Canada to help pulp firms in tax credit fight

By Allan Dowd

VANCOUVER, British Columbia (Reuters) - Ottawa will help Canadian pulp producers struggling with a U.S. tax windfall awarded their American rivals, but has not decided yet what form the aid will take, Natural Resources Minister Lisa Raitt said on Thursday.

Canada also expects the White House will try to end the "black liquor" tax credit for U.S. producers in October, three months earlier than scheduled. But Raitt said Congress might fight that and try to extend it into next year.

She said details of the Canadian response were still being worked out, but stressed it would not mirror the U.S. program.

"We are looking at all the options. Industry has been very clear it is a situation of seismic proportions," Raitt told the PricewaterhouseCoopers conference of forestry industry executives in Vancouver.

Canadian producers have expressed anger over a new interpretation of U.S. tax law that has allowed U.S. pulp mills to claim millions of dollars in alternative energy tax credits for burning black liquor in their power plants.

The material is a byproduct of pulp production that mills have long reused.

Under the U.S. law, companies that blend biofuels with fossil fuels and reduce their dependence on fossil fuels are eligible for tax credits.

U.S. pulp makers have recently been adding diesel to black liquor to qualify for the credit, which a congressional analysis said could be worth $3 billion a year for the industry.