Blue Heron Permanently Closing Oregon Paper Mill

Blue Heron Paper Co. has announced that it is permanently closing its Oregon City, Ore., newsprint and specialty paper mill. The company has struggled with its business model over the past several years. The company filed for Chapter 11 bankruptcy protection Dec. 31, 2009. Blue Heron had been operating under Chapter 11 protection for the past 14 months.

After filing Chapter 11, the company took a number of steps to improve its business model, including reducing its newsprint production by 3,000 tons per month and introducing a new product line -- recycled-content tissue and towel products.

In a release announcing the closing, Mike Siebers, Blue Heron’s president, says, "The initial plan was successful in restoring profitability, and the company received meaningful support from its suppliers and other creditors. But lately those profits began to erode due to escalating waste paper prices and limited availability of that raw material. "All the paper products we manufacture use a high percentage of recycled fiber in them.”

"Mills like Blue Heron are where the actual recycling of the collected waste paper you set out at the curb takes place. But China and other Far East countries have developed an insatiable appetite for recycled fiber to support their own paper plants, which are then subsidized by their parent countries in other ways to maintain their jobs. This allows them to drive up the price for waste paper to unsustainable high levels for periods of time, giving them an unfair advantage over companies like ours," Siebers adds.

During its Chapter 11 protection, the company sought an investment partner or buyer to provide additional capital to allow the company to continue operating. However, the company was unable to identify an investor willing to proceed at an appropriate value.

"Unfortunately, things have come to a quick head due to an unforeseeable and dramatic increase in waste paper cost in February," Siebers adds. "In this month alone, our delivered cost for recycled paper has increased by $24 per ton, adding around $240,000 to our monthly cost of production and basically wiping out any potential for profit in the near-term future. Our waste paper suppliers have told us to either meet the market price or they will not deliver.

“This has left the company with no other choice other than to curtail operations and announce the closure. The Oregon City mill is expected to only operate for a few more days as it runs out its supplies. Beyond that," Siebers notes, "it is unclear if the operation will ever be re-started."