June 14, 2008

Millinocket: Katahdin Paper Officials Hope Boiler Solves Woes

By Nick Sambides Jr., Bangor Daily News, Maine

Jun. 14--MILLINOCKET, Maine -- Katahdin Paper Co. LLC officials are figuring costs in a tentative plan to build a biomass boiler that would wean the local mill off its almost total dependence on oil and save 208 jobs.

The installation, which could save company officials from shutting down the mill, could occur in substantially less than the 18 to 24 months mill management originally predicted -- and for much less money -- but would still cost tens of millions of dollars, mill Manager Serge Sorokin said on Friday.

Biomass boilers use living and recently dead biological material, such as wood chips, as fuel for industrial production of steam.

"We're working very hard to save the mill," Sorokin said. "We are letting the process go forward and are looking at the [financial aspects] of the plan very closely. We have a great sense of urgency. Our options will become much clearer in the next few weeks."

News of the plan came after Sorokin met behind closed doors at the mill Friday afternoon with U.S. Sens. Susan Collins and Olympia Snowe along with representatives from 13 unions, Town Manager Eugene Conlogue and the Town Council. Gov. John Baldacci spoke briefly about the plan during an interview earlier Friday.

Council Chairman Wallace Paul called the discussions "very encouraging.

"We were all very impressed with what they had to say," Paul said. "The company has done everything it could, in a very high-end way, to keep the mill going. All that I have heard was significantly more favorable than what I was expecting."

The announcement was the most specific and positive news since mill parent company Brookfield Asset Management Inc. announced plans May 29 to shut down the mill indefinitely on July 28 because of runaway oil prices. The mill used more than 400,000 gallons of oil to make steam in 2007.

But the plan comes with a significant caveat -- the numbers must add up.

Company officials told union workers months ago that they dropped their energy upgrade plans because it would take as much as a $50 million investment over the next two years to install a biomass boiler to power the plant and cover expenses during the 18 months to two years it would take to get the boiler running.

State forest products industry advisers, who have been working with Brookfield since the mill crisis began, now indicate that those estimates were too high, sources said.

The final decision on adopting the plan rests with Brookfield Asset Managing Partner Peter Gordon, and the plan is not complete, Baldacci said.

"The alternative energy piece of it we have figured out," Baldacci said. "Now we have to see if there are any financial issues.

"What we are looking at is keeping the mill operating while things are being done, and the company has been very helpful in finding strategies to accomplish that," Baldacci said. "We would have to make changes while operating the mill. The point to realize is that the plant is losing money every month."

While lacking specifics because of the ongoing nature of the planning, Baldacci, Snowe, Collins and Sorokin hit reassuring themes stressed all along: the strong cooperation between company, state and federal officials; the excellence of the mill's labor force, product and management; the mill's strong customer base; and the many agencies that can help displaced workers or provide gap funding until a new energy source is operational.

The mill is booked with orders for catalog, magazine and retail industry fliers through 2008. Mill customers have offered to help keep the mill going, Sorokin said. Town Councilor Jimmy Busque said he was impressed with how positive customers have been.

"They are willing to step up and help in any way they can to make the mill viable," said Busque, who also works as a steam operator at the Millinocket plant. "Everybody was very optimistic that a solution could be found."

Collins and Snowe discussed the plethora of federal and state funding programs that could provide the mill with low-interest loans, tax credits and other stimulus toward changing power sources, and the assistance programs that would help mill workers should a shutdown occur.

Collins called biomass an established technology -- the Brookfield-owned East Millinocket mill has had a boiler for decades, Sorokin said -- "that will greatly reduce if not end the mill's dependence on foreign oil.

"There's a lot of concern about how long [transition to new energy] would take and what the sources of funding would be," Collins said. "We are here to assure that we will use everything at our disposal to help people get through this."

"It's very important that everybody knows that we are all on the same page here," Snowe said. "Another mill shutdown would devastate this area, especially given how the mill was saved from the ashes of bankruptcy in 2003."

The governor said his response team, which is headed by Baldacci's senior forest products adviser, Rosaire Pelletier, plans to put together financial estimates for the different options next week. The team will then go over those options with representatives of Brookfield Asset Management and Fraser Papers Inc., which operates the mill.


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