Lincoln Pulp and Paper was one of 20 businesses to receive the state’s highest environmental award Friday.

The company won the Governor’s Award for Environmental Excellence for its use of a unusual oxygen bleaching system that has virtually eliminated the discharge of dioxin from the Lincoln mill since 1999.

During an awards ceremony Friday for businesses and organizations that have significantly decreased their pollution levels, Gov. Angus S. King singled out Lincoln Pulp and Paper for advances in pollution abatement.

“Lincoln Pulp and Paper’s reduction of dioxin is way beyond what is required by either the state or the federal government,” he said. “That’s why we want to recognize what they’re doing.”

At the same time the state is recognizing the mill’s recent environmental improvements, the federal government continues to pursue a multimillion-dollar claim against the company in bankruptcy court for past environmental damage.

The U.S. Department of Justice in May filed a notice of claim on behalf of the Penobscot Nation, the U.S. Environmental Protection Agency and the Department of the Interior seeking up to $60 million for alleged damage done to the Penobscot River by the discharge of dioxin by the Lincoln mill. The claim was amended last month to remove the Penobscot Nation from the list of parties seeking the money, but the substance of the claim was unchanged.

Eastern Paper, Lincoln’s parent company, filed for Chapter 11 bankruptcy protection last year, and the federal government is one of several parties that filed claims against the company.

Officials at Eastern Paper, which also owns a mill in Brewer, have long said the government’s filing in bankruptcy court is simply a legal maneuver, not an indication that the company has done any damage to the river.

In an interview this spring, company president Joseph Torras said almost all the money Eastern Paper has spent during the past nine years has gone into environmental improvements at the Lincoln mill. In that time, the company spent nearly $100 million. It was the first paper mill in Maine to build a wastewater treatment plant and the second in the country to build a low-odor recovery boiler, he said.

“It’s satisfactory to tell you the truth,” Torras said. “We feel we’ve accomplished things the others haven’t.”

In fact, Lincoln Pulp and Paper has done a lot of things that other small mills have not, but as an independent company in an industry dominated by giant multinational corporations it has had to be creative, said Torras.

For starters, it makes its paper and tissue out of a mixture including recycled sawdust, which is unusual.

The Lincoln mill dominates the market in the manufacture of deep-die tissue, a process that allows napkins and other tissue products to be dyed very dark, rich colors that don’t run.

It also recently developed a process that allows napkins to be printed from edge to edge. Traditionally, a pattern was surrounded by a plain border.

Torras conceded the company made many of the improvements because of pressure from the government and the Penobscot Indians. In 1990, the Maine Department of Environmental Protection fined it $1 million – still the largest fine the agency has ever levied – for environmental violations.

“Without any question, they’ve been demanding,” Torras said of the Penobscot Nation, which routinely monitors the water quality of the Penobscot River downstream from the Lincoln mill. “So has the state government. So has the federal government.”

Despite the improvements and awards, the company still feels it is in the cross hairs.

“We feel like we’re under serious pressure with the [bankruptcy court] filing,” said Douglas Walsh, executive vice president of operations at Eastern Paper.

“There’s no basis for it,” he continued. “This facility has been studied for 10 years. It’s not like they found any smoking gun out back.”

In fact, two years ago the EPA investigated the possibility of contamination of water on and near the site at the request of the Bureau of Indian Affairs. The study is ongoing, but the EPA has finished analyzing the more than 100 samples taken and determined the low levels of contamination found are not out of the ordinary for such a facility.

Others who received the governor’s award at the ceremony Friday are: Goodkind Corp. of Rockland, Guilford of Maine, International Paper Co.’s mills in Bucksport and Jay, ZF Lemforder in Brewer, Osram Sylvania facilities in Bangor and Waldoboro, Dead River Co. of Bangor, Great Northern Paper in Millinocket, Mead Paper in Rumford and its haz-mat team, Hussey Seating Co. of North Berwick, CYRO Industries of Sanford, Auburn Educational Services Inc., the U.S. Postal Service in Portland, Brunswick Naval Air Station, the Portland Water District, the town of St. Agatha, the Bio-Hazards Working Group, and the Maine Environmental Policy Institute.