A law to promote alternative fuels is giving paper mills an unintended multibillion-dollar tax windfall.
Paper companies discovered they qualify for federal tax credits because they use a byproduct in the paper-making process to power their mills.
International Paper has received nearly $72 million in credits for a single month. Verso Paper got a nearly $30 million credit for a single mill in Maine for the fourth quarter of 2008.
Congress offered firms 50 cents a gallon to blend renewable fuels like ethanol with traditional fossil fuels like diesel oil.
When turning wood into pulp, paper mills produce a liquid substance called "black liquor" that is often used as fuel to power the mill.
The tax credit, however, is only available to firms that produce a blend of renewable fuels and traditional fossil fuels. Late last year some paper companies realized they could qualify for the credit by adding small amounts of diesel to the black liquor used for powering their mills.
Senate Finance Committee Chairman Max Baucus is working on a bill that could end the credits for paper companies.