By Felicia Willis, Associate Editor, Pulp & Paper International magazine
The larger pulp and paper companies stand in line to receive huge amounts of money in the form of tax credits as well as direct cash, if they take advantage of the alternative fuel bill, which was originally developed in 2007, and was intended as a highway bill. This bill was meant to increase the use of ethanol and other biofuels in cars and trucks.
The unexpected upside for pulp makers is that the bill initially intended for cars and trucks, would be a major benefit for pulp makers who are only doing what they've been doing for years anyway - using alternative fuel, in the form of black liquor as an energy source.
As most of us are reeling from the current recession that is affecting most businesses and households alike, these payments could not have come at a better time, especially for pulp makers that have lost money during this economic downturn. The tax credit has allowed US pulp and paper mills to qualify for a 50-cents-per-gallon tax credit for using a mix of diesel and the alternative fuel. Even though the tax credit has been in existence since 2007, pulp and paper companies had not applied for these extensive benefits before the end of 2008.
The alternative fuel credits were expected to cost the federal government $61 million a year in lost taxes, but that was before pulp and paper companies started applying. A cost estimate being circulated among lawmakers by the nonpartisan Joint Committee on Taxation now puts the price tag at $3.3 billion. There is also the issue of the loss of tax revenues at a time when the federal deficit is already expected to be $1.8 trillion this year.
The tax credit is due to expire at the end of this year and certain members of Congress want to make sure it is not renewed for pulp and paper companies, and maybe even rescinded. Another opponent of the tax credit called the tax breaks for paper companies a loophole that "needs to be plugged." Supporting members of the tax-writing Senate Finance Committee said they would fight to keep the credits through the end of the year and beyond. One Senator commented that the credits would not expire without pulp and paper companies receiving some other relief. Yet another Senator called the credit a "lifeline" for a struggling industry, and indicated that we should be doing everything we can to salvage the industry.
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