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Photo by Chad Harder
No plume rises from Smurfit-Stone’s Frenchtown plant, shut down for seven weeks because of market conditions. But a fluke tax credit may help bring the mill into the black.
If his efforts prove fruitful, it could ensure that the bankrupt Smurfit-Stone Container Corp., which temporarily laid him off last November, receives a much-needed, multimillion-dollar shot in the arm from taxpayers.
If his efforts fail, well, paper companies were never intended to receive the money anyway, and the Frenchtown mill, set to start up again in the beginning of June after a seven-week shutdown, may sooner suffer the fate of an unfriendly market.
Paper companies across the country are cashing in on the alternative fuels tax credit contained in the 2005 highway bill. The credit intended to encourage the blending of biofuels with fossil fuels in vehicles. But after Congress modified the definition of bio-based fuel a couple years ago, paper companies discovered they could take advantage of it, too, by adding diesel to the decades-old practice of burning the pulping byproduct “black liquor,” earning $0.50 for every gallon of diesel burned.
“It just turned out that, by chance, the way the law was written, the paper industry could qualify,” Houseman says.
And, pulped themselves by the recession, paper companies will take whatever they can get.
Since late last year, when paper companies began applying for the credits, the U.S. Treasury Department has paid them hundreds of millions of dollars in credits and direct payments. It could cost taxpayers between $3 and $10 billion in 2009—much more than what lawmakers originally intended.
Smurfit-Stone is set to collect as much as $543 million through the credit, according to industry analyst Resource Information Systems, Inc. Houseman estimates the Missoula mill’s black liquor burning would generate between $40 and $50 million.
Smurfit-Stone spokesman Mike Mullin did not return calls for comment before press time.
“I think, combined with other efforts, that this is the tipping point for Smurfit-Stone in Missoula,” Houseman says. “This facility is constantly at a cost disadvantage because of higher fiber prices, and so anything that can help this facility will keep it around that much longer.”
But it’s an uphill climb for Houseman on Capitol Hill. Speaking at a Senate Finance Committee hearing in April, Chairman Max Baucus said, “Unless we plug this loophole, the federal government is liable for billions in credits for black liquor in 2009 alone, even though the credit was never intended for this fuel…We are working to undo that unintended consequence.”
The Obama administration also announced in May its desire to end the loophole. The 2010 budget proposal includes a rewritten alternative fuels credit, which would take effect October 1 if approved by Congress. To end payments sooner, lawmakers would need to pass separate legislation.
“Obviously Max was pretty upset about this because it ballooned into a much larger number than he was expecting,” Houseman says. “But there are some arguments that the credit actually was a very good stimulus. It couldn’t be more timely and is worthwhile recognition to an industry that on average produces 70 percent of its own electricity.”
Environmental groups, though, argue that the only thing the loophole has stimulated is the consumption of fossil fuel. In an April letter to Baucus and Sen. Chuck Grassley, ranking minority member of the Senate Finance Committee, a consortium of 25 environmental groups urged the closure of the loophole because they said it perversely increases fossil fuel consumption and puts environmentally responsible mills at a disadvantage. The Missoula-based WildWest Institute was among the groups that signed the letter.
“How will we ever get to a more sustainable future if the industrial dinosaurs of the past continue to fleece billions of dollars from the American taxpayers?” asks Matthew Koehler, WildWest’s director. “The reality is that Smurfit-Stone Container Corp. has plants in Asia, Mexico, Canada and the United States. They have 140 facilities around the world. In 10 years the stock of the company has gone down 99.9 percent in value. They are in bankruptcy. Their business model is clearly flawed. Let’s face that reality head on and decide what we want to do to use that facility out in Frenchtown for the future.”
In an effort to preserve his future at Smurfit-Stone—and its unexpected windfall—Houseman was one of two union representatives in Washington lobbying lawmakers. It was “Mr. Houseman goes to Washington,” he quips. “It’s been a very eye-opening experience.”
In addition, as soon as Houseman returned, Smurfit-Stone announced that 250 workers (not including Houseman) would return to work at the containerboard plant when it fires up its No. 3 paper machine the first week of June. But the question surrounding the on-again, off-again mill is, for how long?
“If the credit were to be retroactively repealed, or ended prematurely,” Houseman says, “I feel pretty strongly that it would really damage the paper industry and the wood products industry—not just in Montana, but pretty much across the country.”
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So, if taxpayers are footing the bill, can this be considered a forestry bailout?
Confused: Unfortunately you're not confused, as you pretty much have it right about this being a forestry bailout to the tune of $10 billion! Just imagine: Every man, woman and child in the US is being forced to hand over $30 a piece to the industrial dinosaurs in the pulp and paper industry. I guess if you want salt in your wounds, consider the fact that this $10 billion taxpayer funded boondoggle comes with the added bonus of needlessly burning through an extra 20 billion gallons of diesel fuel, including 100,000,000 gallons right here in our fair, inversion-prone valley thanks to Smurfit-Stone (who's getting $543 million from us taxpayers)! Yippie! But remember, it's all about jobs! You can learn more about this issue at this link to a letter that was sent in April to Senator Max Baucus, Chair of the Senate Finance Committee: http://www.environmentalpaper.org/Baucus.Grassley.Letter.htm Please contact Senator Max Baucus and ask him to end this tax loophole as soon as possible. You can email Senator Bacus via his website here: http://baucus.senate.gov/contact/index.cfm or call his DC office directly at: (202) 224-2651. Thanks to those who care enough to take action.
Smurfit Stone's purchases of alternative fuels for blending allow alternative fuels refiners to stay in business. Without the scale provided by their volume there would be no alternative fuels business.
Ah, what "alternative fuels for blending" is Smurfit Stone purchasing? According to this article they are simply adding diesel fuel to what they have been doing all along...Oh, and asking taxpayers to give them $543 million to do it! If we want to support alternative fuel businesses wouldn't it just be better to hand this $543 million directly to those businesses, instead of giving it to Smurfit Stone to burn an extra tens of millions gallons of diesel?
Keep in mind, these companies are also taxpayers -- on a much larger scale than individuals -- and their employees pay taxes, too. Burning black liquor combined with less than 1/2 of 1% of fossil fuel (required by federal law) allows pulp and paper companies to generate up to 66% of their own energy -- more than wind, solar, and bio-fuel companies combined. The black liquor was always combined with a fossil fuel, usually natural gas. They have taken a toxic by-product of manufacturing and found a way to capture the energy in a carbon-neutral manner. The companies have been more successful than the lawmakers imagined, so the payouts have been larger than the lawmakers had planned. The message here is, "we want you to be energy efficient -- but don't overdo it."
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