Domtar’s shutdown to hit county hard

The fact that the modern world exists in a global economy was underscored last week when the Domtar Corporation, Washington County's largest employer, announced the shutdown for an "undetermined period" of its Woodland mill, beginning May 5. With about 63% of the pulpwood produced at the Baileyville plant destined for Asian markets and about 27% headed for Europe, a steep decline in orders from foreign papermakers is affecting the employment of more than 300 mill workers, plus an untold number of other local people whose jobs depend wholly or partly on the mill's productivity.

In announcing the "idling" of the plant, Domtar President and CEO John D. Williams, cited "worldwide economic conditions with weaker global demand for pulp, historically high inventory levels and depressed prices."

The Canadian corporation, based in Montreal, acquired the century-old Baileyville mill in 2001 and currently operates one pulp line there, producing 398,000 metric tons per year. Domtar paper mills are located at 10 U.S. sites in nine states. They also operate five U.S. pulp mills, in addition to their Canadian facilities in Quebec, Ontario and British Columbia. In early February, the corporation permanently reduced manufacturing at its Plymouth, N.C., plant from two paper machines to one, terminating 185 employees. Production has been cut at one of their Canadian plants as well.

Pulpwood sales down

Until two years ago, the Baileyville facility still manufactured the finished product, the uncoated free-sheeted paper that is consumed ream after ream by business and home users. When paper production was terminated there in July 2007, so were the jobs of 150 mill workers. If the idling of the remaining 300 employees should continue for an extended time, or permanently, life in eastern Maine would change significantly.

At the same time pulpwood sales are depressed by the worldwide recession, competitive pressures within the industry have grown in recent years with the rise of Latin American production. Brazil is now third in the world behind the U.S. and Canada in pulpwood production. The faster growing eucalyptus hardwood from tropical forests is being processed in huge new factories with modern technology, each capable of producing millions of megatons annually, with lower labor costs and, some experts say, cheaper shipping costs.

Michael Bilodeau, director of the Maine Pulp and Paper Process Development Center at the University of Maine in Orono, says North American producers are hard pressed to match the "economies of scale" achieved in South American factories. "Buyers' inventories are high now," he adds, and "in the very cyclical paper market, it doesn't take many paper machines going down to upset the balance." Bilodeau says the problem is "supply and demand. It's difficult to predict when inventory might drop. [Increased demand] would be tied to the world economy and the U.S. economy."

Scott Beal, environmental compliance officer and a spokesperson for the mill, cites many of the same economic factors affecting the industry. He also notes the effects of digital information storage on paper consumption. As data is increasingly collected electronically, the use of "hard copies" C paper records C has declined.

Many businesses affected

Since 1997, Domtar has purchased most of the wood chips it processes into pulp from a chipping facility located on property that is leased from the mill but is wholly independent of Domtar. The facility is part of Fulghum Fibres of Atlanta, Ga., a company that owns 25 U.S. chipping plants, all in southern states except for the one on the Domtar site and others in South America. According to Fulghum's website, the facility in Baileyville, one of the company's highest producers, chips 1,100,000 tons annually, all of which is sold to Domtar. It normally operates seven days a week with a crew of 44 employees.

Fulghum's mill manager, Mark Seavey, says he had already "curtailed" his staff in November to 20 workers, "and just last month, I was able to get back to 31." With the Domtar layoff, he expects further cutbacks. "Right now. We're contracted to Domtar and we're dedicated to them. It's too early to tell what would happen if [the shutdown] is prolonged. It would be up to the higher-ups in Georgia to work out something with Domtar."

Speaking of the "trickle-down effect" of the mill shutdown on workers in allied businesses, Seavey says, "You can probably multiply [the 300 idled Domtar employees] by two or three others." He named just two local employers off the top of his head: "the Mainway where everybody gets their coffee, or the IES [Industrial Electric Supply] in town that sells to Domtar." Wayne St. Pierre, one of the owners of IES, confirms that "25% of our business is with Domtar." In addition, to direct sales to the mill, IES supplies the electrical contractors in the area who service the mill as well as the residences of mill workers.

Tim Call, credit manager at Tammaro Oil Co. and also a Baileyville town councillor, says the oil company has a substantial account with Domtar. Losing it would be "devastating to our business, along with losing accounts of people at the mill." At another local vendor, Border Electric in Calais, vice president John Smith foresees "a detrimental impact." He says Border Electric does a "substantial amount of work for Domtar on an annual basis" and maintains an office trailer at the plant site for their employees.

All pulp milled at Woodland and destined for foreign ports is trucked to Eastport for shipping, and Domtar's product represents the vast majority of freight handled at the port. Gerald Morrison, one of two full-time harbor pilots serving the port, says each pilot was averaging 20-25 ships per year until last year when his total dropped to 15. In order to keep his license current, Morrison attends costly training programs, and "after that expense, there's not much left over for profit." Last year, he was able to close the gap by working with an LNG simulator project that trains tanker crews carrying the fuel. As Morrison sees it, "The only opportunity we'll have is to bring in an LNG company" to keep Eastport viable as a port for shipping. Morrison also has a small marine-based manufacturing business in Perry, now down to one employee from a high of four, that he expects will suffer from a decline in marine traffic. He observes wryly that he once advised one of his sons, now a student at Maine Maritime Academy, that he could always "come back home and be a harbor pilot."

Loggers, independent truckers, food service providers, pipefitters, vendors to the pulp mill, marine suppliers and many others would be directly affected by the shutdown. If it were protracted, the dominos would fall on households, businesses, schools, hospitals, shops. As Call says, "Everything from Danforth to Jonesport would feel the impact." As Morrison says, "Maybe everything in Maine would feel it."

Sandy Brawders, executive director for Professional Logging Contractors of Maine, says that logging and trucking businesses in rural areas of the state are typically small and often wholly dependent on a single mill in the area they serve. "No one in the state," she says, "has done any real assessment of the extent of the impact [of mill closures] on them." As she puts it, they are "outside the gate" C workers whose livelihood depends on the mill, but are not as easily counted as the mill workers "inside the gate."

Long-term planning

When news broke of the planned shutdown, elected officials including the governor, the state's congressional delegation, county representatives to the legislature, and county, city and town officials all reacted with press releases, news conferences, statements and meetings. Governor John Baldacci came to Baileyville March 9 to meet with mill, union, port and public officials, pledging "to make sure the workers and their families are taken care of." He and others at the meeting emphasized repeatedly that the "priority is to get Domtar back," but some did allude to "worst case scenario" and "other options" if the plant does not reopen soon. Few specific alternatives were mentioned, though the governor and legislators agreed an LNG facility in the county and a proposal for a waste treatment facility for biomass production are "on the table."

There were references to wind and water power projects in the county. County Commission Chair Chris Gardner noted that tax increment financing (TIF) has been used in municipalities for certain redevelopment projects, but enabling legislation is needed to permit such facilities in the Unorganized Territory. "The commissioners stand ready to invest these funds in Washington County, if those constraints are removed," Gardner added. Senator Kevin Raye said he has such legislation in the works and Baldacci pledged support for it.

Gardner urged the need for a "rail infrastructure," claiming, "A substantial rail investment would change the face of the county." Baldacci agreed, adding, "We want to focus on transportation C rail and port. The two big issues are the cost of energy and the cost of transportation. We want to know how [the state] can help." The governor reiterated, "We want a united Washington County delegation saying, 'Here's what we need. Here's how the state can help.'"

George "Bud" Finch, Eastport city manager, likened the mill layoff to an earthquake, "with its epicenter at Domtar," sending aftershocks throughout the county. He proposed a "triage," urging that a "diversified economy" is needed whether the mill reopens or not. "We must begin to set aside the differences that exist among our communities," he added, implying that rivalries impede the area's economic survival.

The governor came up with his own aphorism to describe the impending crisis: "It may not be Little Round Top, but it's the next best thing," referring to the pivotal battle at Gettysburg waged by Mainers under the command of Col. Joshua Chamberlain.

Dorothy Johnson, chair of the Baileyville town council and acting town manager, can rattle off the mill's history without a pause. Her apprehension focuses on how the town and its people will change, "even if Domtar comes back." She grew up on a farm in Robbinston, she says, where she was taught that if "you worked hard, you would succeed. Nobody works harder than the people at the mill." When the plant was still manufacturing paper, she recalled, workers managed to "keep obsolete machinery running, and they produced some of the finest paper in the world in Baileyville, Maine."

Some 150 years ago, historian Thomas Carlyle called economics "the dismal science." That seems still an apt description.