PORTLAND —  A pair of shuttered paper mills in Millinocket and East Millinocket could be spared from being dismantled if the state chooses to buy them for a dollar under terms of a deal that a San Francisco-based suitor walked away from late last week, the mills’ owner said today.

Such drastic action by the state may be the only way left to save the Katahdin Paper Co. mills because Meriturn, which backed out of negotiations, was the only potential buyer to step forward over the past two years, said Dan Whyte, vice president at Brookfield Assets Management.

Additional Photos

This March 8, 2011, photo shows the idle paper mill in Millinocket. The other idled mill is in East Millinocket. AP

“We’re planning our next step, cognizant that the state could still step in and buy these assets under the terms of the former agreement,” Whyte said.

Dan Demeritt, spokesman for Gov. Paul LePage, said Brookfield’s chairman agreed to delay a final decision until stakeholders meet. In the meantime, the state is scrambling to find another buyer.

“The chairman has given the governor a commitment that he would not make a final decision until everyone is in the room to talk about it. We’re working off that commitment, looking at the different options. And we’re actively seeking another buyer,” Demeritt said from Augusta.

News that the Katahdin Paper Co. mills could be dismantled was first disclosed by the Bangor Daily News, sparking outrage from community leaders who hope that the mills will be reopened.

Sen. Olympia Snowe weighed in today, saying she’d spoken to a Brookfield official to urge the company not to scrap the mills.

“Economic options are limited once critical infrastructure is sold, and whole communities of hardworking families are adversely affected,” Snowe said. She said the state has a history of fighting to find solutions to difficult problems, “and I know we will continue that tradition on behalf of the people of the Katahdin region.”

Whyte said it is premature to say that scrapping the mills is inevitable, but he said it’s increasingly unlikely that someone will step forward to buy the mills. For its part, Brookfield wants a final resolution because it’s losing $1 million a month on the paper mills.

Meriturn negotiated concessions from labor unions and was attempting to negotiate lower property taxes. It also wanted relief from liabilities associated with an old dump, as well as a commitment to build a biomass boiler to address the high costs of the Millinocket mill’s oil-fired boilers.

Rail service described as unreliable and expensive by Whyte, along with the inefficient oil-fired boilers, are two of the biggest obstacles to profitability, Whyte said.

The mills have been at the heart of the economy of the Millinocket region for 100 years.

Before ending negotiations, Meriturn had planned to restart the East Millinocket mill on Tuesday, providing employment to 450 paper workers. It also planned to reopen the Millinocket mill, which shut down in 2008.

While workers may feel betrayed, Whyte said Brookfield kept the East Millinocket mill in operation even though it was losing money to make it attractive to a buyer.

“We take comfort in the fact that we’ve done everything we could to try to find someone to operate these facilities. We’ve been at this for more than two years now,” he said.

Related Stories