By Sandy Sanders
Last week, while having a “catch-up” phone conversation with a friend from a decade ago, we some how turned our conversation to Black Liquor. Since he is the expert on the subject being qualified by having an engineering degree and years working in the pulp mill industry, I asked questions and he answered.
First for those of you who are not familiar with black liquor it is a liquid byproduct you get at a paper mill when wood is turned into pulp. This material holds the wood fibers together. Before you can make paper, the liquid must be removed. Paper mills have used this liquid energy for years to generate electricity and heat for their own use. Mills that rely on recycled paper to make newsprint — like the kind in the paper you are reading — do not get this byproduct since they are not using wood.
Black liquor has been around since the first tree and the first paper mill. During the past couple of years, this byproduct has turned into a profit maker for our paper mills and a loss for the American taxpayer. This happened when our well-meaning Congress tried to help without studying the consequences and most particularly the loop-holes.
In 2005, Congress passed an alternative fuels mixture tax credit inside the Safe, Accountable, Flexible and Efficient Transportation Equity Act. The plan was to encourage alternative-fuel use in vehicles. This is part of the plan to reduce our dependency on oil. As taxpayers, we were OK until 2007 when our friends in Congress added an amendment so that non-transportation companies could be eligible for the credit.
Kraft paper mills who were already using the natural black liquor could now add as little as 0.1 percent of diesel to the fuel mixture and they could qualify for a tax credit. Congress thought it would cost us no more than $60 million a year. This has not worked quite the way they expected. Some reports show that International Paper could claim more than $1 billion this year alone. Across the country from paper mill to paper mill we could be at $10 billion or better in lost tax revenue.
Once Congress went oops, they frantically started trying to figure out ways to repeal the credit and this is expected by year end. One IRS report, I read, said the tax credit does not have to be claimed now and could be carried out during the next 15 years. You cannot blame the paper mills for taking advantage of this tax credit. Any business in the country looks for ways to pay as little taxes as possible. We do the same on our personal income taxes.
Our elected Congress, who we expect to be our watch dog, has instead opened the gate and are giving dog biscuits to all who enter. Now I am more excited than ever about the new Health Care Act coming our way. I wonder how long it will take for the oops to drop there.
Sandy Sanders is the publisher of The Valdosta Daily Times.
