Senate Finance Committee Chairman Max Baucus (D-Mont.) is considering the introduction of a bill to remove a tax credit the paper industry receives for blending diesel with a wood residue liquid fuel used to power pulp and integrated pulp and paper mills.
The tax is seen as providing a lifeline for an industry that is struggling to keep over 140 pulp and pulp/paper integrated mills open because of the decreased demand for paper products amid a poor economy. Already the US paper industry has lost 250,000 workers since the early part of this decade—over 9 percent of its work force—and 25 mills have been closed in the last two years alone.
The tax credit originated from a 2007 change to tax law that expanded eligibility for a 50 cents-per-gallon alternative fuels mixture credit to liquid fuels derived from biomass, including the wood pulp “black liquor” byproduct. Companies can obtain the credit by mixing alternative fuel with 0.1 percent of a fossil fuel like diesel. There is not a limit as to how much credit can be taken.
Baucus says the tax break is an unintended loophole that is costing the US Treasury billons.
USW Activism at Work
He is getting pushback on his idea from Senate Finance Committee Democrats from paper-producing states and Republicans on the committee. Due to the activism from USW paper workers and USW International President Leo W. Gerard’s calls to key committee members, the committee is asking for input from senators that come from states with a high paper concentration. Paper companies also have been lobbying hard to retain the tax break.
“Pulp and paper has been hammered; the workers are counting on Congress to come through, and we are going to make sure that this is kept until there’s an alternative and it protects the workers,” says Sen. Ron Wyden (D-Ore.).
Although he originally wanted to make the tax credit’s removal retroactive, Baucus is now considering letting the credit lapse on its Dec. 31 expiration date and adding provisions to lessen the impact on the paper industry.
Sen. Debbie Stabenow (D-Mich.) says she opposes letting the credit expire. “I’d like to find a way to actually extend it,” she says. “Yes, it is something that wasn’t previously used, but given what was happening to the pulp and paper industry and the economy, this has given an infusion of capital to them at an absolutely critical time.”
Stabenow says the paper companies have suffered from the auto industry’s problems because it is one of the largest customers for paper, particularly the glossy paper used in showrooms. Thus, with the auto industry slowdown, mills have been closing.
Leader in Using Renewable Energy
Critics of Baucus’s plan also point to the US paper industry being the leader in the use of renewable energy. The sector produces almost 70 percent of its own power, most of it generated from biomass, including the conversion of paper making residue into the fuel known as “black liquor.” In addition, the paper industry’s contribution toward greenhouse gases from the burning of biofuels and fossil fuels is lessened by the sequestering of carbon through sustainable forestry practices and use of biomass.
“In fact, if every energy producer followed this model and sequestered as much carbon as it released, the U.S. would serve as a global leader in reducing greenhouse gas emissions,” Gerard wrote in a letter to the Senate Finance Committee.
Canadian competitors in the forest products industry, who are suffering their own economic slump, are not keen to keeping the US tax credit intact for their American competitors. They, along with government officials, have been lobbying Finance Committee staff and US trade negotiators, urging them to shut down what they call a protectionist subsidy for domestic firms.
Opportunity to Discuss Entire Industry
The tax credit issue is giving the USW the opportunity to have a dialogue with elected officials about the paper industry and its future. In addition, this issue is providing a chance to show Congress and the public the sustainable nature of the paper sector and how it continues to develop new ways of being green. Many USW-represented mills recycle products like paper, newsprint and boxes and are working hard to encourage this type of recycling. Such conversation is important as Congress develops legislation to deal with climate change and energy issues.
The biofuel tax credit also gives the USW the ability to develop an agenda with its allies to preserve and promote the entire industry, including the recycled mills.
Contact your Senators
The USW is urging people to call ALL senators to make them aware of how the biofuel tax credit is necessary to maintain a paper industry in this country, and in particular the following senators on the Senate Finance Committee:
Senate Finance Committee Members
Max Baucus, Montana
John D. Rockefeller IV, West Virginia
Kent Conrad, North Dakota
Jeff Bingaman, New Mexico
John F. Kerry, Massachusetts
Blanche L. Lincoln, Arkansas
Ron Wyden, Oregon
Charles E. Schumer, New York
Debbie Stabenow, Michigan
Maria Cantwell, Washington
Bill Nelson, Florida
Robert Menendez, New Jersey
Thomas Carper, Delaware
Chuck Grassley, Iowa
Orrin G. Hatch, Utah
Olympia J. Snowe, Maine
Jon Kyl, Arizona
Jim Bunning, Kentucky
Mike Crapo, Idaho
Pat Roberts, Kansas
John Ensign, Nevada
Mike Enzi, Wyoming
John Cornyn, Texas