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When Georgia-Pacific threatened a few hundred jobs at its Old Town mill last April, reactions around the state varied from resignation to outrage, with a notable outbreak of worry in Augusta, where Governor Baldacci has made retention of mill jobs a top priority. After nearly a year of uncertainty and contentious negotiations, the governor announced that the state had reached an agreement to buy the Old Town millís landfill from Georgia-Pacific for $26 million, which G-P would put into a biomass boiler to reduce energy costs and make the plant more competitive. Problem was, the state didnít have $26 million, even after slashing benefits for brain-injury rehab and Baxter School compensation, so it decided to sell operating rights to the landfill, holding out the carrot of expansion permits that would make the facility the largest in Maine.
Vermont-based Casella Waste Systems, owner of the Maine Energy Recovery Company incinerator in Biddeford, the former Sawyer Environmental Landfill in Hampden, and a number of other waste-processing concerns in the state, stepped up with the $26 million to make the deal happen. Agreements were finalized in February, with much fanfare. According to the governor, everybody won: The state had long-term disposal capacity, Casella had a landfill, and G-P would stay in town.
There are good reasons to believe, however, that in its single-minded drive to keep politically untouchable mill jobs in the state, Governor Baldacciís office allowed itself to be used by two powerful, politically connected companies doing each other a favor.
Maine has a trash problem. Its landfills are nearing capacity, its incinerators are badly run and dirty, and nobody wants new landfill capacity built near their little piece of The Way Life Should Be. Commercial landfills have been illegal by state law since 1989, and municipal landfills canít make money because theyíre prohibited by state law from taking out-of-state waste.
A useful loophole in the out-of-state waste prohibition is the Department of Environmental Protectionís handy ó if nonsensical ó definition of "out-of-state waste." According to the DEP, once waste is processed at a facility in Maine, it becomes in-state waste, no matter where it came from originally. So a truck can show up in Biddeford or Orrington, the two major commercial incinerators in Maine, or at the Waste Management landfill in Norridgewock, carrying trash from New Jersey or Texas, and once that waste is sorted, both the bypass and the ash are no longer "out-of-state."
George MacDonald of the State Planning Office points out that Maine ships all of its hazardous, radioactive, and medical waste out of state ó the implication being that Maine gets the better of the bargain. "Itís also important to remember" that Maine needs out-of-state trash to make its large incinerators operate economically, MacDonald says. For example, when the Maine Energy Recovery Corporation (MERC) incinerator was built in Biddeford in the late 80s, there wasnít enough indigenous waste to make the incinerator viable. "Thereís not enough trash in southern Maine to fulfill the roughly 150 to 160,000 tons that they need to make the plant operational," says MacDonald, citing 2003 figures that show MERC processing a total of 300,000 tons of waste, of which 161,000 tons was out-of-state product.
"The state is directed to provide disposal capacity for municipal solid waste and special waste generated within the state," MacDonald adds, "and itís been a long-standing policy of the state to manage its waste within its borders. The only entities that can develop new landfills or disposal facilities are public entities."
So what prevents any municipality or public consortium from opening a landfill and then signing an operating agreement with a commercial hauler already present in Maine, as the state is in the process of doing with Casella, which owns MERC?
"It would still have to pass the straight-face test," MacDonald answers.
True, and the problem is that, for many people, the West Old Town deal fails exactly that test. Biddeford state representative Joanne Twomey, for example ó herself a scarred veteran of the years-long environmental and legal battles over the MERC incinerator ó calls it a "back-room deal" cooked up by "Baldacci and his merry men" in violation of state laws regarding public input, and this charge is echoed by representatives of citizen groups opposing the landfill. Stan Levitsky, an Old Town graphic designer who has gotten deeply involved in the wrangling, sent the Phoenix a batch of documents, obtained via freedom-of-access laws, that go a long way toward explaining why, for many observers, the deal is hard to take with a straight face.
In his statement following the closing of the landfill transfer agreement in February, Governor Baldacci said, "Itís important that we make Maine a competitive place to do business, so we can retain good paying jobs and set the stage for growth." Unfortunately, the deal as it exists doesnít do any of that. It subsidizes Georgia-Pacificís presence in Old Town, gives them a two-year air-quality variance, concentrates even more market power in Casellaís hands, and possibly affects the market value of C&D (construction and demolition debris) fuel and green wood-chip fuel. And the kicker is that despite these giveaways, Georgia-Pacific has not made any formal commitment to keep the Old Town mill open.
Why did all this happen? Because paper-mill jobs are too politically valuable to lose.
This is apparent in an April 17, 2003, memo from state Director of Economic and Community Development Jack Cashman to Georgia-Pacificís Pete Correll. In it, Cashman gives Georgia-Pacific a two-year environmental-compliance extension and suggests that G-P sell the millís landfill "to a third party for use in whole, or in part, as a commercial landfill." Never mind the fact that itís been illegal in Maine since 1989 to open a commercial landfill. G-P certainly had no objection to the legal problem; despite Cashmanís acknowledgement that a commercial landfill would be "difficult to sell politically," he notes in his memo that G-Pís management team had already discussed the commercial-landfill option with the state.
By April 24, just a week later, Casella and G-P had met to discuss a possible Casella purchase of the landfill. The next day, Cashman sent a note to Baldacci indicating that he already had a proposal from Casella to operate the landfill, and noting that heís also already "had a series of meetings with people from State Planning and DEP to work on details of a plan to have the State buy the landfill as an alternative to Casella." The memo goes on to note that G-P executive vice-president Jim Bostic has come up from Atlanta "ram-rodding this process."
Ram-rodding is no hyperbole. By April 29, Casella had already offered G-P a proposal that would have the state buy the landfill and Casella buy the operating rights ó exactly what happened 10 months later. Casellaís financial analysis at the time suggested that the landfillís value was between $33 and $43 million, depending on the amount G-Pís tipping fees were discounted. The same day, the state planning office generated a draft report estimating the income and expenses if the state were to operate the landfill.
The stateís initial figures have the landfill yielding about $250,000 yearly on 100,000 tons of solid waste and 50,000 tons of discounted ash from Georgia-Pacificís biomass boiler. The Operating Services Agreement finalized in November, however, tells a different story. Casella will be permitted up to 540,000 tons of waste yearly, at tipping fees higher than the stateís estimate. Even if Casellaís expenses are triple the stateís estimate ó which they wouldnít be, because not every expense rises with capacity ó the total gross over the 30-year life of the landfill projects to be somewhere around half a billion dollars.
And this doesnít take into account that part of this tonnage will be ash and bypass from out-of-state waste taken through the MERC incinerator in Biddeford, taken on spot-market rates much higher than the tipping fees given to municipalities on long-term contracts. Neither Casellaís Don Meagher nor Pete Prata of Penobscot Energy Recovery Corporation (PERC) in Orrington would say how much they typically charge for spot-market tonnage, but the figure is substantially above the long-term fee. Multiply that by, say, 35 percent (PERCís spot-market ratio; MERCís is probably higher because itís two and a half hours closer to the nearest state border) of MERCís 2003 total of 161,000 tons of out-of-state waste, and the figures make clear that if you control both processing and final disposal ó as Casella does in Maine ó thereís a lot of money to be made in the landfill business.
For Georgia-Pacific, the deal gets even better. Exhibit B appended to the Operating Services Agreement is a fuel supply agreement between Fort James (which operates the G-P mill) and Casella, under which Casella agrees to sell the Old Town mill "C&D fuel" for its boiler at a price capped at $4 per ton, half the going market rate. At 100,000 tons a year, the projected minimum according to the agreement, this provision will provide G-P a fuel subsidy of about $400,000 per year.
Supposing the plant canít get permitted to burn C&D fuels, Casella once again steps in to rescue Maineís embattled paper industry from the cruelties of the free market, offering up to 75,000 tons of green wood chip fuel at a fixed $9 per ton. Green wood chips are a commodity with a price that in Maine fluctuates between $15 and $20 on the open market; taking an average price of $18, that 75,000 tons of green wood chips will come to Fort James at a discount of $675,000, and the supply is to continue in smaller amounts over the next 10 years, by which time Georgia-Pacificís Old Town mill will have saved somewhere in the neighborhood of a million dollars.
Why is Casella being so generous? Because the pellets and wood chips will come from a waste stream they would otherwise have to landfill. This increases the life of the West Old Town facility, making them more money ó plus, theyíll already have made market rates off the tipping fees of the original debris. Subsidizing the continued existence of the Old Town mill, which makes the governorís office happy and gets Casella 30 yearsí worth of tipping fees, is well worth undercutting the biomass market by selling wood pellets at 50 percent of the going rate.
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Issue Date: April 2 - 8, 2004
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