Threatens ethanol

Cruz victory in Iowa threatens ethanol's power

By Alex Guillén and Jenny Hopkinson

For election after election, contenders for the White House knew one thing they had to do to win Iowa's first-in-the-nation presidential caucus: pay homage to the state's corn ethanol industry.

But a potential victory next week by Ted Cruz is threatening to explode that script.

Already, the Republican Texas senator has defied the caucus' usual political gravity by flying high in the polls in Iowa, despite his years of efforts to kill a federal ethanol mandate that supports tens of thousands of jobs and billions of dollars of investments in the state. Recent surveys show him either neck-and-neck with or just behind Donald Trump, who backs the mandate.

A Cruz victory in Monday's GOP caucus would deal a death blow to ethanol’s already waning clout on Capitol Hill, say critics of the biofuel program, many of whom are allied with the oil industry.

“The impenetrable wall that is the corn lobby could come a-tumbling down if Ted Cruz ends up pulling it off,” said Tom Pyle, president of the American Energy Alliance, a conservative group — aligned with oil industry billionaires Charles and David Kock — that wants a full repeal of the ethanol program.

“Once it becomes obvious a Republican politician can be against ethanol and it doesn’t really cost much, everyone’s going to be against the mandate,” said Mike McKenna, a Republican energy lobbyist whose clients include Kock Industries' government and public affairs branch.

Iowa's ethanol supporters, including Republican Gov. Terry Branstad and his allies, are frantically working to keep that from happening.

A Cruz victory is “absolutely” a threat, said Derek Eadon, a Des Moines political consultant and senior adviser to America's Renewable Future, a pro-ethanol group led by one of Branstad's sons. The group is dogging Cruz's appearances around the state and airing ads denouncing him as a “hypocrite,” saying he opposes ethanol incentives yet supports “the nearly $5 billion in subsidies received by the oil industry.”

Republican ex-Sen. Rick Santorum, who is polling at just 1 to 2 percent in the state, similarly warned that a Cruz win would spell the beginning of the end of the ethanol mandate, also known as the Renewable Fuel Standard. “You will kill the RFS, and Iowa will have its fingerprints on the weapon,” he said during a biofuels summit last week.

Cruz’s campaign did not respond to requests for comment.

This is far different from ethanol's stature during the 2008 caucus, which took place weeks after Congress created the mandate's current version in hopes of stemming the oil imports that had spiked during the Iraq War. The mandate requires gasoline refiners to blend billions of gallons of ethanol into their fuel each year, and has helped spur a biofuel boom that now turns more than 40 percent of the nation's corn crop into ethanol.

Then-Sens. Barack Obama, Hillary Clinton and Joe Biden all supported the bill at the time. Ethanol also had the backing of former President George W. Bush, along with the last two Republicans to win in Iowa, Mike Huckabee and Santorum.

But the roster of the mandate's critics has grown, including chicken farmers and food manufacturers who blame it for spiking corn prices and environmental groups that say it has led to water pollution. Support for the program has also suffered because of the U.S. energy boom of the past decade, along with sharp declines in oil imports and lagging gasoline consumption.

Seeking to dent Cruz's chances, ARF has deployed its staff to follow the senator around the state and question him about his stance on the fuel, and is pouring as much as $5 million into its get-out-the-vote efforts and an ad campaign. But ethanol backers are also spinning a Cruz victory as not necessarily devastating to their cause, saying they have the support of almost every other presidential candidate on the ballot.

“The vast, overwhelming majority of Iowa voters are going to go to the caucus and vote for a pro-RFS candidate,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association. Shaw also held out the possibility that Cruz’s stance on ethanol could cost him the state in November if he makes it to the general election.

Still, even the creation of ARF can be seen as a sign that ethanol's political power in Iowa has been on the downswing. Ethanol interests formed the group last year, aiming to pressure candidates during the primaries, after Republican Joni Ernst won Iowa's 2014 Senate race despite saying she "philosophically" opposes the fuel mandate.

This time, the group says it has secured promises from 50,000 caucus-goers who say they will support a pro-ethanol candidate — which, by the group’s estimation, includes anyone except Cruz or Kentucky Republican Sen. Rand Paul. About half those voters are Republican, the group said, meaning they have secured a healthy percentage of voters in the GOP caucus (122,000 Republicans voted in the 2012 caucus). ARF employs 23 paid workers, including 17 field staff working out turnout, and has blanketed Iowa with television, radio and online ads.

Branstad added to the anti-Cruz campaign last week, when he broke his decades of neutrality in the caucuses by calling for the senator’s defeat.

“He is the biggest opponent of renewable fuels,” Branstad said, adding that Cruz “could be very damaging to our state.”

Ethanol supporters in the state say the mandate’s fate is weighing heavily on some Iowa voters.

“It would be devastating to corn farmers if you got rid of the RFS and got rid of the growth that we need in biofuels,” said Kevin Ross, a corn farmer near Underwood, Iowa, and member of the Corn Board for the National Corn Growers Association. He added, “I hear from a lot of folks that there are a lot of undecided voters out there and most of those people are not pleased with Ted Cruz.”

Trump could benefit from this unhappiness, said Bill Couser, who raises corn and cattle near Nevada, Iowa, and sits on the board of a local ethanol plant. “I know there is a lot of people who are going to vote for Trump because they don’t want Cruz to win,” he said.

Trump praised the ethanol mandate during an Iowa renewable fuels summit last week, calling it “an important tool in the mission to achieve energy independence.”

Cruz’s stance on the program has shifted somewhat over the years, though not nearly enough to satisfy the pro-ethanol camp: While he once sponsored legislation that would have immediately repealed the mandate, he has more recently supported phasing it out over five years. That phase-out wouldn’t end until 2022, Cruz now tells Iowans.

Cruz even made a point of taking his anti-mandate message to an agricultural summit last year in Des Moines. “Look, I recognize that this is a gathering of a lot of folks who the answer that you’d like me to give is, ‘I’m for the RFS, darn it.’ That would be the easy thing to do,” Cruz said at the time. “But I’ll tell you, people are pretty fed up, I think, with politicians that run around and tell one group one thing, tell another group another thing.”

One Iowa ethanol industry official called himself a conservative who agrees with Cruz on many issues, but said the Texas senator’s policy and rhetorical shifts on ethanol issues have provided a “window” into Cruz’s true politics.

“It’s raised more fundamental questions with me on whether or not I can trust him,” said the source, who is uncertain for which other candidate he will caucus.

Cruz still has some prominent defenders in Iowa, including GOP Rep. Steve King, who endorsed the senator in November. King, whose district produces more ethanol than any other in the country, drew a lot of criticism for the endorsement, but he argues that Cruz’s stance on the mandate is perhaps the best way to more the industry forward.

King noted that Cruz — a major recipient of oil and gas industry cash — is pushing for a flat tax that would also eliminate all government subsidies for energy, including those for the oil industry. That would level the playing field between the two fuels, King said, while a phase-out could provide a soft landing for ethanol, which is already under attack from lawmakers.

“We have a huge opposition to the RFS in Congress and they are going to continue to press that,” King said. “The ability to continue the RFS through statute in Congress, it’s not there.”

While ethanol supporters may be leery of Cruz, at least he has a plan for dealing with the mandate, King said. He said the industry is better off with a candidate who understands the issue — and "Ted Cruz does."