After years of rancor over ethanol, Cruz, Cornyn go head to head on reform

Source: By James Osborne, Houston Chronicle • Posted: Tuesday, February 27, 2018

  • This collage is made from photos by Evan Tucci/AP (Donald Trump), Tom Reel/San Antonio Express-News (John Cornyn), and John Davenport/San Antonio Express-News (Ted Cruz).
This collage is made from photos by Evan Tucci/AP (Donald Trump), Tom Reel/San Antonio Express-News (John Cornyn), and John Davenport/San Antonio Express-News (Ted Cruz).

WASHINGTON — Standing before a crowd of cheering refinery workers in Philadelphia last week, Sen. Ted Cruz didn’t spare anyone. He attacked not only the “swamp” culture of Washington, but Wall Street, “big corn,” and the large, integrated oil companies he said were getting rich on ethanol regulations at the expense of “working men and women.”

Meanwhile back in Washington, Sen. John Cornyn was closely watched by energy lobbyists, waiting for a sign on when he was going to release legislation adjusting the ethanol rules, known as the renewable fuel standard. His office declined an interview request, stating, “He’s working hard to unify all stakeholders in a consensus effort to reform the renewable fuel standard.”

Cruz and Cornyn are pursuing competing and widely disparate strategies to reduce the financial burden on oil refineries under the more than-decade old law requiring ethanol be blended into the nation’s gasoline supply.

“It’s almost like a good cop bad cop routine. Cruz proposes this really drastic change and then Cornyn comes in with a compromise,” said Mark Jones, a politics professor at Rice University. “I don’t think that’s the case [they are working together], but it wouldn’t surprise me if Cornyn saw Cruz’s gambit and said there might be an opportunity here.”

For Cornyn, a third-term senator, who as majority whip, is the number two Republican in the Senate, the strategy appears to be stay quiet and work to win over senators from the ethanol-friendly Midwest on a compromise bill.

Cruz, meanwhile, has taken a more aggressive approach, forcing attention on the issue by holding up the confirmation of President Donald Trump’s nominee to be deputy secretary of agriculture. And with barnstorming speeches like he gave in Philadelphia last week, he has painted himself as a one-man wrecking crew working on behalf of the nation’s oil refineries.

Their alternate approaches to this critical issue for the oil industry that dominates the Texas economy illustrates a fundamental divide between the two men. For years, the two senators have had discordant and often chilly relations, which were on full display in 2016 when Cornyn refused to endorse Cruz in his run for president against Trump.

“Cruz plays the outside game and Cornyn plays the inside game. That’s how he got to be the whip, while Cruz is out there trying to motivate the grass roots group,” said Matt Mackowiak, a Republican consultant in Austin. “They obviously work together, but they’re also playing in the same sandbox in terms of donors and voters, so that creates some tension.”

The Renewable Fuel Standard was signed into law by former President George W. Bush in 2005, primarily as a way to reduce U.S. dependence on Middle Eastern oil. But as ethanol has grown to take up larger and larger concentration of the nation’s fuel supply, so too have the prices of the biofuels credits that refineries that don’t blend ethanol themselves are required to buy.

Cruz, during his visit to Philadelphia Energy Solutions, claimed the refinery spent $218 million last year on the credits – known as Renewable Identification Numbers or RINs – more than double what they spent on employees’ salaries.

That has motivated refining companies like Valero in San Antonio to lobby hard for a change to the ethanol mandate. But with Midwestern senators behind an ethanol industry that has brought billions of dollars in revenue to their states, it was well understood that any effort to ease the mandate was dead before it hit the Senate floor.

The slightest ray of opportunity appeared late last year when Cruz spearheaded a meeting at the White House with other oil-state senators, including Cornyn, in which the president implored them to come up with a solution that benefitted both the biofuels and oil industries.

So far that has proven easier said than done. Cruz has proposed that the Environmental Protection Agency cap the prices of the ethanol tax credits, reducing the burden on refineries. But that was dismissed by Sen. Chuck Grassley, R-Iowa, and other Midwest Republicans almost immediately as a blatant attack on ethanol demand.

During an interview in Philadelphia last week, Cruz maintained he was making progress, saying, “The president doesn’t want to see tens of thousands of blue collar refinery workers out of work. Nobody wants to see that,” he said.

Asked about Cornyn’s legislation, Cruz said he and Cornyn “work together on a great many things, including this issue,” but the proposal wouldn’t solve “the immediate problem of refinery workers losing their jobs today.”

What exactly Cornyn’s legislation will look like it when it is introduced remains an open question. A spokeswoman for his office said staff were still working on the draft, but hoped to have a bill ready “as soon as possible.”

As some preliminary details have leaked out, the biofuels industry, which has fought off Cruz’s proposal, has stayed relatively neutral on Cornyn’s legislation.

“There may be some interest” in some aspects of the legislation,” said Geoff Cooper, a vice president at the Renewable Fuels Association. “The other element we’re hearing is the [Renewable Fuel Standard] is eliminated post 2022, and if that’s part of the proposal it would be a very short discussion.”

The stakes are high for both Texas senators as the ethanol debate ramps up in the weeks ahead. For Cornyn, who is believed to have ambitions to be come majority leader one day, a deal would cement his reputation as a consensus builder with a White House that appears eager to broker a peace on ethanol.

Cruz, on the other hand, is in the midst of a re-election campaign against Rep. Beto O’Rourke, D-El Paso. He is running with a reputation for favoring his national political ambitions over the interests of Texas at the same time Republicans are bracing for a wave of anti-Trump Democratic voters. That makes a 2018 election date a potentially worrying prospect.

Cruz is expected to win, Jones said, but a victory of less than “double digits” would leave the impression, “You’re not all that popular in your home state.”

Cruz is scheduled for another meeting at the White House this week, with senators from both the oil and corn regions of the country After touring the Philadelphia refinery and meeting with workers there, Cruz said his motivations on ethanol reform lay in protecting “the thousands and thousands of Texans” employed by refineries.

“My number one priority in the Senate, from the day I was elected, was to fight for Texas jobs and low taxes, low regulations, more jobs, higher wages, more opportunity,” he said. “The federal government needs to act and act now.”