Bail Out for the Paper Industry

A recent article by Graphic Arts Online reports that the paper industry may receive much needed tax support, but not if environmentalists have anything to say about it.

A tax clause benefiting paper mills is threatened as environmentalists complain they are receiving a billion dollar bailout from an obscure tax provision meant to drive development of alternative fuels. A 2005 transportation bill passed by Congress included a $.50 per gallon subsidy to encourage companies to blend biofuels and fossil fuels—the credit was extended two years ago to include nontransportation energy sources. Paper companies who burned black liquor—a wood byproduct—to fuel operations for decades reportedly saw an opportunity to take advantage of the provision by adding diesel, a fossil fuel, into its already used biofuel.

International Paper received a $71 million check last month from the Internal Revenue Service for 15 mills over a one-month period. Verso Paper received $29.7 million for a single mill.

The credit is set to expire at the end of the year with an estimated potential windfall to the paper industry as high as $6 billion. The credits could provide a much-needed 2009 lifeline for the industry, according to a Deutsche Bank report released last month titled “Liquored Up?”

Paper industry advocates say the incentive is fair because it if applies equally to all firms engaged in the practice, noting that the industry should benefit from its long-term efforts to use renewable energy. Plus, they say, adding diesel fuel to the mix increases the efficiency of boilers and other pollution controls.

The American Forest and Paper Assn. says, "if Congress were to revoke the alternative fuel incentive, it could lead to sudden plant closures, job losses, and economic disruption that would have not otherwise occurred. The resulting loss of the forest product industry’s renewable energy generation and use would be a blow to the nation’s ongoing efforts to support and expand this type of clean-burning, environmentally friendly energy production. "

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