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Price Spike Dooms Maine Paper Mill's Gas Conversion Plans
02/07/2014   Reported By: Jay Field

When Great Northern Paper temporarily laid off 212 workers yesterday, the company again cited high energy costs as a big reason for its financial struggles. This winter, Great Northern had hoped to begin running one of the boilers in its East Millinocket mill on compressed natural gas. The company saw this as a way to affordably heat the mill without having to scale back paper production. But as Jay Field reports, a spike in natural gas prices has forced Great Northern to abandon that plan.

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Great Northern's energy dilemma is evident way up on the grated, steel walkways that make up the fourth floor of the mill's boiler house. During the long winter here, the plant's main boiler, which runs on biomass, can't crank out enough steam to heat the building and run two paper machines.

And to make a profit, Scott Tranchmontagne says the mill has to run those machines round the clock. Tranchmontagne is Great Northern's spokesman.

"We have to find another way to heat our building, other than using heat from our biomass boiler," he says. "So that's a challenge we have to overcome."

Firing up just one of the mill's two oil boilers is too expensive. But last winter, officials at Great Northern Paper believed they'd found an answer to their problem in the shale boom flooding the U.S. market with cheap natural gas. The company began converting one of its oil boilers to run on gas. And it partnered with a Massachusetts-based company, Xpress Natural Gas, to truck the fuel to East Millinocket from the Canadian border.

"We had hoped to be heating this winter season with natural gas," Tranchmontagne says. But he says that by the time Great Northern was ready to flip the switch on that boiler, the market had changed.

"What we've seen this year is the prices for natural gas - and for power generated by natural gas - are extremely, if not historically, high," he says. "That has really put our plan to convert to natural gas on indefinite hold."

Roughly half of Maine's 15 paper mills already use natural gas and they're suffering too. Last spring, Verso Paper announced that natural gas costs at it's two mills in Jay and Bucksport had risen by $22 million over the course of just one year.

In January, the Bucksport mill shut down for two weeks, due in part, to the continued high gas prices. Tom Welch is chairman of the Maine Public Utilities Commission. "The cost of getting that gas here is quite high becuase we don't really have the infrastructure to get it here."

There are currently five pipelines that bring natural gas into New England. According to Bloomberg News Energy Finance, there are roughly 10 new pipeline projects in the works that will bring another two billion cubin feet of gas into New England.

And an energy bill, passed by the Legislature last year, allows the state to invest in pipeline expansion in the New England, if - says Tom Welch - it will mean lower energy costs for Maine consumers. "Once you start looking at 2016, 2017, 2018 and beyond, the picture, I expect, will be considerably better," he says.

What remains unclear, though, is whether these improvements will add enough capacity to bring down prices in parts of the state, like East Millinocket, that still may not have easy access to a pipeline. At a celebration in 2011, marking the reopening of the mill after the last shutdown nearly three years ago, Gov. Paul LePage talked about the need to bring a pipeline into the area. But some industry analysts don't think that will happen anytime soon, if at all.

"There's a certain Greek tragedy aspect to it," say Lloyd Irland, who runs the Irland Group, a forestry consulting firm. "If you were on the board of directors of the gas company, asking, 'Should we extend this line for basically one customer, plus some little nickle and dime business from some small potential users?' Huge investment" - in a customer whose future is uncertain at best.


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