Monday, September 27, 2010

U.S. Taxpayers' Black Liquor Tab Surpasses $30 Billion

The cost of "green" energy subsidies involving the pulp and paper industry shot well past $30 billion today -- with not a cent of it doing anything to help the environment.

President Obama today signed the Small Business Jobs Act of 2010, a package of goodies that is supposedly deficit neutral partly because of nearly $1.9 billion in "savings" from closing the non-existent "Grandson of Black Liquor" loophole. The alleged savings come from making crude tall oil, a highly corrosive pulp byproduct, ineligible for Cellulosic Biofuel Producer credits, which are intended for alternative motor fuels.

Because crude tall oil has never qualified for such credits and by all rights never could have, the law's provision is just a Congressional ruse to add to the federal deficit while pretending not to do so.

Regular readers of Dead Tree Edition know too well the sad story of how American taxpayers have been ripped off with black liquor tax credits, Son of Black Liquor, and Grandson of Black Liquor, but the story bears re-telling.

The idea of using pulp byproducts to fleece taxpayers first came to light early last year when some paper companies revealed they had hijacked another biofuel program. Alternative Fuel Mixture Credits were supposed to encourage greater use of biofuels, but the paper companies snagged billions in such credits for burning black liquor as a fuel source, which they had been doing for decades anyway.

Despite howls of protest from Congressional leaders, Congress did nothing to plug this loophole and simply let the law expire at the end of 2009. Aided by friendly rulings from the IRS, publicly traded pulp manufacturers received well over $6 billion in black liquor tax credits, and privately held companies probably received a couple of billion more.

A good whipping boy
But Congress didn't completely ignore the black liquor tax credits. Smart politicians know a good whipping boy when they see one, especially when they can whip up money for pet programs.

Riding public disgust with the original black liquor tax credits, Congressional Democrats proposed closing the "Son of Black Liquor" loophole. That is, they made black liquor ineligible for CBP credits starting this year. Never mind that even pulp makers didn't think black liquor would qualify for the credits.

A compliant Joint Committee on Taxation said that closing the non-existent loophole would save a bit more than $23 billion, and Congress then applied the "savings" toward "paying for" ObamaCare this past spring. The watchdogs of the press mostly chewed on and regurgitated Congressional press releases touting the resulting savings that supposedly helped make ObamaCare deficit-neutral.

The IRS got back into the act this summer with an odd ruling that made black liquor burned prior to this year eligible for CBP credits. It has already approved two pulp manufacturers for the credits, while others that have lined up at the trough are awaiting word on their applications. Preliminary indications are that the net value of the credits to paper companies will be "only" in the hundreds of millions -- unless Congressional bill writers decide to close this latest loophole and use the savings for another new project.

So let's recap the tab -- probably $8 billion-plus for the original black liquor credits (the only money in this story that actually went to the paper industry), $23.6 billion for Son of Black Liquor in ObamaCare, untold millions for pre-2010 Son of Black Liquor, and nearly $1.9 billion for Grandson of Black Liquor.

So when your daughter or granddaughter asks you in a few years why the U.S. didn't do more to wean itself from dirty energy sources and foreign oil imports, just tell her we were too busy adding to the federal deficit while pretending to be fiscally responsible.

For more details on the black liquor saga, please see:

1 comment:

Mike said...

Unbelievable isn't it? The collusion between enviro groups and paper companies is staggering. And at such a cost to the everyday consumer. There's a great report on it all over at Definitely check it out.