Thursday, August 07, 2008

Death Watch in a Mill Town

Death Watch in a Mill Town

High oil prices may be the final blow for a legendary paper plant
By Alex Kingsbury

MILLINOCKET, MAINE-The name Millinocket comes from the Abenaki Indian expression for the "many islands," a fitting description of the region near the geographic center of th e state. It was the thousands of acres of timberland and the rivers, on which logs could be floated, that attracted the paper makers a century ago. But mention Millinocket in New England, and it's never clear if you're speaking about the town itself or its old industrial anchor, the Katahdin paper mill, once the world's largest paper producing facility. In fact, there was a time when most phone books on the East Coast came from the Millinocket mill.

The mill no longer holds that title, but its No. 11 machine still spins out more than a thousand miles of paper a day in rolls wider than a two-lane road, mostly for glossy circulars and magazines (including in the past U.S. News). That's more than enough to paper a highway from Boston to Chicago. It has been a mild summer and a relatively good one for making paper, with orders for the high-quality "supercalendared" stock flowing in. But the mill and the town are facing a hard winter. The abrupt jump in fuel oil prices has made paper production dauntingly expensive, perhaps too expensive to keep the mill going, while the soaring cost of home heating oil has made living here equally challenging for anxious millworkers and other residents.

Sitting in a conference room in the mill's ivy-covered, brick administrative building, located at one end of the town's main street, mill manager Serge Sorokin outlines the problem on a whiteboard. "This is what oil prices means for Millinocket," he says, writing with a red felt marker. "We use about 400,000 barrels of fuel oil per year, and 18 months ago, we bought it at around $40 per barrel." He writes the numbers on the board. "Now, the price per barrel is $110." Sorokin, who studied paper engineering at the State University of New York College of Environmental Science and Forestry, does the arithmetic and underlines the corporate bottom line: The annual cost of making paper went up here by $28 million.

But the bottom line that matters most here is that the mill could close within weeks, unless the company, Maine's governor, and its congressional delegation are able to find funding to help keep No. 11 rolling. Already, paper orders have dropped off because of the possible closing, and there is talk that skittish national retailers dropped plans to occupy some of the vacant space in the town's commercial strip. The company scraped together enough orders to keep the mill running through the end of August.

A sister mill in East Millinocket long ago supplemented its oil boiler with a biomass burner, which uses treetops and boughs as fuel. Normally, those cuttings are left on the ground when the timber is cleared. Not only does the sister mill still churn out phone-book paper, but it also produces more power from the biomass boiler than it can use, pumping some of the energy back into the power grid. For years, there's been talk of similarly adapting the Katahdin mill, but installation and retrofitting the existing equipment would cost millions of dollars and take time. "Biomass is an attractive option, but it's hard to see how we can get there from here," says Bill Manzer, a senior vice president at the Toronto-based Fraser Paper, which operates both facilities.

Social costs. Michael Michaud's first job in 1973 was driving a truck for the East Millinocket Mill. His father worked there for 40 years, his grandfather for 45. Now a Democratic congressman for Maine's Second District, he is working to find emergency funding to help keep the Katahdin mill open, to provide home heating oil assistance to low-income residents, and to help with the often overlooked social costs that come with layoffs. "When these things happen, there's an increase in alcohol and drug use, domestic violence, a loss of retirement savings, and higher healthcare costs that often get overlooked by people in Washington who may see more drilling for domestic oil as the catch-all solution," he says. Since he left the mill to run for Congress in 2002 (after serving part time in the state Legislature), he's still on the books as an employee on unpaid leave. "You want to be optimistic and give people hope," he says, "but it can't be false hope either."

Budgets are tight in Augusta, the state capital, and in Washington. While the congressional delegation will probably get the low-income assistance, it's unlikely it will be able to do much to rescue the mill. Besides, some argue that it's not the government's responsibility to bail out companies that, when prices were low, didn't modernize their machinery and diversify their energy sources. In the meantime, paper production shifted from American timberland to Asia.

Sadly, as goes the mill, so goes Millinocket, a company town built almost entirely by the Great Northern Paper Co. at the turn of the 20th century. Historically, it was hard to separate the two. At one point, for instance, a man named George W. Stearns was at once Great Northern's land agent, head of the town selectmen, the county judge, and the superintendent of schools. The town named the high school after him when it was completed in 1923, which was fitting because the mill donated a quarter of the construction costs.

For the better part of a century, Great Northern owned most of the land in northern Maine, much of which is still unincorporated. That kept out other employers, an unwritten company policy that held down labor costs but is now coming back to haunt the town. Even after decades of downsizing, the Katahdin mill, where employment has fallen from about 4,500 in the mid-1980s to around 200 today, is the second-largest employer, behind the regional hospital. Tourism now provides some jobs because the Appalachian Trail terminates atop Mount Katahdin, just a few miles outside town. In the winter, snowmobiling brings in the tourists, though high gas prices are likely to cut their numbers.

Like the mill, the town is showing its age. Under union rules, those with the least seniority (generally the youngest employees) were the first to lose their jobs. And many didn't hang around, instead taking their families to the coast or the southern part of the state, where the jobs picture was better. In 1990, the average age in town was 37. Now, officials say, it's around 50. The old George W. Stearns High School, meanwhile, long ago was converted into an assisted living facility.

"Future is bleak." Sitting in the cafe on Penobscot Avenue, a retired, second-generation millworker looks dubiously at his salad, poking it with a fork, and gripes. "Millinocket is turning into a retirement community," he says, glancing over at a group of young hikers scarfing down hamburgers before tackling the mountain. Then he whispers, "Don't you quote me sayin' it, though. This is a small town, and we stick together." Across town, the owners of Kim's Market on Medway Road shuttered their doors in July after a decade of serving sandwiches and beer to locals, but they don't want to say much either. In his downtown office, town manager Eugene Conlogue is less reticent. "The future is bleak for a community that only ages," he says.

Property values, for instance, have fallen as the mill's workforce has shrunk. Today, out-of-state residents own some of the town's Victorian-style homes and use them as vacation cabins. They often don't cut the grass or clean the clutter, and they don't send their kids to the local schools. For residents, this will be a particularly hard winter. A typical home along Penobscot Avenue burns about 800 gallons of fuel oil during a heating season. At current prices, that will come to $3,200 this winter, up from $1,700 a year ago. While that alone is a mighty hit to the family pocketbook, factor in high gasoline and food prices, and the impact can be devastating.

For the town, shuttering the mill would be catastrophic. The closure would cost the town some $2.5 million in taxes from the company that the community sorely needs, not to mention the scores of families who may leave town. Congressman Michaud remembers earlier hard times, soon after he first began working at the mill during the energy crisis in 1979. The mills were in danger then, too, because of rising oil prices, but managed to survive. As a result of that energy crisis, the East Millinocket mill put in the biomass boiler. If anything is to be saved from the Great Northern project, it will take the same Yankee ingenuity that a century ago harnessed waterways of the land of many islands to feed the paper mills.

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