Fear and conjecture abounded in 1985 concerning the departure of Wisconsin’s largest public corporation headquarters from the state. Beginning in early 1983 Kimberly-Clark chairman Darwin Smith publicly voiced his grievances with the state’s regulatory processes, both environmental and operational, and expounded on just how bad for business they were. Following up two years worth of threats with action, Smith gathered the paper giant’s base of operations and relocated it to Dallas, Texas. Corporate Report Wisconsin’s premier issue covered the aftermath in an effort to sort out the differing viewpoints circulating within the debate over the business climate of the state sparked by K-C’s exodus, and what their move would mean for the local paper industry.

For those with a serious interest in the survival of the state’s paper business, the overriding apprehension was that the relocation was symptomatic of the state government’s failure to adequately accommodate the industry, and quite telling of how willing other states were to welcome Wisconsin’s recently departed. The initial public prognosis following K-C’s exit was less than positive, with the Milwaukee Sentinel going so far as to label their emigration “a black day in the history of Wisconsin.” Leaders of Wisconsin’s other mills echoed this pessimistic outlook, their sentiment perhaps best captured in a projection about the industry’s future by Fred Herbolzheimer Jr., the then president of Thilmany Pulp & Paper Co. of Kaukauna: “I do not think you’ll see great growth here [in Wisconsin].”

So, after 25 years, have these concerns proven to be warranted?  Has Wisconsin paper shriveled under overly stringent regulation and governmental red tape?  The answer to these questions, according to Wisconsin Paper Council President Jeff Langdin, is both yes and no.

“The ‘yes’ part is that the cost side of the environmental regulation and the red tape has not really abated; it has probably grown,” Langdin says. “However, we did see the industry grow for a period of time from the ‘80s through the ‘90s. Jobs were created, and we saw the peak in the paper and pulp industry in this state right around 2000…a generally accepted statistic is 53,000 jobs created.”

The longevity of this vast number of jobs was not to last long into the new millennium, however.  According to Langdin, the number of jobs associated with paper and pulp mills in the state has fallen over the last decade to somewhere near 32,000. Despite this decrease Wisconsin remains the nation’s No. 1 state in terms of variety of paper products produced and total paper product output, the same ranking it held in 1985. In his final analysis of the growth issue Langdin concludes that the industry has indeed expanded, but not at as quick of a rate — or as much —  as it has in other regions of the country.  His reasoning is that there exists “a more competitive environment” in those states, due to their “lower cost to do business…less expensive labor, and being more business-friendly as far as regulatory practices go.

Presently, the debate over business climate and state regulation has taken a back seat in terms of priority in the paper business to a different issue, one that is likely going to ultimately decide its fate here in Wisconsin: Carbon emissions. Mills require a tremendous amount of energy to operate, energy that is most cost-effectively generated by burning coal. The paper companies utilize enough of the resource every year to place them second only to the utilities industry in carbon emitted.

And this is, of course, a bad time to be in a position of reliance upon carbon resources, as the current administration is pursuing cap-and-trade legislation to ratchet down acceptable emissions levels during the next 50 years. New cap-and-trade regulations within the state will not work to any sort of advantage for paper; as one of the leading producers of carbon emissions paper mills will be forced to pay out if they wish to keep their plants producing at their current capacity. According to Langdin, if technology is not developed to reduce the industry’s collective carbon output, there could come a time when mills are forced to lower their production levels because they will simply be unable to shell out enough money to cover the ever-rising cost of emitting carbon.

Paper is at a similar crossroads in 2009 as it was in 1985. Its current condition revolves around pieces of legislation, both federal and at the state level, that are arousing the same concerns that K-C’s departure from Wisconsin did 25 years ago. If they come to pass, the new regulations threaten to scare the owners of the largest paper companies out of the state and possibly the county, into the open arms of other, less ethically stringent locales. It seems Wisconsin paper has come full circle since Corporate Report Wisconsin first checked in on them, and only time will tell where the industry will be in another 25 years.

By Patrick Newman

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