Obama administration looking to eliminate alternative fuel tax credit funding for US pulp makers -- possibly by Oct. 1

By Greg Rudder, Editor, PPI Pulp & Paper Week, RISI

SAN FRANCISCO, May 11, 2009 (RISI) - The US government's alternative fuel black liquor tax credit funding for kraft pulp mills could end as early as Oct. 1, rather than at yearend as originally anticipated, contacts said.

President Barack Obama seeks cuts in some programs to raise money to pay for health care coverage for roughly 40 million uninsured Americans.

The US government expects the alternative fuel funds to US pulp mills could cost $3-4 billion this year.

More than 15 US pulp and paper makers are either signed on for or applying to the Internal Revenue Service for alternative fuel funds. International Paper in the first quarter was paid $145 million of an anticipated $330 million.

The president's budget starts on Oct. 1, the beginning of the government's fiscal year.

The White House wants to deny paper companies access to the credit immediately when legislation to block the benefit is signed by the president, the Wall Street Journal said.

"In our view, and looking at the legislative history and talking to people who were around at the time, this provision was meant to provide a credit for alternative fuel for use in vehicles or other new uses of alternative fuel," a Treasury official told the Washington Post in a story published Saturday. "It was not meant to provide a subsidy for behavior that was already occurring."

The American Forest & Paper Assn (AF&PA) as well as senators from paper-making states maintain that the fuel funding is warranted because spent black liquor from the kraft pulping process is reused and burned in a recovery boiler to generate energy. Without the funding, US mills could close and workers would could lose jobs, the AF&PA has maintained.

Showcase your company: Enter the 2009 PPI Awards!
The inaugural Pulp & Paper International (PPI) Awards will honour leadership, vision, innovation and strategic accomplishments of companies, mills and individuals within the pulp and paper industry. The PPI Awards are the only global awards dedicated to recognizing these achievements in the pulp and paper sector.
Entry is Easy and Free - Enter Online Now!