A provision that would prevent paper producers from claiming a second-generation biofuel producer credit won’t be included the final version of a health care reform bill, if U.S. Rep. Jim Oberstar has his way.

Included in the 1,990-page health care reform bill approved by the U.S. House Saturday was a provision that would help pay for the rest of the bill by disqualifying a large portion of the forest products industry’s renewable energy from the cellulosic biofuel producer tax credit.

The House version of the bill would preclude the paper manufacturing byproduct known as “black liquor” from credit eligibility. Prohibiting papermakers from taking the credit would generate about $24 billion over 10 years.

Black liquor is a wood byproduct considered a renewable fuel used to produce thermal and electrical energy. Paper mills generate, on average, about two-thirds of their own energy needs on-site from renewable biomass, including black liquor, according to Virginia Aulin, Boise vice president of corporate affairs.

Oberstar, though he voted in favor of the House health care bill, has already received firm commitments from congressional leaders about leaving the black liquor provision out of the final version of the bill, according to John Schadl, Oberstar’s communications director in Washington.

“I will strongly encourage modifications in the financing in the final version to ensure fairness for Minnesota,” Oberstar stated for the House record Saturday.

Schadl said it’s important to note that the black liquor provision is not included in the Senate bill and can be left out of the final version when rectifying the two versions in conference committee.

“Jim is not interested in having any language that prohibits the paper industry from availing itself to the black liquor credit,” Schadl said. “The paper industry has been doing this before the first generation. So why should the industry be penalized for being decades ahead of the curve.”

Schadl explained that the House version does not revoke the “first generation” or current black liquor tax credit, known as the alternative fuel mixture tax credit. That credit is set to expire at the end of the year. And while Congress may extend the provision for other qualifying fuels, paper industry officials have been told that black liquor may be specifically excluded from any extension.

Instead, the House health care reform legislation included a provision excluding black liquor from eligibility in the cellulosic biofuel producer tax credit.

Recently, the Internal Revenue Service released guidance indicating that black liquor may qualify for the cellulosic biofuels credit.

“While the industry believes that black liquor meets the IRS definition of liquid biofuel, the statute also appears to require registration of the fuel by EPA (Environmental Protection Agency). After careful review, we do not believe that EPA will find that black liquor, in its current uses, meets the registered fuel requirement,” said Aulin.

“However, we do believe that black liquor, a lignin-based renewable fuel used to produce thermal and electrical energy, should not be singled out or treated differently from other similar renewable fuels,” Aulin continued.

U.S. Rep. Chris Van Hollen introduced the legislation Friday to “improve and enhance the existing cellulosic biofuel credit.”

According to Van Hollen, the Second Generation Biofuel Producer Tax Credit Act is intended to modernize the existing cellulosic biofuel tax credit while ensuring that taxpayers get the biggest bang for their renewable energy buck by making clear that only qualified, non-food feedstocks capable of powering America’s energy future are able to claim the credit.

“In addition to supporting homegrown renewable energy, it is my hope that this legislation will be added to the Manager’s Amendment for the House health care reform package making its way to the floor this week so that the savings generated by these improvements can help pay for health care for all Americans,” noted Van Hollen in a press release.