Janice A. Oser, Esq.

The column, "There Oughtta Be a Law" [March 2009] illustrated the difficulties of drafting laws and rules in such a way as to avoid ambiguity and unintended consequences. The column might also have been titled, "Be Careful What You Wish For, Legally Speaking." Recently, a fairly startling example turned up of a law that environmentalists surely wished for but that had unintended consequences – but with a twist. Perhaps the intended consequences weren't so hot, either.

A recent article in The New York Times told of the interest of senior Congressional lawmakers in repealing or limiting a tax credit meant to encourage companies to add biofuels (renewable energy sources) to fossil fuels such as diesel ["Lawmakers May Limit Paper Mills' Windfall," by Jad Mouawad and Clifford Krauss, April 18, 2009]. As the law is written, however, the tax credit also applies to companies that add a fossil fuel like diesel to a biofuel.

Originally enacted as part of a transportation bill in 2005, the provision was extended two years ago to apply to nontransportation companies as well. The transportation companies that were offered the tax incentive were, presumably, relying exclusively, or largely, on fossil fuels. With the extension of the credit to nontransportation companies, however, papermaking companies that had been burning only a wood-byproduct in their mills (pulp companies have been doing this for decades) have been adding diesel to the mix to qualify for the tax credit. As a result, they have been receiving what the Times article describes as "an unintended, billion-dollar windfall."

Hackles rise.

And yet.

It would seem that, when the tax credit was extended to nontransportation companies, it would not have been overly difficult to revise it at the same time so that the credit would be granted only to companies adding a biofuel to a fossil fuel, and not the other way around. But it is arguable that this would also have had an unintended consequence, namely, putting companies that were already using a biofuel, or had already blended it with a fossil fuel, at a competitive disadvantage.

The papermaking industry has fallen on hard times. Gone are the centuries-old New England mills. A spokesman for the papermaking industry is reported in the Times article as saying that an incentive to companies to lessen the adverse environmental impact of their operations should apply to "existing good actors" and not just to "new good actors."

That is, such an incentive should apply to papermaking companies that had been burning a biofuel all along, exclusively or blended with some diesel. One papermaking company official claims, in the article, that the diesel adds to the efficiency of boilers and other means of controlling pollution. These companies, the argument goes, should be on a level playing field with companies, including papermaking companies, that have been burning diesel and that added biofuel to qualify for the credit.

Critics of the papermaking companies that are adding diesel to a biofuel to qualify for the credit are outraged by what they characterize as cheating and tax avoidance. The credit is set to expire at the end of this year, and if it is extended, it will surely be revised.

If, though, the papermaking companies that have caused so much outrage may actually have a case, how might the the tax credit provision be revised so that it would be fair to "existing good actors" (companies that that use biofuels and were using them prior to receiving any tax credit for doing so) and would at the same time reward "new good actors" (companies that blend a biofuel with the fossil fuel they are using so as to qualify for the credit)?

Here's a stab at it: might it be feasible, and would it be desirable, to grant the tax credit to a company if and only if the company could provide evidence of the extent to which the cost to the company of burning a specified proportion of biofuel exceeded the cost of burning fossil fuel in its stead?

No? Gobbledygook? Well, we said it wasn't easy to draft a law. Would any readers like to give it a try? Send your thoughts to Jan@Eldercountry.com.