ESCANABA — After being promised millions in state funds and tax abatements to fund the conversion of the Escanaba paper mill to produce cartonboard, Billerud, the Swedish company that owns the mill, scrapped the project last week — leaving many to wonder what will happen to that money.

“It’s very reasonable to assume that this grant or the discussions that we’ve had in Michigan state is off the table. We are very thankful for all of the support and the, let’s call it, very, very good discussions that we’ve had with all of the Michigan state over the years, but I think that the base assumption is that this is off the table with our new plan,” said Ivar Vante, president and CEO of Billerud, during a conference call with media and financial analysts held May 21.

One of the largest sources of American funding for the project was $200 million approved by Governor Gretchen Whitmer and the state legislature for the project in the 2023 state budget. The funds were part of the Michigan Economic Development Corporation (MEDC) appropriations for the year, and a grant agreement between MEDC and Billerud guaranteeing the funds was signed during a special project kick-off event in July of last year.

However, according to MEDC, the funds had not yet been distributed when Billerud announced the project was terminated.

“We are disappointed the conversion of the Escanaba Mill is no longer feasible. The MEDC is working through a mutual termination of the company’s agreement with the state. None of the $200 million appropriation has been disbursed to the company, and so there has been no loss to state funds, or clawbacks required,” said Otie McKinley, media and communications manager for MEDC.

It’s unclear what will happen with the $200 million going forward or if the money will be used for other projects in the Upper Peninsula.

“We remain committed to identifying opportunities to bring investment and jobs to the U.P. with the support and willingness of the Legislature and our economic development partners,” said McKinley.

Other state and local support from the project came from tax abatements, which were approved using a few different legal methods.

In late 2022, Gov. Gretchen Whitmer and the Michigan Economic Development Corporation (MEDC) announced that the Billerud paper mill had been approved to be designated a “Forest Products Processing Renaissance Zone.” Billerud’s approval for the FPPRZ, which was to be valid for a period of 15 years, was expected to result in approximately $1.96 million worth of abated property taxes annually to support the expansion project. Over the course of the FPPRZ period, that would have resulted in a savings for the mill of $29.4 million.

Delta County advocated for the designation by offering a letter of support for the FPPRZ. That letter was approved unanimously at the Dec. 20, 2022, county board meeting, following a public comments from individuals representing a wide swath of the community, including the mill’s union, the city of Escanaba, the Delta-Schoolcraft Intermediate School District, banks, relators and the Delta County Economic Development Alliance.

“The State Administrative Board was the ones that approved the designation, so they are the ones that have to revoke the designation,” said Delta County Administrator Ashleigh Young.

According to Young, the Michigan Strategic Fund Board will meet on June 25. At that meeting, the board will vote to send a request that the FPPRZ designation be revoked to the State Administrative Board, which has general supervisory control over the administrative activities of all Michigan state departments and agencies. Assuming the Strategic Board passes the motion, the State Administrative Board will take up the issue at its meeting on July 16, where it is expected the designation and any related abatements will be officially revoked.

Further tax abatements made by Delta County townships are in the same boat.

Both Wells Township and Escanaba Township approved abatements to support the mill’s conversion through the Plant Rehabilitation and Industrial Development Districts Act (Public Act 198 of 1974) for the project, which were expected to result in $657,000 over 12 years, based on a 50% property tax abatement. The vast majority of that abatement was for property taxes that would have been levied in Wells Township, as only a small portion of the mill property is located in Escanaba Township.

According to Young, the plant rehabilitation and industrial development district must also be revoked by the State Administrative Board, following the same process as the FPPRZ revocation. Until that happens, there’s not much the townships can do themselves beyond reaching out to the state boards to advocate on their own behalf.

“No formal action needs to be done,” said Young.