Thursday, April 16, 2009

Black Liquor -- Never So Tasty

Did you ever see Matthew Lasko, the guy wearing the question-mark covered suit on TV infomercials touting free government money giveaways? I always thought it was a joke. Man, I guess I have missed the boat.

The latest opportunity seems to be the pulp & paper industry getting multi-million dollar payments and tax credits from the US government for doing something the industry has been doing for the past 70 years, powering their mills by burning the recovery boiler black liquor residual. Well, actually there is something new in that they have to add some diesel fuel to the black liquor burn to qualify as an alternative fuel, and thus be able to obtain a tax-credit/subsidy. They get this by taking advantage of a loophole some clever paper industry people found in a 2005 highway transportation bill.

As recently reported in The Nation, Washington Post and other sources, the practice of burning black liquor at pulp mills started in the 1930s, but the opportunity for an alternative fuels tax credit is something most pulp mills with recovery boiler operations could now qualify for. Why would any paper company pass up a Wesley Snipes-like, jump-on-the-bandwagon, we-twisted-it tax scheme?

International Paper Company recently touted its windfall of $79 million for one month of operation.

Clearly this tax credit/subsidy for black liquor burning was not the intent of the 2005 highway transportation bill. The alternative fuels tax credit was intended to stimulate and create incentives for new production of non-fossil fuels. Not to support existing 1930’s technology.

Possibly kudos should be considered for the people who discovered that pulp mills could, with the minor addition of diesel fuel, be the recipients of US Government largess. But the whole thing is so similar to the public’s perception of undeserved bonus money going to AIG executives, that maybe it could backfire. The potential public relations disaster should cause any paper company boardroom to pause. My thought: discontinue the practice…and maybe send back any money already received. The bad publicity is not worth it.

Back during the Reagan Administration, I am certain the idea of having ketchup qualify as a vegetable for school lunch programs was not an Oval Office decision. It was some USDA wise guys who made that “cost effective” pronouncement. But the Reagan Presidency was widely ridiculed as cynical for allowing such a definition in school lunch nutrition programs. It was a PR nightmare for the White House.

Likewise, some bean-counting, tax code-researching, buried-at-headquarters MBAs uncovered the potential to reap some generous rewards from everyday operations at pulp mills…maybe it required an additional meeting to make some minor modifications. But now the boardroom is going to have to deal with resulting heat. Given our current economic climate, the public may lump this in with any and all public money bailout abuse.

Situations like this make our country's operations look amateurish. This just adds to America’s unfavorable standing in the world. Hell, even the Canadians are getting pissed off at us.

The paper industry in the US does need help and support. But let’s reward jobs and innovation. Not existing everyday technology. These recovery boilers, which are the money-making engines referred to in this alternative fuels subsidy issue were called "...old, relatively inefficient, high maintenance and vulnerable to catastrophic smelt water explosions" in a joint US paper industry and US Department of Energy report in 2006. Senators Baucus and Grassley want to put a stop to the loophole. No doubt pressure will mount to keep the loophole in place. Maybe a review of the report will remind the paper industry that just a few years ago they were focused on the new and innovative...not 70 year old technology.

Someone found this tax loophole and presented it to higher ups. The problem is higher ups in charge said “cool!”.

Time to call this a bad idea and shut it down.

With this said, I still may just send away to Pueblo, Colorado and get one of those government booklets on give-away programs. I may be missing out too.


A.M. Mallett said...

I am never amazed at how quickly so many of you disputers pull the "crook" trigger on anything you dispute. You stated the following:
"Why would any paper company pass up a Wesley Snipes-like, jump-on-the-bandwagon, we-twisted-it tax scheme?"
Just what in particular is criminal about taking advantage of tax code opportunities that help an ailing industry weather the worse recession in over 30 years? We have a Congress and President tossing Trillions of dollars at intangible paper assets and when funds actually flow to buttress hard assets that actually employ people, you cry foul waving the cheat and criminal label at them. Each recipient of these credits has passed muster with the IRS before ever submitting any filings.
Why do I suspect that if the industry were to apply for the same level of assistance through another program, you would vociferously oppose that well? These funds enable these companies to stay in business or avoid prolonged layoffs as well as fund absolutely essential and long delayed capital investments.

Gerard said...

I'll admit that I may have gone overboard in using the name "Wesley Snipes" in that he was convicted of doing something illegal. What I meant was the potential for the pile-on by pulp & paper companies to get undeserved tax credits...and the pile-on resulting from the Welsey Snipes "that tax-dodge applies to me too" thinking.

The tax credit is undeserved. Make some pulp and paper...get a credit for that. But not for everyday bark & lignin burn. I hope the US gives the paper industry some sort of help. But I also hope, like if they help Detroit Auto...that Detroit make some freaking autos to sell w/ the money. Not just collect cash.

The whole problem with America was stuff like buy a home for no money down and flip it. This tax for black liquor burn is the same thinking.

Make products and sell them. Quit ruining America. Take cash and upgrade the mills. Invest in deinking so the curbside and office paper collection programs do not crash.

And I suspect many mills could continue the current smoke & steam production for money, while at the same time handing out pink slips.


Gerard said...
This comment has been removed by the author.
Unknown said...

I also think that they are actually there is something new in that they have to add some diesel fuel to the black liquor burn to qualify as an alternative fuel. Because as the market shows that the prevalence is this kind of fuel. Reports and analysis view here.