Clean | Green | Sustainable

Black Liquor Scorecard: Pulp & Paper Companies Take $6.5 Billion from US Taxpayers in 2009

Posted by Matthew Koehler on March 17, 2010

Smurfit-Stone Container Corp took home $654 million from US Taxpayers, while their net income was only $8 million in 2009

Over the past year I’ve written a few articles (here and here) about the US pulp and paper industry figuring out how to use an unintended tax loophole in the 2005 highway bill to basically transfer billions in US taxpayer funds right into their own packets.

Last May, the Washington Post provided extensive coverage of the black liquor boondoggle in an article that opened up with: “The Obama administration wants to stop billions of dollars of tax credits and direct payments to the paper industry under a tax provision originally intended to promote alternative fuels for motor vehicles.” The same article included this statement from a US Treasury Department official, “Right now this does appear to be a transfer from the taxpayers to this industry.”

Talk about a “redistribution of wealth!” Where are the tea-baggers complaining about “socialism” when you need them, eh?

Sadly, for the most part, this multi-billion dollar transfer of taxpayer funds to the pulp and paper industry hasn’t gotten nearly the coverage it deserves by the mainstream press. That in itself is just really strange, especially since the US Government appears to be handing out taxpayer dollars like candy at Halloween and Americans of all political stripes are fed up and rightfully worried about our future.

Perhaps the mainstream newspapers in this country are a little gun shy about giving the pulp and paper industry a black eye.  For example, here in Missoula, Montana the local daily paper – the Missoulian – over the past year has completely failed (unless I missed it somewhere) to let their readers know that the Smurfit-Stone Container Corporation (while in bankruptcy and closing mills in Montana, Michigan and elsewhere) collected over half a billion dollars from US taxpayers in 2009. To make matters more interesting, Smurfit’s net income for 2009 was only $8 million.  Seriously, is this not a “newsworthy” item?

The fine folks at the Dead Tree Edition blog have put together more detailed information about the black liquor tax credit, which includes a detailed scorecard showing which pulp and paper corporations profitted the most on the backs of US taxpayers. That blog post is pasted below or available here. – mk
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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 about $3 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, three recipients – Weyerhaeuser, NewPage, and Sappi – together lost $1.1 billion last year despite receiving nearly $800 million from the black-liquor program that expired on Dec. 31. AbitibiBowater, the one recipient that has not reported earnings for the 4th Quarter, almost certainly lost hundreds of millions as well.

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: $284 million (estimated); $ – 801 million through 3rd Quarter
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

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