Tax credit preserving Maine jobs, resources

Posted April 30, 2009, at 7:57 p.m.

Recently, I have heard and read a number of harsh and unfair criticisms with respect to the legitimacy of paper mills utilizing an existing, federal renewable energy tax credit when creating energy from a waste byproduct — a dark, sludge-like substance referred to as “black liquor.” I first learned how crucial this tax credit could be in assisting paper mills during these trying economic times in a conversation with Domtar Paper General Manager Tim Lowe and during my visit to the company’s mill in Baileyville in April. Subsequently, Lincoln Paper and Tissue CEO Keith Van Scotter recently noted publicly and to me, personally, that the credit could help keep the doors open at his paper company in Lincoln.

Therefore, I believe it is imperative that the facts are known about the history of this vital tax credit and its utilization by a critical industry whose own economic decline — starting with a $2.1 billion loss in the fourth quarter of 2008 alone — was caused through no fault of its own but rather directly mirrors the collapse of the nation’s financial institutions resulting from unbridled greed and excess on Wall Street.

At the center of the debate is a 50-cent-per-gallon tax credit aimed to increase America’s energy independence by encouraging the use of alternative fuels, specifically liquids that are a blend of renewable and fossil fuels. In December 2007, the tax credit was specifically modified in statute by Congress and signed into law as part of Public Law 110-172, making eligible pulp and paper companies as well as other industries that use alternative blended fuels. Moreover, underscoring its credibility, any industry seeking to use it must first petition the Internal Revenue Service for approval before it can claim the credit. A number of companies have ultimately been approved.

It should also be noted that the percentage of fossil fuel this industry blends into the biomass fuel is de minimis — one tenth of one percent — as compared with the level of fossil fuels in other blended fuels for which no one is questioning use of the credit. Shouldn’t this kind of behavior that propagates greater energy efficiency and less reliance on foreign sources of oil be rewarded?

Yet, inexplicably, there are those who now seem intent on penalizing the paper industry for being ahead of the curve in employing energy efficiency technology when so many were behind it. Meanwhile, we’re spending $30 billion to bail out an auto industry, which could have avoided this predicament in the first place if they had worked with Sen. Dianne Feinstein and me when we first championed improvements in the Corporate Average Fuel Economy standards nearly a decade ago to increase efficiency and reduce consumption of petroleum-based fuels.

Furthermore, the federal government spent $787 billion on an economic stimulus package because we rightly decided it must be our national public policy to save and create at least 3 million jobs. In this vein, why would we repeal a tax credit being legally applied to an industry that was profitable until the recession, that is le-gitimately using alternative liquid fuel, that employs 1.3 million Americans and is a top 10 manufacturing employer in 42 states?

As an expert witness testified at a Senate Finance Committee hearing last week, revoking the tax incentive this year would violate two important principles that should guide energy tax policy. The first is “technology neutrality,” meaning that Congress should not try to pick winners and losers among competing technologies; and second, that Congress should consider industry economics. Ending the credit this year would violate both tenets.

Indeed, the paper industry lost $2.1 billion in the fourth quarter of 2008 alone and 44 paper mills in America have already announced temporary closings in 2009. Indisputably, these are desperate times for the economics of this industry with 13 mills in Maine employing almost 8,000 — and this incentive is saving both precious resources and indispensable jobs in some of the most rural areas of our state and nation. This credit should be preserved, and I will continue the fight to do just that.

Olympia Snowe, Maine’s senior U.S. senator, is a member of the Senate Finance Committee.

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