Cutting the tax credit “does not encourage the additional energy efficiency benefits of renewable energy produced and used on-site,” says Donna Harman, CEO of the American Forest & Paper Association, AFPA, a trade group of over 150 member firms.
Black liquor certainly has its carbon virtues. The liquid waste product contains about hall of the energy content of the original wood and its use is considered carbon neutral because it is generated in a closed production loop, meaning the waste is re-circulated to burn as fuel.
That could be a key consideration if the industry were ever to be regulated under a carbon cap-and-trade program.
Last week, Sen. Max Baucus (D-Mont.) and Sen. Charles Grassley (R-Iowa) suggested not renewing the multi-year, $24 billion tax credit to pay for their $85 billion Hiring Incentives to Restore Employment (HIRE) Act, a bill designed to spur job creation, which at this point now seems to be out of favor with Majority Leader Harry Reid (D-Nev.)
“Three-quarters of our operations’ energy needs come from biomass,” says Anthony Chavez, spokesman for forestry firm Weyerhaeuser , who says the company considers black liquor a biomass fuel worthy of incentives.
Biomass fuels are generally defined as those derived from living or recently living organic material—as opposed to fossil fuels—and black liquor would seem to qualify, but groups promoting a clean energy economy argue that granting any industry tax credits for a process that has an economic incentive, like recovering chemicals, is a waste of economic resources better used in spurring other forms of green energy.
“Again and again the pulp and paper industry will find any loophole to keep claiming subsidies,” says Nathanael Greene, director of renewable energy policy at environmental non-profit Natural Resources Defense Council, NRDC. “The central thing about black liquor is that it’s already being used for energy. It’s burned to recover the chemicals. The energy off that is captured to run mills.”
The black liquor tax credit is certainly not small change for the industry and has probably helped some forest products companies survive a rough recession. The credits, for instance, helped turn a $7 million loss into a $38 million profit for papermaker Temple-Inland in the fourth quarter of 2009.
But other firms in the sector, like International Paper and Weyerhaeuser, have said publicly that since the 50-cents-a-gallon tax credit had expired at the end of 2009, there would little impact on their operational expenses going forward.
Nevertheless, industry participants are emphatic about the use of by-products like black liquor as being a part of how the sector can help provide a bridge to greener energy production in the country.