October 18, 2019
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Cleanup concerns emerge in Lincoln mill bankruptcy

Nick Sambides Jr. | BDN
Nick Sambides Jr. | BDN
The Lincoln Paper and Tissue mill as seen on Dec. 12, 2013.

PORTLAND, Maine — A group of liquidators is expected to take possession of the Lincoln Paper and Tissue mill Wednesday as state environmental regulators worked out a deal to have some of the bankrupt mill’s cash set aside for environmental cleanup.

Sam Anderson, the mill’s attorney, was working on the final details of a deal Tuesday afternoon, outlining how to distribute the proceeds from selling the mill.

That arrangement will involve setting aside $50,000 for a fund that could help with environmental remediation costs that the attorney for Maine’s Department of Environmental Protection wrote could be as high as $80,000 in the near future and many millions of dollars for full remediation.

“Based on two recent site visits by DEP’s environmental response team, DEP can state, with some certainty, that there is potential for there to be millions of dollars in long-term cleanup costs relating to decommissioning the wastewater lagoon, abating the pervasive asbestos problem and other remediation efforts,” Kevin Crosman, an assistant attorney general representing the DEP in the case, wrote in November.

The initial agreement did not set aside money specifically for environmental cleanup, the full scope of which will be sorted out as the bankruptcy case continues, Anderson said.

The DEP expects that cleanup will involve removal of buildings with asbestos siding that could crumble into smaller pieces, the enclosure of 15,000 cubic yards of industrial sludge in the wastewater lagoon and unknown cleanup requirements at the site of a recovery boiler explosion.

“Several of the buildings associated with the boiler explosion are unsafe for inspection,” Crosman wrote, adding that the DEP believes there are some chemicals inside that may be explosive.

In an objection to the deal that did not include setting aside money for environmental remediation, Crosman wrote that the DEP “has only begun to wrap its arms around the widespread environmental damage existing at the mill site,” but identified the lagoon and asbestos among “some of the more readily identifiable and imminent threats to public health and safety.”

The DEP had objected to giving unsecured creditors the first grab at a carve-out from the estate, before any money was set aside for environmental cleanup.

“Ostensibly, parties to the [distribution plan] believe that both the long- and short-term environmental cleanup costs should be absorbed, in full, by the taxpayers of Maine. DEP disagrees,” Crosman wrote.

While the court directed the parties to revise details of the escrow account set aside for environmental cleanup on Tuesday, it approved the mill’s disbursal to its first-in-line lender, Siena Lending Group, when the sale closes.

Anderson and other attorneys in the case said they expect the $5.95 million sale to close Wednesday. The sale includes the mill’s buildings and equipment but not the land.

After the payment to Siena, other lenders that hold security claims against the mill’s inventory and property will get paid next and collectively put $175,000 into the fund for unsecured creditors, a group that includes the mill’s suppliers and employees with yet unpaid vacation time or severance claims.

After paying its secured creditors, Anderson said during a court hearing Tuesday morning that the bankrupt mill should have about $1.3 million and other land and inventory to sell off.

That money would be used to cover costs of winding down operations at the mill and for the environmental remediation fund and paying Reich Brothers, who are in line to get $150,000 for being the stalking horse bidder for the mill.

The DEP said most of the environmental cleanup needs at the site require further testing to determine the extent of the cleanup needs.

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