MADISON — Madison Paper Industries will lay off an undetermined number of employees for at least two weeks starting later this month during a short-term halt in paper production.

The news was disclosed Tuesday in a letter from the company’s president to Maine’s congressional delegation, citing competition from Canada’s Port Hawkesbury Paper and rising energy costs as challenges at the Madison mill. It follows a steep drop in the mill’s property tax valuation and growing concerns around Maine about the state’s paper industry.

“We regret having to take this downtime, but conditions in the U.S. market for supercalendered paper, combined with the increased energy costs we incur during the cold winter months, require us to reduce production,” Russ Drechsel, president of Madison Paper Industries, wrote in the letter.

The mill produces supercalendered paper, used for magazines and advertisements, and employs 220 to 230 people. Officials have not yet determined how many will be laid off during the curtailment, which is scheduled to begin Jan. 24, Drechsel said.

For employees, the news was disappointing but did not come as a surprise.

“It’s just part of life. Paper mills are a dying breed, and unfortunately there’s nothing else coming to this area,” said 54-year-old Mike Derocle, of Norridgewock, an employee of Madison Paper for 33 years. He said he plans to collect unemployment during the temporary shutdown.


This is the first time Madison Paper has shut down because of market conditions and energy costs, and officials aren’t sure how long the shut down will last, although the letter estimated that normal production will resume around Feb.9.

“It’s hard to estimate power prices and what the market will be doing. Typically in the summertime this isn’t something we would experience,” Drechsel said. “Whether it happens again next year or the year after, it’s hard to predict.”

In April, the mill finally connected to a new natural gas pipeline, following months of anticipation of expected savings on energy costs. The change has saved the company some money, but electricity prices remain high in New England, especially in the winter, Drechsel said. In addition, demand for natural gas in the winter often drives prices up.

The problem is that there isn’t enough pipeline in New England to carry natural gas, according to Tony Buxton, spokesman for the Coalition to Lower Energy Costs. When colder-than-normal temperatures hit, the price of natural gas rises to meet demand, which includes not just residences and businesses, but also natural-gas powered power plants and the electric grid. In 2013, New England ratepayers paid $3.6 billion more than they should have in energy costs than they would have if there had been enough pipeline in place to meet demand, according to the coalition.

“Madison is being affected by Canadian subsidies,” Buxton said. “On top of that, these energy costs are like pneumonia. It harvests people who are suffering from other problems.”

The Port Hawkesbury mill is one of just eight mills in North America producing the same type of paper as Madison Paper Industries, according to the Maine Pulp and Paper Association. About 1.8 million tons of supercalendered paper are purchased each year in North America and the market is declining, said Andrea Maker, spokeswoman for the organization.


Port Hawkesbury was closed by then-owner NewPage Corp. in 2011, but it reopened with the help of about $125 million in subsidies from the Canadian government in 2012. Since reopening, the mill has taken over about one-sixth of the market for supercalendered paper, Maker said. It produces about 360,000 tons of paper each year, while Madison produces about 200,000.

“With the subsidies, they have a much lower cost structure. It really does have a significant impact on other mills, including Madison,” Maker said. “When they were not operating, the supply and demand was just about in balance, but bringing on a major machine like Port Hawkesbury has done has disrupted the market, and Madison is feeling it now.”

Past efforts to put a stop to subsidies from the Canadian government to the Port Hawkesbury mill have been unsuccessful, according to Drechsel, who urged senators and representatives to put pressure on U.S. Secretary of Commerce Penny Pritzker, who oversees anti-subsidy laws.

Officials from Maine — including Gov. Paul LePage, who released a statement saying about 150 employees at Madison Paper would be affected — said they were troubled by the layoffs.

“We have raised concerns regarding the unfair subsidies received by the Port Hawkesbury paper mill directly with the Office of the United States Trade Representative, and we will continue to press the Administration to investigate this subsidy and pursue remedies. We will continue to fight unfair trade practices that threaten Maine jobs,” U.S. Sens. Susan Collins and Angus King said in a joint statement.

U.S. Reps. Chellie Pingree and Bruce Poliquin also responded to the letter, saying they were concerned about unfair foreign competition and its effect on manufacturing jobs in Maine.


Mill employees have been notified of a two-week shutdown while paper production stops completely, according to Mike Croteau, president of Steelworkers 36, the local union.

“We’re not 100 percent sure how many people will be in the facility for the two-week outage. We’re going to work with the company as soon as we possibly can to determine all that and let people know what’s happening,” Croteau said.

“Anytime people have to endure a layoff or a downtime, you get a little nervous, you get a little frustrated. What does this mean for the future of my mill? Is this something we’re going to have to endure more of? There are a lot of concerns out there, certainly.”

Though this is the first time the mill has shut down because of market conditions and the price of energy, Croteau said he doesn’t think it is unusual among other mills owned by UPM-Kymmene Corp., which took over the Madison mill in 2011.

“My understanding is in the UPM paper mills in Europe as well as other UPM paper mills in the United States, they try to run efficiently and not waste money, and it’s not uncommon. They have to take things like energy prices, power prices, order book status and production status into consideration when they make decisions about whether they have to take a couple of weeks of downtime,” Croteau said.

“The job market everywhere is insecure. It doesn’t matter what field you’re in,” said Mike Gallant, who lives in Madison and works in the mill’s warehouse. He said he hadn’t heard yet whether his job would be among those affected by the temporary layoffs.


“It’s going to be a hardship. It’s going to hurt, but I don’t think it will be devastating as long as the mill isn’t closing long-term,” Gallant said.

Others in town also expressed their concern about the temporary shutdown at the mill, which until recently made up about 40 percent of the town’s tax base. In August, the town’s board of assessors announced that the the mill’s value had dropped from $229.7 million in 2013 to $80 million.

“It is a concern to the selectmen in town. These are good-paying jobs, and for people to be out of work at jobs they are dependent on, it’s very disappointing for them, I’m sure. These are people who live here. They buy local and they spend their money here, so it’s going to probably be a hardship for some,” said Al Veneziano, chairman of the Board of Selectmen. “We had a big reduction in value there, which cost a lot of people in town some money in higher taxes. We’ve accepted that, but as far as what we can do in the current time, I don’t really know what we can do.”

At Madison House of Pizza, located just up the street from Madison Paper on Main Street, employee Elizabeth Toner said the mill frequently places large orders with the restaurant. With employees out of work, the restaurant will lose a lot of business, she said.

“The owner was actually pretty bummed out when he heard about it,” she said. “The mill is important to the community, but what can you do?”

Rachel Ohm — 612-2368

[email protected]

Twitter: @rachel_ohm

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