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EAST MILLINOCKET, Maine (NEWS CENTER) -- $25 million dollars: that is the amount of money Maine taxpayers are being asked to guarantee in a bond for a project that many are hoping will breathe life back into the struggling Katahdin Region. Cate Street Capital is the developer behind the Thermogen Project, a mill that would produce a black pellet that could be used as a coal substitute. The Project promises to create up to 55 direct jobs and 250 indirect jobs.

But there's a problem that is holding up that bond: Other Companies that Cate Street manages in Millinocket and East Millinocket owe millions of dollars in unpaid property taxes and millions more in liens to the federal government and other businesses.

GNP East and GNP West, The companies that own the Great Northern Paper Mill in East Millinocket and the former mill property in Millinocket owe $2.3 Million dollars in unpaid taxes to Millinocket, more than $650 thousand dollars to East Millinocket, and there are nearly $2.5 million in liens filed by the IRS. An attorney for Brookfield Assett Managment says the mill also owes the Hydro Power company $2.5 Million in unpaid electric bills. There are also hundreds of thousands more in liens filed at the Penobscot County Registry of Deeds by companies that did business with the paper mill.

Cate Street Capital, which manages those struggling companies, is investing in a new company Thermogen--which would be located at the Millinocket mill property. Before the Finance Authority of Maine issues the $25 million dollar bond for the Thermogen Project, the unpaid tax issues must be resolved.

"That bond does not close that money does not switch hands unless all these tax issues are satisfied," explained George Gervais, the Commissioner of the Department of Economic and Community Development, and also a FAME board member.

Cate Street Capital appears to hear that message.

"Those tax payments are Great Northern Papers obligations and will be met in order for Thermogen to reach a financial close and proceed," explained Alexandra Ritchie, the Director of Government Relations for Cate Street Capital. She concedes the paper mill is struggling, but says people need to view the Thermogen project separately.

When asked if Cate Street could guarantee taxpayers that Thermogen would not run into the same financial pitfalls, she explained that the projects are entirely different business models. She also said that they knew running the mill would be challenging.

"Great Northern Paper was restarted in 2011 with the intention of preserving the workforce of preserving the woods, because both of those are components that thermogen industries, once its operational will require."

Ritchie says Cate Street has spent three years and invested $11 million in this project to date, but there have been bumps along the road. Including a switch to a completely different technology, from making wood pellets using microwave technology, to a process using steam.

"It is a radical change for them but it is an improvement in technology," explained Dr. Robert Rice, a UMaine wood science professor and consultant to FAME on this project. Dr. Rice says that Thermogen will need about three times as much biomass to make pellets using steam,-and that has to be taken into account..

"We would have to make very certain that fiber was available to make the product in the quantities Cate Street has anounced," Rice said. He added that FAME must also have assurances the markets exist for the product.

Those are all questions the board of the Finance Authority of Maine must answer as they decide whether to reaffirm their commitment to a bond backed by all the taxpayers of Maine to help bring jobs to communities desperately need them.

"To have Millinocket and East Millinocket with facilities that employ people, that's the ultimate goal here, that's what gets vendors paid in the end," Commissioner Gervais said.

FAME's board approved issuing the bond by a 8 to 5 vote in October but never did issue it. With Thermogen's changes in technology and the new IRS tax issues with the Great Northern Paper companies, FAME, is scheduled to revisit the Thermogen Loan at Thursday's meeting at its office in Augusta.

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