Storming the Corn Palace
Ethanol was once viewed as a possible solution to the nation’s energy woes. But now, an array of interests appear poised to kill it once and for all.
by Coral Davenport
Updated: September 13, 2012 | 9:15 p.m.
September 13, 2012 | 3:00 p.m.
AP PHOTO/NATI HARNIK
Cropped out? The use of corn for fuel may be on the wane.
The era of ethanol may soon be coming to an end.
The corn-based biofuel that just five years ago was hailed as an energy panacea—a way for America’s farmers to grow the country’s energy independence, reviving the heartland along the way—is under attack as never before. Launching a sustained campaign against the nation’s ethanol policies is a powerful and diverse coalition of interest groups, including oil companies, gasoline refiners, environmentalists, automakers, grocery manufacturers, pork and cattle farmers, and humanitarian advocates.
In their crosshairs is the law that essentially created the nation’s ethanol industry, growing it from a tiny niche product to a major agribusiness that has made billions of dollars for companies such as Archer Daniels Midland and for America’s farming communities.
“It’s hard to find anyone who doesn’t hate ethanol,” said Scott Faber, vice president for government affairs at the Environmental Working Group. “It costs you more money in the grocery store, at the gas station, at the engine-repair shop; it lowers your gas mileage; it lowers your engine efficiency.… It’s bad for virtually every American except for a handful of corn farms, ethanol refiners, and ethanol lobbyists.”
The fossil-fuel industry agrees. “What we’re seeing is just a shrinking of the core of corn-ethanol supporters and a diverse confederation of opposition, bigger and stronger than it’s been,” said Stephen Brown, a lobbyist with Texas-based oil-refining company Tesoro.
Humanitarian groups say that government-mandated ethanol production is contributing to soaring food prices, a situation exacerbated by this summer’s drought. “The 2012 drought isn’t an aberration,” said Marie Brill, a policy analyst with the group ActionAid USA. “We need either a more flexible ethanol mandate in times of drought, or to phase out the corn-ethanol mandate altogether.”
The Renewable Fuel Standard program was created by the Energy Policy Act signed by President Bush in 2005 and updated in 2007. It requires gasoline refiners to buy and blend an increasing volume of ethanol each year, up to 36 billion gallons by 2022. Only 15 billion gallons of that amount can be corn-based ethanol; the rest must be “cellulosic” or advanced biofuels made from nonfood crops such as switchgrass.
Here’s where things start to get difficult: Sometime in the next year, U.S. ethanol producers will hit that 15 billion-gallon cap for corn-based ethanol. Already, the massive diversion of a food crop to fuel has contributed to skyrocketing prices for corn and grain—a situation that’s great for corn farmers but increasingly problematic for everyone else who has to buy grain, from cattle farmers to grocery manufacturers to food shoppers. The problem was exacerbated this summer after the drought pushed food prices up even further, prompting a slew of governors, advocates for the poor, and livestock farmers to beg the Environmental Protection Agency to temporarily waive the renewable-fuels standard.
In theory, the problem should be eased by the fact that the law caps production of corn ethanol at 15 billion gallons—and the authors of the RFS envisioned a future where the market eventually would transition to using mostly nonfood biofuel crops. But despite years of public and private research, there is no affordable non-corn biofuel on the U.S. market. While Energy Department researchers have managed to produce biofuels from switchgrass and other nonfood crops, none of them have been produced at a scale or price that gasoline refiners can afford.
Meanwhile, refiners must continue to buy and mix corn-based ethanol with gasoline at a time when U.S. gasoline consumption is actually declining, due to a combination of slow economic growth and higher fuel-efficiency standards. So there could soon be much higher concentrations of ethanol in the U.S. fuel mix, from about 10 percent today to 15 or even 20 percent in the coming years. That worries U.S. automakers, who say that the higher ethanol blends could corrode standard engines.
All of these concerns come on top of a long-standing push against ethanol by environmentalists, who say it produces nearly as much carbon pollution as fossil fuels if emissions from production are counted; and by the oil industry, which views ethanol as a threat to its market share in transportation fuels.
Striking the law from the books, however, won’t be easy. The ethanol lobby, backed by corn farmers, is gearing up for the fight of its life. The group Growth Energy, which represents corn farmers, ethanol producers, and manufacturers of farm and ethanol-refining equipment, has launched an all-out campaign to save the Renewable Fuel Standard. The industry has hired the Glover Park Group, a powerhouse lobbying firm, to advocate on its behalf. This week alone Growth Energy spent three days pleading its case with lawmakers. And the industry still has powerful friends in Congress, most notably Iowa’s two senators, Republican Chuck Grassley and Democrat Tom Harkin, who will fight tooth and nail to keep the law in place.
The ethanol lobby will make a compelling case: The Renewable Fuel Standard program has been a boon to struggling farm communities.
“I think at the end of the day we’ll win this, because we provide jobs, we revitalized the rural economy,” said Tom Buis, CEO of Growth Energy. “You’ll see the power of the farm lobby.”
Even ethanol’s opponents concede that’s true; the program has been “like a Marshall Plan for the Midwest,” said Tesoro’s Brown.
And the ethanol lobby’s ace in the hole is how that plays in 2012 swing states. The ethanol mandate has driven economic recovery in farm states such as Iowa, Ohio, Wisconsin, and Colorado—all states that President Obama and GOP rival Mitt Romney need to win in November. Both candidates favor keeping the RFS.
But after the election, it may be a different story. As the opposition to ethanol from ever more constituencies grows, so too could opposition in Congress.
“If Congress were to take the lead, would President Obama or President Romney stand in the way? Probably not,” said Robert McNally, president of The Rapidan Group and a top energy adviser in the George W. Bush administration.
Faber of the Environmental Working Group put it this way: “It’s just a question of when the mandate will end, not whether it will end.”