A Nova Scotia mill will reopen this week after a $124.5 million government rescue that observers in Maine have said will create unfair challenges for Maine paper producers.

The Bangor Daily News reports that the Canadian mill in Port Hawkesbury has the ability to produce around 400,000 tons of supercalendered paper — used for magazines, catalogs and some newspaper inserts — per year, making up nearly 30 percent of the total market for that type of paper.

The government deal aims to entice Pacific West Commercial Corp. to buy the mill for $33 million from NewPage, which closed the mill one year ago.

David Elstone, a paper industry analyst for ERA Forest Product Research out of British Columbia, told the BDN that the added supply to the market will push down prices and could push a struggling competitor out of business.

“Maybe there’s a mill in Maine that might be in that category of being at risk of closure,” Elstone told the BDN.

The UPM mill in Madison produces that same stock of paper, but mill manager Russ Dreschel told the BDN it’s too early to tell what the impact will be.

In a previous iteration, the mill’s $124.5 million aid package included a repayable $40 million loan, an offer that has been modified in the deal reached Saturday. That portion of the loan may now be forgivable if the company can show it has paid up to that amount in taxes on energy costs.

In 2010, U.S. paper manufacturers were successful in seeking new tariffs on subsidized coated paper imports from China and Indonesia in a ruling by the International Trade Commission.

Sappi Fine Paper, with a mill in Westbrook, and NewPage, with a mill in Rumford, were party to that complaint.

For the mill in Madison, Dreschel told the BDN that pleas to trade authorities often bring results too late for affected manufacturers.

“Usually in those cases you have to wait until the damage is done before you can file, so there’s very little preparation to be done until you can demonstrate the damages,” Dreschel said.

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