Citing costly gas and electric rates, Gates Formed-Fibre Products Inc. said Wednesday it will close its Eastport processing plant Dec. 31 and lay off its 50 employees.

“High energy costs have killed our hopes for this plant,” company President David McMahon said in a news release. “We could not overcome the financial burden of paying some of the highest electric and gas rates in the nation, despite good production rates and excellent employees.”

Employees at the plant are involved mainly in extracting polyester fiber from recycled resins to be used in automotive trunk liners. During the process, electrical power is used to melt polyester resin and gas is used for producing steam and drying the finished product.

The Passamaquoddy Tribe at Pleasant Point owns the building and equipment leased by Gates, but it was unclear Wednesday what the building will be used for when Gates Formed-Fibre moves out.

“It took me by surprise and it would have been nice if we’d have gotten a phone call,” said tribal Lt. Gov. Ed Bassett.

“It’s going to come as somewhat of a blow to the community with the lack of employment.”

According to Bassett, Gates Formed-Fibre is signed on to a long-term lease with the Passamaquoddy Tribe for both the facilities and the equipment.

“Their lease extends way beyond the end of the year, so that will have to be re-examined and worked out,” Bassett said Wednesday. “We have no idea what they may be planning. So we’ll just have to wait for their proposal.”

According to the Eastport Assessor’s Office, lands and buildings leased by the Gates extrusion plant are valued during the current fiscal year at $1,568,272, with a property tax of $41,557 for four pieces of land. The Gates plant also pays $38,124 on $1,438,651 worth of machinery and other movable property. However, since the land and equipment will not leave with the company, the city’s property tax revenues aren’t likely to be affected.

Gates Formed-Fibre is evaluating alternative sites with lower energy and transportation costs for construction of a polyester fiber production facility, although it wouldn’t release any details on prospective sites.

“We’re in confidential discussion and we’re not prepared to discuss” alternative sites, company representative Bonnie Morissette said Wednesday.

Gates Formed-Fibre is no stranger to layoffs. Last October, when the company had 80 employees at Eastport, it idled 60 for almost three weeks, citing an oversupply of inventory. A similar shutdown had occurred in 1992.

More than a third of the Auburn plant’s workers were laid off due to a General Motors strike in 1998. Half of the plant’s business was with GM.

Employee severance packages will be based on accrued time at the company and are being reviewed in private with employees. The company also plans to continue education benefits to those currently enrolled in further education programs at the Washington County Technical College and the University of Maine at Machias through May 2002.