Cruz win may dim ethanol prospects, some predict

Source: By Christopher Doering, Des Moines Register • Posted: Wednesday, February 3, 2016

WASHINGTON — U.S. Sen. Ted Cruz won the Iowa caucuses despite his opposition to ethanol subsidies, prompting concern among some supporters of the renewable fuel that the industry’s influence among presidential candidates in the state may be waning.

Iowa is the nation’s No. 1 ethanol producer, yet Cruz won despite his call for an end to all energy subsidies and the phasing out of the country’s ethanol mandate known as the Renewable Fuel Standard.

“A clear message coming out of Iowa is that whatever political influence ethanol used to have in the state, those days are now over,” said George David Banks, executive vice president of the American Council for Capital Formation. “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 policymakers in Washington.”

David Swenson, an economist at Iowa State University, said while the ethanol industry succeeded in getting people to talk about the fuel in recent weeks — culminating in Republican Gov. Terry Branstad saying last week that Iowans would make a mistake in supporting Cruz — it fell short of the level of importance it had reached in prior caucuses.

Now, ethanol is unlikely to gain traction among a host of other issues in primary states such as Nevada, New Hampshire and South Carolina, where the fuel lacks the same support as in Iowa and other corn-producing areas.

“This was the last chance for the domestic ethanol interests to assert themselves in a place where they had had extraordinary success (in the past), and it didn’t quite work,” Swenson said. “Does it matter anywhere else besides Iowa? And the answer there is going to be no.”

Ethanol trade groups, including America’s Renewable Future led by Eric Branstad, the governor’s son, dismissed claims that the relevance of the fuel has diminished politically in Iowa or other swing states. Branstad maintained that ethanol and the Renewable Fuel Standard will be key topics for voters come November, citing its role in creating jobs and lowering U.S. dependence on foreign oil.

“Whoever is the nominee, when they come to Iowa, we are a swing state, and this is going to be a big, decisive issue,” he said in an interview.

U.S. Sen. Chuck Grassley, R-Iowa, cautioned against reading too much into one victory.

“We’re only through one state, so at this point I wouldn’t draw too many conclusions about ethanol,” Grassley told reporters.

Grassley and others noted more than 80 percent of caucusgoers picked candidates Monday who favor the Renewable Fuel Standard, a 2007 federal law requiring the blending of alternative fuels into cars, trucks and other vehicles. They said Cruz’s margin of victory over RFS supporters Trump and U.S. Sen. Marco Rubio of Florida was not a sign that he has locked up the Republican nomination.

“The narrative coming out after last night’s Iowa caucus that the domestic ethanol industry is somehow on the ropes is false,” said Bob Dinneen, president of the Renewable Fuels Association.

During a call held by the ethanol industry, Paul Tewes, a political strategist, said if Cruz is the GOP nominee, it could mean Iowa backs the Democratic nominee in November.

“The RFS is a unique issue in rural America, and if the Democrat is for the RFS and the Republican is not, thank you, and we’ll take Iowa,” he said.

Cruz’s victory comes as the Senate could consider taking up legislation that would repeal the Renewable Fuel Standard or end the mandate in 2022 as part of a sweeping energy bill being debated this week.

Another amendment being considered would end the corn-ethanol component, responsible for most ethanol production in Iowa and across the country, while protecting the advanced biofuels portion. Previous efforts to overhaul or repeal the mandate have languished in Congress.

“Despite the pro-ethanol lobby spending millions of dollars to prop it up as a campaign issue, Iowa voters ignored those calls,” said Karen Kerrigan, president of the Center for Regulatory Solutions, a group opposed to excessive government regulations. “Washington now has no excuse not to act to end the failed corn ethanol mandate.”