BANGOR DAILY NEWS FILE PHOTO BY JOHN CLARKE RUSS Domtar's Baileyville mill shut down Tuesday, May 5, 2009.

BAILEYVILLE, Maine — What better way to start the new year than to begin training nine new employees?

As of Monday morning, Domtar Corp.’s Washington County pulp mill is operating at full capacity with 309 employees, spokesman Scott Beal said Monday, and company officials are looking hopefully to the rest of 2010.

Last year was rocky for the Montreal-based company. In March, citing weak global pulp demands, high inventories and depressed prices, the company idled the mill, laying off all 300 employees until late June.

Domtar is Washington County’s largest employer, and the closure had a ripple effect. Affected in particular were Fulghym Fibres Inc., which supplies most of the wood chips to the mill, and the port at Eastport, which ships pulp around the world.

When the mill reopened in June, the company cited a stronger global demand for pulp, tax credits for the use of alternative fuel mixtures, favorable currency exchange rates, and improving prices.

As 2010 dawns, Beal said, the mill is producing well and producing quality pulp to feed a growing demand.

“The markets strengthened in 2009,” he said. “We are guardedly optimistic.”

But one of the incentives that helped the mill reopen has ended. A federal 50-cent per gallon tax credit for the use of alternative fuels expired Friday.

Big paper companies such as Domtar, International Paper, Verso Paper and others were entitled to millions of dollars in payments in exchange for burning “black liquor,” a byproduct of the pulp-making process that can be used as a fuel to run the mill.

“That was a tremendous help to us,” Beal admitted. He could not provide any dollar figures for the Baileyville mill.

The Verso Paper mill in Jay received $29.7 million for one three-month period last year, according to The Washington Post, and a Goldman Sachs report last March estimated that International Paper could receive as much as $1.06 billion in tax benefits.

Verso’s mill in Bucksport does not generate the black liquor byproduct.

Lincoln Paper and Tissue, which has used several biomass fuels to run its mill, also qualified for the tax credit. Calls requesting comment from mill officials late Monday afternoon were not returned.

The tax credit, part of the 2005 U.S. Highway Bill, was refundable, allowing companies to qualify for direct cash payments.

“We participated in the program for most of 2009, and it was helpful,” Beal acknowledged. “It was indeed one consideration that got us back on our feet.”

But Beal said that loss of the incentive would not compromise the mill’s operations in 2010 or push it toward closure again.

“The market conditions are on an upswing,” he said. “If these market conditions continue, I’m very optimistic for 2010. Today we started nine new employees. I’m delighted, and I’m looking for the mill to have a very productive year.”

Sandra Dowdell, speaking on behalf of Verso Paper from Memphis, Tenn., said the company’s Maine mills are in fine shape.

“There is no question the [tax credit] came at a good time,” she said. “But we have always managed our business knowing that credit was going away.”

Dowdell said the company shifted in 2008 to focus more on the lightweight, coated paper market and has been developing new products.

“As we move into 2010, we are realizing the benefits of those products,” she said.

A one-year extension of the biodiesel tax credit was included in a bill that was approved by the U.S. House recently, but was not passed by the Senate, according to a report by The Associated Press. If eventually approved, the tax credit extension would be retroactive, lawmakers have said.

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