North Carolina legislators are close to giving a Canadian paper company up to $10 million to help it finance a production switch and retain hundreds of jobs in one of the state's poorest regions.
Yesterday, a House budget-writing committee approved the N.C. Commerce Department's use of money to give Domtar Corp. of Montreal up to $2 million a year for five years.
The Senate approved the spending on Wednesday, the same day that legislators approved a budget that included a $1 billion tax increase and service cuts worth billions more.
Domtar plans to stop making white office paper at its mill near Plymouth, but it sees a market opportunity to turn loblolly pine trees into the absorbent fluff used in diapers, state officials said.
The company is shopping states where it operates for money that it needs to pay for new machinery and production equipment because it is having a hard time finding its own capital for the conversion, said Dale Carroll, the deputy secretary of the state commerce department.
"There are also other states to make a project like this a priority," Carroll said.
At stake are more than 300 jobs paying a "rather remarkable" average salary of $72,000 a year plus generous benefits, Carroll said, about three times more than the average in a rural area where unemployment is in double digits. A pulp-paper mill has been operating at the site since the late 1930s.
"The company, without this conversion, will simply close down (the plant). The 300 employees will be out of work," said Rep. Tim Spear, D-Washington, who represents the district and has been in discussions with the company for months.
Domtar had employed more than 500 at the site last year but shut down a paper-production line in February, laying off about 185 workers.
The head of the United Steelworkers Union local was not aware of the company's plans.
The company must commit to maintaining more than 300 jobs at the plant and spending $65 million on the conversion. The state would be able to recoup money if employment levels drop.
The Senate approved the provision hours after the proposal surfaced. The House was expected to act before adjourning for the year next week.
More than 1,000 addition logging jobs in Eastern North Carolina are at stake if the Domtar plant shuts down, legislators said. "If the plant closes down, then all of the loggers, the forestry people, they have nowhere to transport their products to," Spear said. "There is no other mill for them to go to, to haul this product."
Carroll said while the state is committing to spending $10 million on Domtar's conversion project, the company could get up to $9 million shared by the state, local governments in Martin and Washington counties, and from the Golden LEAF fund, which uses part of North Carolina's share of payments from a cigarette-industry lawsuit to encourage economic growth in rural areas.
A spokesman for Domtar, Pascal Bosse, confirmed the company's interest in state money for the conversion.
"We are far from making a decision," Bosse said. "This is part of an exercise of looking at alternatives for our facilities."
The money would come from a state fund designed to stave off major job losses. Last year, state officials tapped the fund to give the Goodyear Tire & Rubber Co. plant in Fayetteville and Bridgestone Firestone North American Tire LLC plant in Wilson $30 million each over the next 10 years.
On Tuesday, Domtar reported a $48 million second-quarter profit as paper demand increased for the first time since early last year.
In other business, North Carolina legislators have extended and expanded a state income-tax credit for small-scale renewable energy units.
The House took final legislative action yesterday, voting 83-29 to extend the tax credit by five years to 2016.
The credit can now be taken on geothermal energy units as well as solar and wind.
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