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Black Liquor – A Bitter Drink

I had never heard of Black Liquor until a colleague told me about it a few weeks ago (though I do confess to drinking several Black Dogs with some locals in a bar in Mumbai India a few years back…but that is another post!). Turns out, Black Liquor is not a drink at all, but is VERY bitter to swallow.

We’ve all heard of the bank bailout, we’ve heard of the auto industry bailouts, who knew we were bailing out the paper mill industry? Who knew they even need bailing out? Who knew we were bailing them out to the tune of $4 billion a year?

In 2005 congress enacted a law as part of a highway bill that would provide a tax credit to companies that would mix alternative fuels with fossil fuels. This tax credit provided a 50 cent per gallon tax credit OR DIRECT PAYMENT. The Joint Committee on Taxation estimated that this credit would cost the US Taxpayers (me and you) about $61 Million. Now, dear reader, how would YOU interpret the intent of this law? Any sane person would think something that is part of a highway bill would apply to vehicles, right? Any logical person would think the intent of this bill was to reduce the amount of fossil fuels used, right? I think even my dear friend Jay would agree that those are both logical conclusions.

Ok…put that on hold for a minute, while I tell you about Black Liquor. Black Liquor is a byproduct of the paper pulp making process (http://en.wikipedia.org/wiki/Black_liquor). Since the 1930’s paper mills have been using Black Liquor as a fuel to create energy for their plants. Truly green, before green was cool! Before the recovery boiler was invented in the 30’s this Black Liquor was dumped in to streams and rivers killing off untold numbers of aquatic life. Some mills now achieve over 99% recovery and reuse of this byproduct. In fact US mills produce about 28.5 megawatts of electricity from the burning of this byproduct.

So, all you environmentalists are feeling pretty good about this about now…but as Paul Harvey used to say…in a moment the rest of the story.

Somewhere in 2007, some corporate bean counter had a brilliant idea. “What if we take diesel fuel and MIX it with the Black Liquor? It will still burn in our boilers…AND we will qualify for the Alternative Fuel Tax Credit. WHAT? You are going to take a process that used zero, zip, zilch fossil fuels and introduce the burning of fossil fuels so you can get a tax credit, a refundable tax credit at that (read…a direct payment). An average mill burns about 175 million gallons of black liquor, which equates to about 90 million bucks you and I are giving them! 90 Million bucks to an average mill and the entire program was only supposed to cost 61 million! My guess is that some of the folks that own these paper mills are the some folks complaining about the mounting federal deficit, decry government bailouts and think they pay too much in personal income tax! Hypocritical?

And now? We have Canada ticked off at us! Canada! Mad at us! Their mills don’t get part of this “bail out”! In fact, this practice has lead to layoffs in Canada. (think how outraged WE would be if it were reversed!)

Congress has a lot of issues in front of it when it returns from summer vacation…health care reform, the American Clean Energy and Security Act and countless others. Please express your feelings to your representatives…let them know they need to close this loop hole to stop the bail out of the paper industry!

0 replies
  1. Mary
    Mary says:

    Canada’s forest industry is already heavily subsidized from their government. Perhaps you should read up on the Softwood Lumber Agreement of 2006. The US government will be forced to clarify what exactly qualifies for tax credits. In the meanwhile, don’t judge the paper industry for playing the tax game in their favor. All’s fair in love and war, right?


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