Even as it awaits the final approval of several pieces of funding, ST Paper LLC announced Friday it will purchase Verso Corp.'s idled Duluth mill and convert it to produce tissue, instead of the supercalendered paper the plant has manufactured in the past.
Sharad Tak, founder and principal partner of ST Paper issued a statement that said: "Working together with the Duluth community, we can reopen the mill and create family-supporting jobs." The converted plant is expected to employ at least 80 people on a full-time basis.
The mill employed more than 220 people before its closure last summer. Verso cited weakened demand for supercalendered paper — a type of stock often used for advertising circulars — in its decision to halt production both in Duluth and at another mill in Wisconsin Rapids.
"While the negotiations have been long and intense, all parties have focused on reopening the mill," Tak said. "Our tissue-manufacturing business has been expanding for the last 15 years, continuing on that path, we hope to refurbish the existing machines in Duluth in two years' time, in addition to installing a new tissue machine now and double the production capacity, resulting in a significant increase in local jobs."
Bill Broydrick, a spokesman for ST Paper, said it will likely take about 18 months to ship and install the equipment needed for the conversion of the Duluth mill. But he said work on the plant is expected to begin very soon.
However, he stressed the importance of financial support the company expects to receive to make the $54 million project come to pass.
Pending approval of state budget bills in St. Paul, ST Paper appears poised to receive a $3 million forgivable loan, contingent upon the company's continued employment of at least 80 full-time workers for no less than five years.
While District 7A Rep. Liz Olson, DFL-Duluth, noted that the Legislature has not yet wrapped up its work, she served on the conference committee for the Jobs Bill, and it includes funding for a forgivable loan to support the mill conversion.
As long as the Legislature completes its work, Olson said: "I don't want to be overly confident. But I feel like we're in a really great position right now."
ST also is in line to receive $1.5 million from the state's Job Creation Fund.
On top of the state aid, the city of Duluth has agreed to abate $600,000 in property taxes over the next 10 years, with St. Louis County expected to follow suit with equal support later this month.
The Duluth City Council also approved a $242,000 loan to ST Paper that could be forgiven if the company creates and maintains at least 80 full-time jobs at its Duluth mill.
“We are pleased about the purchase of the mill,” said Director of Planning and Economic Development Chris Fleege in a statement. “Our staff has worked diligently with Verso and interested partners to keep as many jobs in Duluth as possible. The City is very supportive of ST Paper and committed to the conversion of the Mill. We will continue to work with ST Paper to secure remaining incentives that will bring the new vision of the plant to fruition.”
ST Paper has already successfully converted mills to produce tissue paper in two other locations, both in Oconto Falls, Wisconsin, and Franklin, Virginia. Tak said the company could have invested in additional equipment at one of those facilities but is instead directing those resources toward Duluth.
He said the purchase and conversion of the Duluth mill would not be possible without the local and state incentives being provided.
"We wish to express our gratitude to the local legislators who on a bipartisan basis introduced the $3 million forgivable loan bill. We also salute the mayor, City Council and city staff who have backed our project," he said in a written statement.
For her part, Olson said: "It's good news to hear that the mill is hopefully going to be up and running. I mean, that's the best possible outcome. It's not all of the jobs that we had, but it's a great number of jobs. And, as we've talked about before, they're good-paying jobs. They're in the district, and it has broader ripples into our energy and our wastewater and our timber industry. So, I think this is very good news, and I'm hopeful it can move forward."
This story originally contained an incorrect tax abatement figure. It was updated at 11:18 a.m. May 17 with the proper amount. The News Tribune regrets the error.