Paper companies may claim about $6.6 billion from a U.S. tax break meant to discourage use of fossil fuels, and they’ll burn more diesel to get it.
The tax credit is an incentive to mix an alternative energy source with carbon-based fuel. Papermakers already generate electricity by burning a wood byproduct from pulp-making called “black liquor.” To qualify for the windfall they are adding diesel fuel to the black liquor, following the letter of the law while violating its spirit, said Verle Sutton, editor of the Reel Time Report, a unit of Los Angeles-based Forestweb Inc., a provider of data on the paper industry.
“It’s an absolute government boondoggle,” Sutton said. “These companies were not using fossil fuels. They only started because they needed it for the tax credit to work. So there’s a negative to the environment, not a positive."...
...Mason said he expected some papermakers to qualify for more from the U.S. Internal Revenue Service than their market values. Those companies are Boise Inc. of Boise, Idaho, with a market capitalization of $57 million as of yesterday’s close; Northbrook, Illinois-based KapStone Paper & Packaging Corp., worth $72 million; Chicago-based Smurfit-Stone Container Corp., worth about $23 million, and Verso, $35 million.
“This tax credit puts pulp-producing paper companies in the black,” said Dennis Ruggles, a director with Fitch Ratings Inc. in Chicago who follows the paper industry. “Many of them are losing money from making paper so the only money they’re making in some cases is from the tax credit.”KapStone Chief Executive Officer Roger Stone said his company hopes to participate in the program.>>>>MORE