The plant will close next April with the loss of 69 permanent jobs.
However, the firm said its plant in Derrinlough, Co Offaly, is to remain open.
Fianna Fail TD Barry Cowen said the announcement was "deeply disappointing".
He said: "The Derrinlough plant is a significant employer in the region and contributes a great deal to the local economy. I have been aware that Bord na Móna has been considering the future of its briquette production plants in recent months. I have met with workers and management at the company on many occasions with the aim of keeping both factories at Derrinlough and Littleton open. It's now apparent that the company has decided to cease production at Littleton while keeping the Derrinlough plant open. It's a bittersweet moment of the people of Offaly.
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"Bord na Móna has been a significant employer in Offaly down through the years and remains an important part of the local economy. The Government needs to step in and help the company diversify to ensure it can remain a significant employer in the years ahead. A new enterprise fund is needed to help Bord na Móna, and the companies dependent on it, to diversify into new forms of energy production. It's positive to see Bord na Móna commit to constructing a new biomass plant at Derrinlough and I'm hopeful that this will lead to increased investment in the area over time.
"I have been raising this issue with Minister Denis Naughton in the Dáil and have made the case for part of the revenue raised through the carbon tax to be ring-fenced for investment in the Midlands region. The purpose of this investment is to allow Bord na Móna to pump more resources into new forms of energy which in turn will help safeguard the future of the company in the years ahead. This is something which I will continue to push both within my own party and with the Government."
(CD/LM)
