LOBBYING:

Some see energy bill helping money grow on trees

Long the bete noir of conservationists, paper and forest companies are using the climate debate to try to recast themselves as environmental champions, caretakers of natural resources capable of sucking large quantities of heat-trapping carbon dioxide out of the atmosphere.

With sweeping climate and energy legislation in the works, four paper companies and a trade group representing 175 or so forest and paper businesses and associations have hired lobbyists to work on those issues. And insiders suggest even more paper-company lobbyists will soon surface, as Senate rules allow up to 60 days between when they start work and when they must register their employment.

"Any time you're talking about what will be over time hundreds of billions of dollars, it's going to attract thousands of lobbyists," said Steve Ellis, vice president at Taxpayers for Common Sense. "The stakes are high, and every industry has to either protect themselves or get a piece of the action."

The forest and paper industry is not only trying to avoid being squeezed by energy legislation, they are also trying to seize an opportunity to persuade lawmakers that paper production is a green business deserving of tax benefits and other plums.

The timber trade is among myriad businesses asking Congress to bestow special concessions as part of energy legislation. But the commercial forest industry wields a unique weapon. Because its forests absorb carbon dioxide that is being blamed for global warming, the industry is arguing any help it gets will also help the climate. The industry also argues that the products it makes -- from paper to lumber to wooden furniture -- store carbon.

"If we are not competitive and we close businesses here, it will move companies overseas," said Rhea Hale, director for climate and air programs at the American Forest and Paper Association. "If we stop producing here and the trees were no longer continually replanted, you could potentially lose all the sequestration benefits that the industry provides right now."

If carbon caps here push commercial forest businesses overseas where there are no limits on greenhouse gas emissions, she said, it could result in higher levels of carbon dioxide.

"Balancing greenhouse gas reductions with a regulatory cost structure that preserves the viability of U.S. manufacturers, therefore, is both an economic and environmental priority," Hale said.

While some environmental groups have begun holding hands with paper producers on some green issues, not all agree that those who harvest wood are helping the climate, or that they will act as environmental stewards.

"The idea that the industry needs some sort of special benefit, I haven't seen a good rationale for it," said Michael Francis, director of the national forest program for the Wilderness Society. "Every time you turn around they are saying, 'You need to just trust us that we will do it, and you need to pay for it.' I don't subscribe to that."

Congress will have to decide whether to give concessions.

"We've had many industries who have asked for help during the transition to a clean energy economy," said Eben Burnham-Snyder, spokesman for the House Select Committee on Energy Independence and Global Warming. "We are making every effort to consider economic concerns to protect and grow jobs, while ensuring that we are keeping the environmental integrity of the legislation intact."

Wish list

Paper companies and the trade group for both forests and paper want to shape several pieces of energy legislation.

They are concerned about how they would be treated under a policy that would cap greenhouse gas emissions and let companies buy and sell credits for emission reductions. Paper and timber companies also are lobbying on tax issues, seeking to protect a tax break they have and to get a new one. And they want to be defined as a green alternative available to electric utilities if there is a new mandate requiring power companies to produce a portion of their electricity from renewable sources.

The paper industry argues it will be hit with higher costs under a cap-and-trade system for greenhouse gases because other businesses will begin buying lumber and wood scraps to make biomass energy. That will drive up the cost of a limited product, the American Forest and Paper Association said. Natural gas, which the industry also uses, is also expected to increase in price.

To compensate, forest and paper companies want Congress to give it credits that would cancel out some of the expected penalties for emitting carbon. While the draft Democratic House climate and energy bill provides some credits for energy-intensive industries, the trade group for forest and paper companies argues it is not enough. Some members of Congress agree, the trade group said.

"There's some acknowledgement that what's in the bill isn't adequate," Hale said. But he conceded, "There's lots of other groups out there vying for the allowances that are in the bill."

The draft bill, on which the House Energy and Commerce Committee has held a series of hearings, provides for a credit equal to 85 percent of the additional energy costs, the trade group said, versus the 100 percent industry prefers.

"It's just not adequate as written to mitigate all of the costs we're going to face," Hale said.

The companies cannot pass along increased costs to consumers because of competition from foreign companies, Hale said.

The paper and forest group opposes, however, adding any import taxes to a competitor's products imported from countries that do not penalize carbon emitters. The group said it supports free trade, as its member companies import raw materials and ships products overseas.

'Green offsets'

The forest industry wants to be included on the list of what Congress considers as "green offsets," the credits that companies can buy to counteract their carbon emissions. In recent years lawmakers have talked more favorably about giving those credits to trees planted on land that had not recently been forested, but not in commercial forests where trees continually are replanted. The House draft climate bill does not address U.S. forests at all, leaving that to U.S. EPA. But the forest-industry advocates still are optimistic they can get some language included.

U.S forests and forest products currently offset 10 percent of U.S. carbon emissions, Hale said.

Forest preservation is important not just for climate but for air, water and habitat reasons, said Laurie Wayburn, president of the Pacific Forest Trust, a conservation group advising Congress on forest policies.

"Clearly, it's in everybody's interest to have an incentive-based system that rewards land owners" who preserve and restore forests, Wayburn said.

But there needs to be better accounting, Wayburn said, of how much carbon that forest businesses are producing and what their trees absorb.

Forest businesses typically generate large amounts of carbon, said Francis with the Wilderness Society, because of equipment used to cut trees and then haul them to processing sites.

Both environmentalists and analysts agree it is far from automatic that commercial forests would be cleared if forest companies pulled out. The volume of trees in U.S. forests both private and public have been growing over the past 50 to 60 years, said Roger Sedjo, director of the forest economics program at Resources for the Future, a nonprofit that provides research on energy and environment issues.

"If [forest companies] pick up and leave," Sedjo said, "The trees aren't going to leave instantaneously."

At the same time, he said, forest companies already have been leaving the United States for South America and elsewhere because of lower costs abroad.

Wanted: tax breaks

Paper producers already qualify for a lucrative government payment they get for producing an energy source made from their leftover materials -- a liquid known as "black liquor," made during the pulping process that separates wood fiber from lignin, which gives wood rigidity. Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, has talked about eliminating payment for production of that alternative energy source.

Paper companies add fuel -- either diesel or natural gas -- to that liquid that they say helps it to burn evenly. Mixing black liquor with fossil fuels also qualifies the companies for a 50-cents-per-gallon tax credit paid to those who blend cleaner fuels with diesel or gasoline.

That credit is reaping billions of dollars for some paper companies, and some lawmakers have called that an abuse of a loophole. The credit is set to expire at the end of the year, and paper lobbyists are working to protect it through then.

Paper companies, meanwhile, are pushing for another tax credit for renewable-energy production.

Most paper mills also generate portions of the power they need by using the black liquor. The forest products industry on average generates two-thirds of its energy needs from black liquor, enough power to meet the annual needs of 2.7 million homes, the American Forest and Paper Association said.

That electricity in most cases is used only on site and is not sent to the power grid for use by others. Paper companies and the trade group argue that it should qualify, however, for the tax credit paid to renewable power generators.

If the tax credit was expanded to include the energy used at plants, "basically it would provide an incentive to invest further in green power generation," said Keith Van Scotter, president and CEO of Lincoln Paper and Tissue, a Lincoln, Maine, company with about 400 employees.

Van Scotter considers his business fairly green, he said, using wood waste products to generate 100 percent of the steam used at the plant and 50 percent of the electricity.

The company is located near other plants that take wood from the surrounding commercial forests and use it solely to generate power. Those companies qualify for the tax credit but his business does not, Van Scotter said.

"It's kind of an issue of a level playing field and competition for the [wood] resource," Van Scotter said. Because of the tax credit, those companies can afford to pay more for the wood.

"In our view if the government's going to be in the business of rewarding certain behaviors, we want to be there," said Van Scotter, who has hired a lobbyist to work in Washington on his company's behalf.

Sen. Blanche Lincoln (D-Ark.) sponsored legislation that would extend the credit to paper mills. There is a similar House bill from Rep. Michael Michaud (D-Maine).

But Ellis, with Taxpayers for Common Sense, said tax incentives should not be used for practices that businesses already are doing.

"The whole point of the using the tax code is to influence behavior that would otherwise not have occurred," Ellis said. Otherwise, he said, "it's just corporate welfare and padding the bottom line."

Higher wood prices would be a likely result of extending that tax credit, said Sedjo, with Resources for the Future.

"We're subsidizing the new competitor, then we're subsidizing the old competitor so he can compete with the new competitor," Sedjo said.

Renewable-energy mandate

Paper companies see another place where the move to green energy might bring profit, and lobbyists and now environmental groups are arguing on their behalf.

Congress is expected to pass a mandate requiring electric utilities to make a portion of their power from renewable sources. Those power companies that cannot make enough green power will need to buy credits from renewable providers.

Paper companies believe the biomass-generated power they make and use at their plants should qualify as a green credit they could sell to utilities. They argue that they would be competing for the wood against utilities and others who would buy it to make biomass and get the credit. They have been backed by the Sierra Club, Union of Concerned Scientists and the United Steelworkers.

"They have to get that energy somewhere, and we would prefer they get that from sustainable biomass rather than coal," said Ben Larson, national field coordinator of Union of Concerned Scientists' clean energy program.

Union of Concerned Scientists supports the credit in conjunction with a mandate that utilities make 25 percent renewable power by 2025, Larsen said.

Senators are discussing the possibility of making the paper industry's biofuel use a green credit that utilities could purchase to meet a renewables mandate, said Bill Wicker, spokesman for the Senate Energy and Natural Resources Committee.

The committee has several senators who have paper companies in their states, which gives that industry some pull as the renewables mandate is crafted. Committee Chairman Jeff Bingaman (D-N.M.) wants to have a bill by the Memorial Day recess.

"The paper industry has been pretty active and effective in communicating what they would like to see regarding their industry and a renewable electricity standard," Wicker said. "We're certainly listening."

But there is also "a long line of people who feel they should get some sort if credit in the [renewable electricity standard]," Wicker said. "We've been pretty disciplined in not showing a reflexive quick willingness to expand the definition of renewables."

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