Dogwood Alliance

Stop the Paper Industry Tax Payer Ripoff!

Frustrated by the financial crisis? Outraged at the greed of the AIG bonus scandal? Well, you still won't be prepared for the cynical and sneaky grab of taxpayer dollars now being perpetrated by the paper industry to the tune of billions of your money... all by cheating a small program designed to decrease dependence on fossil fuels and fight climate change.

The alternative fuels clause of the 2005 transportation legislation, SAFETEA-LU, was intended to increase the use of ethanol and other biofuels in cars and trucks, but instead paper companies are ADDING diesel fuel to an organic waste called "black liquor" which they burn for energy resulting in an INCREASE in the use of fossil fuels. They then qualify as an "alternative fuel mixer" with the IRS, and the first companies starting receiving checks for millions of dollars this past month. And more are on the way, unless Congress takes action. Analysts reports estimate if this loophole is not closed, the companies could walk away with $6-8 billion dollars by the end of the year!

On Friday, The Wall Street Journal said the black liquor loophole saga, "has allowed the paper industry to start collecting giant federal payments for doing nothing more than what it has done for decades." Is this really how we are going to solve the massive challenges facing our economy and our climate?

This effects everyone of us who pay taxes, and especially all of us working for green jobs in a new economy to combat climate change and protect the environment. The massive payments to certain companies adversely bias the free market in an ecologically harmful way. The losers include more environmentally responsible producers using recycled paper content, because they don't create the black liquor waste. Such mills, which are critical to developing a green jobs economy, are being put at severe disadvantage. These billions of dollars of payments are encouraging additional emissions of greenhouse gases at some of the most polluting and least efficient mills in America.

September 02, 2010

Subject:

Dear Congress Member,

I urge you to take action regarding the tax credit loophole in the SAFETEA-LU 2005 transportation bill, which is costing taxpayers billions of dollars while perversely increasing consumption of fossil fuel in contravention of the Act’s intention.  We urge you to end this loophole as soon as possible.

Paper companies that normally rely on biomass for fuel are receiving millions of dollars in payments from the Treasury by increasing their use of fossil fuel.  International Paper in March 2009 received a payment of $71.6 million for one month of adding diesel fuel to its biomass fuel. The alternative fuels clause of SAFETEA-LU, was intended to increase the use of ethanol and other biofuels in cars and trucks, not increase the use of fossil fuels.

Paper companies are adding a small amount of diesel fuel to each gallon of black liquor fuel historically consumed by mills in order to apply to the IRS and become registered as an "alternative fuel mixer" and claim a multimillion dollar tax credit.

This cynical exploitation the alternative fuels tax actually results in an increase in the use of fossil fuel, thanks to the scheme's method of adding diesel fuel to the black liquor.  Reports cited in the Washington Post and The Nation estimate that the loophole could result in $6-8 billion in payments to the 10 largest paper companies alone.  An average size U.S. pulp mill can burn more than 175 million gallons of black liquor a year in its recovery boilers, which implies an annual tax credit of $90 million, according to a J.P. Morgan report cited by the Washington Post.

The massive payments adversely bias the free market in an ecologically harmful way.  The losers include more environmentally responsible producers using recycled paper content.  Such mills, which are critical to developing a green jobs economy, are being put at severe disadvantage.  These billions of dollars of payments are encouraging additional emissions of greenhouse gases at some of the most polluting and least efficient mills in America.

The exploitation of this loophole by paper companies clearly violates the intention of the original legislation by increasing use of fossil fuel and costing taxpayers billions of dollars.  It is critical that Congress take swift action to close this loophole.

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Sincerely,