Domtar scores big black liquor' tax credit

Domtar Corp. says it's scored a $159-million (U.S.) tax credit in the third quarter 2009 from the U.S. government for the production and use of a so-called alternative fuel called black liquor.

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Bertrand Marotte - Montreal Globe and Mail Update

The North American environmental credit bonanza for forest products companies continues apace.

Domtar Corp. (UFS-T45.343.257.72%) said Friday it scored a $159-million (U.S.) tax credit in the third quarter from the U.S. government for the production and use of a so-called alternative fuel called black liquor.

U.S. forestry companies and Canadian firms with operations in the U.S. have been cashing in on the subsidy program that rewards them for using a mixture of black liquor, a byproduct of the chemical pulp-making process, and conventional fossil fuels such as diesel.

The credit helped boost Domtar profit to $183-million in the quarter, or $4.24 a share, from $43-million or $1 a year earlier. Revenues fell 6.2 per cent to $1.5-billion.

Montreal-based Domtar is also in line for $143-million (Canadian) in tax credits from a Canadian program to finance environmental upgrades at pulp and paper facilities. The $1-billion program was set up after Canadian forestry companies complained about the unfair advantage that the U.S. black liquor program provided to firms operating south of the border.

So far, 24 Canadian companies operating 38 mills have qualified for credits under the Pulp and Paper Green Transformation Program.

Montreal-based AbitibiBowater which is operating under bankruptcy court protection from its creditors said recently it's eligible for $33-million in tax credits under the Green Transformation program.

The tax breaks are a welcome development for the forestry sector, which is still reeling from the devastating impact of the global economic downturn.

This is a good example of federal support for our industry under the current challenging times, said AbitibiBowater spokesman Jean-Philippe Ct.

But there are calls for more support from the Canadian government in the face of proposed new U.S. subsidies, including incentives promoting the use of biomass energy and cellulose-based fuels.

We understand the U.S. is developing their own incentive programs. We support incentives on both sides of the border. We would support any additional incentives, said Mr. Ct.

Avrim Lazar, head of the Forest Products Association of Canada, has been calling for a coordinated national strategy to counter subsidies in the U.S. and Europe and to help the ailing forestry sector become a significant global bio-energy player.

The Canadian forestry industry has lost tens of thousands of jobs over the past few years as it struggles to cope with the impact of the global recession, shrinking demand for newsprint and other challenges.

Additional Information

Web Site: http://www.theglobeandmail.com

Category: Forestry>Mill News

Region: Quebec, Canada

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