OAKLAND — The U.S. Environmental Protection Agency has terminated a grant for cleaning up the site of the former Cascade Woolen Mill and has told the town it owes the agency about $1,600.

The EPA determined in July that Oakland was never eligible to receive a $200,000 brownfields grant that it awarded the town in 2008 to clean up the property.

The town already has spent about $117,000 of the grant to remove contaminants from former mill site. The mill building was leveled by a fire in January, and the town had hoped to use the rest of the money to clean up the charred remains.

Now, property owner Michael Dye is waiting to hear whether the EPA or other federal agencies will contribute other funds to help pay for the cleanup.

Dye was operating a wood-products company out of the former mill building, and the town has been holding Dye’s mortgage. After the fire, the grant came under scrutiny by the EPA, which determined that the town was never eligible to receive the money because it didn’t technically own the property.

A stipulation of the grant was that the town would cover 20 percent – a contribution that could be made in the form of in-kind donations. Town Manager Peter Nielsen said the public works department did about $20,000 worth of in-kind cleanup work. The EPA notified Nielsen this month that Oakland still owes the agency $1,640.

Dye still owed the town about $77,000 in mortgage payments. His insurance company has covered that cost, and the town is holding that money in an escrow account.

Nielsen said he will make a recommendation to the Town Council on Sept. 8 to discharge the mortgage and use the money in escrow to pay its outstanding balance with the EPA.

Dye said Monday he still plans to reconstruct the building but probably won’t restart the same business.

The Cascade Woolen Mill shut down in 1997. At its peak in the 1980s and ’90s, it employed 250 people. The structure that burned was 127 years old.