Monday, April 13, 2009

US government fuels black liquor

The Nation:
"Seventy-three percent of the energy we use in our mill system we produce," says Ann Wrobleski, [International Paper's] vice president for global government relations. "We feel like we're the original green industry, if you will." (In developed nations, paper is the third-largest industrial greenhouse gas emitter, behind the steel and chemical industries.)

By adding diesel fuel to the black liquor, paper companies produce a mixture that qualifies for the mixed-fuel tax credit, allowing them to burn "black liquor into gold," as a JPMorgan report put it. It's unclear who first came up with the idea--Wrobleski told me it was "outside consultants"--but at some point last fall IP and Verso, another paper company, formerly a part of IP, began adding diesel to its black liquor and applied to the IRS for the credit. (Verso nabbed $29.7 million at just one of its mills in the final quarter of 2008 for its use of mixed fuel.)

Despite the obvious contrivance of the procedure, Wrobleski is unapologetic: "The credit is supposed to encourage the use of green fuel." Sure, I said, but isn't it a bit weird you're now adding diesel fuel to the process in order to take advantage of it? "It is what it is," she said.

Others are less charitable. "You use the toilet every day," said one hedge fund analyst who's been closely following the issue. "Imagine if you could start pouring a little gasoline into the bowl and get fifty cents a gallon every time you flushed."

No one in Congress seems to have anticipated this creative maneuver. This past fall the Joint Committee on Taxation computed the cost of extending the tax credit for three months and projected it would cost a manageable $61 million. It now appears that the extension (which was passed as part of the TARP) could cost as much as $2 billion before the credits expire at the end of this calendar year.



Blogger gueppe barre said...

Well - this is what you get when the governemtn tinkers with trying to pick winners and losers - with tax money. You end up with a BIG loser (ethanol is a boondoggle of massive proportion) and a WINNER (paper mills, who actually DO make "green power"). Therefore, the issue is NOT one of shall we make "green power", because paper mills have been doing it for years with no subsidies, just regulations and fines payed out, but rather, let's fund a darling project of the left - non-fossil fuel from food - who gives a damn if everyone starves?.

Leftist philosophy makes me sick due to the dizziness I get trying to follow its contorted "reasoning" and tortured logic.

As for the hedge fund analyst's comment, it's a non sequitur - heavy on the anal part of his title by the way, with head inserted therein.

The business simply followed the law - more so than Timothy Geithner - heaven knows there are plenty other laws it follows, too, under PENALTY of law, so if you don't want this to happen, then don't pass the law - you whiners!

9:00 PM  
Anonymous said...

Here, I do not really consider it will work.

10:22 PM  

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