Iowa Senate: Ethanol fuels a clash in corn country

Source: By ERICA MARTINSON, Politico • Posted: Friday, August 1, 2014

A plant that produces ethanol is next to a cornfield near Coon Rapids, Iowa. | AP Photo

Iowa’s corn-based fuel seems to have lost much of its political heft in Washington. | AP Photo

This story is part of an ongoing POLITICO series on how national policy issues are affecting the 2014 midterm elections.

CEDAR RAPIDS, Iowa — Rep. Bruce Braley is betting the farm on corn — and Democrats’ hold on the Senate may be in danger if he’s wrong.

The Iowan is touting federal support for ethanol while competing in one of 2014’s most critical Senate contests — and he’s banking on his ability to champion his state’s cause in D.C., where the corn industry’s political power has waned. While critics ranging from environmentalists to anti-subsidy fiscal conservatives have turned against ethanol, Braley is busy posing at gas stations that sell the corn-based biofuel, campaigning with farmers and pressuring EPA to protect the federal mandate that guarantees corn’s role in the U.S. fuel supply.

His Republican opponent, state Sen. Joni Ernst, has been more elusive on the issue — saying she “philosophically” opposes government meddling in markets but promising to protect EPA’s ethanol program until all other subsidies are repealed. That sounds like waffling to Braley supporters, an impression Ernst has tried to counteract with some pro-ethanol rhetoric this week.

Less-than-overwhelming enthusiasm for EPA’s ethanol mandate is a rare stance for any candidate in Iowa, from either party, so a perception that Ernst is wobbly on biofuels would offer an advantage to Braley. Ernst’s opponents have also attacked her for planning to attend a Washington fundraiser hosted by the oil industry, one of ethanol’s biggest opponents.

But Braley, whose campaign leans heavily on his influence in Washington, faces pressure to show he can deliver. A key test is expected in the coming weeks, when EPA announces a decision that could make or break the federal mandate that requires gasoline refiners to blend ethanol into their fuel.

People in the home-grown industry agree that ethanol looms large here, though many are still deciding where they think Ernst stands.

“I think renewable fuels can be a big issue in the race,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association. Shaw, who lost a Republican House primary in Iowa earlier this year, says about 10,000 households in the state are directly invested in or employed by the renewable fuels industry, and nearly 300,000 Iowans are “pretty much directly engaged in agriculture,” he said. “That’s a lot of voters.”

“If you can’t find a senator in Iowa that supports ethanol, you’ve got a serious problem,” said Pam Johnson, a sixth-generation farmer in northern Iowa and chairwoman of the corn board at the National Corn Growers Association.

Braley expects Iowa voters to pay close attention to the candidates’ stances on the ethanol program, known as the Renewable Fuel Standard.

“There’s a clear choice,” Braley said in an interview after giving a campaign speech at a gas station in Marion, just outside Cedar Rapids — filled, like many gas stations here, with high-ethanol blends not usually found inside the Beltway. “My opponent, she is philosophically opposed to the Renewable Fuel Standard. I have been a strong supporter since I was elected to Congress.”

Ernst, meanwhile, insists she’d defend the program too — while sticking to her tea-party opposition to the government interfering in business.

“While I do not believe the government should pick winners and losers in our economy, and from a philosophical standpoint I do not believe in taxpayer subsidies, I do believe that if we were to end subsidies, it would have to be done across the board, for every sector at the exact same time — meaning until and unless that day comes, I will passionately stand in defense of RFS and other related programs,” Ernst said in response to written questions from POLITICO.

Ernst has also tried other ways to burnish her agricultural cred, including boasting of her experience castrating hogs.

Adding to the drama is the fact that EPA is way behind schedule in making its decision on the ethanol program, which was legally due last November and was later expected to come in June.

The agency says it makes such decisions based on the merits, not politics. But whatever the cause of the delay, many observers note that the ruling has been pushed into a crucial stretch of the political calendar.

“That’s got to be on the minds of the White House,” said Eric Washburn, an attorney with the firm Bracewell & Giuliani who represents refiners and environmentalists opposed to the mandate. “And frankly, Iowa is one of the very few states where people actually vote on biofuels policy.”

The politics of corn

Obama carried Iowa by almost 6 points in 2012, and Braley had a clear lead just a few months ago in the race to replace retiring Democratic Sen. Tom Harkin. But the congressman has stumbled with some self-inflicted gaffes, including dismissing beloved Republican Sen. Chuck Grassley as “a farmer from Iowa who doesn’t have a law degree” — a videotaped statement now airing on a veritable loop in Iowa television ads. Lately, Braley has reshuffled his campaign staff while watching the race tighten to a toss-up in the polls.

At the same time, Iowa’s corn-based fuel seems to have lost much of its political heft in Washington, despite the state’s continued draw for presidential hopefuls.

Corn was on an upswing in 2005, when Congress created the mandate, and in 2007, when lawmakers expanded it to its current form, with the expectation that EPA would make refiners use ever-growing amounts of ethanol every year. Back then, oil imports were soaring, gasoline demand was expected to continue to grow, and supporters saw ethanol as a tool for reducing the United States’ reliance on the Middle East while curbing greenhouse gases.

But since then, the North American energy boom has cut the need for Mideast oil, and some green groups have vocally abandoned their support for corn ethanol, blaming the crop for polluting water supplies, wiping out conservation land and even increasing carbon emissions. (Some environmentalists still hold out hope for more “advanced” forms of ethanol, such as those made from corn husks or switch grass.) Pig and cow farmers argue that ethanol drives up the price of their feed, chain restaurateurs complain it makes eating out more expensive, and the powerful oil industry warns that the mandate will drive up gasoline prices.

“Corn ethanol’s brand has been seriously dented in the last 18 months,” said Craig Cox, director of the Ames, Iowa, office of the Environmental Working Group, an environmental organization that opposes the mandate as it’s now structured. “The industry is still very politically well-connected, especially in the Midwest … but it certainly doesn’t occupy the same sort of pedestal that it occupied two years ago.”

Last fall, EPA gave the ethanol industry a scare that showed how much clout corn has lost: For the first time, the agency proposed to cut the amount of ethanol that gasoline refiners must use this year. Biofuel supporters said the move could put a permanent chill in their industry, which they say still provides a much-needed alternative to petroleum.

After much lobbying since then, most observers expect EPA to lessen the blow when it issues a final rule, though it’s unclear how much.

The outcome means economic life and death in Iowa, Braley says. He also points out that support for the mandate has traditionally been a bipartisan cause in Iowa, and that he and Republican Gov. Terry Branstad both championed the program at an EPA hearing in December.

Iowa has 41 ethanol plants and 14 biodiesel plants, plus several cellulosic operations in the beginning stages of opening.

“Voters in Iowa look at where I stand on this issue and where my opponent stands, who’s supporting me in this campaign and who’s supporting [Ernst],” Braley said.

Braley is also finding other ways to champion ethanol, one of his top three issues along with protecting Social Security and raising the minimum wage. On a hot July morning at the Marion gas station, he touted a bill he’s sponsoring that would require “country of origin” labels at the pumps, like the kind now required for T-shirts or produce.

Iowans say wavering on corn ethanol once would have been certain political suicide in a state where 90 percent of the land is farm acreage. So Braley has sought to capitalize on Ernst’s expressed qualms about big government, portraying her as someone Iowans can’t trust for fight for them.

Ernst’s statements have been “a surprise to us because I know she’s a farm gal, and she says she’s for things that Iowa’s for,” said Tom Brooks, general manager of Western Dubuque Biodiesel and treasurer of the Iowa Biodiesel Board. He said that Ernst’s “philosophical” statements offer “confusing or conflicting signals.”

“I would say most Iowa voters, especially in the rural areas, which obviously candidate Ernst is trying to get … if she’s not for the RFS, I would say that probably is not going to be something favorable for her,” Brooks said.

‘Voted with us every time’

Ernst, who says she “grew up walking beans, canning food and feeding hogs on our family farm,” wants Iowa growers to know she’s one of them.

“As a rural candidate, the members of Iowa’s agricultural community are more to me than just a significant part of our state’s economy — they are also my neighbors, friends and family,” she said in a written response to questions. “Renewable fuels are important to our farmers, our communities, and our state.”

Ernst has also attacked Obama’s agenda on other fronts that resonate in farm country. She criticizes a proposed EPA water rule that opponents claim would seize control of ditches and farm ponds, and she’s called for cutting off the agency’s funding. Republicans also portray Braley as anti-farmer, seizing on flaps like his Grassley diss, as well as an apparent dispute between Braley and his neighbors over trespassing chickens.

Until recently, Ernst has said little about the ethanol mandate in her campaign. But she offered Braley an opening when she filled out a state Farm Bureau survey during the primaries.

Ernst checked “yes” in favor of the ethanol mandate, as well on renewing tax credits for Iowa’s cellulosic ethanol, biodiesel and wind energy industries. But she appended a cover letter saying she is “philosophically opposed to government subsidies and influences on the private marketplace,” though adding her caveat that she would defend the ethanol program as long as other government subsidies exist.

Iowa Democratic strategist Jeff Link said Ernst’s words should offer plenty of doubts for ethanol supporters.

“If you have a philosophical opposition to something, are you really going to draw a line in the sand if there’s a move to try to kill the Renewable Fuel Standard?” he asked. “How hard are you going to work for something you are opposed to?”

Braley, meanwhile, has detailed his aggressive efforts to get the administration to defend the mandate, including meetings with White House advisers and his delivery of a petition with 100,000 signatures to the EPA. “In fact, there has been no bigger advocate in the U.S. House for the RFS than me,” he wrote in his own Farm Bureau questionnaire.

The Democrat’s supporters had a chance to advance their message while Ernst spent much of July fulfilling Army National Guard duty in Wisconsin. While she was gone, Iowans got a heavy dose of ads describing her as not on board with biofuels.

When she returned, Ernst tried to counteract that message, telling POLITICO this week she that has written to EPA Administrator Gina McCarthy urging her not to cut the ethanol mandate.

Ernst’s campaign also pointed to her history of voting in favor of the ethanol industry in the state Senate. In 2011, 2013 and 2014, she voted for bills that provided tax credits and other support for ethanol and biodiesel industries. She also voted for and co-sponsored two “statements” from the Senate urging the federal government to support renewable fuels and the ethanol mandate.

“She’s voted with us every time,” Shaw said. Braley also has “voted with us every time we’ve asked him to,” Shaw said. “He’s been a strong leader on renewable fuels issues out there.”

The two candidates are far apart on many issues, and an influx of outside spending is leading to a boom in negative ads.

Conservative PACs have spent nearly $1.7 million supporting Ernst, with cash coming from American Crossroads, American Heartland PAC, Citizens United, Conservative Majority Fund, the National Rifle Association, Reclaim America PAC, Senate Conservatives Action, Senate Conservatives Fund, Susan B. Anthony List, Tea Party Patriots Citizens Fund, the U.S Chamber of Commerce and Vote to Reduce Debt, according to the Center for Responsive Politics. Much of that cash was for her GOP primary campaign.

She has also gotten support from ads aired by Americans for Prosperity and other nonprofits that have not yet had to disclose their spending.

A smaller group of liberal and mostly environmental PACs has turned out nearly $2.9 million for Braley, all of it for the general election, including the Environmental Defense Action Fund, the League Of Conservation Voters, billionaire Tom Steyer’s NextGen Climate Action, Senate Majority PAC and the Sierra Club.

While Republicans try to paint Braley as a trial lawyer who looks down on farmers, his supporters are doing everything they can to tie Ernst to the oil industry and the Koch brothers.

Americans United for Change is running a radio ad this week saying Ernst is in cahoots with “Big Oil,” which is “spending millions of dollars to put Iowa ethanol out of business,” and pointing to the Washington fundraiser that ExxonMobil’s PAC and the American Petroleum Institute PAC hosted for Ernst on Wednesday.

Another ad by the League of Conservation Voters hit Ernst for threatening to shut down the EPA. But she doesn’t back down from attacking the agency.

“I believe the EPA has put forth extensive rules and regulations that are harmful, overreaching, and ultimately deal with matters that generally can be handled at the state and local level,” Ernst said when asked if she believes the agency should be shut down. “Certainly some functions and programs, like the RFS, must continue at the federal level, but many of those could be handled by other existing agencies.”

Back in Washington

While everyone waits for EPA’s announcement on the mandate, White House adviser John Podesta met with pro-ethanol senators last week to hear out their concerns. The administration made no announcements afterward, although Sen. Al Franken (D-Minn.) said he came out of the meeting expecting to see EPA increase the amount of ethanol that refiners will have to use — an outcome the agency has fairly well telegraphed in recent months.

What’s unclear is whether any increase would be big enough to assuage ethanol producers’ fears for their future.

Washburn, the attorney from the anti-mandate side, argues that the administration is caught in a squeeze between two priorities: Obama’s climate agenda and Democrats’ desire to keep the Senate.

“Podesta is now confronted with two contradictory objectives,” he said. “One is to try and help the fortunes of people like Braley,” and the other to push for further reductions in greenhouse gases.

The big question is when EPA will act. It already gave refiners until Sept. 30 to meet last year’s ethanol mandate, which means it has essentially given itself until then to set the final 2014 numbers.

“If the decision goes our way, we want it as soon as possible,” said Link, the Democratic strategist. “But I don’t think it’s set in stone yet.”

Shaw says he’s not sure what EPA’s upcoming decision will mean for election day, but he suspects Braley may not get as much of a bump as some in Washington hypothesize.

“I hope I’m proven wrong,” Shaw said. “But I expect that most of our industry will be disappointed when the final rule comes out.”