Taxpayers spending millions on mill that keeps on polluting

The state has spent millions of dollars to prop up the Old Town pulp mill while steadily fining the mill’s owner for ongoing pollution. And now the biggest fine ever is imminent.
back lot of Old Town Fuel and Fiber
The back lot of Old Town Fuel and Fiber, which houses the steam plant and recovery boilers. Photo Kevin Bennett of the Bangor Daily News.

The state has spent millions of dollars to prop up the Old Town pulp mill while steadily fining the mill’s owner for ongoing pollution. And now the biggest fine ever is imminent.

The Maine Center for Public Interest Reporting has learned that the state Department of Environmental Protection (DEP) is preparing to slap a $497,000 fine on Old Town Fuel & Fiber for excess air pollution over a 12-month period.

That will come on top of $331,000 in penalties assessed by the DEP and the federal Environmental Protection Agency (EPA) in the past five years.

Rather than spend money to solve the persistent air-pollution problem, the mill owners want the state to relax the pollution rules. They have asked the DEP to allow the mill to more than double its permitted emissions of carbon monoxide, a colorless, odorless, poisonous gas that can be harmful to people with heart disease.

Old Town Fuel & Fiber says that it’s too expensive to fix the carbon monoxide’s source — principally, a wood-burning (biomass) boiler — and that continued pollution, which it characterizes as small, is a price the community should pay for the mill’s economic benefits. It currently has 216 employees.

Totaling the full cost in cash to taxpayers of keeping the mill open is impossible without access to financial information the mill and the government won’t reveal.

But available figures show that since 2003 the mill’s three owners have received or been promised more than $56.5 million from the federal Department of Energy and state sources.

Taxpayers also support the mill through its research partnership with the nearby University of Maine, whose officials say they are not disturbed by the continuing pollution.


The massive public support for the mill began in 2003 when Georgia-Pacific Corporation (G-P) shut down the 130-year-old pulp and paper facility, putting 450 people out of work. Democratic Gov. John Baldacci engineered a complicated deal to restart it by having the state buy G-P’s Juniper Ridge Landfill, also located in Old Town, for $26 million.

Casella Waste Systems supplied the state with the cash. In return, Casella got a 30-year lease to operate the landfill.

To save on electricity costs, G-P used the money to buy a mothballed 1980s-vintage biomass boiler in Athens, Maine. It turned out the boiler, which hadn’t met air-pollution standards in Athens, couldn’t meet them in Old Town, either. This is the boiler at issue in the company’s request to expand its permitted pollution.

Mill closing story excerpt from the Maine Campus, March 23, 2006.

Even with the $26 million and no more liability to clean up its waste dump, G-P shut the mill in early 2006 after it was acquired by Koch Industries, controlled by billionaires Charles and David Koch, recently famous for bankrolling conservative causes. Koch’s G-P sold off the paper-making machines.

In 2006 Baldacci, up for re-election, tried to find a buyer for the mill, in the process getting legislators to force the DEP not to strengthen biomass-burner pollution regulations, according to a Portland Phoenix investigation. Late in the year, investors calling themselves Red Shield Environmental bought the mill and reopened it.

In April 2008 Red Shield announced a $30-million grant from the federal Department of Energy (DOE) to see if ethanol, a motor fuel, could be commercially produced from pulpwood.

But Red Shield went bankrupt two months later. By then the mill had shriveled to 160 workers, who again lost their jobs. The DOE grant appeared dead.

In late 2008 the facility was bought at auction for $19 million by Patriarch Partners, an $8-billion private-equity conglomerate.  The mill was renamed Old Town Fuel & Fiber (“Red Shield Acquisition” is also used) and decided to try to produce butanol from pulp instead of ethanol.

In October 2009, Gov. John E. Baldacci joined Patriarch Partners founder and CEO Lynn Tilton to celebrate the one-year anniversary of Old Town Fuel & Fiber. Baldacci and Tilton were joined by Old Town city officials and company employees at the event. Photo courtesy the Bangor Daily News. 

The DOE grant was reinstated, now for “biobutanol,” also a motor fuel. About $5 million has been paid out so far, according to DOE official Melissa Klembara. The mill also produces 500 or so tons a day of pulp for paper mills and sells excess electricity on the New England grid.

The biobutanol effort is a collaboration with the University of Maine, which is in the forefront of research on how to distill fuels from wood. The mill subcontracted part of the DOE grant to the university’s Forest Byproducts Research Institute. The university is building a 40,000-square-foot bioproducts technology center in a rent-free mill warehouse.

Like many corporations, the company also takes advantage of federal and state tax breaks.

In 2009 the company got a special break to encourage biofuel use: a 50-cents-a-gallon federal “refundable” income-tax credit (you get cash even if you don’t pay taxes) for the pulp-generated “black liquor” fuel it has used for years.

Old Town Fuel & Fiber won’t say how much it got, but spokesman Dan Bird said, “It helped us to get started sooner” as the operations ramped up again.

In 2009, the mill qualified for the state’s Pine Tree Development Zone job-creation program, which can “greatly reduce or virtually eliminate state taxes for up to ten years,” according to the Department of Economic and Community Development.

By law the state keeps confidential most tax breaks given to a company, but public records show that in 2010 alone the mill received $111,000 as a refund on property taxes under the state’s Business Equipment Tax Rebate program.

In 2010 Efficiency Maine, a state agency that promotes energy conservation, pitched in with $377,000 for improvements to reduce the mill’s fossil-fuel consumption.


During the past five years, EPA and DEP records show, the mill has paid $267,000  in air-pollution fines for excess emissions of carbon monoxide, sulfur, methanol, and smoke.

In 2007 the EPA required the mill to install $8 million in air-pollution-control equipment.

In 2008 the company paid a $64,000 DEP fine for improper handling of ash, which included trucking lead-contaminated ash to Juniper Ridge.

In 2011 the Center for Public Integrity revealed that the mill was on the EPA’s watch list of the 464 violators of the Clean Air Act in “serious or chronic noncompliance.”

This November the DEP proposed the $497,000 fine for excess carbon monoxide and smoke emissions for the 12 months ending in September. The fine is “proposed” because the amount to be paid will be negotiated with the company, the DEP says.

Also this fall, the mill applied to the DEP to increase the carbon monoxide the biomass boiler is allowed to emit without penalty from 0.35 pounds per million British thermal units (Btu), a measure of energy or heat, to 0.90 pounds per million Btu, according to its DEP application. That would potentially increase the carbon-monoxide emissions to 1,045 tons per year from the boiler’s actual 406 tons per year. In the proposal for the $497,000 fine, the DEP said the boiler had violated carbon-monoxide emission limits 330 days out of a 381-day period.

The boiler’s “age and relatively small size make it difficult for the mill to meet the current limits,” the company said, adding that fixing it would run into millions of dollars. The company also blames its pollution on the boiler’s need to burn green wood.

There are hints the DEP may grant the more-pollution-without-penalty request.

Melanie Loyzim, the DEP’s air quality bureau director, said that the mill’s carbon-monoxide limits have been stricter than would normally keep the mill within national guidelines and that a “cost consideration” will be a factor in the DEP decision.

“I haven’t heard of anyone being affected personally” by the mill’s pollution, said Peter Carney, the DEP’s enforcement chief.

Melissa Doane, town manager of Bradley, across the river from the mill, said she has heard complaints of soot from the mill, but nothing about health problems that could be tied to pollution, though some residents have concerns about that possibility.

With the mill’s recent request, said John Banks, natural resources director for the Penobscot Nation on neighboring Indian Island, it’s trying to make its pollution “compliant with the regulations by changing the standards” — continuing to pollute but not getting fined. Banks adds: “We’re very much opposed to that.”

This month, the DEP expects to circulate a “draft permit” containing the department’s recommendation. Unless appealed, the recommendation will be up to Commissioner Patricia Aho, a former lobbyist for paper companies appointed by Republican Gov. Paul LePage.

The mill’s Dan Bird called the carbon-monoxide emissions “pretty darn small,” calculating them as six-hundredths of one percent of the total from all sources in the state: “It’s not like we’re putting a plastic bag over someone’s head.”

Bird compared six-hundredths of one percent to another number: the 1,000 families that he said can be directly or indirectly “tied back to the operation of the facility” and the paychecks it provides.

DOE official Klembara said that, while her department hopes America’s increased use of butanol will lead to reductions in greenhouse gases, the Old Town mill’s production of air pollution is not something it considers.

The DEP’s Carney said the new pollution penalty and the new pollution proposal are separate issues.

“No one has raised the concern” that air pollution rises to the level that the university shouldn’t collaborate with the mill, said university assistant vice president Jake Ward.

But Paul Schroeder, an environmental activist in Orono, accused the university of “enabling this polluting facility to keep running” in its federally funded collaboration with the mill.

The mill has big stakes in the collaboration. Bird said the mill is “too small to just be a market pulp producer.” And its biobutanol production will not be at commercial scale. Patriarch Partners has said it sees future sales of biobutanol technology as the moneymaker.

But even biobutanol success won’t return the mill to glory days. The company has said only a small number of employees will be hired if the bio-refinery is a going concern in a year or two.

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Lance Tapley

Lance Tapley, of Augusta, is a veteran investigative reporter and a co-author of “The United States and Torture: Interrogation, Incarceration, and Abuse,” published by New York University Press. 
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