Ethanol loses its potency in the Iowa caucuses

By James Pindell. The Boston Globe

For years presidential candidates had a choice: They could either pledge unwavering support for federal programs propping up the corn-based ethanol industry or they could lose the Iowa caucuses, the first contest in the presidential nomination season.

Iowa is the largest producer of ethanol in the country. The industry contributes $5 billion to the state’s economy, including 47,000 jobs. And Iowa leaders of both political parties have long leveraged their presidential election clout on ethanol, successfully changing national agricultural and energy policies and shifting federal spending priorities. But their efforts also caused a backlash among those skeptical of Iowa’s out-sized role in selecting presidents.

And now there are signs that ethanol’s grip on the nominating process has begun to slip.

When Senator John McCain ran for president 15 years ago, the Arizona Republican refused to campaign in Iowa, citing his opposition to ethanol subsidies. But some of this season’s crop of would-be presidential candidates have made an even more dramatic calculus. This past weekend, some leading Republicans didn’t just articulate their opposition to helping the ethanol industry — they did so in person at the Iowa State Fairgrounds in front of 900 attending the first Iowa Ag Summit.

Wellesley College professor Robert Paarlberg, author of “Food Politics: What Everybody Needs to Know,” said political support for corn-based ethanol has fallen significantly in the last five years.

“The national security argument weakened after US imports of petroleum fell due to increased domestic production of oil and gas,” said Paarlberg. “When budget-cutting Tea Party Republicans took over the House in 2010, support for a continued tax credit for ethanol was undercut. And then when the 2012 summer drought pushed up corn prices, livestock producers — even in Iowa — turned against a mandated use of feed corn for fuel.”

That the weekend summit on agricultural issues was even convened — designed to get presidential hopefuls thinking about the ethanol issue and get them on the record — could be further evidence of the industry’s nervousness. An ethanol magnate, who is also Iowa’s top Republican donor and a close friend of Governor Terry Branstad of Iowa, organized the summit.

In the past, including the 2012 presidential contest, candidates were asked in Iowa to pledge to support federal subsidies, which expired in 2011. Now Iowa ethanol advocates are trying to protect a federal regulation, called the Renewable Fuel Standard, requiring oil companies make their gasoline mix used in automobiles to be at least 10 percent corn-based ethanol. More than 95 percent of all fuel sold in the United States contains 10 percent of ethanol, according to the Iowa Corn Growers Association.

And for decades, Iowa agricultural interests could count on support from would-be presidents. Every winner of the Iowa caucuses since 1980 has supported ethanol subsidies in some way. Former Kansas senator Bob Dole, who won the caucuses in 1988 and 1996, was nicknamed “Senator Ethanol.”

In New Hampshire, which traditionally holds the second presidential nominating contest, ethanol subsidies have been roundly opposed. Senator Kelly Ayotte, whose endorsement is coveted ahead of the New Hampshire Republican primary, has cosponsored a bill to repeal the Renewable Fuel Standard.

Remarkably, University of Iowa political science professor Timothy Hagle believes ethanol is no longer the third rail of Iowa politics. He points to Republican Joni Ernst, who was elected as Iowa’s newest senator, despite being “philosophically opposed” to ethanol subsidies, though she supports ethanol in the EPA’s Renewable Fuels Standard.

In addition, Steffen Schmidt, an Iowa State political science professor, notes that no candidates this year are being asked by local activists to pledge to do anything on ethanol ahead of the 2016 contest.

And now, even the 10 percent standard is under attack in Washington, with some potential presidential candidates leading the charge as a way of showing they favor free markets over government regulation.

Senator Ted Cruz of Texas, who has sponsored legislation to drop ethanol from the fuel standard, had a big smile when he showed up at the AG summit on Saturday. (Cruz represents a state where oil and gas are key industries and oppose the mandate.)

“The answer you’d like me to give is ‘I’m for the RFS, darn it,’ ” Cruz said. “That’d be the easy thing to do. But people are pretty fed up with politicians that run around and tell one group one thing and tell another group another thing. Then they go to Washington and don’t do anything they said they would do.

“I’m going to tell you the truth,” he said.

Among the nine potential Republican presidential candidates who attended the summit, Cruz and former New York governor George Pataki flat out opposed the ethanol mandate. (Pataki compared it to the Obama administration’s health care law.) Supporting it were former Arkansas governor Mike Huckabee, former Pennsylvania senator Rick Santorum, Governor Chris Christie of New Jersey, Senator Lindsey Graham of South Carolina, and Governor Scott Walker of Wisconsin. Former governors Jeb Bush of Florida and Rick Perry of Texas voiced opinions somewhere in the middle.

Walker, who leads his potential Republican rivals in Iowa, articulated a position that was something of a shift. As a candidate for governor in 2006, he ran a radio ad opposing a similar ethanol mandate for Wisconsin. Theoretically, Walker wants the market to decide the question, he said, “but you can’t get to that unless you deal with market access.”

Bush said subsidies and the fuel standard for ethanol were good ideas that should be phased out now that the industry is mature.

Bush went on to say that whether it was ethanol or any other energy source, “the markets are going to have to decide this.”

Perry opposed the ethanol standard when he ran for president in 2012. On Saturday, he said while he saw this as an issue for state governments, it would be unfair for the federal government to pull ethanol from the federal standard but “leave all these other subsidies and mandates and policies into place” for other industries.

Senator Rand Paul of Kentucky, viewed as a top-tier contender in Iowa, did not attend the summit. He has long been an opponent of the ethanol mandate.

But if the 2016 race marks the end of presidential contenders bowing before Iowa ethanol interests, it surely doesn’t mean an end to flattering Iowa agriculture interests more broadly. After all, Bush told his audience Saturday he planned to partly spend Sunday “cooking Iowa beef.”