A provision in a bill recently approved by the Minnesota House of Representatives could help breathe new life into the Duluth paper mill, following Verso Corp.'s June decision to shut the plant down.
District 7B Rep. Liz Olson introduced language to House File 2079 that would authorize the state to provide a $3 million forgivable loan that would support "the conversion of the existing paper mill for the manufacture of new paper grades," providing that its owner invest $25 million in the facility by May 1, 2023. The forgivable loan would be predicated not just on the private investment to be made at the Duluth mill, but also on the continued employment of the equivalent of at least 80 full-time workers for a five-year period.
The mill formerly employed more than 220 people producing graphic supercalendered paper — the type of material used for catalogs and advertising circulars. But Olson said the plant likely will need to undergo significant changes and a shift to a more profitable product to return to economic viability.
"It's going to require less jobs obviously. We'd love to be able to maintain what we had, but the reality is 80 good jobs above the median income in Duluth is a good thing," she said, noting that the median annual household income in her district is about $45,000, compared with jobs that pay an average of more than $60,000 at the paper mill.
"So, it's very important to have these good-paying jobs in Duluth," Olson said, noting additional "ripple effects" in support of the timber industry, Minnesota Power, the building trades, and other mill vendors.
Olson pointed out the bill does not lay out the specific type of conversion the Duluth mill must undergo to qualify for the forgivable loan. But a workforce of at least 80 would likely be needed to support a plant producing tissue paper. Alternately, when Verso was proposing to convert the mill to produce brown kraft paper — the type of material used in grocery bags and packaging — the retrofitted plant was expected to employ at least 150 people.
Sharad Tak, the founder, president and CEO of ST Paper, issued a statement thanking Olson and fellow members of the House Committee of Workforce and Business Development Financing and Policy for their support of the Duluth mill. He said it "offers an opportunity for ST Paper or other parties to utilize the current plant in Duluth to be refurbished and reopened creating employment, and many positive secondary effects in Duluth."
Chris Fleege, Duluth's director of planning and economic development, said, "The city has certainly been actively involved with all potential buyers, and I think the statement by ST Paper kind of speaks for itself. They are likely a potential buyer, judging by their support for that bill."
Fleege hedged his comment a bit, however, saying: "I do know the intent of that bill was to make it generic enough that it could serve multiple potential buyers. So, I would say Verso is not exclusively negotiating with one individual buyer. But that buyer is definitely interested and engaged."
Tak noted that while the paper industry as a whole has seen dramatic undulations, the tissue market that his company serves has remained a relative bastion of stability.
"The demand for tissue paper is strong and immutable. We are confident that we can create a permanent presence in Duluth offering good-pay jobs, making a significant equity investment and becoming a stable manufacturing partner with our employees, suppliers, customers and the city of Duluth," he said.
"It would reposition the mill with a new mission," Fleege said, suggesting that converting the mill to tissue production could put the plant on a firmer financial footing.
"They don't think tissue paper is going away any time soon, unless the human anatomy greatly changes," he quipped.
Verso spokesman Shawn Hall did not respond Wednesday to the News Tribune's request for an update on ST Paper's overtures or any other ongoing negotiations to sell the company's Duluth mill.
Tak also declined any further comment beyond the statement he offered to lawmakers.
Fleege noted that ST Paper does have a track record of taking struggling paper mills and successfully converting them to tissue production. It first did so with its 2007 acquisition of a facility in Oconto Falls, Wisconsin, and then repeated the feat with its 2012 purchase of a mill near Franklin, Virginia. Both those plants remain in operation.
"They definitely bring a really strong operations background, that's what we've noticed so far. And if this all comes together, I think they'll be a good member of our business community," Fleege said.
As for the likelihood of returning the Duluth paper mill to operation, Olson said: "I will work as hard as I can to make it possible. That's why I've been really working on this legislation and getting it as far along in the process as possible and having it all teed up, because I'm willing to take this as far as we can and fight to keep these jobs in Duluth and keep the mill open."