Gov. Paul LePage promoted a late-session bill this month that would have benefited Canadian forestry giant J.D. Irving by giving above-market-rate electric contracts to companies that create sawmill and biomass energy jobs.
Irving’s name doesn’t appear on L.D. 1632, which calls for establishing a manufacturing jobs program. Although other companies potentially could benefit from it, the proposed law was written on behalf of and tailored for Irving. Lawmakers refer to it simply as the Irving bill.
Critics say the bill, which expands elements of an existing program and ties new incentives to biomass plants, amounts to a multimillion-dollar subsidy for one of the state’s largest landowners. They also say it was hypocritical for a governor who rails against energy policies that increase electric rates to support a bill that would do exactly that.
LePage initially pushed for lawmakers to take up the bill before the Legislature adjourns. But the sense of urgency faded when members of the governor’s energy team – who didn’t get to scrutinize the bill until the day it was printed – realized the potential impact on electric customers. Large manufacturers were especially alarmed, saying their electric bills could potentially increase by $2 million a year. By then, there was opposition to quick action, and lawmakers on the committee that handles energy matters voted to carry it over until next year.
Although the effort is on hold, the bill’s introduction offers a glimpse of how an influential corporation tried to nudge energy policy to its advantage, by appealing to a governor who’s passionate about saving forestry jobs, especially in northern Maine.
In a response to questions from the Maine Sunday Telegram, an Irving executive declined to provide details about the project proposals or where they could be located. But he said the company believes the bill benefits the environment, using high-efficiency wood-fired power plants to reduce carbon emissions, while creating good-paying manufacturing jobs.
“We respect the process, understanding that the bill has been carried over to 2018, as the committee wanted more time to consider it,” said Anthony Hourihan, Irving’s director of land development. “We look forward to watching its progression in the next session.”
Kathleen Newman, the governor’s deputy chief of staff and the point person promoting the measure on LePage’s behalf, didn’t return a call or email seeking comment.
Chris Jackson, the lead lobbyist for Irving on the bill, referred questions to the company.
BIOMASS SUPPORT
The closings of six paper mills in three years have hit rural Maine hard. The loss of the mills has been compounded by the struggles of power plants that use low-grade wood and waste from sawmills to make electricity. These plants play a vital role in Maine’s $8.5 billion forest sector. They provide jobs to loggers and truckers, create a market for sawdust and waste wood from sawmills and generate electricity that’s sold in southern New England. But the plants are old and inefficient, reducing the value of their power.
Lawmakers threw a lifeline to four aging biomass plants last spring in the form of a $13.4 million, taxpayer-funded bailout to keep them operating for up to two years. LePage reluctantly supported it, torn between his ideological resistance to energy subsidies and his desire to protect logging and trucking jobs. Maine’s logging industry has lost nearly 600 jobs in the last decade, according to federal data.
Removed from the bill was a provision that would have benefited a proposed $100 million wood fuel project that Irving had proposed for Ashland, where it owns a sawmill.
Lawmakers also set up a special study commission to develop long-term solutions for biomass plants. The resulting ideas were included in a bill that got a public hearing in May. At the hearing, it became clear that LePage, as well as Central Maine Power Co., opposed elements of the bill that would have electric customers subsidize power generation in the name of economic development. Facing a fight and unable to see consensus on complex details, the bill’s sponsor agreed to carry it over until next year.
TIMING AND TACTICS
With biomass energy seemingly off the table for the rest of the session, the timing of Irving’s bill came as a surprise.
It’s common for LePage, who doesn’t need permission from legislative leadership, to submit proposals late in the session. But Sen. Mark Dion, D-Portland, who serves on the Energy, Utilities and Technology Committee, said his panel is reluctant to rush through complicated and controversial measures.
That raised questions, including:
Why didn’t Irving bring up its proposal when the biomass study bill was in play?
Was the company hoping to slip through a late bill, with the governor’s support?
“You would assume Irving is strategic,” said Dion, a former co-chairman of the energy committee. “So the question is, was this late arrival tactical? I can’t believe their business plan was predicated on getting approval from the Legislature this month.”
Dion said he became aware a few weeks ago that Irving was talking to LePage about building at least two modern power plants in northern Maine, one likely in Millinocket. These plants would burn waste wood and use the excess energy for other things. This design, called combined heat and power or cogeneration, captures steam from the power plant to dry lumber or wood fuel, such as pellets, boosting the plant’s efficiency. Electricity is sold on the grid.
Both Dion and Rep. Seth Berry, D-Bowdoinham, the committee’s House chairman, said they were subsequently approached by Hourihan and Jackson, the Irving lobbyist. The men outlined the need for power contracts that would be above the wholesale market price, in order to make the plants financially viable. In exchange, the plants would employ a certain number of workers.
POTENTIAL RATE IMPACT
It’s common for lobbyists and their clients to brief lawmakers on upcoming bills, but some exchanges carry more weight.
Jackson is a former Maine State Chamber of Commerce lobbyist and partner in Mitchell, Tardy, Jackson, a well-connected firm with clients that include some of Maine’s largest employers. J.D. Irving owns 1.2 million acres of timberland in Maine and has sawmills in Ashland and Dixfield. Through its family-run parent company, Saint John, New Brunswick-based Irving Corp., hundreds of Mainers work in ventures including farms, rail, oil terminals and gas stations.
But the bill makes no mention of Irving or specific power plants. Rather, it would expand an existing community renewable energy program and tie electricity output from combined heat and power plants to manufacturing jobs. Specifically, it called for projects with a generating capacity of less than 10 megawatts each, with a total of 30 megawatts. Three jobs would need to be created for each megawatt of capacity. Using that formula, a maximum of 90 jobs would be created.
The Maine Public Utilities Commission would approve long-term power contracts and register and track the jobs. But unlike the current community energy program, the amended version lifted a price cap of 10 cents per kilowatt-hour and left it up to the PUC to decide if the rate was good for ratepayers.
Big power users immediately cried foul. That provision could lead to rate increases for all Maine electric customers, according to Tony Buxton, a lawyer who represents the Industrial Energy Consumer Group.
“We figured it was a $12 million a year subsidy, minimum,” Buxton said.
Buxton’s estimates are calculated off the current 10-cent per kilowatt-hour cap. The impact for home customers would be less than $2 a year, he said. But big energy users could see a noticeable increase. Buxton estimated that it could cost manufacturers such as Bath Iron Works and the Huhtamaki paper products factory in Waterville more than $2 million each, over the life of a 20-year power contract.
RUSH TO JUDGMENT
But the potential rate impact and other details of the bill weren’t immediately apparent to lawmakers. The office of LePage, a Republican, asked Sen. Jim Dill, D-Old Town, to present the bill, said Dill, who had served on the biomass study commission. His district includes Millinocket and other communities hard hit by paper mill shutdowns. It was co-sponsored by other northern Maine lawmakers, including Sen. Troy Jackson, the Senate Democratic Leader, in what seemed to be an effort to give the bill a bipartisan face.
Key details also weren’t known to LePage’s staff, according to Jim Labreque, a part-time energy adviser to the governor. As late as June 6, the energy staff was trying to decipher the financial impact of the bill. It was printed the next day.
“That was the first time we looked at it,” Labreque said. “I looked it over and ran some numbers. I said, ‘I don’t think this is what the governor wants.’ ”
Irving made some changes to the bill, Labreque said, but they didn’t fully address concerns in the governor’s office. Labreque said the governor was clear that he wouldn’t support above-market-rate contracts. But Labreque also said he understood how much LePage wants to create manufacturing jobs in rural Maine.
“The governor really wants to help those people in Millinocket,” Labreque said. “You want to help everybody, but you don’t want to hurt anybody.”
By then, action on the bill was coming to a climax. The energy committee scheduled a public hearing for June 9, with little notice. The Natural Resources Council of Maine tried to rally media interest with a same-day press advisory. It was headlined: “A study of hypocrisy: Governor LePage supports long-term contracts for biomass after attacking the use of identical policies to support solar and wind power.”
But the event attracted scant attention, in part because the hearing was over in a few minutes. Most members of the committee had agreed it was too complicated to take up at such a late date. Even Dill, who was presenting the bill on LePage’s behalf, didn’t show up.
In the wake of the postponement, Berry said his committee will drill down next year on the issue of linking jobs to energy projects, and whether this proposal sets out a truly competitive process or is skewed to one company.
“We’re looking forward to a public hearing next January to understand this better,” he said.
Tux Turkel can be contacted at 791-6462 or at:
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