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Business and Economy

Maine Manufacturers: More Natural Gas Needed to Lower Energy Costs

BANGOR, Maine - One thing Democrats and Republicans in Maine agree on, at least in general terms, is the need to get more natural gas into the state, sooner rather than later. High energy costs, and ongoing efforts to bring more pipeline infrastructure here, were the main topics of a breakfast forum put on this morning by the Bangor Region Chamber of Commerce.

Keith Van Scotter's mill, based in Lincoln, is the leading manufacturer of specialty tissue in North America. Van Scotter is Lincoln Paper and Tissue's CEO. He says the mill's ability to hold its own in the market depends on what he calls the four Fs: "Fuel, fiber, freight and folks. Those are the big cost drivers in our business."

Lincoln Paper and Tissue runs a biomass boiler. But that boiler, by itself, can't heat the mill and provide all the energy needed for tissue making. So up until 2012, the company was buying large amounts of oil to run its paper making equipment - "Number 2 home heating oil," Van Scotter says. "Very, very expensive stuff."

Especially in the winter of 2012. So expensive, in fact, that to control costs, Van Scotter and his team looked for other options. They signed on with a company to truck in liquified natural gas from Boston. Later, the mill switched to deliveries of compressed natural gas, also by truck, when this same supplier built a compressor in Baileyville.

"If I were to build a new tissue mill today, candidly, I was asked the question, 'Would we ever expand?' No," he says. "If I was going to build a new tissue mill today, I'd build it in North Carolina. That's where all our competitors are going. Low-cost energy. Don't have to deal with the vagaries and the issues of winter, transportation, etc, etc."

All along, says Van Scotter, the company was hoping to be able to get its gas directly from a pipeline. That finally happened a little more than a year ago, when Bangor Natural Gas began operating a 60-mile stretch of the Loring Pipeline, north of the city. Other mills and energy intensive businesses in Maine haven't been as fortunate.

"We are looking at significant pipeline constraints that have led to scarcity pricing in natural gas markets," says Mark Vannoy, who chairs the Maine Public Utilities Commission. Vannoy says this imbalance between supply and demand has resulted in high electricity costs, especially in the winter months.

"This has been a contributing factor, leading to a variety of responses from energy intensive businesses in the state, ranging from winter shutdowns to actual plant closures," Vannoy says.

This week, Madison Paper Industries announced it would close down temporarily, due, in part, to high energy costs. Expanding access to natural gas is one of the LePage administration's top priorities. The governor says Maine will continue to have a hard time attracting energy-intensive businesses, and keeping the ones it has, unless it makes more progress on the issue.

Democrats and Republicans in the Legislature have already given the Maine PUC the go-ahead to work with partners in neighboring states. Sara Gideon, a Freeport Democrat, is the assistant House Majority Leader.

"We can not escape the fact that when natural gas prices rise, our electricity prices rise," Gideon says. "It's because of this capacity issue we have."

Over the long-term, Gideon says Maine needs a larger mix of renewable souces to become truly energy independent. But in the short term, she says Democrats stand ready to work with Republicans to bring more natural gas to Maine.

Gov. Paul LePage is hoping Charlie Baker, the new Republican governor of Massachusetts, will join other chief executives in New England and back electricity tariffs that could pay for new pipelines in the region.