Paper tiger 

Green Investment Group tries to fend off the feds

In late April, Ray Stillwell, president of Green Investment Group, Inc., which in 2011 acquired the former Smurfit-Stone pulp mill near Frenchtown, penned a letter to Montana Gov. Steve Bullock imploring him to reconsider his administration's support for the proposed federal Superfund designation. Stillwell said he "very strongly" prefers state oversight, citing the "uncertainty associated with lengthy processes" required by the Environmental Protection Agency, and noted his company's "proven track record of completing successful voluntary remediation of other sites."

Attached to the letter was a packet of materials intended to support Stillwell's case. One of the items was a letter from Missoula attorney Thad Huse, who wrote that he's helped GIGI lure potential new businesses to the property, and attested to a "multi-dollar transaction, which would involve economic development and benefit, that is on hold and in jeopardy, because of the potential Superfund listing of the site by the EPA."

But as state and federal officials determine how to clean up the 3,200 acres of contaminated land along the Clark Fork northwest of Missoula, which is expected to cost tens of millions of dollars, GIGI's environmental track record isn't inspiring confidence, and promises of economic development are becoming harder to believe. The company's cleanups at two of the shuttered mills it owns in the United States and Canada—neither of which were near the scale of what's required at the Frenchtown mill—are outweighed by a pattern of unmet expectations, litigiousness and doubts over the company's solvency.

The latest evidence is the Chapter 11 bankruptcy filed by one of the company's subsidiaries, SWI Energy, on May 28. The largest claim is for $1 million. In 2006, GIGI purchased a 235-acre former Smurfit-Stone mill in Alton, Ill., where GIGI is based, with plans to transform it into an ethanol plant. The company, through SWI, scrapped the mill, sold off anything of value and later nixed the ethanol plant idea. Stillwell says the decision to file for bankruptcy protection was influenced by the recession and a declining ethanol market. SWI is also in court over a contract breach alleged by South Dakota-based Integro Services Group.

•••

Questions about GIGI's financial wherewithal first arose in April 2012, when VanTek, a Washington-based supplier of used paper mill equipment, dropped its breach of contract suit against GIGI after reviewing the company's confidential financial disclosures. VanTek, which had sued because GIGI allegedly disregarded an agreement to buy the Frenchtown mill in partnership with VanTek, concluded from the disclosures that GIGI wouldn't be able to pay back any judgment. VanTek's statement to that effect was published by the Independent. GIGI subsequently filed a claim of civil contempt, which prompted VanTek to run a full-page retraction.

The Ministry of the Environment in Ontario, Canada, recently reviewed GIGI's environmental cleanups at its seven former paper mills as the company attempts to acquire an eighth property in the town of Marathon. The mill is currently owned by Tembec, a forest products company, which MOE has ordered to pay $4.8 million in financial assurance for extensive cleanup work. For GIGI to take over the site and assume environmental liability it must pay an additional $2 million, an amount MOE attorneys insisted on after reviewing GIGI's confidential financial documents, according to Lisa Brygidyr, an MOE project coordinator.

"There was a little bit of uncertainty—not a whole lot of confidence—in the financial ability of the owners," she says. GIGI has until the end of July to post the $6.8 million. Stillwell declined to comment on the transaction.

In Bathurst, New Brunswick, where GIGI owns another former Smurfit-Stone mill, the Department of Environment and Local Government sent a warning letter to GIGI subsidiary SSPM Bathurst earlier this year because the company was out of compliance with decommission and cleanup plans. Stillwell declined to comment because he says there's a pending transaction involving the Bathurst mill.

•••

The company's "proven track record of completing successful voluntary remediation" is largely based on a 26-acre portion of the roughly 300-acre former Smurfit-Stone mill in Circleville, Ohio. That cleanup was funded by $750,000 in public brownfield revitalization funds. Stillwell says 280 acres of the property has been sold to a cattle rancher, and that another transaction will be announced in a couple of weeks. But even in Circleville the local subsidiary, CircleGreen, hasn't avoided trouble. In 2009, the Ohio EPA issued several violation notices related to the mill's demolition.

click to enlarge Green Investment Group, or GIGI, purchased the former Smurfit-Stone pulp mill near Frenchtown in 2011. Now the site has been proposed for federal Superfund designation, much to the company’s dismay. - CATHRINE L. WALTERS
  • Cathrine L. Walters
  • Green Investment Group, or GIGI, purchased the former Smurfit-Stone pulp mill near Frenchtown in 2011. Now the site has been proposed for federal Superfund designation, much to the company’s dismay.

Stillwell, in an emailed response to questions about GIGI's properties, refers to several "exciting development activities," including a pending transaction at the former Smurfit-Stone mill in New Richmond, Quebec, and the imminent announcement of a recycling center at the former Smurfit-Stone mill in Portage-du-Fort, Quebec. In Portage-du-Fort, Stillwell says, GIGI's redevelopment work has created hundreds of jobs.

But nothing GIGI has done convinces Peter Nielsen of the Missoula City-County Health Department that the company has the capacity to conduct a voluntary cleanup of the toxins left behind by a half-century of papermaking in Frenchtown.

"We are very concerned about the Green Investment Group's ability to complete the cleanup at Frenchtown," he says. "It will be very expensive, requiring much more work than at any of the other mill sites they own. The federal Superfund process is the only way to bring the former mill owners back to the table to clean up the messes they left behind when it closed."

Stillwell counters by saying that a Superfund listing would impact "the timing of economic development, job creation and even environmental cleanup at that location for many years."

•••

A recent EPA investigation of the Frenchtown mill's soil and sludge ponds found concentrations of multiple dioxins and furans, among other contaminants, exceeding federal benchmarks for cancer risk. Before the mill shut down in 2010, every year it produced, on average, about 5.7 billion gallons of wastewater, much of which was discharged into the Clark Fork, with some 20,000 tons of sludge sent to the ponds in the river's floodplain. GIGI has yet to perform an environmental assessment in the two years it's owned the site.

When Smurfit-Stone sold the mill to GIGI it passed on all environmental liability. Soon after the transaction, and about a year after emerging from Chapter 11 bankruptcy protection, Smurfit-Stone was acquired by RockTenn, one of the largest paper and packaging manufacturers in North America. A Superfund designation would allow the federal government to force RockTenn and all other former mill owners or their corporate heirs to pay for the cleanup.

GIGI doesn't want that. Protecting former mill operators from environmental liability is central to its business model—although it wasn't apparent amid the fanfare of GIGI's acquisition of the Frenchtown mill two years ago, when former Gov. Brian Schweitzer stood at the mill's gates and spoke of GIGI's "proven track record."

"[GIGI] sold a bill of goods to the state of Montana, particularly the community of Missoula," says attorney Milt Datsopoulos, whose firm represents local real estate agent Tom Dauenhauer in yet another breach of contract suit against GIGI. "I think they acquired property and misrepresented what they actually intended to do, and also what they were capable of doing financially."

Datsopoulos believes the company's acquisition and scrapping of so many mills furthers another, larger goal among industry heavyweights such as RockTenn: "to reduce the papermaking capacity and create more demand than supply," he says. "Everybody that remains in business wins. The community became a victim of that approach."

As the Associated Press reported last month, "a wave of consolidation" has concentrated 75 percent of the packaging market with a few companies, allowing RockTenn to "aggressively increase prices twice in the past year, driving earnings." Last week, RockTenn's stock hit a new 52-week high, with shares up nearly 50 percent in that time.

The EPA's comment period on the Frenchtown mill's proposed Superfund designation ends July 23.

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