(Bloomberg) — Senator Ted Cruz’s victory in the Iowa
Republican caucuses emboldens other critics of federal biofuel
mandates just as the U.S. Senate is poised to consider a measure
that would gut the decade-old program.
The Senate could vote on proposals to spike the program’s
ethanol mandate or sunset the entire renewable fuel standard in
2022 as part of a broad energy bill now being debated in the
chamber.
Refiners, restaurant owners and other critics of federal
biofuel mandates seized on Cruz’s caucus win Monday in the face
of fierce opposition from ethanol backers, including Iowa
Governor Terry Branstad. The pro-ethanol group America’s
Renewable Future ran ads against Cruz and trailed him in buses
during campaign stops in the state.
“The verdict from the cornfields of Iowa last night was
that the RFS is no longer a third rail that GOP leadership
should be afraid to touch,” said Stephen Brown, vice president
of federal government affairs for refiner Tesoro Corp., in an e-mail. “They can man-up and do something constructive here to
confront this fatally flawed program. They key is finding the
right approach to help set that stage.”
Cruz, while professing his support for growing the biofuels
market, called for an end to subsidies for all forms of energy
and said he wanted to see the renewable fuel standard phased
out.
‘Clear Message’
“A clear message coming out of Iowa is that whatever
political influence ethanol used to have in the state, those
days are now over,” George David Banks, executive vice President
of the American Council for Capital Formation said in a
statement. “Very few Iowans are going to their caucus in support
of continuing to prop-up our failed federal corn-ethanol mandate
regime, and that’s not something likely to escape the notice of
politicians and policy makers in Washington.”
Bob Shrum, a Democratic campaign adviser, said the Cruz win
proves that declaring fealty to ethanol is “no longer necessary
politics in Iowa.”
“Ted Cruz, who I don’t agree with on much of anything,
proved that this is no longer the third rail of Iowa politics,”
Shrum said on a conference call organized by groups opposed to
the RFS.
No Setback
Ethanol backers pushed back against the idea the caucus
results were a setback. “The narrative coming out after last
night’s Iowa caucus that the domestic ethanol industry is
somehow on the ropes is false,” Bob Dinneen, president of the
Renewable Fuels Association trade group, said in an e-mail.
Although the ethanol industry’s political clout in Iowa may
have shifted, the legislative landscape hasn’t, said Bloomberg
Intelligence analyst Rob Barnett.
“Cruz’s victory disrupts the narrative that you have to
sing ethanol’s praise in order to win Iowa, but I wouldn’t
expect any immediate shift in biofuel policy as a result,”
Barnett said in an e-mail.
For one thing, Cruz’s win was far from a landslide;
renewable fuel standard supporters Donald Trump and Marco Rubio
captured a greater combined share of the caucus vote. And, in an
election year, it’s hard to advance any major policy changes in
Congress, particularly those that have staunch, influential
defenders on Capitol Hill.
One of those ethanol boosters, Iowa Senator Chuck Grassley,
cautioned against misreading the caucus results as a referendum
on biofuel mandates.
Ethanol Vote
“You look at one person that made a big deal out of doing
away with the RFS. He came in tops, but you got to remember that
other people supporting ethanol got 72 percent of the vote if
you add them all up separately,” Grassley, a Republican, told
reporters in a conference call Tuesday. “And then you have to
wait until who’s going to be the next president of the United
States, and we’re only through one state, so at this point I
wouldn’t draw too many conclusions about ethanol.”
America’s Renewable Future said “Big Oil” was claiming “a
false victory” in the wake of the Iowa results.
“Their No. 1 candidate has moved closer to ethanol and
further from oil,” the group said in an e-mailed statement. “He
has even committed to repealing subsidies for the oil industry.
Those are unmistakable signs that the relevancy and importance
of ethanol are dominant.”
The renewable fuel standard requires steadily escalating
volumes of biofuels to be blended into the country’s gasoline
and diesel supplies. Designed to shrink the nation’s dependence
on foreign crude and curb greenhouse-gas emissions, the law pits
oil companies and refiners such as Exxon Mobil Corp., Valero
Energy Corp. and Tesoro Corp. against farmers in the corn-rich
Midwest who are fighting to preserve the mandates.
15 Billion
Since 2005, when Congress passed the RFS, ethanol’s share
of gasoline consumption has jumped to 10 percent from about 3
percent, data from the Energy Information Administration show.
Production of the fuel increased to a record 14.9 billion
gallons in 2015 from 3.9 billion gallons in 2005, government
data show.
Oil companies and trade groups that put their muscle into
lifting the crude export ban last year now will dedicate that
attention to repealing or revising the renewable fuel standard.
Both the American Petroleum Institute and the nation’s top
refining trade group, the American Fuel and Petrochemical
Manufacturers, have singled out the issue as a top priority.
Diverse Coalition
They will be working with a diverse coalition of
stakeholders, including livestock producers, environmentalists,
motorcycle enthusiasts and boat owners.
“We’re going to continue to press for reform or repeal, so
when the opportunities present themselves, we are going to
pursue them,” said American Fuel and Petrochemical Manufacturers
President Chet Thompson by phone. “And if nothing else, we’re
going to find out where folks stand on the issue.”
The first major opportunity may come this week, as the
Senate considers sweeping energy legislation. Senator Pat
Toomey, a Republican from Pennsylvania, has proposed an
amendment that would do away with RFS mandates for traditional
renewable fuels while preserving existing requirements for
advanced, next-generation alternatives.
Toomey’s ethanol-only amendment is viewed as unlikely to
achieve 50 votes for adoption, much less the 60 that would
probably be necessary under a Senate agreement.
Sunset RFS?
Another possible amendment being discussed by Senate
Republicans would sunset the renewable fuel standard in 2022.
Current law sets annual biofuel targets through 2022; after
then, it is up to the Environmental Protection Agency to decide
how and whether to continue quotas.
“Ending the RFS in 2022 sure makes sense post-Iowa as a
starting point,” Tesoro’s Brown said.
Although an amendment to kill the RFS in 2022 falls short
of the immediate, full repeal that oil interests are seeking, it
would represent a political win for the sector — and could be a
stepping stone to broader changes. Thompson, with the refiners
group, said it also would help dispel a myth that the program is
already set to expire without intervention from Congress.
“We believe full repeal is the way to go, but we’re also
open to having discussions on other types of meaningful reform,
including a phaseout,” Thompson said.
If passed, the Senate energy bill would be negotiated with
a separate House-passed measure. It is unclear whether any
biofuel provisions, if added, would be retained as part of that
process.
To contact the reporter on this story:
Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net
To contact the editors responsible for this story:
Jon Morgan at jmorgan97@bloomberg.net
Elizabeth Wasserman