Pine Tree Politics

UPDATE: Michaud Affirms Support For Existing Mill Tax Exemption – Additional Exemptions An Open Question

By Matthew Gagnon
November 6, 2009

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UPDATE: Since first running this story, I have heard back from Congressman Michaud’s office.  They directed me to speak with Scott Milburn, Director of Communications for the American Forest & Paper Association about the issue of tax credits in the Van Hollen amendment.

I spoke with Scott on the phone and received some clarification on the tax exemptions.  Essentially, he (and by extension the Congressman) contends that there has been some confusion about what tax credits are being affected by the Van Hollen amendment, and that the tax credits that I discussed below are actually not affected.

Milburn explains:

Just to clarify, there are actually two separate tax credits at issue here, not just one.

The Alternative Fuel Mixture Tax Credit is the one from which ME mills have benefited. That one is ongoing and is not threatened by the health care bill.

The second one is the Cellulosic Biofuels Producer Tax Credit. That is a relatively new tax credit and no one, not mills or anyone else at all in the whole country, has ever benefited from it.

It’s doubtful if that credit would even apply to mills and the EPA has already suggested it doesn’t. We at AF&PA believe it is unlikely that EPA would register black liquor for it and aren’t really pursuing this credit.

This second cellulosic credit is the one that’s being “eliminated” in the health care bill. As mills have never benefited from it and we don’t think EPA would register us for it anyway, we’re not taking a position on whether it’s in or out, but instead are asking Congress to make sure they don’t single out mills in an unfair way or change the law in a way that causes an unintended negative consequence for the renewable energy incentives from which the industry currently and rightly benefits, such as the AFMTC.

This has been a very moving target over the past several weeks for everyone, especially given that there has been more than a little confusion over the two different credits and keeping them straight.

For what it’s worth, Michaud has been a very big booster of the industry—both for the AFMTC and in making sure there aren’t any unintended negative ricochets from the cellulosic provisions.

If what Mr. Milburn says is accurate – and I have no reason to believe that it is not – then the vote on the Van Hollen amendment would not in fact “screw millworkers” as I had initially reported.  This was borne from confusion over the nature of the tax exemptions in the amendment as they were explained to me, and I thank Mr. Milburn for clarifying the issue with such great detail.

Update 2:

My original sources for the article have given me their take, and explained why they interpreted things the way they did:

What [Milburn] is referring to is the existing black liquor credit. The credit the Van Hollen amendment is referring to is a prospective one – [from the NY Times]:

“Last month, news of an Internal Revenue Service memorandum surfaced saying the the paper industry could be eligible for the credit with its wood-pulping byproduct that is burned as fuel to produce electricity for paper mills.”

The [AFPA] is correct about the existing black liquor credit.

But there is a potential that black liquor could be designated a cellulosic biofuel, which would make it eligible for potentially millions in tax credits. As far as I know, the industry group that contacted you has not made any statement about that.

What the van hollen bill, and Michaud’s vote, would do is to formally deny that credit, thus eliminating any chance that black liquor could fall into this category.

I’d like to apologize to the Congressman for using strongly worded language on this subject.  My opinion was based on what at least appears to be potentially incorrect information, and I am happy to correct the record.  The issue appears to be a matter of interpretation, and as such I should have chosen lead definitive/loaded language.  I will leave it at that.

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Original Post:

Olympia Snowe and Susan Collins may get all the national press for their involvement in national politics, but Maine does have two additional members it sends to Washington – Democrats Chellie Pingree and Mike Michaud.  Later this afternoon, both of them will be getting involved in the House fight over healthcare, and neither one of them plan to do their constituents, or the bill itself any favors.

But particularly egregious here is how Mike Michaud plans to screw his constituents.

My sources on Capitol Hill have been passing me information which indicates that Michaud is prepared to vote to eliminate International Paper and Lincoln Pulp and Tissue’s “black liquor” exemption in order to use those funds to help pay for the health care reform bill.

As my contacts note, voting against these mill workers is not likely to cause Congresswoman Pingree any sleepless nights, but for Mike Michaud – supposed friend of the mill worker, and indeed viewed as “one of us” by that crowd – this has the potential to really damage him politically.  That is, if anyone notices – and I think he is counting on it being obscure enough that nobody does.

Sadly (for Michaud), there are more eyes watching these things today than there were  even last year, and it’s time to shine the light on Congressman Michaud.

The ‘black liquor’ tax exemption is something that is essentially keeping the IP and Lincoln Pulp and Tissue plants open right now.  It is of massive concern to the companies and their workers, and Michaud’s vote against it (if he goes through with it – which I have on good authority he is strongly considering) is unquestionably a vote against his strongest constituency, and the entire basis of his strength in the second district.

Lincoln Pulp estimates that the exemption is worth roughly $10 million to them. If it goes away, there are serious questions as to the financial future of these plants.  If they close, the removal of this tax exemption will be the straw that broke the camel’s back.

Both Senators Olympia Snowe and Susan Collins are very strong supporters of the exemption – and before this move, he appeared to support it as well.  Now, with healthcare reform on the table, and pressure from both the White House and the Speaker of the House, Michaud is considering putting the screws to his base to appease the left in Washington DC.

Which begs the question – if the entire basis of Mike Michaud’s strength in the second district is a connection with the everyman, going to bat for the little guy in Washington, and supposedly being an independent thinking Blue Dog Democrat – why then is he so willing to sell out his constituency to help Nancy Pelosi pay for her reform bill?

Does that not fly in the face of everything he has built his image around?  Is he so confident that he is untouchable in the second district that he can talk like a moderate, then betray the interests of his district?

There is still a chance he will actually stand by the workers of his district.  I’ve been told that he plans to vote to cancel the exemption, but that it isn’t 100%.  As such I hope to see him stand up to the national party and actually go to bat for his constituents.

Careful, Mike.

Tags: Mike Michaud, Olympia Snowe