U.S. Senate to review black
liquor subsidy
VANCOUVER — A growing backlash in the U.S. over a $6-billion US subsidy to the American pulp and paper industry for burning an alternative fuel called black liquor has prompted the powerful United States Senate finance committee to reconsider its energy tax credit policies.
Black liquor is a burning issue in Canada as the sheer size of the subsidy to its American competitors threatens to destroy the industry here. The Canadian industry has been raising awareness of the issue with U.S. news media while the federal government has been taking its concerns to officials in the Obama administration and the U.S. senate.
The finance committee has scheduled a hearing for Thursday.
The American subsidy has shone a laser beam not only on the abuse of the American fuel subsidy but on the pressing need for policies in both countries to address the emerging bioenergy economy and how it meshes in with the existing pulp and paper industry, a major producer and user of biofuel, said David Gandossi, vice-president of Vancouver pulp company Mercer International.
“Just providing a bunch of dollars to kraft pulp mills isn’t going to help,” he said.
The U.S. subsidy is a tax rebate of 50 cents a gallon for converting from fossil fuel to a mixture of fossil fuel and biofuel. It was approved by the U.S. Senate in 2005 to increase the use of biofuel in highway vehicles. But in 2008, kraft pulp mills who have traditionally used black liquor – a by-product rich in carbon – for producing heat and energy, realized they could qualify for it if they added some diesel fuel to it. The resulting fuel meets the tax guidelines but burns more fossil fuel rather than less, turning the intent the legislation upside down.
The potential size of the rebate has been pegged at $6 billion. It is expected to reduce costs in the U.S. by 60 per cent, enough to force Canada out of global markets.
The collapse of the pulp sector here would also kill the market in Canada for wood chips, a by-product of making lumber that represents 30 per cent of the revenue stream for B.C.’s struggling sawmill industry.
Opponents in the U.S. now range from Senator John Kerry, who referred to the subsidy as “an excuse to cheat,” to environmental organizations like the Rainforest Action Network and Greenpeace, who say American paper companies are violating the intention of the alternative fuel tax rebate.
However, according to a memo to the pulp sector from Foreign Affairs Minister Stockwell Day’s chief advisor, Paul Benoit, the American pulp and paper industry is mounting a “full-court press” keep its tax break.
“Some sources have said the finance committee was about to issue a press release/staff paper but was persuaded by an aggressive campaign by the pulp industry. . .to delay such action until a careful review of all the options could be taken,” according to the memo, a copy of which was obtained by The Sun.
Scott Milburn, spokesman for the American Forest and Paper Association, defended the industry’s position in an e-mail to The Sun.
“Papermakers are leaders in renewable energy, generating two-thirds of their energy needs onsite through carbon-neutral renewable byproducts of their processes,” he said. “Revoking their eligibility for the tax credit before it expires later this year, despite the industry’s efforts to comply with the rules, could have serious consequences for our companies and our nearly one million employees at a time of unprecedented economic challenges.”
© Copyright 2009 The Vancouver Sun
