Blame It On the (Black) Liquor, And Other Tales From A Strange Family of Tax Credits

In this week's saga of the Black Liquor Tax Credits, Dad got blamed for luring away a big customer, Son looks as if he'll really start paying off for some paper mills, and Congress decided to cash in on Grandson. Let's start with the oldest first:

Dad (AKA, the original black liquor tax credit): In advance of a hearing regarding whether his company illegally sold paper in the U.S. at below cost, an official of Asia Pulp & Paper noted today that his company's adversaries had been heavily subsidized by the U.S. government.

"Domestic producers gained market share between 2007 and 2009 and during that time we lost our largest U.S. customer, Unisource, to NewPage. NewPage lured them away with lower prices made possible by the enormous federal ‘black liquor’ subsidies they received," said Terry Hunley, acting president of APP Americas. "What we’re seeing here are hedge fund managers, who have taken over the American paper industry, looking for another government bailout."

Son of Black Liquor: A second pulp maker, Rock-Tenn, revealed this week that the IRS approved it as a Cellulosic Biofuel Producer last month, which means it can claim a lucrative tax credit for the black liquor (a pulp byproduct) it burned last year to produce power. The company estimates the after-tax value of these "Son of Black Liquor" credits to be $113 million, but it expects to net only $29 million because it will first have to return the original black liquor credits it earned last year. Kapstone, the first paper company to qualify for Son of Black Liquor, has similarly estimated it will net $22 million.

Grandson of Black Liquor: After many months of wrangling and revisions, the U.S. Senate gave a crucial thumbs up today to the Small Business Jobs Act of 2010, which includes a provision banning crude tall oil, another pulp byproduct, from receiving cellulosic biofuel credits. Most pulp makers had never dreamed of the acidic, corrosive liquid qualifying for a program intended for motor fuels, but that hasn't stopped Congress from claiming that closing this Grandson of Black Liquor loophole will save nearly $1.9 billion. (A friend of Dead Tree Edition has questioned my moniker for this bogus loophole, noting that movie monsters have sons but not grandsons. He suggested "Creature From the Black Liquor Lagoon" instead.)

For help in understanding the saga of the dysfunctional Black Liquor Tax Credits family, see:

• IRS Ruling Helps Pulp Makers Keep Black Liquor Billions
• IRS Brings Son of Black Liquor Back From the Dead; Ruling May Be Worth Billions to U.S. Pulp Makers 
• Congress and Paper Companies Covet 'Son of Black Liquor' Funds
• Grandson of Black Liquor: Congress Milks Another Pulp Byproduct for Bogus Savings

Greenpeace Is Back, But Time Warner Looks the Other Way

Nearly 16 years to the day after protesters hung a "Take The Poison Out Of Paper" banner on the TIME-Life building, Time Warner's paper-buying practices were blasted once again this week by Greenpeace.

But two Time Warner properties, TIME magazine and CNN, published articles about the Greenpeace study that failed to mention its listing of Time Warner's CNN Traveller magazine as one of the brands that "prop up Sinar Mas" by buying from its Asia Pulp and Paper (APP) division.

Other magazines singled out for criticism in "How Sinar Mas Is Pulping the Planet" on Tuesday include three Hearst brands (Esquire, Marie Claire, and Cosmo Girl) and Hachette Filipacchi's Elle -- though it wasn't clear whether Greenpeace was pointing the finger at those companies or at content licensees who publish Asian-language editions.

But the copy of CNN Traveller shown in the report is clearly an English-language edition, and the magazine's Web site indicates that the Asian edition is published by CNN.

The TIME article notes that Greenpeace "singles out some of APP's big global customers" like WalMart, Hewlett Packard, and KFC. But nowhere does the article mention Time's UK-based sister publication. And the CNN story doesn't list any of the companies that Greenpeace criticizes for buying from the Sinar Mas empire, which has repeatedly been accused of massive deforestation in Indonesia.

On July 11, 1994, three Greenpeace activists gained international media attention by climbing Time Inc.'s headquarters in New York and hanging a banner saying "TIME: Chlorine Kills -- Take The Poison Out of Paper". Since then, the Time Inc. branch of Time Warner has focused on studying the environmental impact of magazine paper and working with its suppliers to reduce that impact.

Related articles:

• Illegal Logging in Indonesia: Not Funny "The country’s enforcement of logging laws is a joke."
• Three, or Maybe Four, Green Magazine Pioneers: Both Time Inc. and Hearst have been green leaders in the U.S. magazine industry.
• Marcal Challenges the Green-ness of Greenpeace: Paper company accuses Greenpeace of setting its standards for paper too low.

Both Sides in Asian-Paper Debate Are Lobbying U.S. Printers

U.S. printers are hearing environmentally themed messages from both sides on the question of whether to buy Asian paper.

Ten North American environmental groups, including Greenpeace, the Sierra Club, and ForestEthics, issued a letter to various printers and paper buyers today asking them not to buy paper from Eagle Ridge Paper, claiming the merchant is a division of Asia Pulp and Paper (APP).

The letter claims that APP “is obtaining pulp and paper products from operations having adverse climate, human rights, and biodiversity impacts in Indonesia,” reports The Paper Planet. APP established Eagle Ridge as a front in the U.S., the letter adds, after APP “lost hundreds of millions of dollars in contracts” from such companies as Office Depot and Staples “because of its poor environmental and social record and its reported links to illegally obtained wood.”

Meanwhile, an APP-backed organization called Save Printer Jobs is urging U.S. printers to oppose anti-dumping penalties on coated paper from Indonesia and China. The U.S. Department of Commerce is scheduled to issue a preliminary ruling March 1on the case, which was brought by NewPage, Sappi, Appleton Coated, and the United Steelworkers union.

“A tariff on imported coated paper from China and Indonesia will hurt the U.S. printing industry” by driving up paper prices, the organization claims. “Higher costs will force many publishers to seek cheaper printing options in Canada and Mexico – or forgo printing some products all together.”

Save Printer Jobs also notes the “hypocrisy” of American mills claiming they are being hurt by government-subsidized Asian paper after the U.S. industry received about $9 billion in black liquor credits during 2009. NewPage and SAPPI received more than $400 million last year in black liquor credits, which critics claim is an abuse of a program that was intended to encourage production of new, environmentally friendly fuels.

“How can giant mills claim, with a straight face, that they are victims rather than perpetrators of market distortion?” Save Printer Jobs asks. “The giant mills and their hedge fund backers won’t give the taxpayers back their money from 2009, but it is not too late to stop their effort to slap an unwarranted tariff on imported paper that will raise costs for the printing industry and eventually drive U.S. printing jobs overseas.”

Some of the 10 organizations involved in today’s letter about Eagle Ridge have also opposed U.S. subsidies for black liquor, a pulp byproduct commonly used as a power source by pulp mills.

Related articles:

• Subsidized U.S. Mills Fight Back Against Subsidized, Cross-Dressing Coated Papers discusses the original filing of the antidumping case.
• Illegal Logging in Indonesia: Not Funny describes Indonesia's destructive forestry practices.
• Black Liquor Scorecard: $4.7 Billion Through September details what 21 publicly traded companies received in black liquor credits through the 3rd Quarter. Some of the companies have not reported 4th Quarter numbers yet.