Union: IP tax credit needed

Published 8:31 am Friday, June 12, 2009

FRANKLIN—Union workers, including those at International Paper Co., are urging Congress to keep intact a tax credit that rewards industry for using a source of renewable energy. For papermaking companies, that godsend is from a liquid called black liquor.

The government started offering the Alternative Fuel Mixture Tax Credit to companies in 2007, when it changed existing tax laws to include an unlimited 50-cents-per-gallon credit for alternative liquid fuels that come from natural sources, or biomass. Black liquor qualifies as one of these alternative liquid fuels. Companies get the credit when they mix the alternative fuel with at least 0.1 percent of a fossil fuel, like diesel.

“Over the past decades the paper industry has invested billions of dollars in technology to help us produce nearly 70 percent of all the energy it uses,” said Carroll Story, president of Local 2-1488 of the United Steelworkers of America. “The self-generated power is of such a massive scale that it dramatically reduces the strain on our national power grid.”

Story added, “These fuels make the paper industry the leader of users of renewable energy amongst all of the companies in the U.S.”

Black liquor is a by-product of the papermaking process. One of the main chemical compounds in black liquor is lignin, which is found naturally in wood and helps bind the wood fibers together. Lignin must be removed from wood before it can be transformed into pulp, which is then dried to make paper.

Since lignin contains most of the energy content of wood, papermaking companies burn it as fuel at their facilities, and also use it to remove water from pulp before it becomes paper.

According to the Washington, D.C.-based American Forest & Paper Association, papermakers use black liquor to generate approximately 66 percent of their energy needs onsite. A typical pulp mill produces between 250 and 400 gallons of black liquor per ton of pulp, and most is used onsite to produce energy.

Story said some politicians in Congress, including those on the influential Ways and Means Committee and Senate Finance Committee, claim that industry has been claiming a credit that was not intended for them.

“That’s not so,” Story said, adding that the first part of the 2007 legislation was enacted for transportation fuels, but a second part was designed for non-transportational fuels and industries, like papermaking.

“Most people chose just to look at the first part,” Story said. “But the second part of that (law) was for the industries to encourage them to go green.”

Story said papermaking companies could be saving as much as $5 to $7 billion a year with the tax credit.

“IP is one of the larger paper companies, so they would benefit greatly from it,” Story said. “But in these economic times, this tax incentive is actually helping some of the paper industries survive.” He added that since 2006, more than 250,000 jobs in the papermaking industry have been lost and 25 mills have closed in 2008 alone.

Story said that he and other union officials had about 50 meetings with members of Congress the week of May 11 and characterized them as good and educational. Meanwhile, the legislation has not yet been called up in committee.