My Voice: Ethanol debate should focus on fairness

Source: By Bart McLeay, Sioux Falls Argus Leader • Posted: Thursday, April 16, 2015

The Corn Ethanol Mandate Elimination Act of 2015 was recently introduced in the Senate for the second time this year and the third time in two years. It should be permanently plowed under as a matter of fairness.

The Act concerns the Renewable Fuel Standard, a federal law designed to ensure a minimum amount of biofuel is blended into the nation’s fuel supply.

The Act takes aim at ethanol created from corn starch, retreading several tired and mistaken arguments about rising gas prices or food costs or alleged harm to cars or the environment. A look under the hood reveals these arguments are out of gas (see ethanolrfa).

Ethanol has many benefits but, at minimum, RFS should be maintained out of fairness.

The current version of RFS came into existence in 2007, for national security reasons. America’s dependence on foreign oil was alarming, and domestic oil companies had little interest in renewable fuel.

The federal government turned to rural America for help. South Dakotans, Nebraskans and other Midwesterners together invested hundreds of millions of dollars to build or expand corn ethanol plants in response. Only harm to the economy or environment or an inadequate domestic supply could alter RFS for 15 years, they were assured.

None of these conditions exist.

Corn farmers and investors believed the strict volume purchase requirements in RFS would keep them safe.

The Act seeks to eviscerate their investment.

By analogy, if a contractor built a major toll bridge with its own money in exchange for receiving tolls for 15 years, a government decision at the half-way point to stop payment of the tolls would rightfully be met with outrage.

The same principle applies here. It makes no difference whether you believe RFS is a good idea or not looking from a rear-view mirror.

This is not the same as gratuitously receiving a government handout year after year for doing nothing. RFS is not a subsidy. No farmer or ethanol producer will receive one penny from taxpayers if RFS for corn ethanol is unchanged.

Energy security is vital in our unstable world. America may be glad it has plants and know-how to make its own fuel. Ethanol also provides valuable environmental benefits.

Opposing arguments are predictable, namely, the Act does not eliminate all ethanol and further there can be no harm in removing corn ethanol from RFS because there is no actual corn ethanol mandate. Both arguments are specious.

Corn ethanol has a de facto mandate. When RFS was passed, advanced biofuel (cellulosic or biodiesel) did not truly exist. Congressional Research Service at the time found RFS was a “major impetus” for ethanol development and a “vast majority of the mandate” would be met with corn ethanol.

Almost 150 corn ethanol plants were built or expanded as a result.

Corn ethanol’s dominance continues today. Last year, 98 percent of ethanol came from corn.

The Act extirpates corn ethanol by deleting the term “renewable fuel,” plus four other words in RFS, alone proving corn ethanol’s mandate in the law.

Farmers and investors reasonably relied on “renewable fuel” in RFS to mean corn ethanol.

Some ask whether the government should be picking energy winners and losers. That might have been a fair question before passage of RFS and rural America invested heavily in response to America’s plea for help.

Oil companies receive billions in tax expenditures. Oil and ethanol producers should be treated alike. RFS has a built-in sunset provision in 2022. Tax expenditures for oil companies should end no later than the RFS.

This issue should be a can of corn for lawmakers of both parties. A vote against the Act is a vote for fairness.

Bart McLeay is an Omaha lawyer practicing in energy and agriculture law.