SEPTEMBER 2009

Early repeal threatens paper industry and workers in weak economy

The United Steelworkers (USW) has filed comments strongly opposing a Senate Finance Committee staff draft of legislation that if enacted would specifically target the pulp and paper industry for repeal of a vital tax credit.

The tax credit in question gives users a tax credit for the use of the alternative fuel when it is mixed with very small amounts of taxable motor fuel. The paper industry is the largest industrial user of bio-fuel in the United States. Last year, the IRS issued a ruling to qualify for the credit, provided companies met strict conditions mandated by the agency.

“This tax credit is encouraging paper companies to make greater use of bio-fuel, and in the case of one Maine producer, Old Town Fuel & Fiber in Old Town, it’s allowing this company to pursue a project to produce jet fuel in addition to pulp,” said USW president Leo G. Gerard. “In addition it is saving thousands of steelworker and other jobs.”

The tax credit began to cause controversy when International Paper and other companies reported the receipt of large tax credits from their use of the biologically-based by-product known as “black liquor” to produce in some cases, nearly all of the power that runs their mills.

“This was controversial because no one knew the massive size of the contribution the paper industry is making to increase the use of bio-fuels,” said USW vice president Jon Geenen, who handles the union’s relationships with the paper industry. “Repeal isn’t a solution. We believe the paper industry has significant expertise that could help jump start development of the second generation of bio-fuels. We think the tax credit is playing a large role in helping this happen, and we think any new legislation should create targeted incentives to encourage this behavior, not only with chemical pulp mills, but all across the paper industry.”

In April, Senate Finance Committee Chair Max Baucus (D-Mont.) and Finance Committee Ranking Member Charles Grassley (R-Iowa) criticized the tax credit and stated they were considering a move to repeal the paper industry’s eligibility for the credit. The USW immediately made contact with key Senators.

As a result, key Senate Finance Committee members expressed strong support of the tax credit. In May, dozens of rank-and-file USW paper workers visited Finance Committee members and many other members of the Senate and the House. “We made the point that the tax credit has turned out to be good for both jobs and for America’s energy future,” said USW Local 4-261 Vice President Dan Lawson, one of the leaders of the group that visited Capitol Hill.

In spite of all this work on June 11, Senators Baucus and Grassley issued their staff draft targeting the paper industry for repeal of the tax credit. “We feel the staff draft makes a mockery of the intent of Congress around increasing the use of bio-fuels, and is a specific slap in the face to the paper industry and to the tens of thousands of Steelworkers who work in it,” said Gerard.