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September 15, 2016

Ashland pellet mill to boost employment after landing UMFK contract

Ashland-based Northeast Pellets has been awarded a contract to provide pellets to the University of Maine at Fort Kent, an agreement seen as having a potential $5.25 million impact on the local economy, according to President and CEO Matthew Bell.

Northeast Pellets was awarded the contract, which went into effect July 1 through a competitive bid process. The one-year initial contract could potentially be renewed twice.

Northeast Pellets will see its sales increase by about $750,000 over the potential three-year life of the contract. Based on economic impact multipliers developed by the state that projects a seven-fold increase in economic activity tied to manufacturing, the impact to the region could be $5.25 million, including hundreds of thousands of dollars in additional residual revenue for mills along the Route 11 corridor.

"We will potentially see more than $750,000 in direct sales over a three-year period of manufacturing and delivering pellets to UMFK, which translates to more than 1,300 tons of pellets annually," Bell said in a written statement announcing the contract. "The state uses an impact multiplier of seven for manufacturing. Thus, the $750,000 Northeast Pellets receives will result in the spinoff of other goods, services and jobs — anything from more loggers and truckers, to gas stations and grocery store workers, to the goods they sell."

"This means $200,000 in additional revenue for the mills along the Route 11 corridor, Bell said Northeast Pellets will be purchasing residual wood that would otherwise go to biomass, which Bell estimated would provide $200,000 in additional revenue for mills along the Route 11 corridor. Corinth Pellets has agreed to serve as backup, according to Bell, and a Houlton business will provide delivery service.

The request for proposals issued in June by the University of Maine System for the UMFK pellet contract in June 2016 includes among its scoring criteria a provision for economic impact within Maine. "Maine's pellet industry is still relatively new," said Bell. "We appreciate the willingness of our elected representatives and university leaders to consider industry concerns and respond to opportunities to boost Maine-based manufacturing."

Bell said the contract will allow the mill, which in December 2015 cut its production in half due to UMFK switching to a Canadian supplier coupled with decreased demand from warmer weather and cheaper oil, to ramp up its employment and production starting this fall.

"We currently employ one, but will need 15 to meet production needs," he said. "We're currently operating five days a week, with 12-hour days. We'll be ramping up as we get into the fall, going back to 24-hour-a-day production, four days a week."

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