Governors' Biofuels Coalition

The Iowa primary has put into play one of the more obscure issues in the political life of the nation — ethanol, of all things. Donald Trump led off his rant against Sen. Ted Cruz in a CNN interview Monday night with the assertion that Cruz is “totally” opposed to ethanol. Then the Washington Post reported Tuesday morning that Iowa Gov. Terry Branstad’s highly unusual campaign against Cruz on ethanol has played a major role in the pending primary, where governors usually do not participate.

What is going on? Cruz has made his position clear: He supports ethanol (made from corn of which Iowa is the leading producer) — but he also opposes the so-called ethanol mandate (known as the Renewable Fuel Standard) because it is an anti-market mandate, it is not needed, and because it actually operates as a limitation on ethanol’s potential growth.

As Cruz explained at Thursday night’s debate, the major flaw of the RFS is that it does not eliminate the so-called “blend wall” erected by the Environmental Protection Agency under statutes and rules enacted independently of the RFS. Cruz promised to “tear down EPA’s blend wall,” which essentially limits ethanol blending at 10 percent (15 percent in limited circumstance), implemented primarily at the request of the automakers to protect car components. So it does not matter where the ethanol comes from — cellulosic matter, natural gas, or corn — “advanced” or not — it cannot be blended above the blend wall unless EPA agrees to relax it. Even Gov. Branstad seems to understand the basic problem: He told Fox News on Thursday that “the only thing we want is access to the market.” But EPA’s blend wall stands in the way.

A second problem with the RFS is that for purposes of the current practice of blending 10 percent ethanol into gasoline, the RFS is largely irrelevant because ethanol’s high octane content, which Mercedes has called the single most important attribute of gasoline, has made it indispensable. Previously octane was supplied by lead, which had revolutionized the auto industry at the beginning of the 20th century but which Vice President George Bush had to eliminate for serious health reasons in the 1980s — thus opening the door for ethanol as today’s cleanest octane substitute.

As ethanol’s principal enemy — the American Petroleum Institute — has acknowledged, “ethanol, even without a mandate, has desirable blending properties. It adds to octane. It helps with environmental compliance, so ethanol in gasoline would be used without a mandate” (emphasis added). Even Koch Industries, which opposes the RFS as anti-market, believes ethanol is a good product, which can survive well without a subsidy, and Koch owns and operates several ethanol plants.

Now the auto industry is in need of another big octane boost, as low gasoline prices have prompted consumers to start buying gas guzzlers again, making it virtually impossible to meet the high mileage standards that are the result of Bush 43 legislation and an Obama regulation implementing it. Blending higher levels of ethanol into gasoline would solve this problem, giving the auto industry the octane it needs to achieve the higher compression necessary for mileage compliance. But as Cruz explained on Thursday, the EPA’s blend wall currently “makes it illegal to sell mid-level blends of ethanol.”

The EPA actually proposed in a recent proceeding to permit ethanol blending at 30 percent (so-called E-30) in improve fuel efficiency. The auto companies replied with a flood of positive comment (remember that they were the ones who had asked for the blend wall initially), whereupon the EPA went radio silent — it never responded to the industry’s comments. When Sen. Cruz said at Thursday’s debate that he would increase ethanol’s market share without a mandate, that was no empty promise. The auto industry’s untapped demand for high-octane ethanol will be realized if the next administration removes the EPA’s regulatory barriers.

An irony here is that Trump’s basis for alleging that Cruz is “totally” opposed to ethanol — when in fact he wants the EPA to eliminate anti-competitive rules to open up the market for ethanol — is that the senator is from Texas. But as indicated above, ethanol’s two most important benefactors have been the two prominent Texans who became president — it was 41 who phased out lead (the octane predecessor), and it was 43 who developed and enacted the RFS (without understanding that the EPA would never budge on the blend wall despite requests to the contrary from the auto industry, which had asked originally for the now-anachronistic limitation).

C. Boyden Gray has served as White House counsel, U.S. ambassador to the European Union, special envoy for Eurasian energy and special envoy for European Union affairs. Boyden Gray & Associatesrepresents the states of Kansas and Nebraska and pro-ethanol public policy organizations in regulatory and legal challenges to EPA rules that block ethanol’s market access. Contact:  info@boydengrayassociates.com

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