New Brunswick Premier Shawn Graham is promising the government will do what it can to help Dalhousie as AbitibiBowater Inc. prepares to permanently close the paper mill in the northern town.

The government has promised to put money into retraining for workers and economic diversification.

The closure of the mill in the small coastal community will directly affect 330 people. But it is also expected to lead to other job losses in the town of 3,600, where many local firms supplied products to the mill.

Dalhousie's town council held an emergency meeting Friday morning to discuss the impact of the closure and how to proceed.

"It's like a death in the family," said Mayor Clem Tremblay. "We have to mourn the death and turn around the next day and say, 'Hey, life still has to go on for other families, for the community.'"

That means speeding up plans to develop the town's marina and finding ways to create new jobs in the town, Tremblay said. Tourism will be explored as an option.

The town will also be asking the province not to reduce the mill's property taxes. The province had originally offered the company a $5 million property tax relief program to keep its operations going.

The mill pays $2 million annually in taxes, making up one-third of Dalhousie's budget.

Several Dalhousie residents told CBC News they expect younger workers will move west and expressed fears about the impact the closure will have on property values.

"Everybody's been sort of walking around like in a cloud," said Reginald Vienneau, who's worked at the mill for 27 years. "Everybody doesn't know what to think or what the future holds. A lot of people refinanced their homes, thinking they had a few more years to go before retirement, they bought new vehicles. Everybody's in a mess."

The mayor and union said they've been told the mill will be closed by Jan. 31.

Province offered incentives to stay

Graham admitted the closure is a major setback in an industry already struggling with high energy and wood prices in the province and tough competition in the global marketplace.

Analysts say there may be a turnaround in the forestry sector but it's not imminent and more closures are possible next year.

Of the 61 mills left in New Brunswick, only 16 are operating at full capacity.

The province did everything it could to convince AbitibiBowater not to close its paper mill in Dalhousie, said Natural Resources Minister Donald Arseneault.

The province offered to freeze the mill's power rates, to build a $10-million bleach plant, implement a property-tax relief program and even to share the cost of new paper machines, Arseneault said.

"But at the end of the day, all the lobbying we have done wasn't good enough to convince the shareholders to have faith in Dalhousie," said Arseneault.

Arseneault said the closure is a wakeup call for his hometown, which assumed the mill built in 1928 would always be there.

"All throughout the last decades, we've been focusing on the mill and we forgot to look at the untapped opportunities we do have," Arseneault said.

"We really have to roll up our sleeves and get to work on creating new opportunities for our community, and I know we will do that."

Closure part of major restructuring

AbitibiBowater announced late Thursday that it would be closing or idling mills in New Brunswick, Quebec, Ontario, British Columbia and Texas.

The downsizing follows the merger of Montreal-based Abitibi-Consolidated and the paper division of Bowater, an American forestry company based in Greenville, S.C.

The new company's management said it would move quickly to reduce debt by $1 billion over three years and to reduce annual costs.

The restructuring is one of the biggest blows yet delivered to a forestry industry that's been hit by high fuel costs, a slowing U.S. economy and the competitive disadvantage of a high Canadian dollar.

The restructuring will impact about 2,600 workers in North America.

AbitibiBowater said it will incur cash closure costs of about $100 million related to severance and other charges.

"These were difficult decisions that were made after careful deliberation and represent the best course of action given the current economic conditions and significant challenge that lies before us," said CEO David Paterson in a statement.

"We are mindful of the impact these decisions will have on the employees and communities affected, and will be working with them to help mitigate the effects," he said.

"I hope they treat the employees with the greatest respect, all the years they've given to that company," Arseneault said. "I hope Bowater realize they do have a moral responsibility to the province and to our community."

With files from the Canadian Press