A representative of Maine’s paper industry said Friday that although he was surprised by the extent of Katahdin Paper’s financial troubles, he believes the state’s other mills are somewhat more insulated from volatile oil prices.

John Williams, president of the Maine Pulp and Paper Association, said rising fuel and wood costs are a problem for all mills in the state. But Williams, whose organization represents Maine’s seven paper companies, pointed out that Katahdin Paper Co. LLC was unusually dependent on oil for production.

Maine’s other mills typically have more diversified or lower-cost energy sources, such as biomass boilers or natural gas. At the same time, higher paper prices have enabled mills to offset some of the rising energy costs, Williams said.

“Generally, I think the industry is in pretty good shape in Maine despite the costs of oil and wood,” Williams said. “But it is a warning that they can’t indefinitely absorb the rising costs.”

The forest products industry feeds billions of dollars into the Maine economy every year. But skyrocketing oil prices are putting a severe pinch on every corner of the industry from the loggers and truckers in the woods to the plants.

Katahdin Paper is entirely reliant on oil to produce steam in the papermaking process and used more than 400,000 barrels last year. Company officials said they investigated installing a biomass boiler that would burn wood or wood waste to offset oil costs. But it would have been 18 months to two years before the boiler was operational, which was too long for the company to hold on financially.

Katahdin Paper plans to shut down its Millinocket mill indefinitely on July 28 unless an alternative energy source is discovered. More than 200 workers would be laid off by the closure.

“If companies are able to invest in biomass boilers to be profitable, I think that benefits everyone,” Williams said.

Robert Rice, professor of wood science at the University of Maine’s School of Forest Resources, pointed out that papermaking is one of the most capital- and energy-intensive industries in the country.

Maine mills also face stiff competition globally. So it’s certainly no surprise that mills are struggling, Rice said Friday. A stronger U.S. dollar, the ability to modernize equipment and reductions in energy costs would all go a long way to help the industry, he said.

“Every mill is constantly trying to become more efficient,” Rice said. “But sometimes there are cost increases beyond the control of the mill.”

kmiller@bangordailynews.net

990-8250