Remember the other day when we heard that International Paper received $71.6 million from the IRS for burning an alternative fuel mix?
Well Domtar and AbitibiBowater want in too.
Domtar has retrofitted seven of its U.S. mills to produce the black liquor to qualify for the tax credit.
If approved, Domtar could see an estimated $225 million a year from the U.S. tax credit program.
The program was initially designed to encourage companies to add green energy like biodiesel to their fossil fuels to reduce America´s dependency of foreign energy.
For the forestry companies to qualify for the tax credit, they are actually adding diesel to the black liquor that they are already burning for steam generation. To qualify, at least 0.1% of taxable fuel such as diesel, gasoline or kerosene must be mixed with a qualified alternative fuel.
As a result of this tax credit, multi-national companies, like Domtar and AbitibiBowater, will likely increase production at their mills located in the U.S. at the detriment of their Canadian operations.
In addition to hurting the competitive position of Canadian producers, the incentive encourages producers to add even more pulp on the market even though an oversupply continues to deflate prices.
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