” to the DEP,” he said. “If something goes wrong, we have to tell” state regulators. “We cultivate a relationship that’s based on credibility and trust, which means we tell the truth and make sure that any time we’re scrutinized” by the DEP, “we’re doing things right.”
Like other Maine manufacturers, “we are subject to unannounced inspections by the DEP,” Van Scotter pointed out.
Across Maine, paper mills seek younger, skilled employees as an aging workforce starts to retire. “I’d say we’re probably in better shape than most” other mills, but “we do have a challenge,” Van Scotter said.
“We’re able to hire skilled workers, particularly on the maintenance side, and we’ve got good training programs to bring people on,” he said. “Where we actually struggle at times is finding good people that want to work on the production side.
“People want to come in and collect paychecks, but it’s a demanding job. It’s shift work,” Van Scotter commented. “But this is one of the industries in this state where you can come in and you can live a good middle-class life on the wages we pay you. You can raise a family, and you have benefits.
“But it’s a challenge” to find qualified applicants, he said. “There’s a shortage of people who are capable and willing. It’s not easy [work], but … compared to what’s out there for people to get [for work], it’s a pretty good job.”
For production workers, Lincoln Paper & Tissue requires “either two years’ college and/or significant work experience or military” service,” Van Scotter said. “We are still able to hire very good people.
“All things being equal, if we can get a more mature worker — when I talk about ‘mature,’ somebody who’s not straight out of high school, but somebody who’s in their late 20s or early 30s — you get a better worker and you’ve got the kinds of skills it takes to work in an environment like this,” he said. “Even a production job is pretty technical” now. This is underscored by the fact that a high percentage of the management has engineering degrees, including Van Scotter and Wissmann.
A competitive future
“Business is tough,” Van Scotter succinctly stated. Lincoln Paper & Tissue faces stiff competition in selling its paper products; “printing papers is a business that is in decline,” he said. “There is a lot of capacity out there chasing a shrinking market.”
Fewer competitors manufacture products similar to “our specialty tissue, particularly the deep-dyed products,” but “it’s a relatively small market, too,” he said.
The company ships its products “all over the country” and to Canada and the Middle East, Van Scotter said. “We have shipped product to Australia, New Zealand in the past” and occasionally to Great Britain.
Lincoln Paper & Tissue ships all products by truck, often to destinations in the Upper Midwest and the Middle South and the far West. “Rail from the mill is not cost-effective, and it’s not service-effective,” Van Scotter said. “We’ve actually done some trials” to ship specific products by rail “to the Midwest,” but those trials were not successful. Lincoln has been able to effectively use so-called intermodal transportation whereby a trailer is placed on a railcar for long distance hauls, however this requires that the trailers must be taken to Massachusetts for loading on flatcars.
“Ever since the economic downturn of late ’08, we [have] found that our customers are under more cost pressure, [and consequently] we are under pressure from the revenue side,” Van Scotter said.
“We’re experiencing record and near-record costs” for wood fiber, medical insurance, chemicals and transportation, among other expenses, he said. “Because we ship everything out of state, energy costs … are very high.”
Looking to the future, Van Scotter said that Lincoln Paper & Tissue is involved in efforts to extend a natural gas pipeline to Lincoln and points farther north.
For the mill, burning natural gas makes economic sense; “on a BTU basis, delivered natural gas is one-third the cost of oil,” he said. “It’s [a] huge [savings].
“We’re talking to several different parties who are interested in providing pipeline [natural] gas,” he said. “There is support in the state to get it done.” However, a sufficient number of industrial and commercial customers must commit to purchasing natural gas to justify extending a pipeline north from Old Town to Lincoln and perhaps East Millinocket and Millinocket.
“That’s really our next big step, getting pipeline gas in here,” Van Scotter said. “That would allow further expansion of this site.
“It’s good mill” with a “great workforce,” he said. “Our challenge is” continuing “to find ways to grow the business and make it more secure over time.”
“Maine is really suited for a business like this,” and the forest-products industry is “a big economic driver in this state,” Van Scotter pointed out. Quoting figures provided by the Maine Department of Labor, he said that for each worker employed in a paper mill, “you’ve got five indirect” jobs, including loggers and truckers.
“Just about everything” made in Maine paper and saw mills “is sold out of state,” he said. This “brings money into state” and provides “a net cash flow for Maine.
“It’s a big deal,” Van Scotter said.