The Standoff Between Big Oil and Big Corn

Source: By DAVID GELLES, New York Times • Posted: Monday, September 19, 2016

Minh Uong/The New York Times 

A decade ago, lawmakers in Washington tried to address a trifecta of thorny challenges with one simple fix that has turned out to be anything but easy to assess.

The problems: an overreliance on foreign oil, rising greenhouse gas emissions and tepid economic growth.

The solution: the Renewable Fuel Standard, commonly known as the ethanol mandate. Enacted in 2005 and expanded two years later, the legislation required that refiners blend an increasing amount of biofuel into the gasoline that powers most American cars.

The logic was straightforward. More ethanol production would in theory reduce America’s dependence on oil from the Middle East. Because biofuel generally releases less in greenhouse gases than fossil fuel when burned, all that ethanol would be good for the environment, too. And by stimulating demand for domestically produced ethanol, made largely from corn, the mandate would prop up farmers and refiners.

In the intervening years, the ethanol industry has ballooned into an economic juggernaut. Last year, the industry contributed an estimated $44 billion to the economy.

Those numbers are set to become bigger. The Environmental Protection Agency, which administers the mandate, effectively increased the amount of ethanol required to be added to gasoline to 17.4 billion gallons this year, an annual increase of about 9 percent over 2015. The mandate calls for production to nearly double to 36 billion gallons by 2022, and in theory, much of that will be cellulosic ethanol, made from crops other than corn, like sugar cane and switch grass.

Yet even as the Renewable Fuel Standard exerts its powerful sway, there is hardly consensus about whether it has delivered on the lofty promises lawmakers made a decade ago.

Indeed, depending on whom you ask, the Renewable Fuel Standard is either one of the best policy decisions to come out of Washington in decades or a special-interest boondoggle that costs taxpayers billions of dollars and harms the environment.

Supporters of the mandate claim it has reduced America’s dependence on foreign oil, helped the environment and spurred economic growth, all while saving consumers money.

“Ethanol is the great American success story,” said Emily Skor, chief executive of Growth Energy, a group that represents ethanol suppliers and producers, including Dow Chemical and DuPont, two big agricultural companies working on a complex merger. “The R.F.S. is the policy that has allowed Americans to access cleaner, cheaper fuel at the pump.”

To back up these claims, Ms. Skor and her allies proffer reams of data that portray ethanol as a solution for many of the country’s problems. They say ethanol has made America less reliant on Middle Eastern oil, saved consumers up to $1 a gallon at the pump and spared the air from vast clouds of harmful carbon emissions.

Of course, Ms. Skor has a vested interest in advancing this narrative. Were the Renewable Fuel Standard to be repealed, many of the companies that support Growth Energy would lose millions of dollars.

Critics of the ethanol mandate are just as adamant that it has been a colossal failure. They point out that domestic oil and natural gas production has surged in recent years as a result of hydraulic fracturing. They argue that because ethanol refineries are consuming so much corn, the cost of food is going up. And many say that when ethanol production and carbon dioxide absorption by crops like corn are factored in, ethanol is no better for the environment than gasoline.

As with supporters of the ethanol mandate, many ardent critics are beholden to their own special interests. Among the most vocal antagonists of the law is the American Petroleum Institute, with members including Exxon Mobil and Royal Dutch Shell. Big Oil has been opposed to the Renewable Fuel Standard from the beginning — after all, as more ethanol is blended into gasoline, the less oil it sells.

The debate has become binary. Depending on which army of lobbyists you believe, the Renewable Fuel Standard is either an unqualified success or an unmitigated disaster. But of course, the truth is rarely quite so simple.

There’s no doubt that thanks largely to the enormous increase in domestic oil and gas production, America’s energy security is not the concern it was a decade ago. Yet it is also true that the strong rise in ethanol production has helped.

“Did it give us energy independence? No,” said James H. Stock, an economics professor at Harvard. “Has it been helpful? Sure.”

When it comes to the hope that the Renewable Fuel Standard would support domestic economies, the results have also been mixed. Ethanol is a big business, but it was always going to be highly localized in top corn-producing regions. That’s why in Iowa, the Renewable Fuel Standard is sacrosanct.

As for the promise that more ethanol would mean less harmful emissions, the data is decidedly mixed. Several independent analyses, including authoritative studies from the Department of Energy’s Argonne National Laboratory in Illinois, suggest that ethanol releases significantly less greenhouse gas emissions than gasoline.

But a recent paper in the journal Climatic Change by John M. DeCicco, a research professor at the University of Michigan who previously worked for the Environmental Defense Fund, made a compelling case that the carbon dioxide being released by ethanol was not being absorbed at nearly the rate expected.

“There’s an assumption that anything that’s not oil has got to be good,” Mr. DeCicco said. “It’s not that simple.”

Almost as soon as Mr. DeCicco’s paper came out, Steffen Mueller, an economist at the Energy Resources Center at the University of Illinois at Chicago, issued a rebuttal. And then there was the note at the end of Mr. DeCicco’s paper: “The work reported here was supported by the American Petroleum Institute.”

With so many dueling claims and special interests at play, it’s hard to know what to think. In this overheated debate, any assertion about ethanol’s worthiness or lack thereof is immediately shot down by the other side.

During this election season, the Renewable Fuel Standard has emerged as a minor issue. Senator Ted Cruz drew fire from Iowa caucusgoers for coming out against the ethanol mandate, while both major party presidential nominees, Donald J. Trump and Hillary Clinton, have voiced their support for the law.

Congress is well aware that the Renewable Fuel Standard is mired in controversy. House and Senate subcommittees held hearings on the mandate this year in the hope that some consensus might emerge. That didn’t happen, though.

Instead, emissaries from both camps descended on Capitol Hill armed with studies that made their case in the most striking terms, pitting the interests of agricultural behemoths against those of oil giants.

The truth is probably somewhere in between. The Renewable Fuel Standard probably hasn’t been the most effective environmental policy. America was going to become less reliant on foreign oil with or without it, the direct beneficiaries were too few and too localized, and the climate science was frustratingly inconclusive.

But the perfect should not be the enemy of the good, and the ethanol mandate has not been a catastrophe. What it has become is a political battleground, another reminder that when competing interest groups try to dictate energy policy, the truth becomes cloudy.