Black Liquor

An Industry Drunk on Taxpayer Cash

“Black liquor” is the name of a byproduct of the pulp and paper manufacturing process. It can be used as an alternative fuel source, although it is extremely uneconomical.

America’s big pulp and paper companies solved the cost problem by raiding the Treasury. “Black liquor” has for years received a generous taxpayer subsidy paid for by American consumers.

How big a gift is this? In 2009, International Paper (IP) booked $2.06 billion from the government. Without the credits, it would have had a loss of $1.4 billion. Well over a dozen other public companies benefitted from the tax credits. Taxpayers were out $6 billion for 2009.

The tax credit has expired and President Obama, to his immense credit, is against restoring it. But the industry is lobbying furiously to have it restored and stick it to consumers once again. It’s no secret why: a J.P. Morgan analyst once described the companies as “burning black liquor into gold.”

Meanwhile, the industry and its allies throughout the Empires of Collusion complain that forest and paper manufacturers in the developing world unfairly benefit from, you guessed it, government subsidies. The hypocrisy would be laughable if it wasn’t so harmful to consumer interests.