EAST MILLINOCKET – The Katahdin Paper Co. LLC’s Main Street mill “took a major step toward profitability” by shutting down its oil burner and answering all steam needs with its biomass boiler, company officials said Tuesday.

Described by mill manager Serge Sorokin as “a significant milestone,” the oil- and steam-use reduction that began last Thursday underlines how the company’s neighboring Millinocket mill, which is threatened with shutdown and layoffs of 208 workers on July 28 due to runaway oil prices, could be saved.

“It reinforces the fact that we can be a lot more profitable if we put a boiler in Millinocket,” mill spokesman Glenn Saucier said Tuesday. “This is a first. It gives us a little more flexibility than we’ve had.”

Company and state officials have said that with an experienced, highly skilled work force, orders booked through 2008 and customer satisfaction extremely high, the Millinocket mill’s biggest problem is its reliance on oil to make steam.

Steam is a critical part of papermaking. To create it, Katahdin Paper used more than 400,000 barrels of oil in 2007 at its Millinocket mill, which makes paper for catalogs, magazines and retail industry fliers on its No. 11 machine, one of the newest in the country.

The East Millinocket mill produces telephone directory paper and has had a biomass boiler for decades.

Gov. John Baldacci’s forest products industry and economic development advisers continued work Tuesday with officials from Brookfield Asset Management, the multinational conglomerate that owns Katahdin Paper, and several third-party energy developers to find a way to switch the Millinocket mill from oil dependence to creating steam with a biomass boiler.

The boiler installation, which could save company officials from shutting down the mill, could occur in substantially less than the 18 to 24 months mill management originally predicted – and for much less money – but still would cost tens of millions of dollars.

No timeline has been set for the talks’ culmination, said David Farmer, the governor’s spokesman, but efforts are continuous.

Rescuing the Millinocket mill has been an everyday endeavor for several members of the state Department of Economic and Community Development, state Department of Labor, and Baldacci’s forest products industry staff since the potential mill shutdown was announced in late May.

Several energy developers have expressed interest in helping finance energy-saving projects at both mills that are designed to capture heat wasted through paper machines or water sources, Sorokin said in a weekly newsletter to company workers dated June 23.

“The third-party power developers look for these type of projects where power and steam are sold in return for building (or modifying) boilers at industrial or other host sites,” Sorokin wrote.

The oil- and steam-reducing initiatives should save the company from having to burn more than 110,000 barrels of oil from late June to early September, an anticipated company savings at current oil prices of more than $11 million, Sorokin said.

That savings will be reduced somewhat by the cost of bark and other biomass, which fuels the East Millinocket boiler, Sorokin said, but the savings occur regardless of whether bark or oil is burned.

The boiler likely will run until the fall, when Penobscot River water temperatures and outside temperatures cool enough to increase energy demands and overtake the boiler’s capacity, forcing a return to some oil usage.

The reduction efforts, Saucier said, involved tracking steam and oil usage more closely and identifying areas of waste.

“We have done some minor modifications to it [the biomass boiler], but nothing major,” Saucier said. “We just take a look at what our steam loads and needs are and have reduced them.”

Waste reduction cut down on energy use at the Millinocket mill by more than 15 percent. Those efforts will continue with repairs to steam pipes and traps.

Millinocket plant workers reduced steam loads so much over the last 30 days that one oil boiler and steam turbine were shut down, saving $142,000 over 30 days.

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