The healthcare bill that passed in the House of Representatives during a weekend vote earlier this month contains a provision striking an advanced biofuel producer tax credit used by pulp and paper companies that could have been worth up to $24 billion over ten years.

The provision was added late in the game as part of manager’s amendment by Rep. Chris van Hollen, D-Md., to raise money for the healthcare reform Democrats are working on. It would formally restrict the paper industry from eligibility for the $1.01-per-gallon cellulosic biofuel tax credit included in the 2008 farm bill.

Industry experts said the amendment fixes a loophole in the existing tax credit for second-generation biofuels that was being exploited by the paper industry.

Pulp producers have been getting renewable fuel tax credits for burning wood by mixing a tiny bit of biodiesel into what’s left over, “black liquor,” after making paper and burning it for power generation in the paper mills.

But the “black liquor” is a byproduct of pulp, not a biofuel feedstock and not a liquid fuel that was meant to benefit from the cellulosic ethanol tax credit, said Michael MacAdams, the president of Advanced Biofuels Association.

Moreover, the paper industry already receives a 50-cent-per-gallon credit for its production of black liquor through a separate credit for alternative fuels set to expire at the end of this year, McAdams added. That alternative fuel credit is for a wide range of non-transportation fuels, including propane and natural gas.

McAdams said he was not necessarily against the tax credit being given to the paper industry, but was in favor of the expansion of the definition of cellulosic to include algae for purposes of the $1.01 a gallon tax credit.

Matt Hartwig, a spokesman for Renewable Fuels Association, told Telvent DTN that, “We support closing the black liquor loophole and expanding the basket of feedstocks from which we make ethanol. By closing the loophole, money was saved that would help pay for the health care bill.”