Here is the story: Congress passes bill a to encourage fuel mixtures as a way to weaning the economy off oil. Subsidises usage of that fuel to the tune of 50c per gallon. Paper producers, who had been using a by-product of their process as a fuel for decades, now add diesel to it in order to claim the subsidy. On March 24 International Paper (IP) announced it had received its first check from the IRS for a one-month period this past fall. The total? A whopping $71.6 million. “It’s probably close to a billion a year of cash,” McClay said. “If you look at the economics of this business, to make that kind of money today you’d have to be on another planet.” IP’s stock rose 12 per- cent on the news. This might be fine if it were just a subsidy to the inframargin (that is, a deal that encourages behavior you were doing anyway); that happens all the time with these things. But the fact that it is encouraging diesel oil use is where the inefficiency lies. Oh yeah, one final twist. Apparently, consultants are useful. By adding diesel fuel to the black liquor, paper companies produce a mixture that qualifies for the mixed-fuel tax credit, allowing them to burn “black liquor into gold,” as a JPMorgan report put it. It’s unclear who first came up with the idea–Wrobleski told me it was “outside consultants”–but at some point last fall IP and Verso, another paper company, formerly a part of IP, began adding diesel to its black liquor and applied to the IRS for the credit.
Wow, that's just wrong. Adding fuel to liquor and paper? Instead of using less fuel, the bill causes companies to use more fuel by sneaking it. It just goes to show how some people would do anything for extra money.
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