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Efforts to save Ponderay Newsprint plant lead to lawsuit settlement

UPDATED: Mon., Feb. 12, 2018, 7:10 p.m.

Box Canyon Dam in northern Pend Oreille County near Ione generates electricity for Pend Oreille Public Utility District customers. (JANET BOEHME)
Box Canyon Dam in northern Pend Oreille County near Ione generates electricity for Pend Oreille Public Utility District customers. (JANET BOEHME)

With the goal of keeping its largest customer afloat, the Pend Oreille Public Utility District has settled a 2-year-old lawsuit with Ponderay Newsprint Co.

The rural utility will pay the newsprint plant north of Spokane in the community of Usk $557,000 under the terms of the settlement and give the plant a $50,000 monthly break on its electric bill as long as it continues to operate.

In return, Ponderay Newsprint will pay $150,000 toward finding new buyers for the electricity generated by the utility’s Box Canyon Dam on the Pend Oreille River.

The settlement, announced last week, ends a dispute that was scheduled to go to trial in June. However, questions linger about the long-term viability of Ponderay Newsprint, which buys about 70 percent of the utility’s electric load.

“The Pend Oreille PUD is really sending the message that it’s important to keep the jobs and the industry in our community,” said Colin Willenbrock, the utility’s general manager. “They are a longtime community partner.”

About 139 people work at the newsprint operation, which is jointly owned by Resolute Forest Products of Quebec and several large publishing companies, including McClatchy, Media News and Gannett.

Rural Pend Oreille County has chronically high unemployment. In December, the county’s 7.9 percent unemployment rate was among the highest in Washington.

The parties ended up in court after Ponderay Newsprint officials alerted the utility that declining demand for newsprint made the plant’s future uncertain. They said the plant could start losing money by the end of 2016.

In January 2016, the utility sued Ponderay Newsprint for breach of a power-purchase contract that runs through June 2027. Plant officials have since given the utility new projections for power purchases, indicating Ponderay Newsprint will continue to operate at least through 2022.

But “we don’t have clarity or certainty on that,” said Willenbrock. And “that’s a lot of power” if the utility had to scramble for a new buyer.

Myron Johnson, Ponderay Newsprint’s general manager, said the plant is operating at full capacity and has been for the past year. “We are not in a position to speculate about the future,” Johnson said in an email Monday.

Willenbrock said he issued a “a call to action” to the utility’s 8,800 ratepayers and the community’s elected leaders at a public meeting announcing the settlement last week. The utility needs to “decouple some of the risk” of relying on one large customer to buy the majority of Box Canyon Dam’s power, he said.

“We need to come together as a community to really start talking about regional economic development,” Willenbrock said. “It can’t be limited to tourism and recreation.”

But Pend Oreille County’s recent efforts to recruit heavy industry have generated widespread opposition.

Several hundred people turned out for a meeting at Newport High School in November to protest a Canadian company’s efforts to build a $325 million silicon smelter south of town. Local residents said they were worried about the smelter’s smog- and acid-rain causing emissions, and how it would affect their health, property values and the community’s rural character.

The Kalispel Tribe sent a letter to Gov. Jay Inslee opposing the smelter and asked the governor to work with the tribe and Pend Oreille County to identify “a more suitable business” to help revitalize the local economy.

Officials from HiTest Silicon, the Alberta company proposing the smelter, have said the smelter must comply with federal and state environmental rules to get operating permits. They’ve projected an opening date in late 2019.

If the smelter is built, it would be a large utility customer, using about twice as much electricity as Ponderay Newsprint’s operation. About 150 people would work there.

The Pend Oreille Public Utility District sold HiTest 186 acres for $300,000 last fall for the proposed smelter. The acreage was surplus land where the utility once planned to build a gas-fired plant. The land is in a rural residential area south of Newport.

HiTest has agreed to pay $1 million to the utility for a study of how its demand for electricity would impact the electrical grid. However, utility officials aren’t considering the HiTest project as a direct replacement for Ponderay Newsprint, Willenbrock said.

“We’re working on the assumption that the newsprint plant would continue operations,” he said.