Mainstream Media Finally Covers Black Liquor Loophole and Taxpayer Rip Off

For more than a year the Environmental Paper Network has been working to dig into the facts, the politics, and the cost of what is the year's biggest untold stories of taxpayer rip-off and an important lesson for lawmakers in unintended consequences that should inform current debates about energy subsidies and the pitfalls of corporate welfare in general.  We've been telling the world this story, and looking and encouraging the mainstream media to catch up.

Today, Washington Post journalist, Steven Mufson, has a dead-on piece entitled, "Paper industry pushed further into the black by ‘black liquor’ tax credits."

The Washington Post piece introduces the issue by saying,

The heart of the issue is the tax treatment of a substance called “black liquor,” a byproduct of the wood-pulping process at paper mills. The companies have burned black liquor to generate power since the 1930s. 

It was not the intent of Congress to reward that behavior, but the industry and its accountants persuaded the Internal Revenue Service to allow black liquor to count as an alternative fuel in 2009. Under that program, the paper industry received more federal money than almost any industry outside the auto sector.

Wow.

The spokesman for the American Forest & Paper Association, Chuck Fuqua, says in the piece, “Companies have a fiduciary responsibility to their shareholders to use the credits if it is advantageous for them,”

But, the thing is, they didn't just innocently, "use the credits if..."  It was consultants for a paper company that first found the loophole.  Then they pushed.  They lobbied.  They persuaded Senate allies to weigh and protect their bailout.  They cried they were being, "singled out" if the loophole was closed.  Those that know the facts of the case also know how dubious and obscure the IRS memos were that surprised everyone and trumped the EPA's unequivocal and contrary interpretation and sealed the deal for them to receive millions dollars more free money this year.

Some of us might find Mr. Fuqua's spin slightly hard to swallow.  It doesn't help that many of us remember Chuck Fuqua from his tour in the Bush Administration's Commerce Department and as one of the stars of a December 2007 Congressional Committee Report titled, Political Interference with Climate Change Science Under the Bush Administration.

But this is a serious issue that matters for people's pocketbooks and our environment right now.  That's why we've been working so hard to tell this story for so long.  It has already cost taxpayers billions and billions of dollars, padding corporate profits while achieving no public benefit.  It caused waste and overproduction of virgin tree fiber paper by companies seeking to cash in on free government money tied to volume, even when demand for the product is dropping.  It created an unfair environment for businesses to compete in a free market, subsidizing virgin tree fiber production while doing nothing whatsoever to support recycled paper manufacturing.  This risked closures and job loss at recycled mills, and disruptions through the whole recycling system, a major employer, and key to our national security and climate change management.

This story needed to be told, and we hope you will read the full article and share your comments below.