'Black liquor' deal goes sour

A deal environmentalists thought had been worked out to stop mostly out-of-state paper mills from cashing in on Maryland's renewable energy law by burning so-called "black liquor" has come unglued. The state's only paper plant in Allegany County has backtracked on a pledge not to oppose the move in return for being allowed to keep collecting from the state's utility customers for another five years.

The New Page mill in Luke and several others out of state have reaped millions of dollarsfrom Maryland ratepayers over the past eight years by taking advantage of an obscure provision in the "renewable portfolio standard" law, passed in 2004 to reduce the state's reliance on climate-warming fossil fuels like coal, oil and natural gas.

Under the law, Maryland's electricity suppliers must increase the amount of power generated  from renewable sources to 20 percent by 2022. They can either produce it themselves, or buy "renewable energy credits" from facilities generating power from a variety of specified sources, including wind, solar, geothermal and poultry manure. The state's electricity buyers pay for those credits through slightly higher rates.

But the law also recognizes as renewable fuel wood scraps and a tarry substance known as "black liquor," a carbon-rich byproduct of the paper pulping process.  As a result, the New Page mill and others in Virginia, Pennsylvania and Ohio get subsidies for what is a traditional industry practice of generating power for their plants by burning their waste products.

Though many if not most lawmakers thought the law was targeted at boosting new wind and solar projects, the lion's share of the subsidies paid out by ratepayers have gone to paper mills - most of them out of state, according to the Maryland Energy Administration. Paper mills collectively received $3.8 million in 2011, 45 percent of the credits cashed in that year, according to state figures, compared to 14 percent for wind and 1 percent for solar.

 The Luke mill only collected about $350,000 in 2011, but the plant's owner, New Page, has recently emerged from Chapter 11 bankruptcy, and advocates for changing the law said they were willing to make allowances for Maryland's only mill if it wouldn't fight legislation in Annapolis to curtail the black liquor and wood waste benefits. 

So a tentative deal was struck. The bill's chief sponsors, Del. John Olszewski Jr., a Baltimore County Democrat, and Sen. Rob Garagiola, a Montgomery County Democrat, said they'd offer an amendment that would essentially grandfather the Maryland mill and one other, so they could continue to receive marketable renewable energy credits for their longstanding practice.  Richard Wattro, the mill's manager wrote the lawmakers saying the company "does not intend to oppose" the bill.  But he qualified that by saying the mill's neutrality was dependent on a final review of the legislation.

Just days before a Senate hearing on the legislation, Wattro informed the lawmakers that New Page had decided to oppose the change after all. In doing so, it sided with the owners of out-of-state paper mills getting credits, as well as with the paper industry's trade association. Spokespeople for the American Forest and Paper Association and the out-of-state mills argued that cutting out the supply of renewable energy credits that the paper mills sell could drive up their price, ultimately costing Maryland ratepayers more.  A Maryland Energy Administration official testified that was not the case, while proponents noted that other states limit or do not permit such renewable energy credits for paper mills that burn their waste.

Wattro, who's been manager of the Luke mill for 32 years, told lawmakers the income the mill derives from renewable credits are needed and will "create a financial hardship" for a facility employing 880 people that is struggling amid a general decline in paper usage. He complained that the company had been in the state for more than 125 years but was being cut out for not being a new source of renewable energy.  He declined to explain the company's switch, other than to say the bill could hurt New Page as a corporation, even though it doesn't have any other mills cashing in on Maryland's law.

Garagiola was so miffed by the mill's change of position that he told the facility's manager at the Senate hearing that he was disinclined to offer any amendment now to grandfather the Luke mill.

"They have been pressured by the paper industry outside of Maryland to walk away from a good compromise and a good-faith promise they made to the legislators of Maryland," said Mike Tidwell, head of the Chesapeake Climate Action Network, which pushed for the change and negotiated the deal with Luke.

"It’s very possible the industry will wind up causing harm to that paper mill," said Tidwell.  "That’s part of the tragedy," he added. "These outside interests have forced the Luke paper mill to put their own workers at risk."

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