BANGOR (AP) – The Eastern Pulp bankruptcy saga drags on with no clear end in sight, after a 5 p.m. deadline passed Friday without a sale.

Massachusetts-based Paper Acquisition Corporation and Eastern Pulp’s creditors managed to come together on an asset purchase agreement, which says Paper Acquisition wants to buy the Lincoln and Brewer mills for $8.5 million.

But disputes over who would be liable for any pollution at the mills, and how much of the purchase price would go toward paying past-due taxes, could not be resolved.

Paper Acquisition wants blanket liability from any environmental compliance issues caused by the mills’ previous owners. A state official said that would not be possible

“They’re looking for the state to give them an environmental release,” Jim Dusch, DEP environmental compliance officer, said Friday. “State law does not allow us to do that.”

Dusch said Paper Acquisition was evaluating the options the state does have to limit the company’s financial obligations to clean up mills with a historic record of noncompliance.

“Basically, he’s at the point right now where he has to evaluate his risk,” Dusch said.

Robb Osinski, one of Paper Acquisition’s partners, did not return telephone calls for comment Friday.

Fred Bopp III, a Portland attorney representing the trustee of Eastern Pulp’s bankrupt estate, said Friday that the dispute on environmental issues could be a deal-breaker.

The other point of contention is what percentage of the $8.5 million purchase price would go toward balances owed to Bangor Hydro-Electric Co. and past-due taxes owed to the towns of Lincoln and Brewer.

Secured creditor Corsair Special Situations Fund LP, has the top priority rights to Eastern Pulp’s real estate. Corsair loaned Eastern Pulp $2.5 million last summer.

Corsair wants the court to define just how much of the purchase price will go to pay taxes and bills because those payments could decrease the amount it gets back from the loan.

Corsair already has been told it would receive at least $2.5 million, but it wants back both principal and interest on its loan, or about $3.3 million.

Corsair filed a request Friday for an emergency hearing to reconsider whether Paper Acquisition should even be viewed as a legitimate bidder for Eastern Pulp, and to determine just how much of the $8.5 million would go toward debts and back taxes.

If the hearing request is approved, Corsair will ask witnesses to say how much the debts and back taxes are worth, and whether they will require most of the $8.5 million to be paid.

“We’re not doing this to stop a sale of the mills,” Corsair attorney Bruce Sleeper said. “We’re doing this to make the sale of the mills satisfactory to us and the other creditors.”

Eastern Pulp’s trustee, attorney Gary Growe said Friday he does not believe Corsair will be granted an emergency hearing.

“He might not be able to demonstrate that there’s an emergency,” Growe said.

The auction of Eastern Pulp’s assets is tentatively scheduled for March 17.

AP-ES-03-06-04 1232EST