LINCOLN – Lincoln Paper and Tissue LLC will spend 2008 resting on its oars a bit, one of its owners told the Town Council on Monday.

With the mill’s machines operating at capacity, orders exceeding capacity in many areas and $70 million of investments successfully made in the Katahdin Avenue plant since 2004, LP&T’s ownership will not seek upgrades, hiring increases or other big changes in the mill’s operations.

“We are always thinking about our future, but we have no big [expansion] plans,” mill co-owner Keith Van Scotter said Monday. “At this point, we are kind of taking a breath.

“There is a list of opportunities [for investment or expansion] as long as my arm, but we haven’t decided what that [next opportunity] is,” Van Scotter added.

Van Scotter, who co-owns the mill with John Wissman, gave the council an almost entirely upbeat read on the mill’s status and prospects.

“We feel good about the market and good about our work force,” he said.

The worst detriment facing Maine’s paper industry, Van Scotter said, is the high and rising costs of energy – diesel fuel, oil and electricity chief among them.

“We have seen some frightening cost increases in the last few months,” he said.

He estimated that his costs have increased by as much as 20 percent in the past six months alone. That’s why he is meeting today in Augusta with Gov. John Baldacci, New Brunswick Premier Shawn Graham and representatives of the Maine Pulp and Paper Association.

“We are trying to drive the dialogue to recognize that energy costs are having a very” negative effect on the state industry’s ability to remain competitive, Van Scotter said.

He spoke to the council at the request of Town Manager Glenn Aho, who suggested that LP&T, the town’s biggest taxpayer and employer, and the Town Council hold periodic and informal chats.

“The mill and the town have a good relationship, and having him [Van Scotter] over once or twice a year probably works well,” Aho said.

Van Scotter said eight more workers were hired Monday, increasing the plant’s work force to about 400 full-time employees. According to the company’s Web site, lpandt.com, LP&T is the nation’s largest producer of deep-dyed tissue paper. Such tissue is used by many of the nation’s party goods producers, airlines and food service companies to create napkins, paper towels, table covers and other specialty tissue products.

The company also makes premium-quality business reply cards, index cards and other paper products.

LP&T’s customer orders for tissue paper are comfortably backlogged – “the demand is higher than we can supply,” Van Scotter said – while the paper market is showing some surprising resilience.

“The paper side is a good market [for LP&T], but that has come at a cost,” Van Scotter said. “A lot of mills are shutting down. We are still seeing a lot of demand for white paper, but we are also still seeing demand move to electronics [computers, digital and other nonpaper-using machinery].”

Speaking about LP&T and the industry in general, Van Scotter predicted the paper market would be flat or downturn slightly in 2008, but noted that the continued demand shows costs, and employee reductions over the last several years, are bringing manufacturers’ capacity in line with demand.

His description resembled the “last man standing” scenario seen in East Millinocket and Millinocket, where Katahdin Paper Co. LLC reported last month that, with its No. 11 machine and other operations running 24-7 – and capacity booked for a year – it has begun hiring to replace as much as 50 percent of its 600 workers eligible for retirement over the next five years.

Like LP&T, Katahdin Paper is the successor reborn from the ashes of another manufacturer, Great Northern Paper Co., which laid off some 1,100 workers in late 2002. LP&T succeeded the Eastern Pulp and Paper Co., which shut down on Jan. 16, 2004. Van Scotter and Wissman completed their $23.7 million purchase of the Katahdin Avenue site in May 2004.

LP&T, Van Scotter said, doesn’t have much international competition in tissue or paper manufacturing, and the weak dollar hurts foreign competitors more. Still, this isn’t the time for Lincoln Paper to start with a large-scale upgrade. The year 2007, despite being rather flat industrywide, was hectic for him and his company as it got its new $36 million tissue machine on line.

“Nobody in the tissue mill held the same job at the end of the year that they had at the start,” he said. “Nobody. Can you believe that?”

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