Saturday, March 6, 2010

Black Liquor Scorecard: 21 Companies Earned $6.5 Billion in 2009

The $6.5 billion in controversial black-liquor credits earned in 2009 by 21 publicly traded pulp and paper companies was far more than their total profit for the year.

Despite the government’s unintended largesse, the 21 companies had combined net income of only $2.2 billion, according to an exclusive Dead Tree Edition analysis of documents filed with the Securities and Exchange Commission.

Without the U.S. government subsidy, only nine of the companies would have been profitable in 2009, In fact, four recipients – AbitibiBowater, Weyerhaeuser, NewPage, and Sappi – together lost nearly $2.7 billion last year despite receiving more than $1 billion from the black-liquor program that expired on Dec. 31.

At least one-fourth of the country’s capacity to make kraft pulp is in the hands of privately held companies that don’t have to file with the SEC. Assuming they took advantage of the “alternative fuel mixture” program in the same way that their publicly held peers did, the federal government probably shelled out between $8 and $9 billion to pay to do what they would have done anyway – use black liquor, a pulp byproduct, as a fuel source for their pulp operations.

Several of the public companies' reports state that they expect to receive no subsidies for black liquor this year. And they're right.

But don’t tell that to Congress or the news media. Obama Joins in on the Black Liquor Two-Step documented how sloppy reporting by leading news organizations had allowed Democratic Congress members to claim they were saving money by excluding black liquor from the new Cellulosic Biofuel Producer Credits (CBPC) -- a program that black liquor couldn't qualify for anyway.

In the 12 days since that was published, the black-liquor silliness in Washington has gotten even worse, with Republicans joining the shell game. Sen. Jim Bunning (R-KY) tried to play taxpayer hero this week by proposing to “pay” for a new jobs program by closing the non-existent CBPC loophole. But Democrats blocked that effort because they have already committed to using the bogus savings for healthcare reform.

Bunning's effort to exclude black liquor from CBPC "is absolutely meritorious and should be adopted whatever else Congress does," The Washington Post opined in a fact-challenged editorial. "This particular piece of corporate welfare showers paper companies with about $2.5 billion per year . . . that encourages them to generate power with 'black liquor,' an 'alternative fuel.'" Nope. Not a dime has been paid to pulp and paper companies under CBPC.

Here are the 21 publicly traded companies, listed according to the amount of credits they received. The first number is the amount of black-liquor credits reported, the second is 2009 net income:

  • International Paper: $2.06 billion in black liquor credits; $2.36 billion net income
  • Smurfit-Stone Container: $654 million; $8 million
  • Domtar: $498 million; $310 million
  • MeadWestvaco: $375 million; $225 million
  • Weyerhaeuser: $344 million; $-545 million
  • NewPage: $304 million; $-308 million
  • AbitibiBowater: $276 million; $-1.553 billion
  • Verso Paper: $239 million; $106 million
  • Temple-Inland: $218 million; $206 million
  • Boise: $208 million; $154 million
  • Rayonier: $205 million; $313 million
  • Kapstone Paper and Packaging: $178 million; $80 million
  • Packaging Corporation of America: $176 million; $266 million
  • Clearwater Paper: $171 million; $182 million
  • Graphic Packaging: $147 million; $56 million
  • SAPPI: $136 million; $-251 million
  • Buckeye Technologies: $130 million; $154 million
  • P.H. Glatfelter: $108 million; $123 million
  • Rock-Tenn: $75 million; $279 million
  • Appleton Papers: $18 million; $25 million
  • Wausau: $14 million; $21 million


lkemp said...

Thanks for this excellent information. Where did you get the financial data? We'd love to get this information regarding the ballooning payments under the Biomass Crop Assistance Program, but USDA has not released any information.

D. Eadward Tree said...

To lkemp (and others who have asked about the source of the data): The reports are at Type in a particular company's name where prompted. Usually, the most recent 10-K or 10-Q is what you are looking for. I have not followed the Biomass Crop Assistance Program as closely; I do know that the payments will be made to sellers of biomass (such as logging operations), not buyers (such as pulp mills).