PAPER CHANGES

After years of changes – in corporate ownership, structure and strategy – that often left Maine the loser, current changes in the paper industry are likely to work more in the state’s favor. This week’s news that that a major private corporation, Koch Industries Inc., is buying Georgia-Pacific Corp., which owns a mill in Old Town, is the latest example of positive developments for an industry that many predicted would soon be nonexistent in Maine.

In April 2003, Jim McNutt was in town for a conference on the future of the state’s pulp and paper industry sponsored by the University of Maine. “Maine is on the edge of a cliff,” warned Mr. McNutt, executive director of the Center for Paper Business and Industry Studies. Today, the future looks brighter, he says, mostly notably because state officials began paying attention to the state’s business climate and sought ways to improve it.

After facing the shutdown of four paper-making facilities during his first year in office, Gov. John Baldacci and several business leaders focused squarely on the state’s largest manufacturing industry. Deals were negotiated to get two companies, Great Northern Paper Inc. and Lincoln Pulp and Paper, out of bankruptcy. Both are in operation under new ownership and Lincoln Tissue & Paper Co. installation of a new paper machine is the first major upgrade at a Maine mill in 15 years.

The governor also worked closely with the management at Georgia-Pacific to keep paper production at the Old Town mill when the company wanted to move it to New York. Installing a biomass boiler to reduce energy costs and the state taking over management of a G-P landfill was part of the arrangement that kept hundreds of jobs in Old Town.

This involvement, and changes in tax policies and economic development incentives have done a lot to make Maine more business friendly, says Mr. McNutt. Of course, more remain to be done. His analogy now is that there is a light at the end of the tunnel and it is not an on-coming train.

The Koch acquisition is part of that light. While Gov. Baldacci recently wove strong bonds with G-P’s CEO Pete Correll, the company’s direction has not always been clear. One year, it was determined to focus on tissue making, another year, white paper was its specialty. The company even cut back on building products just as this market blossomed with the housing boom. Koch, on the other hand, runs a focused, efficient business and is not afraid to spend money, according to industry analysts.

The challenge for the Old Town mill, the smallest of G-P’s holdings, is to convince Koch executives to invest money in Maine, which must compete for investment with larger and more profitable southern mills.

Gov. Baldacci and his team have so far persuaded paper companies and their new owners to do things no one thought possible. We hope they can persuade Koch Industries to do the same.