Lincoln mill boss calls for energy plan Van Scotter: Rising costs are eating profits

LINCOLN – Forty million dollars for Fraser Papers Inc. of Edmundston, New Brunswick. Nine million for Irving Paper Ltd. of St. John. Ten million to a mill in Nackawic.

Provided by the government of New Brunswick, the nearly $60 million in low-interest, long-term loans issued this spring will help the Canadian province’s largest employers upgrade technology, dump traditional energy sources and eventually crush their American forest products industry competitors, Keith Van Scotter said Monday.

That’s why the Lincoln Paper and Tissue LLC president has written U.S. Rep. Michael Michaud, Gov. John Baldacci and the state’s two Republican senators pressing them to create a comprehensive federal and state energy policy.

Maine manufacturers are struggling to find private-sector funds with which to upgrade their operations, and among federal and state policymakers, Van Scotter sees more confusion than coherence, he said.

“We have utilized [Maine’s] typical economic development tools, but the amount of money New Brunswick is loaning is 20 or 30 times more than anything we might get,” Van Scotter said Monday. “The real issue is their loaning money to those companies to focus on making themselves more competitive.

“They get an advantage, and it’s a sustained advantage,” he added.

In his letter to Michaud he noted that while Canadian manufacturers are investing in themselves through government loan programs, “U.S. manufacturers are being devastated by energy and material costs that are escalating so quickly that profit margins have been destroyed.”

Michaud agreed with Van Scotter, but blamed President Bush, not Congress, for failing to create a coherent energy policy.

In a sprawling statement, Michaud outlined his support of: suspending shipments to the Strategic Petroleum Reserve, to increase oil supply; closing the “Enron loophole,” which allows speculators to avoid regulation by trading outside conventional oil markets; new energy efficiency standards for autos, buildings and household appliances; and legislation supporting investment in alternative energies.

“I couldn’t agree more with those who have called for a coherent and effective national energy policy, and are disappointed in this administration for failing to deliver forward-thinking energy policy,” Michaud said.

David Farmer, Baldacci’s spokesman, disagreed with Van Scotter.

Many state and regional initiatives have passed or are under way that will help fight the energy crunch and pollution, he said. They include the Regional Greenhouse Gas Initiative, or RGGI, a 10-state cap-and-trade program that will help fund alternative energy source creation and traditional energy usage reduction.

Besides Pine Tree Zone legislation, which provides businesses with significant tax breaks, Baldacci has created several task forces encouraging the creation of wind power, wood-to-energy efforts ranging from cellulosic ethanol to wood pellets, transportation cost reduction, and tax credit and loan programs that help businesses to find cost-effective energy sources and increase efficiency, Farmer said.

“There are a lot of programs out there, but the circumstances between New Brunswick and Maine are very different,” Farmer said.

New Brunswick draws income from owning a great deal of public land, Farmer said. Maine does not. New Brunswick’s governmental system is totally different, and carries a vastly different set of responsibilities and expectations.

Van Scotter wasn’t impressed with those arguments. Most of the Maine initiatives, he said, are at least months away from producing results, and the speed with which energy costs have risen means most companies can’t afford to wait that long.

“This is an issue that has percolated for a long time and neither Congress or the Senate has done anything effective,” said Van Scotter, whose mill is shut down this week for mandatory maintenance. Recounting a conversation with Michaud, Van Scotter said, “He didn’t really have anything to say. I just didn’t get any sense that there was anything he could do to help.”

And wind power, one of state government’s biggest initiatives, isn’t likely to produce anything close to the 10,000 gigawatts of electricity the U.S. needs to create annually to keep pace with rising demand, Van Scotter said.

“It’s a piece of it, but it ain’t all of it,” Van Scotter said of wind power. “The numbers are so big. Wind farms are great ideas, I am very supportive of them, but I fear that we are going to see electricity shortages in the next few years if more isn’t done.”

Van Scotter doesn’t want corporate welfare. The 52-year-old Lincoln resident, a chemical engineer with degrees from the University of Idaho, has with his partners procured private investments of more than $60 million for the former Eastern Pulp and Paper Co. since completing their $23.7 million purchase of the Katahdin Avenue site in May 2004.

The company, which employs about 400 workers, also has vastly cut its electricity costs by investing in a $10 million turbine generator and saved another $2 million to $3 million annually by cutting its steam and oil use.

But most U.S. manufacturers, like his mill, the nation’s largest producer of deep-dyed tissue paper, still suffer from fuel and transportation costs that have risen by more than 50 percent over the last year, Van Scotter said.

That’s why he calls for the creation of federal or state emergency cash grants “for investments in energy efficiency that would be sufficient to make significant progress at an industrial level” and “federal and/or state loan guarantees for non-recourse funding” that would go toward energy efficiency and cost reduction at an industrial level,” Van Scotter wrote to Michaud.

Without that, many manufacturers will be at the mercy of the open market.

“We are hoping that energy prices will at least level off for a little while,” he said. “If they don’t, I think consequences will be disastrous for everybody.”

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