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St. Marys Paper moves ahead with $175-million biomass co-gen plant

St. Marys Paper Corp. has signed a 10-year, 30-megawatt power-purchase agreement with the Ontario Power Authority for the electricity produced by a biomass-fueled co-generation plant to be built adjacent to the St. Marys Paper mill in Sault…

St. Marys Paper Corp. has signed a 10-year, 30-megawatt power-purchase agreement with the Ontario Power Authority for the electricity produced by a biomass-fueled co-generation plant to be built adjacent to the St. Marys Paper mill in Sault Ste. Marie. The plant will be operated by St. Marys Renewable Energy Corporation.

The co-generation plant will replace St. Marys’ aging boilers and allow wood waste, in this case, forest industry residuals, to be used as fuel in the new a bubbling fluidized bed boiler.

The construction phase is expected to begin in 2011 and generate 400 jobs. About 30 people will work at the co-gen plant once it is operational, and another 125 will be employed providing biomass fuel and logistics.

St. Marys has negotiated a commitment of up to 400,000 tonnes of biomass annually from the Algoma and Northshore Crown Forests for the life of the project. “We plan to finalize the funding and begin construction in 2011. The co generation plant capital budget is $135 million plus additional capital for integration and soft costs of an additional $40 million. We expect to be producing electricity by early 2014,” said St. Marys Paper Corp. chairman and CEO Dennis Bunnell.

“The provincial government’s support for a power purchase agreement is extremely important to the long-term viability of St. Mary’s Paper as it allows the mill to build a biomass co-generation plant that will provide a self-sustaining supply of energy that helps protect local jobs,” Bunnell commented.

Local MPP David Orazietti notes that the power purchase is in addition to a recent funding announcement for an $8.8 million re-payable loan from the province’s Ministry of Northern Development, Mines and Forestry (MNDMF), which will enable St. Mary’s Paper to re-open and resume printing production in December, 2010. In 2007, the Ontario government provided St. Mary’s with a loan of more than $17 million for working capital to restructure and re-open, which brings total provincial support for the paper mill to $25.8 million.

Announcing the power purchase agreement on Nov. 9, Orazietti said that the goal was to balance support for the mill and jobs, with a rate that would be acceptable to the government and the taxpayer, according to a report in the online edition of Sault Ste. Marie This Week. He described the process as new in the province, and the lengthy negotiations between the company and OPA leading up to the agreement had focused around revisions to the size and the cost of the project, the engineering, and the rate that would be paid for any surplus power generated.

Sault This Week reports that Orazietti would not specify at this time what rate per kilowatt-hour was negotiated in the contract with St. Marys, other than to say it was lower than the 42 cents per kw/hour agreed to for large scale solar projects in the province.

A press release from the Ontario Power Authority explains that heat from the co-gen plant will be used in the mill’s industrial processes, and surplus electricity not used by the mill will be sold to the provincial electricity grid.

St. Marys’ groundwood pulp supercalendered paper mill has a capacity of 220,000 tonnes per year. The mill has been closed since March.