By Kathryn Skelton,Staff Writer

Jessica Paul has a job with Georgia-Pacific when she graduates in May.

She has wanted to be a paper engineer since attending an unusual summer camp at the University of Maine to groom young talent.

Paul has lived in Old Town her whole life. Working at the paper mill there wasn’t her grand plan but it’s perfect. Close to family. She’ll stay in Maine. She can pursue a business degree at night.

Still she wonders: Should she have backup?

Georgia-Pacific flirted with scaling back two years ago. It ultimately shut down two machines, saying goodbye to the Brawny paper towel man. One industry expert says it’s still a coin toss if the Old Town mill will stay open.

That mixed signal for Paul – a good job before she even started looking; a warning that the mill hiring her could fold – defines the paper industry right now.

Pulp and paper, an economic anchor for Maine for more than a century, has lost 600 jobs a year for six years running. Production’s down.

Yet the resurrected Lincoln mill just decided to build the state’s first new paper machine from scratch in 20 years. It’ll cost $36 million and add 40 jobs.

Just over half the forest companies polled for a state report said they had made a major investment in the last year. That investment is important for the industry to stay competitive.

Yet the governor cut investment incentives to balance the state budget this spring.

The lack of clear direction – by the state and the paper industry itself – has led to heavy speculation. Conflicting predictions:

Dark times are ahead.

Employment losses are about to even out.

Paper will always be here; we’ve got the trees.

The industry could be smaller, sooner than expected.

Adding to the uncertainty: news this summer that Maine’s biggest paper company, International Paper, might want out. (See related story.)

Jack Cashman, head of Maine’s Department of Economic and Community Development, thinks the future will be about attitude and investment.

“If you want to sit around and whine about the paper industry, that’s not helpful. If you want to get off your can and do something about it, this might be successful,” said Cashman.

Big, big business

Maine is the second biggest paper-making state in the U.S.

The industry’s been successful here since S.D. Warren converted his Westbrook mill in the late 1800s from rag pulp to wood and the commodity took off.

Paper is Maine’s third biggest export, the fifth largest private industry measured by gross state product and its jobs among the best-paying at almost $60,000 annually. That’s about double the average pay here.

Employment has hovered below 10,000 since the end of last year, down from 13,900 a decade ago.

After serious hits in confidence, demand and prices after Sept. 11’s terrorist attacks, “there’s been a real struggle in the paper companies to find a way to even-keel their boat,” said Jim McNutt, executive director of the Center for Paper Business and Industry Studies, at Georgia Institute of Technology.

Since 2003, mills in Lincoln, East Millinocket and Millinocket have spent months off-line. Eastern Fine Paper in Brewer closed and went to the city for redevelopment.

Working in Maine’s favor for recovery, as it has for decades: quality fiber, a skilled workforce and hydropower.

“Maine has arguably the finest water, labor and woods” in the country, McNutt said.

Longstanding tugs against success: gripes about business climate, workers’ comp costs, health care and poor east-west transportation.

“The whole combination ends up with companies saying, ‘Why do I want to operate in Maine?’ It’s too much of a pain in the rear to do it,” said McNutt.

And a brand new obstacle: A former attribute – millions of trees – has gotten pricey.

Restrictions on foreign labor, expected to intensify when a new law to limit Canadian help takes effect, and fewer people following family into the business have meant fewer loggers working the woods.

That stifles supply. Plus, since paper mills really don’t own land here anymore, they’re at the pricing mercy of someone else. “I think that bodes poorly for us,” said Peter Duncan at the University of Maine Pulp & Paper Foundation.

Help wanted?

Duncan’s foundation hosted the camp that attracted Paul to the industry. He scouts 500 juniors a year, offering scholarships.

The days are gone when a well-placed nudge and a “You ought to give this person a look” were enough to get someone in the door of a paper company after graduation, Duncan said.

For the very first time last year, not all his engineering grads found work come May.

The class of ‘05 squeaked by – the last graduate got a call on his honeymoon.

Duncan sees some relief for younger paper workers as older ones – the average age is 52 – start to retire.

But industry analyst Lloyd Irland believes the job losses of the last few years will likely continue.

“We always keep saying we’re squeezing every nickel out of costs, we’ve come up with everything technology will allow … then it happens again,” he said.

The Maine Department of Labor projects 8,765 paper workers come 2012 – 2,000 less than now.

“We’re bullish on the paper industry,” insists Cashman.

For him bullish means hanging onto jobs, not adding more.

And the competition, everywhere, is getting stiffer.

“It’s a very different situation than we’ve had historically. The industry has always had ups and downs related to the the economy. What has never been there before is this competition from offshore,” said John Williams, president of the Maine Pulp & Paper Association.

Mills are opening strong in Brazil and Chile. He’s looking for Latin America – Mexico, Columbia – to emerge next.

“I don’t think we’re going to be in for a very long period of stability,” he said, “until we find a way to compete, worldwide.”

So how to compete?

Money, money, money

“Everything will depend on how innovative the paper industry is in new products and markets,” said former state economist Charles Colgan. “No matter what happens it will not be a low-cost industry in Maine, so it’s got to find market success by being better than other paper regions, just not by being the same.”

Doing things different takes money.

While more than half the forest products companies polled in the Maine Future Forest Economy Project said they made a major investment in the last year, less than half planned to repeat that again in the next five years.

Encouraging companies to put money into newer, faster equipment is the No. 1 recommendation of that state report.

Williams believes the state’s recent tinkering with the Business Equipment Tax Reimbursement program is giving paper companies’ big-buck jitters.

BETR returns tax money paid at the local level on new investment, for 12 years.

In 2004, nine mills split $16.2 million initially paid in personal property taxes.

Next year, reimbursement will drop from 100 to 90 percent.

“That, I’m afraid, is sending a really terrible message for investment,” said Williams. He spoke with a mill manager who could lose $300,000. That money’s got to be made up. “He can’t add it to the price of paper because if he does, people can just buy it someplace else.”

So it might mean fewer jobs.

The shift to 90 percent also invites fear that the figure will dip more.

Cashman said a proposal to remove that tax altogether is with the Legislature. The governor intends to stick money back into BETR, he said. No word on where those missing funds will come from.

Cashman’s hoping a new tissue machine at Lincoln Paper and Tissue will kick off a wave of investment here.

Cathy Kecki, executive director of economic development at the Lincoln Lakes Region Development Corp., helped fill out a state grant for part of the $36 million project.

In that area, one paper job supports four other jobs in the community.

Of the 13 pulp and paper mills in Maine, McNutt called NewPage’s Rumford mill (formerly MeadWestvaco) and International Paper’s Androscoggin mill “in the best shape, from an asset perspective.” They’ll run well without lots of immediate investment.

He’s less glowing about Old Town.

“From an economic point of view, Georgia-Pacific probably should have (shut down two years ago), to be frank with you,” McNutt said.

This spring, Georgia-Pacific spent $28 million in Old Town on a new biomass boiler that runs on bark and wood chips. It’ll save $5.9 million a year in energy costs, spokeswoman Kelli Manigault said, effectively taking the company off the grid.

The mill has 450 employees, 150 fewer than when production stuttered for a month in April 2003.

“We’re lucky to be where we are right now. We’ll never get the towel business back. We’re not competitive enough,” Manigault said.

Paul, the 21-year-old student, said her family has always had ties to the mill. Her father is a subcontractor; relatives work there. She’ll be taking a job as an entry-level engineer.

She’s not tempted to go the way of some classmates and leave the industry. Everything can get better, she said. Paper can be made safer, cheaper, leaner.

“I try not to let the doomsday tellers get me down. They don’t know what’s going to happen either,” she said.

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