Today in Baileyville, a place far from the concerns of the media or southern Maine politicians, St. Croix Tissue is holding a ribbon-cutting event to celebrate the completion of two new tissue machines and the start of their official operation.
IGIC, the company that invested heavily in our state, as well as the workers, contractors and officials in my administration who have been working to achieve this accomplishment should be proud of their hard work and the jobs they have brought to Washington County.
The opportunists who are showing up for a photo opportunity should learn the lessons of what led to this day, the challenges the company faces and how it is instructive for the entire forest-products industry. We must understand what encouraged a company to make this initial $120 million investment in Maine, we must address the high-cost issues facing the industry and we must build on these factors to create an economic environment for additional job creation in our state.
It was not a politician’s comments that led to the decision nearly four years ago to make the investment, and the witty banter today will not lead to additional investment. If we truly listen to the economic message of IGIC and implement the pro-growth strategies for which I have been advocating, we can successfully modernize Maine’s forest-products industry.
Nearly six years ago, when IGIC purchased the mill, the company saw a long-term opportunity in converting it from a costly pulp mill to an internationally competitive facility. First, the plan would require creating an integrated tissue facility and a shift from a pulp market that was in decline to a tissue product that has shown stable long-term growth.
The company was new to Maine, but it was attracted to the facility because of the tremendous wood supply and the hydropower production on site, as well as the potential for accessing the low-cost of natural gas in the region. In addition, local and state officials were very welcoming to this new investor.
In fact, I traveled twice to China to meet personally with the investors. Our productive meetings and the relationship we developed were an integral part of their decision to invest in Maine.
The process from the initial purchase in 2010 to today’s ribbon-cutting has had challenges. At the groundbreaking of this project two years ago, company officials raised alarm to me that the competitiveness of the facility was not meeting expectations. Wood costs were out of control. Natural gas prices were spiking in New England, despite our state being close to some of the most abundant natural gas supplies in the world. Two of the major business cases for the location in Washington County were being called into question, and the project was in jeopardy.
The basic problem has been that our regional pipeline infrastructure has not grown to feed our increasing consumption of natural gas, and we must manage our forests more effectively. Although the price reduction of oil and imported gas has helped the energy situation, this is most likely temporary and masks our vulnerability to domestic pipeline constraints. It must be solved together or will not have future ribbon cuttings for new energy-intensive manufacturing in New England. Woodland had a long-term investment plan in place to stomach the spikes in energy and wood costs, while the more vulnerable Maine mills have closed their doors.
Despite being the most heavily forested state in the nation, Maine’s wood costs have been among the most costly in the world. This is unconscionable, and it is the direct result of failed public policy. One policy area that needs reform is the Tree Growth Program, which must be fixed to ensure that woodlot owners are actually contributing to our forest-products industry as originally intended — especially in southern Maine where timber harvesting has decreased. I am open to all serious proposals of reform.
The company also is experiencing unanticipated federal regulatory costs. In a testament to the history of this industry, the hydro dams that power the mill are so old they predate federal hydropower laws and allow the facility to avoid federal bureaucracy. However, because of a congressional mistake decades ago, the upstream minor storage facilities that manage the water flow were not specifically exempted — even though they also were constructed in the 19th century.
Instead of trying to help the facility, the Federal Energy Regulatory Commission has turned a small mistake into a barrier that will cost the company millions of dollars.
We cannot take investments like IGIC’s for granted. Investment goes where it is appreciated — not just on celebratory days like today but also how we help them every day on the difficult issues of navigating federal bureaucracy, unforeseen spikes in input costs and the next challenge that surely will confront a competitive industry. We took our forest-products industry for granted for decades, and we watched as the big investments flowed into other states and countries.
My advice to those speaking at the ribbon-cutting today: After the speeches and the ceremony, when the cameras are away, sit down with the company and ask what they need to keep them in Maine. Then go do it.
Paul R. LePage is the governor of Maine.