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Buried in the health car reform legislation is a mention of a paper-making byproduct known as "black liquor." This substance, a wood-pulping byproduct, is utilized as a biofuel to generate electricity for paper-making companies throughout the U.S. Up until now, companies utilizing this black substance could claim a hefty tax credit related to the use of biofuels for production purposes.
The credits were granted in part due to the recycling nature of utilizing this "black liquor" as a means to reduce from-the-grid electrical consumption. However, the health care reform bills aims to change all of that. Black liquor has nothing to do with health care, but provisions in the bill will eliminate the associated tax credits completely.

Why eliminate the credits to companies doing the right thing by recycling their own byproducts? Its simple math. The credits account for a significant amount of spending on behalf of the U.S. government and government spending is one of the primary concerns that many politicians have over the health care reform bill. Eliminate spending from the bill here and there and many politicians become more accepting of the bill.

UPDATE: As it turns out, this "black liquor" legislation is complicated stuff, as is virtually all legislation coming from the government. Here's a breakdown of the legislation and possible "loophole" fix contained in the health care bill. The Internal Revenue Service made black liquor qualify for an alternative fuel credit when mixed with diesel and used to power paper plants. The IRS paid out some $7 billion in credits in 2009, but the alternative fuel credit came to a halt in December of last year. Now the health care bill has closed a potential "loophole" that some believe never existed to begin with. The loophole could have allowed paper companies to claim another credit termed a cellulosic producer biofuel credit. The IRS believed that paper companies could potentially qualify for this credit, but the Environmental Protection Agency disagrees. So, in conclusion, the new health care reform bill closed a black liquor loophole credit that may have never existed to begin with.

[Source: Green Car Advisor | Image: Chemrec - C.C. License 2.0]


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  • 26 Comments
      • 4 Years Ago
      There is a whole lot of wrong information being spread by this post and the resulting comments. Let me try and add some clarification.

      Disclosure, I work in the biofuels industry and in working to extend the biodiesel tax credit, have become very familiar with the black liquor issue. Closing the black liquor loophole was initially supposed to be used to raise revenue to pay for other expiring tax provisions, including the expired biodiesel blenders tax credit. While dismayed that the House of Representatives yanked our revenue raiser to help pay for healthcare (not in the Senate version), the argument that these things are unrelated, is well....unrelated. Closing the loophole is a measure that is known as a "Revenue Raiser;" not a revenue raiser for a specific thing, but a general revenue raiser to be used to pay for whatever the govt needs paid. That is, the govt pays for stuff by finding money where ever it can at a certain time. If funds could only come from related fields, we'd have a much harder time ever finding money when we need it.

      Now the controversy surrounding black liquor: The paper industry has been using black liquor for a very long time. They do this for a few reasons: It's recycling a by product, and allows them to run their plants self-sufficiently and off the grid. That's good. However, the fuel itself is very dirty, and it's use predates any alternative fuel credits. When these credits came into existence, the paper companies noticed that since they were using a biomass-based feedstock, they, by definition could qualify as an alternative fuel, even though black liquor is counter to the spirit of these credits. All they had to do was add some diesel to the black liquor, and viola, they had an alternative fuel, they could get a tax credit for.
      The purpose of these credits is two-fold:
      1. Decrease dependence on foreign oil.
      2. Encourage green(er) fuels.
      Claiming a tax credit for black liquor doesn't achieve any of these goals, since it's not green, and paper companies have been using it to their own benefit before we realized our oil addiction; their receiving the credit doesn't help make use more independent, since they are adding oil to get access to the credit. The paper companies saw a loop-hole, and the IRS was obliged to pay them. That's getting shut down.
      • 4 Years Ago
      It saves $24 billion over 10 years. That is a lot of subsidy. It was passed before, but the paper industry did not want it because it would mean inspection by the EPA. The paper industry had ignored it because of that. Remember this is the industry that polluted the environment with so much metallic mercury that people fear vast dead zones downstream when bacterial action converts it to methyl mercury. They do not want close scrutiny. Not so simple as the article above presents it. The following article adds a little.

      http://www.nytimes.com/gwire/2009/11/04/04greenwire-black-liquor-tax-credit-restriction-rides-on-h-15986.html
        • 4 Years Ago
        Nep gets a +1 for that one! :-]

        I was going to say: "Now can we PLEASE have the paperless society I was promised in the 1970s?"
        • 4 Years Ago
        W-w-wow.

        Oookie... i'll be buying eBooks from now on.
        • 4 Years Ago
        Indeed...the paper industry is one of the worst environmental disasters out there.
      • 4 Years Ago
      It's attempt to increase tax revenue by reducing or eliminating special tax credit loopholes. Considering how deep in debt the US government is, it needs to do that.

      The paper makers will still continue to use that waste for biofuel even without the tax credit, as it does reduce their operating costs and also makes good use of something they'd otherwise have trouble and expense to get rid of.
        • 4 Years Ago
        Frankly tax credits and deductions shift the tax burden to those who do not receive them or increase the deficit. It would be best that they are eliminated.
      • 4 Years Ago
      What the F....
      Why was there all this totally unrelated stuff in the health care bill? ... including education system tweaks...
        BipDBo
        • 4 Years Ago
        Budget cuts were not the only things hidden in this bill. There are also a lot of perks for states with representatives who were on the fence on their vote for the bill. Essentially bribing certain states was the only way to get this remarkably unpopular bill to pass.
        • 4 Years Ago
        So for the record, you guys are in favor of a $64 Billion giveaway to banks to act as an unnecessary middleman in getting student loans to students?

        Doesn't that sound like the "wasteful government spending" that you tea baggers say you hate? But I guess when billion dollar corporations benefit that's ok?
        • 4 Years Ago
        Crap like that is why people don't trust politics. You never know what you're going to get.
        • 4 Years Ago
        Are not those against the Health Care Bill also FOR budget cuts? Should this not be commended by the detractors of the Health Care Bill? It needed to be included as a method to help fund the HC proposals.

        Everybody wants budget cuts unless until it is something they personally like being cut.
        • 4 Years Ago
        Actually I work with the P&P industry. It has created some bad environmental messes in the past but has really cleaned up its act through some process changes and effluent treatment.

        Black liquor is actually half of the wood that goes into the mill, after it has been dissolved away by sodium hydroxide. It is the lignins and related substances, basically everything other than the cellulose fiber that is used tpo make paper. This is burned in boilers to generate electricity and steam, so that a kraft pulp mill can be self sufficient energy-wise.

        "Stop using dangerous bleaches that are dumped into waterways"

        The dioxins that used to come from elemental chlorine bleaching have been eliminated by switching to chlorine dioxide bleach. Interestingly, the environmental impacts of using the "oxygen bleached" or peroxide methods are worse than using chlorine dioxide, so don't buy it, it's pure marketing. Buy regular toilet paper instead. Of course, unbleached is the best.

        Also interestingly, dioxins are produced not only from elemental chlorine bleaching, but also from incomplete combustion of carbon in the presence of chlorine. So that is why PVC plastic should be kept out of incinerators (poly vinyl chloride). It is also why burning sea salt-impregnated driftwood in campfires at the ocean beach produces lots of dioxins!

        "start processing hemp and save thousands of acres of trees"

        And what grew on the land before hemp did? Trees? Why don't we instead plant trees after we make the first cut so that a forest can return and support wildlife?

        This sounds like the classic argument against hunting for food, as if eating factory farmed meat is somehow better. How do you think farm animals are fed? With lots of sterile farmland, that's how. How many wild animals live on that farmland? How many wild bison roam the great plains? A few hundred? How many used to before it was converted to monoculture agriculture? Tens of millions.

        As to the environmental effects of cutting down all the trees to feed the mills, I don't make excuses, however.
        • 4 Years Ago
        NEP:

        You don't think the government and the cherry picked companies they support could be the crooks they are if they announced it to everyone that they are doing what they do don't you think?

        They've got to hide their thefts and bullsht somehow somewhere.
        • 4 Years Ago
        That's just how the government works. If I remember correctly CARS was passed in conjugation with some bill for the Iraq war.
        jackearlnovak
        • 4 Years Ago
        Here's an idea for the paper pulping companies to "get off the grid". Drink your black liquor.
        Stop using dangerous bleaches that are dumped into waterways and start processing hemp and save thousands of acres of trees...oh... and those diesel generators running your machines...how about peanut oil or hemp seed oil for starters.
        • 4 Years Ago
        Good point in general, but education system tweaks (if you're talking about student loans) are a different bill
      • 4 Years Ago
      By the way, why is the on AutoBlogGreen? Has this stuff EVER been used to make automotive bi-fuel?
        • 4 Years Ago
        Maybe they're thinking that a tax break for non-automotive purposes takes away those dollars that could otherwise potentially be used to drive advancements in transportation technologies. That's a stretch but you only get 5 gallons out of a 5 gallon can, no more.
      • 4 Years Ago
      Paper mills will sell this stuff or continue to use it to offset expenses. It is a viable bi-product that can be used for fuel, there is a market for it and the government tax credit is not needed. Paper prices may go up as a result but this is not a guarantee.
      • 4 Years Ago
      Why in Sam Hill are we subsidizing these PRIVATE corporations?!?

      You say you want free markets? You say that capitalism is the best thing in the world? You don't want "big government" intruding into your lives? - Prove it! Let capitalism prove it can succeed on its own, without my tax dollars going to any FOR PROFIT organization or corporation.

      Stop this idiotic CORPORATE SOCIALISM!
        • 4 Years Ago
        No. This is yet another giveaway to billionaires so they can get richer while the poor and middle class subsidize their mansions and their sports cars. My comment was not directed to just the paper industry nor to polluting businesses to help curb emissions. I believe that American businesses are too dependent on sweetheart deals, loopholes and kickbacks - so much so that they are not competitive in the market. This will harm America in the long run.

        I take it from your comment that you imagine I have a double standard in favor of renewable energy and EVs. For the time being I want tax subsidies going to alternative energy like solar, wind and tidal power as well as electric cars. But only because the businesses they are competing against have been so heavily subsidized for decades that it would be almost impossible for them to compete. There is no level playing field when your competitors get billions in tax breaks, free land to use, no bid contracts and "looking the other way" on environmental abuses. Once they are established they will compete on their own against the dirty, polluting sources they rightfully replace but bear in mind that the deck is stacked against them and the miniscule subsidies they receive is still not equal to what the oil and coal industries get.
        • 4 Years Ago
        But isn't the whole point to start taxing industries which emit carbon so that the external costs of CO2 emissions become internalized to their bottom line, thereby encouraging private enterprise to figure out ways to reduce carbon emissions on its own? So shouldn't industries that do not emit carbon from fossil sources be rewarded over those that do?
      • 4 Years Ago
      Hurry up and do something with the stuff before rap artists make it a popular thing to drink.

      It's like 'purple drank' but way better
      • 4 Years Ago
      Glad to hear it, I heard about this last year and am glad to hear the gov't is taking corrective action.

      Listen to or read about it here:
      http://www.livingonearth.org/shows/shows.htm?programID=09-P13-00015

      Following the Paper Trail 4-10-2009
      "The paper industry is profiting from an obscure law intended to reduce dependency on fossil fuels. Only to qualify for the tax credit, they are using more fuel; they could gain as much as eight billion dollars from the government by doing so."
      • 4 Years Ago
      Apparently this bill only killed 2/3rds of the subsidy. Aargh.
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