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Old Town Fuel & Fiber closes, leaving 180 workers furloughed indefinitely

Posted Aug. 14, 2014, at 10:55 a.m.
Last modified Aug. 14, 2014, at 7:25 p.m.

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Employees at Old Town Fuel and Fiber learned Wednesday night that they would be indefinitely furloughed due to foreign trade and high fuel costs.
Gabor Degre | BDN
Employees at Old Town Fuel and Fiber learned Wednesday night that they would be indefinitely furloughed due to foreign trade and high fuel costs.
Employees at Old Town Fuel and Fiber learned Wednesday night that they would be indefinitely furloughed due to foreign trade and high fuel costs.
Gabor Degre | BDN
Employees at Old Town Fuel and Fiber learned Wednesday night that they would be indefinitely furloughed due to foreign trade and high fuel costs. Buy Photo
Employees at Old Town Fuel and Fiber learned Wednesday night that they would be indefinitely furloughed due to foreign trade and high fuel costs.
Gabor Degre | BDN
Employees at Old Town Fuel and Fiber learned Wednesday night that they would be indefinitely furloughed due to foreign trade and high fuel costs. Buy Photo
The Old Town Fuel and Fiber company.
Gabor Degre | BDN
The Old Town Fuel and Fiber company. Buy Photo

OLD TOWN, Maine — When they finished work Wednesday night, most employees at Old Town Fuel & Fiber also learned they no longer had a job.

“They came up at 4 o’clock and said, ‘We don’t need you to come in tomorrow. Go sign up for unemployment,’” one 26-year veteran millworker said Thursday.

The Hudson man asked not to be identified, “because I want my job back. I’ve been through this a few times. Three times.”

“Effective immediately all Old Town mill operations will be indefinitely suspended,” the company said in a statement issued Thursday. “All employees not needed for securing the facility will be furloughed. During this idled period ownership will be pursuing options to secure the long-term viability of the facility.”

The company blamed foreign competition and increasing wood and energy costs for the shutdown, which affected about 180 employees. In a subsequent release, the city of Old Town said the the mill’s owner, New York-based private equity firm Patriarch Partners, plans to sell.

Lynn Tilton, owner of Patriarch Partners, concentrates on turning around failed manufacturing operations. Tilton’s firm purchased the former Georgia-Pacific mill for $19 million in a bankruptcy auction in 2008.

A representative for Patriarch did not return a request for comment Thursday about the timeline for a sale or prospects for a new buyer.

The statement from Old Town thanked Patriarch for investing in the mill and says city leaders will strive to find a buyer.

“The city has faced this situation before, and we will keep moving forward,” the city said. “The city will work with the mill and state officials to try and find a new buyer and keep Old Town moving forward in a positive direction.”

Employee assistance

Tim Sardano, a spokesman for the Maine Department of Labor, said the state’s Rapid Response program will hold a meeting for displaced workers at 2 p.m. Tuesday, Aug. 19, at the USW Local 80 union hall at 354 Main St. in Old Town.

Rapid Response is a program to assist workers facing job loss because of downsizing or closure find new work or, in some cases, be trained for new careers.

Dan Bird, the human resources director at the mill, said the company is applying for federal Trade Adjustment Assistance funds to help employees, since a flood of wood pulp produced in South America is one of the “primary issues” leading to the pulp mill’s closure. He said some employees also are applying for unemployment.

John Williams, president of the Maine Pulp and Paper Association, said that the mill, which provides wood pulp to other paper manufacturers, has been faced with rising wood costs and a globalizing market for pulp, where new eucalyptus plantations in South America are adding to competition from pulp mills elsewhere in the United States and Canada.

“I don’t think it’s as good of a product,” Williams said of the eucalyptus pulp, “but it’s similar, and there are a lot of new eucalyptus mills coming on line.”

Bird said the quality of that eucalyptus pulp is improving.

“The trees grow overnight,” Bird said. “The fiber is inexpensive, and it produces a quality product. It’s replacing what we produce.”

In addition to trade competition, Bird said the mill also had problems with its biomass boiler. It has been a progressive shutdown, he said.

“We shut down to make repairs to our biomass boilers and ended up finding more work than we expected,” Bird said.

Those biomass boilers have been a source of trouble for the mill, generating hundreds of thousands of dollars in fines from environmental regulators in recent years. According to U.S. Environmental Protection Agency records, an April evaluation found the mill out of compliance, resulting in $126,000 in fines.

Williams said he’s hopeful the mill could reopen with new investment and continue to produce pulp, but that new technologies or the addition of tissue paper machines could help generate new revenue and reduce its exposure to global changes in pricing for pulp.

“[With tissue-making machines] you have some other options and you’re not quite as much at the whim of the market prices,” Williams said. “[Fuel & Fiber] can’t just charge what they need to for their pulp when they’re getting competition from so many other places.”

Williams said the Woodland Pulp mill’s addition of tissue machines in Baileyville is an example.

For now, he said, he’s concerned for the mill’s workers.

“They have a great workforce, and I think that’s why the mill had been successful for a number of years,” Williams said.

Industry’s decline

Pulp and paper jobs in Penobscot County have been on a steady decline in recent years, down from about 2,500 in early 2001 to about 839 at the end of 2014, according to statistics from the Maine Department of Labor. While jobs have dropped, average weekly wages in that industry have risen, up to $1,160 at the end of 2013.

Maine Economic and Community Development Commissioner George Gervais said in a statement Thursday that the state is hopeful operations can continue in Old Town.

“Our primary goal is to get this mill back up and running as quickly as possible,” said Gervais. “The Old Town mill remains a very valuable asset. We are optimistic, that as we move forward, the facility will be able to attract additional private investment so that operations can resume.”

U.S. Rep. Mike Michaud, D-Maine, who was an employee for 29 years at the now-closed Great Northern Paper mill in East Millinocket, has made fighting what he calls unfair international trade practices a focus of his time in Congress.

“Our trade policies at the national level shortchange American manufacturing,” Michaud said in a written statement in response to questions from the BDN. “That’s why I have called on President [Barack] Obama and the U.S. trade representative to pursue trade policies that put Americans on a level playing field. The news out of Old Town and East Millinocket puts a human face on why pursuing fairer trade policies is so important.”

Michaud said he is committed to ensuring that the families affected by the shutdown will benefit from the Trade Adjustment Assistance the company seeks.

Sen. Angus King, I-Maine, said he also is committed to securing Trade Adjustment Assistance but that foreign trade deals are only part of the problem.

“I think this country is in desperate need of a long-term strategy that will not only support, but really rejuvenate, the American manufacturing sector,” said King in a written statement. “I wholeheartedly support efforts in Congress to create industry-led manufacturing institutes that will help foster innovation by bridging the gap between research and development and improve access to cutting-edge equipment and capabilities.”

Republican Sen. Susan Collins agreed with the rest of the delegation about securing Trade Adjustment Assistance and said she is hopeful new investors can continue operating the mill.

“Increased foreign competition continues to present serious economic difficulties for the paper industry, which is why it’s absolutely essential that trade agreements be fair to American workers and open new markets for American products,” said Collins in a written statement.

Rep. Chellie Pingree, D-Maine, had a slightly different take on the issue, suggesting that new industries could eventually backfill the jobs lost in the paper industry.

“We need to recommit to investing in new technologies to drive the next generation of manufacturing jobs, like alternative energy, while giving extra scrutiny to any trade policies that could put American workers and businesses at a disadvantage in the global marketplace,” said Pingree.

Gov. Paul LePage, in an interview with the BDN on Thursday, blamed trade policies, energy costs and — bluntly — the mill’s owner for the closure.

“They just up and left in the cover of darkness, and I’m very offended by that,” the governor said.

‘Just a delay?’

In February, a mill official said during a Portland forum on paper industry innovations that the company planned to launch a pilot project to turn wood pulp into cellulosic sugars that could then be processed to make ethanol.

Darrell Waite, a process manager at the mill, said at the time he expected the biorefinery project would add about 30 jobs to the plant and that it would start later this year.

Hemant Pendse, director of the University of Maine’s Forest Bioproducts Institute, is the company’s lead contact on the research behind its cellulosic sugar processing efforts.

He called Thursday’s announcement “just a delay” in bringing those biofuels to market that stands to push back the timeline for a biorefinery pilot project to make fuels and high-value chemicals from wood-derived sugars.

“This is just a minor setback,” said Pendse, who noted that the Old Town mill has been a leader in pairing that type of technology with its pulp production.

The company previously secured a $30 million grant from the U.S. Department of Energy for its research, and Pendse said he expects it will seek a second phase of funding when the mill is sold to a new owner.

“We have been in a similar situation, when the ownership changed last time,” Pendse said.

Robert Rice, a professor of wood science at the university, said he sees three likely options for the mill’s future: with a buyer interested in re-establishing tissue production on-site, a buyer who would use pulp produced in Old Town for paper manufacturing elsewhere, or a buyer taking a chance on the mill’s promise for selling wood-derived sugar products.

Rice said he sees on-site tissue production as the mill’s best chance at long-term viability, based on the strength in that paper market compared with the market for pulp.

At the mill, some officials such as Bird remain hopeful.

“I’m really optimistic this facility will one day run again,” Bird said. “We just need to reposition ourselves.”

Millworkers affected by the closure, however, had a different reaction. Several who spoke with the BDN on Thursday expressed shock and resignation, but none wanted to be quoted publicly — out of concern it would jeopardize their chances of being rehired.

“I’ve been through it before,” said one millworker, an Old Town resident. “We’ve been expecting this for a year.”

State House Bureau Chief Christopher Cousins contributed to this report.

 

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