Attorney for energy company says no deal on electricity sales until East Millinocket mill restarts

Attorney Harold Pachios speaks during a legislative hearing in Augusta on Wednesday, March 5, 2014.
Nick Sambides Jr. | BDN
Attorney Harold Pachios speaks during a legislative hearing in Augusta on Wednesday, March 5, 2014. Buy Photo
Posted March 05, 2014, at 5:59 p.m.
Last modified March 06, 2014, at 12 p.m.
East Millinocket paper mill workers wore a sticker in support of LD 1792 during a hearing at the State Capitol on Wednesday, March 5, 2013.
Nick Sambides Jr. | BDN
East Millinocket paper mill workers wore a sticker in support of LD 1792 during a hearing at the State Capitol on Wednesday, March 5, 2013. Buy Photo
The Legislature’'s Joint Standing Committee on Energy, Utilities and Technology listens to testimony during a public hearing at the State Capitol on Wednesday, March 5, 2014.
Nick Sambides Jr. | BDN
The Legislature’'s Joint Standing Committee on Energy, Utilities and Technology listens to testimony during a public hearing at the State Capitol on Wednesday, March 5, 2014. Buy Photo
A crowd of about 60 people attended a hearing in Augusta Wednesday on a proposed bill that would allow Great Northern Paper Company's mill in East Millinocket to sell electricity in partnership with Brookfield Renewable Energy. An attorney for Brookfield spoke in opposition to the bill, which is designed to provide the idle mill with revenue to restart paper-making operations.
Nick Sambides Jr. | BDN
A crowd of about 60 people attended a hearing in Augusta Wednesday on a proposed bill that would allow Great Northern Paper Company's mill in East Millinocket to sell electricity in partnership with Brookfield Renewable Energy. An attorney for Brookfield spoke in opposition to the bill, which is designed to provide the idle mill with revenue to restart paper-making operations.
Great Northern Paper Co. LLC in East-Millinocket recently.
Great Northern Paper Co. LLC in East-Millinocket recently. Buy Photo

AUGUSTA, Maine — The owner of three hydropower dams on the Penobscot River is willing to negotiate a profit-sharing agreement with the owner of the idled East Millinocket paper mill, but not until the mill restarts, its attorney said Wednesday.

Opposing a bill that would allow Great Northern Paper Co. LLC to sell electricity at its mill, attorney Harold Pachios told a legislative committee that the long-term rehiring of 212 millworkers must occur before Brookfield Asset Management will enter negotiations with mill parent company Cate Street Capital.

“This bill says they [Cate Street officials] get the money before they reopen. When these workers are back to work, we will work out some kind of [electricity] load-shedding plan conditioned on them staying at work — no long-term shutdowns. We are willing to do that,” Pachios said.

The sole voice to speak against LD 1792, Pachios told the Legislature’s Joint Standing Committee on Energy, Utilities and Technology during a public hearing that the bill’s passage would make the state a business partner with Cate Street without any guarantees that the state would get a return for its investment. About 60 millworkers and Katahdin area leaders attended the State House hearing.

“This is, to say the least, in our view, an unusual and unlawful effort to expropriate Brookfield money for Cate Street,” Pachios said.

Great Northern Paper shut down the East Millinocket mill on Jan. 23. The company said it needed to create a new business plan to overcome high energy and production costs. On Feb. 6, the company laid off 212 of its 256 workers.

Gov. Paul LePage first broached the idea of electricity sales at GNP on Feb. 12. The bill would lift a state law that since 2002 has allowed Brookfield, the mill’s previous owner, to generate power only for the paper mill except when the mill is down, officials have said.

Brookfield has made $4 million to $5 million per month selling wholesale electricity since GNP shut down the mill, Cate Street President and CEO John Halle said outside the hearing.

Pachios said he didn’t know exactly how much Brookfield made, except that it was “a lot.”

GNP gets none of Brookfield’s profits despite owning the power lines and several pieces of equipment Brookfield uses to transmit electricity. The bill will force Brookfield to negotiate with Cate Street because Brookfield has refused to so far, Halle said.

Committee members expressed hesitance about getting between two private companies.

If passed, the bill would generate for Cate Street about $1 million per month during peak-demand times such as winter, Halle said — a revenue stream that several millworkers and local leaders told the committee is essential to the mill’s future. The bill calls for Brookfield to share electricity-sale profits retroactively to when the mill halted production.

The bill, Pachios said, violates a 10-year power supply contract that mill owner Cate Street signed with Brookfield on Aug. 30, 2011, guaranteeing the mill power rates originally set in 2001 during high-cost times such as winter. Such a law would grant government too much power and violate the Constitution, he said.

“When they read this in the paper, people are going to say, ‘And when are they coming for me?’ Because if you can nullify this contract with Brookfield, you can do it to anyone,” Pachios said.

He described Cate Street as defaulting on a Brookfield energy contract that Brookfield maintains despite the default because company officials hope to see the mill restart.

Brookfield, Pachios said, invested more than $1.1 billion in state hydropower. The company, then known as Brascan, bought the East Millinocket and Millinocket paper mills in 2003 for $157 million and sold them for $1 to Cate Street in 2011.

Cate Street has since 2012 received more than $142 million in tax breaks and state loan guarantees for its East Millinocket mill, its Millinocket industrial park and its plans to launch torrefied wood production facilities. The company is also behind on its property tax payments to East Millinocket and Millinocket.

Despite this, company workers and town officials extolled the company as a good corporate neighbor.

“The restart plan will work. It will allow our mill to reopen,” GNP mill manager Ned Dwyer said. “It is an aggressive plan but it is what we need to do. It [the bill] is a critical component of what we need to happen.”

The committee will vote on the bill Friday, said bill sponsor Rep. Steve Stanley, D-Medway. If it passes, the full Legislature will review it next week.

CORRECTION:

An earlier version of this story requires correction. Brascan, not Brookfield, bought the East Millinocket and Millinocket paper mills in 2003, not 2001, and then sold them to Cate Street in 2011. Cate Street has since 2012 received more than $142 million, not $225 million, in tax breaks and state loan guarantees for its East Millinocket mill, its Millinocket industrial park and its plans to launch torrefied wood production facilities.

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