SEEING GREEN: fiber, forests, futures
What's in store for Maine?

Right now it spends its afterlife in a puddle of black liquor — the byproduct of pulp making in Maine’s paper mills.

But within five years, hemicellulose might become Maine’s black gold.

“Working pulp mills are in trouble, not just in Maine,” said Hemant Pendse, a professor of chemical and biological engineering at the University of Maine.

Pressure mounts from places like Brazil, where climate and technology produce a super tree that is becoming the world’s favorite source of pulp. U.S. mills can’t compete in labor, energy or fiber costs.

Hemicellulose could be Maine’s edge.

The compound is a building block of wood, digested during the pulping process and then burned or sent to a landfill. Pendse and researchers at the Forest Bioproducts Research Project unveiled at a September trade conference a way to extract hemicellulose from the pulping process and use it as the foundation for plastics, polymers and alternative fuel.

Someday, it could power cars and sheath homes. The project already has received a $6.9 million grant from the National Science Foundation and has collaborators from private industry as well as foresters and landowners.

Once perfected, the process means new products and new markets for old Maine mills.

“It’s very exciting,” said Jack Cashman, commissioner of Maine’s Department of Economic and Community Development. “We once led pulp and paper production ... If we can lead North America and the world in advancing new technology, it’ll make better use of our natural resources ... and add to the bottom line.”

And none too soon.

Knotty past
In the past five years, three Maine mills have closed, while others have idled machines.

Papermakers numbered 17,200 in 1990; now there are 8,800. Their average age is 52.

It would be easy to say the decline of the industry is all attributable to foreign competition, but that’s not the case. Domestic problems such as successive forest referendum questions in the 1990s and high energy costs hobbled mill investment here long before overseas mega-mills came online. And a boom in new mills in the late ’80s generated an oversupply of pulp and paper in Maine, at a time when markets were flat.

That left little money to reinvest in the mills. For corporations such as International Paper and MeadWestvaco — the multinationals that sold the Jay and Rumford mills to new owners — choosing which mills from its portfolio to reinvest in was a bottom-line decision.

A forecast in the 2006 edition of the Maine Paper Directory sums it up like this: “Mills that are in states that are perceived as being business-friendly, expectedly, often receive more of these limited investment dollars.”

Cashman understands the CEO’s point of view. In addition to the other challenges of doing business in Maine, the state’s tax on business equipment chilled corporate investment.

“It’s a half-a-billion-dollar investment to put in a new coated paper machine, and then you have to pay $22 (per thousand of equipment investment) in personal property taxes? Why would you?” asked Cashman. He said the state’s recent rollback of the business equipment tax is a huge boon to Maine’s paper industry.

But the upshot for Maine now is older mills with older technology. Without investment, mills become inefficient and costly, especially in commodity markets such as newsprint. A case in point: Georgia Pacific’s mill in Old Town produced paper at $79 per ton more than any other mill in the corporation. It closed in March.

Most analysts agree that Maine will cede commodity products to oversees producers. Where it can shore up profits is in niche markets, which command higher prices.

After closing in 2004, Lincoln Paper and Tissue reopened under new owners and now produces specialty napkins, providing jobs for about three-quarters of its original workforce. The purchase included the patents that allow edge-to-edge printing and saturated colors — its hedge against global competitors.

Charlie Colgan, economist with the Muskie School of Public Service, thinks Maine mills can buy some time by focusing on niche markets. But as those niches produce profits, other papermakers will notice and want a piece of the pie.

“These two forces are on a continued collision course,” he said. “Once the niche markets become commodity markets, it begins again.”

Formula for success
To John Wolanski, vice president of sales with Safe Handling in Auburn, the demise and mergers of some mills is painful, but necessary. Safe Handling supplies chemicals to most of the paper mills in Maine, giving it a unique perspective on the industry.

“A big focus in today’s North American paper industry has been on compression and consolidation of paper mill manufacturing locations,” said Wolanski. “It’s a healthy, positive response to maintain competitiveness in a global economy.”

Industry observers expect Darwinian results: the fittest of Maine’s mills will survive while the weaker operations will close.

In Wolanski’s mind, mills that succeed have to capitalize on three factors: fiber, fuel and folks.

Until recently, Maine had an abundant and relatively cheap source of fiber. Picea rubens and abies balsamea — better known as red pine and balsam fir — are the white knights of Maine’s working forests. The two species are the source of an exceptionally strong, light-weight fiber that makes a glossy paper that can hold ink without any bleed-through.

Both the NewPage mill in Rumford and the Verso mill in Jay produce this type of specialized paper. Only one mill in Brazil makes a comparable grade, 75 percent of which is sold in Brazil and the rest in other South American countries.

But in the last five years, Maine paper companies have sold off their timberlands, giving up control of their fiber supply. Some, like Verso and NewPage, have retained logging rights, but that won’t control costs, which continue to increase because of a dearth of loggers and weather conditions that dictate when they can harvest.

Fuel costs have also sharply risen, a combination of electricity, gas and oil increases that have clobbered all manufacturers. Not only does it take more juice to run the machines, but it also takes more diesel and gas to get the raw materials to the mills and then the products to their markets. At Verso, energy costs have doubled over the past six years — the biggest driver in its overall cost increase of 32 percent over the past seven years. And finally, folks.

Not only are Maine paperworkers getting older, but there also is dwindling interest in their jobs, both blue and white collar. Locally, 2,500 people earn their livings at paper mills in Rumford and Jay. Gary McGrane, president of Local 14 of the steelworkers union in Jay, said he sees little interest from the children of Verso employees to work in the mills, despite the tempting pay. Shift work is hard on families.

Contrast that with workers in Brazil, which Dick Jackson, Verso’s mill manager, visited a while back.

“Brazil people are better trained,” he said, noting that many work at the mill during the day and attend classes at night.

“They make $8,000 per year. And they have a boatload of people who want that job.”

At two IP mills in Brazil, more than a third of the workers have college degrees and another 20 percent have technical degrees.

“If you think the U.S. has an edge on technology, wake up,” said Jackson.

“There are countries trying to get our standard of living. They’re hungry. As a result, they’re doing a very good job.

“The problem isn’t Brazil; it’s us.”