Saturday, October 10, 2009

Canadians Belly Up to the Black-Liquor Bar

Following in the footsteps of their American competitors, Canadian pulp and paper mills received government approval Friday for $1 billion in black-liquor funds.

The Pulp and Paper Green Transformation Program is a response to a U.S. tax loophole that is keeping some American mills afloat and helping to push some Canadian companies toward or into bankruptcy. And it seems designed to avoid charges of unfair trade practices from mills in the U.S., which is the largest market for most Canadian mills.

The program will help finance investments to "improve environmental performance through increased renewable energy production or improved energy efficiency" at 38 mills owned by 24 companies, said a news release from Natural Resources Canada. The funds were assigned based on each company's production of black liquor, an energy-rich byproduct of the kraft pulp process. But eligible companies can use the funds at mills that do not produce black liquor.

The largest beneficiary is Domtar Corp., with $143 million. Domtar has already received $183 million this year in U.S. black-liquor credits, while its main American competitor, International Paper, has received $1 billion.

At least three of the Canadian recipients -- AbitibiBowater, Fraser, and Smurfit-Stone Container Corp. -- are in bankruptcy reorganization, while several others are struggling to avoid bankruptcy court. (Click here for a list of the recipients, the amounts granted, and the mills getting the investments.)

The Canadian govnerment is scheduled to pay out the money late this year or early next year, about the time that the $6 billion-plus U.S. program is slated to expire.

For more information about the controversial black-liquor program in the U.S., please see:

1 comment:

Anonymous said...

Is there a way to get information on the specific requirements regarding how the awarded money can be spent by each company, beyond the general statement in the agency release? Any speculation if not?