A power company and the owner of an idle paper mill in East Millinocket are doing battle in private conference rooms and at the State House, where a bill has been introduced to force the power company to share its profits with the mill’s owner.

Brookfield Energy Group owns three hydroelectric dams that provided power to the Great Northern Paper Co. mill before it was shut down in January. Brookfield is now generating excess power and selling it on the open market for a considerable profit, said Harold Pachios, Brookfield Energy Group’s attorney.

Great Northern Paper had an agreement to buy the power at a significant discount, Pachios said, but the agreement is moot while the mill is shut down. The paper company laid off 212 workers in February, saying that it plans to keep the mill closed for as long as four months while it develops a new business plan that would reduce operating costs.

The dispute arose when Great Northern Paper’s parent company, Portsmouth, N.H.-based private equity firm Cate Street Capital, indicated that Brookfield Energy Group should pay Great Northern the profits it makes as a result of the mill’s shutdown, Pachios said.

There are two problems with Cate Street Capital’s plan, he said: Nothing in Brookfield’s contract requires it to share profits with Great Northern, and doing so would violate state law.

A law passed in 2001 contains a provision that forbids Brookfield Energy Group from sharing profits from excess power produced and sold as the result of a mill shutdown in East Millinocket. The law was passed at the time when the power company bought the three dams from Inexcon Maine.

PROVISION HAD A PURPOSE

The provision’s purpose, Pachios said, was to ensure that the paper company had no financial incentive to shut down the mill and lay off its workers.

But a bill presented to the Legislature in late February by Rep. Stephen Stanley, a Democrat from nearby Medway, would strike the profit-sharing prohibition from the 2001 law.

The bill, L.D. 1792, would replace the original language with a provision that requires Brookfield Energy Group to pay Great Northern Paper its profits from sales of excess power.

In testimony Wednesday before the Legislature’s Energy, Utilities and Technology Committee, Pachios called the bill “a very unusual and unlawful effort by some members of the Maine Legislature to expropriate Brookfield’s money and give it to Cate Street.”

“I say ‘unusual’ because this kind of law has been enacted by some non-democratic government(s) in parts of the world, but to my knowledge not in the United States,” he said.

Pachios said there is nothing in Brookfield’s agreement with Great Northern that would justify requiring it to pay money to the paper company, and he questioned the motivation for state government to intervene in what amounts to a contract dispute between two private companies.

STATE CHIDED FOR INTERFERING

Neither Rep. Stanley nor officials from Cate Street Capital returned calls seeking comment Friday.

L.D. 1792 was scheduled for a work session Friday, but the session was tabled to give the two companies time to work out an agreement without legislative intervention.

Pachios said Friday that they could work out some sort of agreement, as long as it did not violate state law or the existing power contract.

One possibility would be to schedule certain days on which the mill would operate at lower-than-normal capacity, he said. On those days, the excess power could be sold on the open market, with the profits shared between the companies.

But it isn’t possible to implement such an agreement until the mill reopens and hires its workers back, Pachios said.

Meanwhile, the government should stay out of the companies’ business, he told the committee Wednesday.

“Can the Maine Legislature pass a law which nullifies an existing contract between two private parties?” he said. “Every member of the committee has access to the Constitution of the United States.”

Pachios noted that the First Amendment contains a provision that, “in the simplest and most direct language possible,” forbids government from passing any law that forces parties to break a private contract.

“It is a constitutional limitation on state legislation,” he said.

J. Craig Anderson can be contacted at 791-6390 or at:

canderson@pressherald.com

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