Obama's budget plan calls for shifting $1.2 billion from paper industry to health care program

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

SAN FRANCISCO, May 11, 2009 (RISI) - President Barack Obama's budget plan released today calls for eliminating $1.23 billion in alternative fuel black liquor tax credit funding from US pulp producers to support a health care program that could result in benefits for uninsured Americans.

Government officials estimated the paper industry would generate about $3.3-4 billion in 2009 from the alternative fuels program. Under Obama's budget, that could be reduced to $2.1-2.8 billion, based on estimates. International Paper already has generated about $220 million from the Internal Revenue Service in fuel funds.

The American Forest & Paper Assn today said the budget plan estimates that repealing the paper industry's access to the credit, which was slated to end at the end of this year, would raise $533 million in fiscal 2009 and another $702 million in fiscal 2010. Fiscal 2009 ends on Sept. 30. The $702 million would be gained from anticipated payments to the paper industry in the fourth quarter this year.

More than 15 US pulp and paper makers are gaining fuel funding or are in the pipeline to receive it.

The administration opposes the funding for paper companies since the alternative fuels legislation was originally focused on expanding biofuels for motor vehicles or motorboats.

Papermakers running kraft pulp mills qualify for the credit funding because they burn spent black liquor from the pulping process in recovery boilers to generate energy. The black liquor process has been used at pulp mills since the 1930s.

Continued claiming of the fuel credit by the paper industry would result in "substantial revenue losses and represent a windfall to the paper industry," the White House budget plan said.

Repealing the credit is among the revenue-raisers the administration proposes to help meet the costs of the $635 billion, 10-year health care "reserve fund" in the budget.

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