Son of Black Liquor Finally Enters the Limelight

Dead Tree Edition’s long – some would say obsessive – campaign to raise awareness of the Son of Black Liquor giveaway to pulp companies paid off big time today in the form of a major Washington Post article.

Steven Mufson, a Post reporter who helped bring the original black-liquor credits to light in 2009, wrote today of “a new binge of tax breaks” for companies that burn the pulp byproduct to produce energy, as they have been doing since the 1930s.

“It was not the intent of Congress to reward that behavior, but the industry and its accountants persuaded the Internal Revenue Service to allow black liquor to count as an alternative fuel in 2009,” Mufson wrote. “Under that program, the paper industry received more federal money than almost any industry outside the auto sector.”

The new tax breaks come in the form of cellulosic biofuel credits, he noted, which “can be applied in future years, slashing tax bills perhaps as late as 2015.”

Mufson, by the way, did not use the phrase “Son of Black Liquor” as first the The Vancouver Sun and now Dead Tree Edition do in reference to the cellulosic biofuel giveaway. But that’s exactly what today’s article is about. (I should know; I provided him with links to financial reports and other background information for the article.)

The article highlights the odd IRS ruling that made pulp manufacturers eligible for Cellulosic Biofuel Producer Credits and details how some companies have already collected hundreds of millions of dollars.

Mufson cites a Congressional Budget Office estimate that the original black liquor credits were worth $4 billion to the U.S. pulp and paper industry – an erroneous estimate that CBO has never corrected. Publicly traded companies reported more than $6 billion in payouts from that program, and privately held companies probably raked in at least a couple of billion more.

For months, it seemed that only Dead Tree Edition and a couple of environmental groups were writing about the black liquor credits. But the Washington Post article is just the latest in a recent string of mentions from various media, including:

• Energy Déjà Vu: Obama Must Break with Failed U.S. Policies: The original black liquor credits were the "most scandalous" of pork-barrel energy programs, Yale professor Michael Graetz wrote yesterday, because they "increased, rather than reduced, petroleum use, while bestowing about $8 billion of government largesse on the paper industry from 2007 to 2009."
• Biorefining deals underway, project financing picks up: "The black liquor and the so-called son of black liquor credits have incentivized pulp and paper mills to burn their spent cooking liquor for energy rather than find other outlets," Biorefining magazine said last week.
• Pulp, Paper Companies Amend Tax Returns: "The cellulosic biofuels industry might produce a maximum of 17 million gallons this year, but the pulp and paper industry continues to be the biggest benefactor of advanced tax credits meant to spur renewable fuels, with pulp and paper companies working to recoup billions in tax credits by amending prior-year tax returns," DTN/The Progressive Farmer reported last month.
  
• Black Liquor Credits Still Flowing: Printing Impressions' environmental columnist (and long-time friend of Dead Tree Edition) Gail Nickel-Kailing, summed up the black liquor credits aptly a month ago: "Suffice it to say, that if there is a loophole to be found, there is someone (or more) lined up to take full advantage of it."
• And then there's the quotation from a British Columbia newspaper this month about a 1963 boiler explosion at a pulp mill: “The liquid [nicknamed black liquor] inside is a very caustic acid, so they said that it was even hard to identify the dead because they turned black and it started to eat away their flesh.”

If you just can't get enough of this strange, twisted tale of black liquor tax breaks, click here to read all (47 and counting) Dead Tree Edition articles on the subject.