CEO Calls Paper Industry's Use of Tax Credit 'Outrageous'

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Tim Spring, CEO of Marcal Paper, LLC, a leading manufacturer of paper from 100 percent recycled paper, is calling a loophole in a 2005 highway bill “outrageous,” as billions of dollars set aside for alternative fuel tax credits have been provided to paper companies for a standard industry practice.

The argument centers around the use of “black liquor,” a byproduct of the wood pulping process which is often used in combination with traditional fuel sources to power paper mills. According to Marcal, paper companies have been using “black liquor” as fuel to run their mills since the 1930s. Since the 2005 bill, paper companies have tapped into $6.6 billion of tax credits available from the Alternative Fuels Provision for their use of this byproduct.

Photo: Flickr/Greg Hickman

The paper industry is concerned about the implications of removing the tax credit, which currently provides billions in credits. Photo: Flickr/Greg Hickman

“There is no greater hypocrisy than to have the paper industry, widely regarded as being culpable for an element of global warming through commercial deforestation, putting its hand out for billions of taxpayer dollars from the remnants of dead forests, under the guise of alternative fuel production,” said Spring.

In June, an amendment to H.R. 2967, which provides the alternative fuel and alternative fuel mixture credits for “black liquor,” was introduced in Congress after President Obama’s budget plan called for a reduction in the tax credit funding.The amendment would deny the alternative fuels excise tax credit for fuels derived from the production of paper or pulp, such as lignin, wood residues or spent pulping liquors.

Last week, Marcal, along with a coalition of 26 environmental groups, expressed its support for the amendment.

The coalition, which includes groups including Greenpeace and the Environmental Defense Fund, sees the tax as an added incentive to an industry manufacturing paper products directly from the nation’s forests rather than available recyclable sources.

“The massive payment adversely biases the free market in an ecologically harmful way,” the coalition stated in an appeal letter to Congress. “The losers include more environmentally responsible producers using recycled paper content. Such mills, which are critical to developing a green jobs economy, are being put at severe disadvantage.”

H.R. 2967 is currently under consideration by the House Ways and Means Committee.

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