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April
20, 2009
Honorable Max Baucus, Chairman
Honorable Chuck Grassley, Ranking Member
Committee On Finance
United States Senate
219 Dirksen Senate Office Building
Washington, DC 20510-6200
Dear Senator Baucus and Senator Grassley,
We, the undersigned social and
environmental organizations, representing
members nationwide, appreciate your
investigation into the tax credit loophole in
the SAFETEA-LU 2005 transportation bill, which
is costing taxpayers billions of dollars while
perversely increasing consumption of fossil fuel
in contravention of the Act’s intention. We
urge you to end this loophole as soon as
possible.
Paper companies that normally rely on biomass
for fuel are receiving millions of dollars in
payments from the Treasury by increasing their
use of fossil fuel. International Paper in
March 2009 received a payment of $71.6 million
for one month of adding diesel fuel to its
biomass fuel. The alternative fuels clause of
SAFETEA-LU, was intended to increase the use of
ethanol and other biofuels in cars and trucks,
not increase the use of fossil fuels.
Paper companies are adding a small amount of
diesel fuel to each gallon of black liquor fuel
historically consumed by mills in order to apply
to the IRS and become registered as an
"alternative fuel mixer" and claim a
multimillion dollar tax credit.
A recent Goldman Sachs report on the loophole
states that paper companies use of this tax
credit is "the opposite of the what the
lawmakers intended when creating it." [1]
That's because it actually results in an
increase in the use of fossil fuel, thanks to
the scheme's method of adding diesel fuel to the
black liquor. Reports cited in the Washington
Post and The Nation estimate that the loophole
could result in $8-10 billion in payments to the
10 largest paper companies alone. An average
size U.S. pulp mill can burn more than 175
million gallons of black liquor a year in its
recovery boilers, which implies an annual tax
credit of $90 million, according to a J.P.
Morgan report cited by the Washington Post.
(Also, according to the Washington Post, this
past fall the Joint Committee on Taxation
computed the cost of extending the tax credit
for three months and projected it would cost a
manageable $61 million.[2] This was
before the paper companies figured out how to
exploit it.)
The massive payments adversely bias the free
market in an ecologically harmful way. The
losers include more environmentally responsible
producers using recycled paper content. Such
mills, which are critical to developing a green
jobs economy, are being put at severe
disadvantage. These billions of dollars of
payments are encouraging additional emissions of
greenhouse gases at some of the most polluting
and least efficient mills in America.
The exploitation of this loophole by paper
companies clearly violates the intention of the
original legislation by increasing use of fossil
fuel and costing taxpayers billions of dollars.
It is critical that Congress take swift action
to close this loophole.
Please direct your reply and any inquiries
regarding this letter to Environmental Paper
Network, info@environmentalpaper.org,
828/251-8558
Sincerely,
Conrad
MacKerron, Director, Corporate Social
Responsibility Program,
As You Sow Foundation
Rev. Charles
Lord, Coordinator,
Caney Fork Headwaters Association
Hope Taylor,
Executive Director,
Clean Water for North Carolina
John Wilner,
Director, CounterCorp
Susan
Kinsella, Executive Director,
Conservatree
Rev. Walter
Stark, Coordinator,
Cumberland Countians (TN) for Peace & Justice
Scot
Quaranda, Program Director,
Dogwood Alliance
Victoria
Mills, Managing Director, Corporate
Partnerships,
Environmental Defense Fund
Scott
Greacen, Executive Director,
Environmental Protection
Information Center
Rolf Skar,
Senior Forest Campaigner,
Greenpeace-US
Frank
Locantore, Director,
Green America Better
Paper Project
Tyson
Miller, Director, Green
Press Initiative
Jim Scheff,
Director, Kentucky
Heartwood
Kimberly
Baker, Forest and Wildlife Protection
Coordinator, Klamath
Forest Alliance
Ernie Reed,
Chair, Board of Directors,
Heartwood
Ginger
Cassady, Senior Campaigner,
ForestEthics
Mike
Peterson, Executive Director,
Lands Council
Eric Palola,
Senior Director, Forests for Wildlife Program,
National Wildlife Federation
Nick
Bennett, Staff Scientist, Natural Resources
Council of Maine
Donald B.
Clark, Coordinator,
Network for Environmental & Economic
Responsibility
Ginger
Souders-Mason, Director,
Pesticide Free Zone
Gwen
Marshall, Coordinator,
Protect Biodiversity in Public Forests
Tyson
Slocum, Director, Energy Program,
Public Citizen's Energy Program
Mike Brune,
Executive Director,
Rainforest Action Network
Whitney
Merchant, Founder and Director.
Sustainable San Anselmo
Mathew
Koehler, Executive Director,
WildWest Institute
------------------------------------
Footnotes:
1.
http://www.thenation.com/doc/20090420/hayes
2.
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/27/AR2009032703116.html
CC:
Stephen Chu, Secretary of Energy
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