Owners of the paper-recycling mill in Snowflake plan to close the facility in Sept. 30, putting 300 people out of work, but Phoenix investors could purchase it to keep the mill and the neighboring biomass power plant running.

The mill's closing would leave its 308 salaried and hourly employees without work in Navajo County in northeastern Arizona, which had a reported 14.5 percent unemployment rate for June.

"We anticipate that at least half of those employees live in the Snowflake-Taylor area," Snowflake town manager Paul Watson said. "It's devastating the fact that we all of a sudden within two months are going to have that many employees out of work."

Canadian company Catalyst Paper Corp. said it will shutter the Snowflake mill because of lagging profit.

However, Phoenix-based private-investment outfit Najafi Cos. is in discussion with the paper company to purchase the mill and maintain operations.

Najafi Cos. owns the biomass power plant next door, Snowflake Power, and CEO Jahm Najafi said the plant has a symbiotic relationship with Catalyst Paper.

The power plant gets part of its fuel for free from the recycling mill, because the mill cannot reuse all of its recycled material. It instead becomes "paper sludge" that is sent to the biomass plant to burn along with scrap wood from the forest to make electricity.

Snowflake Power, which employs 100 workers and subcontractors in the area, no longer would have that opportunity if the mill closed. Najafi Cos. discussed the possibility of buying the mill Tuesday.

Snowflake Power provides electricity to Arizona Public Service Co. and Salt River Project.

"I'm not sure if anybody realized that they were going to close," Najafi said. "We hope that we can come to a resolution on both plants in the not-too-distant future."

Despite the discussions, Watson said Snowflake town officials already are making it their first priority to support the people affected by the closure. Snowflake has a population of 5,587 people, according to the U.S. Census Bureau.

"We're actively in the process of working with the state and regional economic development groups," he said. "The state is trying to address those concerns from the standpoint of unemployment benefits, trying to find replacement work."

The Catalyst Paper-owned recycling mill is one of the largest employers in the region. Although the town knew the mill was struggling, Watson said the announcement of the closure was not anticipated and will hurt an already distressed economy.

"Until this announcement, we thought this particular operation would just have to make some adjustments and changes," Watson said.

APS officials said Tuesday they had just learned of the paper mill's plans to close and did not know if it would affect their contract to purchase power from the biomass plant, which runs through 2023.

APS is required to get 15 percent of its electricity from renewable sources by 2025, and the electricity it gets from the biomass plant helps it reach that state-mandated goal.

"It's still to early, we're not sure what we would do (if it closes,)" APS spokeswoman Jenna Shaver said.

Catalyst Paper acquired the Snowflake operation in 2008. The mill only recycled newsprint, but the paper company began producing higher-value specialty paper grades to cope with market challenges and input cost pressures, it said.

Catalyst Paper tried capital investment, service improvements and competitive labor agreements to improve the mills' profits. Despite the attempts, Catalyst said the mill could not restore its profitability with newsprint demand down more than 10 percent annually since the end of 2008, higher freight costs and difficulty securing product orders.

The mill purchased old newsprint to recycle, but costs for newsprint have dramatically increased over the past four years. The paper company also attempted to sell the mill.

The announcement comes after the company sought bankruptcy protection under Chapter 15 of the U.S. bankruptcy code in January. Chapter 15 allows proceedings for a foreign debtor to access U.S. Bankruptcy Courts.

Company executives met with employees and union representatives at the Snowflake mill and Apache Railway Company Monday, according to a news release. Catalyst Paper said it will work closely with suppliers and regulators as the site ends operations and is prepared for sale.

The company also met with the Snowflake mill's customers, including retailers, publishers and commercial printers, to discuss transition plans. The company said the closure will not affect its three other paper mills in Canada.

Some in the town worry the announcement could prevent retailers and larger companies from coming to the area, but Watson believes there is a number of "economic engines" that could lure businesses to the area.

"This community is very resilient. They've gone through their highs and lows, and while this is devastating on the surface, I think you'll again see that resiliency to pick up the pieces and make things work the best they can."

There are currently reports being floated about at railfan news/rumor sites that the Apache Railway, instead of being shut down Sept. 30th, will operate at a reduced capacity, with employment reduced from 20 to 9 and the line used only for its other customer (a hog farm), possible freight transloading, and freight car storage.

If true, this "buys time" for potential L&N, Monon, CP, and/or N&W Alco preservationists.

Earlier reports of reduced-but-not-abandoned operations confirmed for the time being:

http://www.azjournal.com/2012/09/19/apa ... -chugs-on/