SKOWHEGAN — The Sappi Fine Paper Co. Somerset mill in Skowhegan is now running on natural gas instead of oil, a move the company hopes will shave 30 percent off energy costs and reduce air emissions and other harmful environmental impacts.

Summit Natural Gas of Maine completed the final installation of equipment to allow the Somerset mill to run at full capacity using natural gas, according to Mark Hittie, director of marketing and communications at Sappi North America offices in Boston.

“The Somerset mill is now fully connected,” Hittie said. “We had a (routine shutdown for state ordered maintenance) in October to complete the final stage of our natural gas conversion project, converting the lime kiln. We are now fully operational on natural gas.”

Hittie said the biggest impact of switching to natural gas is in the mill’s lime kiln, where gas has replaced the equivalent of 80,000 to 100,000 barrels of No. 6 fuel oil used per year. Converting to natural gas will also reduce oil use in the mill’s power boiler and decrease the ash load on environmental equipment.

Summit, which went on line with natural gas at the Madison Paper Co. mill after a six-month delay in April, began installing pipe to Sappi about a year ago.

Converting the mill power plants to natural gas is considered a step toward reducing costs to an industry staggered by economic forces and a declining demand for paper.

COMPETITIVE ADVANTAGE

In the last decade, higher energy costs and foreign competition have resulted in mill closures around the state and dramatic drops in property tax valuations recently in mill communities such as Madison and Skowhegan. Switching to natural gas can help offset those rising costs, Summit executives said.

“The opportunity to utilize natural gas is essential to maintain the competitive cost position of our Somerset mill and is another example of our investment in Maine,” Mark Gardner, president and chief executive officer of Sappi North America, said in a release. “Thanks to Summit, we have established access to clean, economical natural gas, this is reducing our energy costs and is better for the environment and will ensure the long-term profitability of our operations.”

Sappi’s mill in Skowhegan is the seventh largest coated paper mill in the world, producing more than 2,200 tons of paper per day, according to Summit. The mill also employs more than 700 Maine workers.

Sappi is among a handful of large businesses that made the $350 million gas pipeline possible in the Kennebec Valley. Summit built a far-reaching network, stretching from Pittston to Madison, while its competitor, Maine Natural Gas, focused more on the Augusta area.

Inland Hospital in Waterville and Redington-Fairview General Hospital in Skowhegan last year joined Sappi, UPM Madison and Huhtamaki Packaging in Fairfield and Waterville as prime potential natural gas customers. Summit was also selected by the city of Augusta to provide natural gas service to city schools and other city-owned property, as well as some state government property in Augusta.

Huhtamaki has had natural gas service since April, along with many of the residential and business customers in the town of Fairfield, according to Greg Glynn, account executive at Nancy Marshall Communications, which does public relations for Summit.

As for Redington-Fairview, since it is based in Skowhegan, the hospital continues to have the potential to be part of Summit’s expansion in the future, Glynn said.

In Waterville, Summit has installed miles of pipe to serve Inland Hospital, Thomas College, Thayer Center for Health, Mount Merici Academy and Mount St. Joseph Residence and Rehabilitation. Summit is also providing gas to residential customers in neighborhoods including First Rangeway, Johnson Heights, upper Main St., West River Road and College Avenue.

Since 2013, Summit, a subsidiary of Summit Utilities of Littleton, Colo., has provided natural gas service to residents and businesses in the state as a new lower-cost energy source and important option for Maine’s largest industrial companies, from paper mills to hospitals, the company said.

“With natural gas, the mill will have an additional energy resource available in their portfolio providing an additional opportunity to save on their energy costs,” said Mike Minkos, president of Summit Natural Gas of Maine. “We’re proud to provide an energy source that will help keep the Somerset mill in a cost competitive position,”

The Somerset mill also has plans for how to use future savings from switching to natural gas.

“Initially, we plan to pay for the $24 million project investment that will reduce our cost of manufacturing to remain competitive to other mills who have benefited from natural gas access,” Gardner said. “The reduced manufacturing cost will improve earnings for further reinvestment and improvements to our processes.”

KEY TO EXPANDED SERVICE

Skowhegan Town Manager Christine Almand said work installing the gas pipelines to the mill began in 2013 and the completion of the project is good news for the town and the region as a whole.

“Sappi has made a positive choice to invest in an energy resource that will reduce their costs and increase their profitability,” Almand said. “It is encouraging anytime you see a company invest in their future the way they have.”

The Sappi complex is two mills: The pulp mill where raw timber is delivered and processed; and the paper-making mill, where three large paper machines turn out the finished coated product — 800,000 tons a year.

There are about 700 employees at the Somerset mill in Skowhegan, including more than 100 salaried employees. The hourly workers are represented by four labor unions.

Sappi, with New Balance Athletic Shoe Inc., in Norridgewock and Skowhegan, is one of the top two employers in Somerset County, according to 2013 state labor statistics. The company last year was listed as the 17th-largest private employer in Maine when its 1,001 to 1,500 employees statewide are factored in, according to the Maine Department of Labor.

The company ranks just behind Cianbro Corp. in Somerset County on the employer list.

In addition to lines serving Sappi and Madison Paper, Summit has installed more than 130 miles of pipe in the Kennebec Valley area as well as Cumberland, Falmouth and Yarmouth in southern Maine.

The University of Maine at Farmington will host a public forum Nov. 19 on the university’s previous decision to “explore alternative energy services” after Summit Natural Gas told the school it could not guarantee a gas pipeline to Farmington by 2016.

UMF had been negotiating over the timeline and the price for a natural gas contract in anticipation of being the largest customer of the town’s first natural gas pipeline, but now is back to looking at its options after the proposed project was repeatedly delayed. The forum is scheduled for 6:30 to 8 p.m. Wednesday in room 101 in the UMF Roberts Learning Center.

In addition, Maine energy regulators in October recommended a $150,000 fine against Summit after an investigation found the company damaged sewer lines in 25 places, most of them in Augusta and Gardiner.

Doug Harlow — 612-2367

dharlow@centralmaine.com

Twitter: @Doug_Harlow