Maine prepares to file US$497,000 fine on Patriarch Partners' Old Town Fuel & Fiber pulp mill in Old Town, Maine, for excess air pollution over 12-month period, adds to US$331,000 penalties assessed on mill in past five years

Kendall Sinclair

BANGOR, Maine , January 11, 2012 (press release) – Maine has spent millions of dollars to prop up the Old Town pulp mill while steadily fining the mill’s owner for pollution. And now the biggest fine ever is imminent.

The Maine Center for Public Interest Reporting has reviewed a “proposed administrative consent agreement” from the state Department of Environmental Protection showing it is preparing to slap a $497,000 fine on Old Town Fuel & Fiber for excess air pollution over a 12-month period.

That will come on top of $331,000 in penalties assessed by the DEP and the federal Environmental Protection Agency on the mill in the past five years.

Rather than spend money to solve the persistent air pollution problem, the mill owners want the state to relax pollution rules. They have asked the DEP to allow the mill to more than double its permitted emissions of carbon monoxide, a colorless, odorless, poisonous gas that can be harmful to people with heart disease.

Old Town Fuel & Fiber says it’s too expensive to fix the carbon dioxide’s source — principally, a wood-burning boiler — and that continued pollution, which it characterizes as small, is a price the community should pay for the mill’s economic benefits. It has 216 employees.

Totaling the full amount that taxpayers have spent to keep the mill open is impossible without access to financial information the mill and the government won’t reveal.

But available figures show that since 2003, the mill’s three owners have received or been promised more than $56.5 million from the federal Department of Energy and state sources.

Taxpayers also support the mill through its research partnership with the nearby University of Maine, whose officials say they are not disturbed by the continuing pollution.

Baldacci tries to save mill

The massive public support for the mill began in 2003 when Georgia-Pacific Corp. shut down the 130-year-old pulp and paper facility, putting 450 people out of work. Democratic Gov. John Baldacci engineered a complicated deal to restart it by having the state buy G-P’s Juniper Ridge landfill, also located in Old Town, for $26 million.

Casella Waste Systems supplied the state with the cash. In return, Casella got a 30-year lease to operate the landfill.

To save on electricity costs, G-P used the money to buy a mothballed 1980s-vintage biomass boiler in Athens, Maine. It turned out the boiler, which hadn’t met air pollution standards in Athens, couldn’t meet them in Old Town, either. This is the boiler at issue in the company’s request to expand its permitted pollution.

Even with the $26 million and no more liability to clean up its waste dump, G-P shut the mill in early 2006 after it was acquired by Koch Industries, controlled by billionaires Charles and David Koch, recently famous for bankrolling conservative causes. Koch sold off the papermaking machines.

In 2006, Baldacci, up for re-election, tried to find a buyer for the mill, in the process getting legislators to force the DEP not to strengthen biomass-burner pollution regulations, according to a Portland Phoenix investigation. Late in the year, investors calling themselves Red Shield Environmental bought the mill and reopened it.

In April 2008, Red Shield announced a $30 million grant from the federal Department of Energy to see if ethanol, a motor fuel, could be commercially produced from pulpwood.

But Red Shield went bankrupt two months later. By then the mill had shriveled to 160 workers, who again lost their jobs. The Energy Department grant appeared dead.

In late 2008, the facility was bought at auction for $19 million by Patriarch Partners, an $8 billion private-equity conglomerate. The mill was renamed Old Town Fuel & Fiber and the partners decided to try to produce butanol from pulp instead of ethanol.

The Energy Department grant was reinstated, now for “biobutanol,” also a motor fuel. About $5 million has been paid out so far, according to Energy Department official Melissa Klembara. The mill also produces 500 or so tons a day of pulp for paper mills and sells excess electricity on the New England grid.

The biobutanol effort is a collaboration with the University of Maine, which is in the forefront of research on how to distill fuels from wood. The mill subcontracted part of the Energy Department grant to the university’s Forest Bioproducts Research Institute. The university is building a 40,000-square-foot bioproducts technology center in a rent-free mill warehouse.

Like many corporations, the company also takes advantage of federal and state tax breaks.

In 2009, the company got a special break to encourage biofuel use: a 50-cents-a-gallon federal “refundable” income tax credit (you get cash even if you don’t pay taxes) for the pulp-generated “black liquor” fuel it has used for years.

Old Town Fuel & Fiber won’t say how much it got, but spokesman Dan Bird said, “It helped us to get started sooner” as operations ramped up again.

In 2009, the mill qualified for the state’s Pine Tree Development Zone job-creation program, which can “greatly reduce or virtually eliminate state taxes for up to ten years,” according to the Department of Economic and Community Development.

By law the state keeps confidential most tax breaks given to a company, but public records show that in 2010 alone the mill received $111,000 as a refund on property taxes under the state’s Business Equipment Tax Rebate program.

In 2010, Efficiency Maine, a state agency that promotes energy conservation, pitched in with $377,000 for improvements to reduce the mill’s fossil fuel consumption.
On EPA watch list

During the past five years, EPA and DEP records show, the mill has paid $267,000 in air pollution fines for excess emissions of carbon monoxide, sulfur, methanol and smoke.

In 2007, the EPA required the mill to install $8 million in air pollution control equipment.

In 2008, the company paid a $64,000 DEP fine for improper handling of ash, which included trucking lead-contaminated ash to Juniper Ridge.

In 2011, the Center for Public Integrity revealed that the mill was on the EPA’s watch list of the 464 violators of the Clean Air Act in “serious or chronic noncompliance.”

This November, the DEP proposed the $497,000 fine for excess carbon monoxide and smoke emissions for the 12 months ending in September. The fine is “proposed” because the amount to be paid will be negotiated with the company, the DEP says.

In the proposal for the $497,000 fine, the DEP said the boiler had violated carbon dioxide emission limits 330 days out of a 381-day period.

The boiler’s “age and relatively small size make it difficult for the mill to meet the current limits,” the company said, adding that fixing it would run into millions of dollars. The company also blames its pollution on the boiler’s need to burn green wood.

This fall, the mill applied to the DEP to increase the carbon monoxide the biomass boiler is allowed to emit without penalty from 0.35 pounds per million British thermal units, a measure of energy or heat, to 0.90 pounds per million Btu, according to its DEP application. That potentially would increase the carbon dioxide emissions to 1,045 tons per year from the boiler’s actual 406 tons per year.

Mill spokesman Dan Bird called the carbon monoxide emissions “pretty darn small,” calculating them as six-hundredths of 1 percent of the total from all sources in the state: “It’s not like we’re putting a plastic bag over someone’s head.”

Bird compared six-hundredths of 1 percent to another number: the 1,000 families that he said can be directly or indirectly “tied back to the operation of the facility” and the paychecks it provides.

And there are hints the DEP may grant the request to emit more pollution without penalty.

Peter Carney, the DEP’s enforcement chief, said the new pollution penalty and the new pollution proposal are separate issues.

“I haven’t heard of anyone being affected personally” by the mill’s pollution, Carney said.

Melanie Loyzim, director of the DEP’s Bureau of Air Quality, said that the mill’s carbon monoxide limits have been stricter than would normally keep the mill within national guidelines and that a “cost consideration” will be a factor in the DEP decision.

Melissa Doane, town manager of Bradley, across the river from the mill, said she has heard complaints of soot from the mill, but nothing about health problems that could be tied to pollution, though some residents have concerns about that possibility.

With the mill’s recent request, said John Banks, natural resources director for the Penobscot Nation on neighboring Indian Island, it’s trying to make its pollution “compliant with the regulations by changing the standards” — continuing to pollute but not getting fined. Banks adds: “We’re very much opposed to that.”

Energy Department official Klembara said that while her department hopes America’s increased use of butanol will lead to reductions in greenhouse gases, the Old Town mill’s production of air pollution is not something it considers.

“No one has raised the concern” that air pollution rises to the level that the university shouldn’t collaborate with the mill, said university assistant vice president Jake Ward.

But Paul Schroeder, an environmental activist in Orono, accused the university of “enabling this polluting facility to keep running” in its federally funded collaboration with the mill.

The mill has big stakes in the collaboration. Bird said the mill is “too small to just be a market pulp producer.” And its biobutanol production will not be at commercial scale. Patriarch Partners has said it sees future sales of biobutanol technology as the moneymaker.

But even biobutanol success won’t return the mill to glory days. The company has said only a small number of employees will be hired if the biorefinery is a going concern in a year or two.

This month, the DEP expects to circulate a draft permit containing the department’s recommendation. Unless appealed, the recommendation will be up to Commissioner Patricia Aho, a former lobbyist for paper companies appointed by Republican Gov. Paul LePage.

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