Cornhucksters: Ethanol Salesmen Who Would Be President

In a National Review Online op-ed earlier this month, Katrina Trinko observed that four of the potential candidates for the 2012 GOP presidential nomination are stuck on ethanol:

What kind of Republican supports high tariffs on imports, dubious green tax credits, and consumption mandates to prop up unprofitable environmental darlings? The ethanol-loving midwestern kind, especially the ones running for president.

Currently, imported ethanol is slapped with a 54-cent-per-gallon tariff, while oil companies receive a 45-cent tax credit per gallon of ethanol blended into their gasoline. Both the tariff and the tax credit have just been extended for another year, thanks to a bipartisan push from Cornbelt politicians. In case these provisions aren’t enough to help the industry hobble its way to satisfying profits, lawmakers also decided to mandate that U.S. consumption of renewable fuels (which will certainly be almost entirely corn-based and cellulosic ethanol) reach 36 billion gallons by 2022. And that’s just the assistance provided on the federal level.

There are four potential midwestern 2012 Republican presidential nominees: Minnesota governor Tim Pawlenty, Indiana governor Mitch Daniels, South Dakota senator John Thune, and Indiana congressman Mike Pence. When it comes to doling out favors to the ethanol industry, none of them can credibly claim his attitude was “just say no.”

Does it matter? Absolutely: As this year’s tariff and tax-credit extensions showed, even a Tea Party–driven small-government surge can’t stop politicians from kowtowing to the ethanol lobby. Further, a Republican president who is willing to carve out exemptions for ethanol interests will lack credibility when he battles spending or tax breaks benefiting other special interests. And finally, while some claim that ethanol will allow our nation to achieve energy independence, the fact that the highest approved corn-gas blend is only 15 percent ethanol (and is approved only for certain automobile models from 2007 or later) suggests that an America running on corn is unlikely in the extreme.

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Mike Pence has announced that he does not intend to seek national office. But a seemingly unlikely friend of the ethanol lobby is already taking his place. Newt Gingrich is a product of the southeast, not the midwest. But he is no less a snake corn oil salesman than his four counterparts in the American heartland, as a WSJ editorial, published today, reveals:

The former Speaker blew through Des Moines last Tuesday for the Renewable Fuels Association summit, and his keynote speech to the ethanol lobby was as pious a tribute to the fuel made from corn and tax dollars as we’ve ever heard.

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Of course, the ethanol boom isn’t due to the misallocation of resources that always stalks inflation. It is the result of decades of deliberate industrial policy, as Mr. Gingrich well knows. In 1998, then Ways and Means Chairman Bill Archer tried to kill ethanol’s subsidies for good, only to land in the wet cement that Speaker Gingrich had poured.

Yet today this now-mature industry enjoys far more than cash handouts, including tariffs on foreign competitors and a mandate to buy its product. Supporters are always inventing new reasons for these dispensations, like carbon benefits (nonexistent, according to the greens and most scientific evidence) and replacing foreign oil (imports are up). An historian of Mr. Gingrich’s distinction surely knows all that.

Given that Mr. Gingrich aspires to be President, his ethanol lobbying raises larger questions about his convictions and judgment. The Georgian has been campaigning in the tea party age as a fierce critic of spending and government, but his record on that score is, well, mixed.

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Do we need to blend ethanol with our gasoline? Yes, but only as a fuel oxygenate and only in very small amounts. That was the original idea when it was discovered in the previous decade that the chemical compound MTBE, which was then the oxygenate of choice, was leaking from fuel storage tanks into the groundwater. MTBE was an excellent anti-knock agent, and it was hailed as a much less toxic solution to increase the octane level of gasoline than lead, which had been used for that purpose for much of the previous century. But environmental and health concerns brought us ethanol as a replacement.

Ethanol was first blended with gasoline at a 10 percent concentration (E10), which is more than enough for it to serve its function as an oxygenate. But an ethanol lobby quickly coalesced around the corn product, and soon it was pushing for higher concentrations of ethanol in each gallon of gasoline. E10 will soon be replaced by E15, and the lobby wants to see even high blend levels, such as E-85, the so-called “flex fuel.”

As a motor fuel, ethanol is not without its issues. At higher concentrations, the net lower energy of the blend becomes a factor. A vehicle will get somewhat lower fuel mileage compared to conventional 87 octane unleaded gasoline. Although many modern American cars are capable of burning E-85 with no harmful effects to the engines, this is not true for all of them. And many owners of small engines, used in their lawn mowers, trimmers, outboard marine applications, etc. have reported severe damage from ethanol blend use, even at concentrations as low as 15 percent. And until cellulosic ethanol production become feasible, economically and otherwise, the sugar and corn we currently use will remain at higher prices than they would if the only demand for corn was for use as food.

The fact is that natural gas, coal, and oil continue to provide the most efficient use of energy defined by what it costs in dollars and energy (fuel and labor) to get to them versus the amount of energy they provide for those dollars and energy. Of these three, the environmental lobby least favors coal and oil, although it is not very fond of any of them because they are not considered “renewable” resources. But natural gas, when used as a motor fuel, has too many advantages to be ignored. It is relatively cheap, clean-burning (Honda’s CNG-powered Civic GX is greener than a Toyota Prius hybrid), and plentiful. We’re living right on top of lots of it, and it’s not just deposited under a few corn-growing states. At least half of our country’s states have natural gas reserves. The Natural Gas Supply Association says those reserves are sufficient for at least 60 years at current use levels, according to its most conservative estimates. Only 56 percent of the crude oil refined in the U.S. comes from North America, but 98 percent of the natural gas we consume is produced here.

What’s holding natural gas back? Nationwide, there are only about 1,500 natural-gas refueling stations for motor vehicles, and only about half of them sell to the public. California and Oklahoma lead the nation in offering the most locations where owners of CNG-fueled vehicles can “fill up.” If we’re to invest in our infrastructure, natural gas refueling stations will likely provide more bang for the buck than money spent in other ways.

There’s another factor holding back the use of natural gas, and that is the commitment to rely on it to make the United States truly energy secure and energy independent. Such a commitment requires a strong will, a vision for the future and a steel spine. Look over the list of potential candidates for the 2012 GOP presidential nomination and see if you can find one who meets these criteria. Hint: It’s not one of the “good old boys.”

- JP

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