Maine’s economy struggles as paper industry stumbles

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Parts of Maine’s proud paper industry stumbled this year, hammering home the challenges of competition from abroad and the difficulty of unlocking new markets for papermaking byproducts.

Verso intends to sell its Bucksport mill for scrap and Great Northern Paper’s East Millinocket mill is headed for the hands of a redeveloper.

Those stories illustrate part of the broader challenge Maine’s economy faced this year in pulling back out from the recession and homing in on which industries can make up for losses elsewhere.

While the emotional significance and quick succession of collapses caused the fate of those mills to dominate business headlines, they were just one story in a broader tale of slow recovery for Maine’s economy in 2014.

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Is the magic gone for good? Great Northern Paper was the first to fall in 2014, continually missing restart deadlines after laying off 212 workers in February. The restart efforts were coupled with investors pulling back from project manager Cate Street Capital’s related Thermogen wood pellet project, which earlier laid out plans for production facilities in Millinocket and Eastport, then to European markets.

Old Town Fuel & Fiber closed in August but got a new operator, Expera Specialty Solutions, in early December. Verso in October announced the shutdown of its Bucksport mill, which it plans to sell to a scrap metal company early next year.

That’s part of Verso’s larger shakeup of the industry through a planned purchase of its larger rival, NewPage. If that sale clears federal antitrust approval, the joined company would operate the mill in Jay and would sell NewPage’s Rumford mill to the Canadian Catalyst Paper Corp.

While competition from abroad has been a challenge for some of the state’s mills, money from away has been a saving grace for Woodland Pulp in Baileyville, which in October started construction on a facility to house two machines for making tissue paper, a segment of the paper industry where demand has not fallen off.

But the whole jobs picture improved. By a count of Maine jobs, the state still had about 10,000 fewer jobs at year’s end than immediately before the Great Recession of 2008. That reflects a steady gain of about 20,000 payroll jobs since the deepest point of the downturn, but still has the state lagging the national recovery, which passed pre-recession job levels in May.

While the typical household has not gained in purchasing power, retail activity continued to rise in 2014, new building permits for single-family homes grew year-over-year for eight of 11 months, and bankruptcies, from January to October, dropped another 14 percent, continuing a decline from a 2010 peak.

The state’s total economic output continued to lag other parts of the country, a trend long foreseen as the state aged more rapidly than others and showed essentially no population growth.

Electricity prices around the region shot up. Power prices have risen for small-business customers in Maine and residential customers in other New England states, all of which share a power grid. Similar increases are expected to hit Maine’s residential power customers in March.

The reasons for that put a spotlight on state utilities regulators, who opened a case to consider whether charging all electricity customers a new fee to help pay for expanding natural gas pipelines to the Northeast would be worthwhile. The gas powers most of the region’s power plants and, for that, any shortages in supply affect the price of power. It’s also used for heat, making the problem worse in winter.

A forecast for the same problem this year prompted NextEra Energy to keep its oil-fired power plant, which gets called up for backup support when natural gas plants can’t fill demand. At the same time, Vermont Yankee was set to close at the end of December, which could exacerbate the problem.

Last year brought out expansion proposals from three companies that say they’re able to put a dent in the region’s natural gas supply constraint with some state support, and that discussion will continue into 2015 in Maine and elsewhere in New England, but without one of its most prominent voices, Tom Welch. The Maine Public Utilities Commission chairman decided to retire early.

Voices in the wind. Maine’s onshore and offshore wind industries continued to navigate complicated terrain in 2014, facing staunch opponents onshore and setbacks at sea.

The University of Maine-led consortium Aqua Ventus lost its bid for a key U.S. Department of Energy grant that would have allowed it to build a full-scale test of its floating wind turbine platform.

Onshore, opponents of wind projects at the local and state levels continued to pose regulatory challenges to new projects through appeals that have risen to the state’s top court, which has clarified parts of the state’s regulatory appeals process.

The state’s most prolific wind power developer, First Wind, announced its sale to SunEdison in November, giving the wind power company access to more resources and broadening its geographic reach. Central Maine Power and Emera said in July they would work together on transmission projects to get wind power south.

But beyond providing energy, renewable-energy advocates have argued Maine has potential to reap more jobs from that sector by building a broad-based “clean economy” on biofuels, industrial and residential wind power, tidal and river power, distributed generation and solar power.

Communication breakdown. FairPoint workers across northern New England went on strike in October and remain at loggerheads with the company, which began hiring replacement workers in early September. State officials in Maine have said complaints are on the rise since the start of the strike, and Vermont Gov. Peter Shumlin has asked for a review of an emergency 911 system outage in that state.

Maine officials have not asked for any similar probe, but the company will in January reveal the extent of any service problems during the strike, when it gives a quarterly report to the Maine Public Utilities Commission.

Any path to resolution of the disagreements over outsourcing work and making certain changes to benefit plans is unclear as both sides said after a meeting with a federal mediator in November that they remained far apart. About 800 workers are on strike in Maine at the company that maintains the backbone of the state’s telecommunications network and provides landline telephone and broadband services to much of the state.

New avenues for trade. In the first full year of Icelandic shipper Eimskip’s operation in Portland, exports to the island nation rose to about $5.2 million, up from about $700,000, from January through October, according to figures from the Maine International Trade Center.

That’s an early measure of the relatively new relationship’s economic impact that’s expected to grow as North Atlantic trade develops.

The relationship will bring other developments to Portland’s changing waterfront as well, including the extension of a Pan Am Railway line to connect with the terminal where Eimskip operates and a business incubator that would emulate a similar project in Iceland and seek to bring in companies dealing in ocean resources from across the state.

That comes as some of the region’s fisheries are up against hard times.

Fisheries management. For the second winter in a row, shrimping was prohibited in the Gulf of Maine, and cod catch quotas continue to fall in the face of poor stock estimates and in 2015 could be reduced to about one-fifth of this year’s 1,550-metric-ton quota.

Regulators raised quotas for some other groundfish species, but noted that those changes would not make up for drops in cod catch limits.

The newly lucrative elver fishery also saw new catch limits in 2014 after stock assessments showed the species was at risk of being over-fished, partly because demand from Japan rose in the wake of the Fukushima nuclear disaster, driving up prices. Fishermen caught about 85 percent of the limit, which regulators further reduced in October.

Elsewhere in agriculture. This year was a bright one for a small segment of Maine agriculture, fueled by a new crop of young farmers and a rise in demand for locally grown food and drink. About a dozen new breweries opened throughout the state, new distilleries got going, and new markets opened for small and organic farms to sell directly to consumers.

In May, the latest agricultural census showed the state has bucked national trends with a rising number of young farmers in the state.

Local agriculture faced two tough blows with the shutdown of Maine’s Own Organic Milk in May and the closure of Coastal Farms and Food in Belfast, but those developments belied signs of strength in that sector, including the opening of food cooperatives in Portland and Houlton and a plan to start a credit union just for small farms, supported by the Maine Farmland Trust and the Maine Organic Farmers and Gardeners Association.

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