LINCOLN, Maine — Bangor Natural Gas LLC and Lincoln Paper and Tissue LLC have inked a deal to extend a compressed-gas pipeline to the mill by late next year, officials said.

The pipeline will make the mill an oil-free facility and cut the energy costs of the town’s largest employer by four or five percent, said Keith Van Scotter, co-owner of Lincoln Paper and Tissue.

The pipeline gas will also be available to residents and other area businesses, providing potential energy savings and a lure to new business and investors, Town Council Chairman Steve Clay said.

“This will be a multi-year process,” Van Scotter said Friday afternoon. “Bangor gas looks at it like [Lincoln Paper and Tissue] is the anchor that makes the investment worthwhile.”

Lincoln Paper and Tissue announced the deal on Friday. It was unclear how far beyond Lincoln the pipeline would extend, though Van Scotter said he believed it would go to Mattawamkeag.

George Gervais, commissioner of the Maine Department of Economic & Community Development, referred questions on the pipeline’s length to Bangor Gas.

A Bangor Gas representative said he could not comment on the eventual pipeline length. He said his company’s corporate headquarters would have its own announcement next week.

According to the company website, Bangor Gas is a subsidiary of Energy West, a publicly traded (NASDAQ, EWST) gas utility and energy supplier serving approximately 36,000 customers in Montana, Wyoming, North Carolina and Maine.

Gov. Paul LePage made extending a natural gas pipeline into Lincoln and the Katahdin region towns one of his administration’s goals in 2011. The paper mills in Lincoln, East Millinocket and Millinocket were expected to anchor the line.

LePage applauded the Lincoln Paper and Tissue-Bangor Gas deal in a statement released Friday.

“Expanding natural gas service in Maine is critical to retaining our manufacturing base, attracting business investment, and keeping Mainers employed,” LePage said. “This positions Lincoln Paper and Tissue to be more competitive in attracting new customers and larger orders, which will lead to more jobs. I look forward in working with them in making this critical investment a reality.”

Clay said he hoped the pipeline’s installation would spur greater investment in Lincoln.

“I think it will be great for the mill and great for the town in general. The main benefit is [for] the mill and the savings it will see over time,” Clay said.

LePage set a goal for the state in November 2011 of cutting from 80 percent to 40 percent the number of state homes and businesses heated by No. 2 heating oil and establishing several hubs around which the state’s existing natural gas pipelines would be extended.

Lincoln Paper and Tissue and Great Northern Paper Co. LLC prepared to help the state meet this goal by converting its oil burners to natural gas during the last two years.

Lincoln Paper and Tissue’s gas is trucked in from Boston, Van Scotter said. The company spent more than a million on that conversion to liquid natural gas and expects to spend more converting to the compressed gas Bangor gas sells.

According to the company’s website and previous news accounts, Bangor Gas has the right to use the 190-mile Loring pipeline, which runs from the Mack Point port facility in Searsport to the former Loring Air Force Base in Limestone.

The pipeline runs through Howland and will need a spur to reach the mill, Van Scotter said.

The pipeline was built by the Department of Defense in the early 1950s at the height of the Cold War to supply jet aircraft with fuel. The jet fuel was taken by ship to the port facility at Mack Point in Searsport, then pumped through the 6-inch-diameter pipe north to the base.

The pipeline was decommissioned in 1994 and filled with nitrogen to inhibit corrosion.