Perry's Ethanol Record Could Haunt Him in Iowa

Republican Gov. Rick Perry of Texas led an unprecedented attack on the ethanol industry in 2008 that could stymie his fledging presidential campaign in the politically critical, corn-rich state of Iowa.

The governor urged the Bush administration at the time to roll back the so-called “ethanol mandate,’’ which requires the federal government to annually boost biofuel production, mainly through corn-based ethanol. The Environmental Protection Agency turned down Perry’s request in a decision that elicited relief among Iowa’s corn growers and political establishment and disappointment from his home state’s cattle industry.

Perry has yet to address the ethanol mandate since he launched his campaign on Saturday, but he is certain to face questions about it in Iowa, where his path to the nomination begins.

“This is a very serious conversation we’re going to have with him," said Monte Shaw, executive director of the Iowa Renewable Fuels Association. “We respect the fact that before, he was acting in the best interests of Texas, which has a lot of oil and quite a few cattle operations.... I’m interested to see if he’s now running for president of the United States, not governor of Texas.’’

“As far as his position in 2008, we didn’t think it was warranted,” said Amanda Taylor, senior policy advisor for the Iowa Corn Growers Association. “We’ll have to wait and see what he says regarding the [mandate] now as he comes to court Iowa voters over the next six months.''

Pandering to the ethanol lobby was once compulsory for candidates trying to curry favor in the nation’s largest corn-producing state and host of the first presidential nominating contest. The notable exception was Arizona Sen. John McCain, an outspoken critic of ethanol subsidies who largely steered clear of Iowa in his 2000 and 2008 presidential campaigns. Republican candidate Jon Huntsman recently cited his opposition to the $6 billion in subsidies as the reason he would not compete in Iowa, though his position is becoming more and more acceptable.

As Congress prepares to make historic cuts in the federal budget, Iowa congressional leaders and the ethanol industry know the subsidies are unlikely to survive intact. But they can take comfort in the fact that the renewable-fuels mandate ensures ethanol’s sustained growth even as Washington seems poised to eliminate the sector’s once-sacred tax subsidies, which have been in place for more than three decades.

Passed as part of a 2005 energy bill and updated in 2007, the mandate requires biofuels, mainly ethanol, to be blended into gasoline as a way to reduce dependence on foreign petroleum.

Perry is the only major presidential candidate who has called for cutting back the mandate. The last time Iowans were this nervous about a candidate’s position on ethanol was in 1999, when another governor of oil-rich Texas, George W. Bush, campaigned heavily in the state. (Bush avowed his allegiance to ethanol subsidies—this was before the mandate—and ultimately won the 2000 caucus.)

“It would make the market really vulnerable if we didn’t have that mandate,’’ said Iowa Agriculture Secretary Bill Northey, pointing to the state’s 42 ethanol plants and production of 3.5 billion gallons of ethanol a year. “It’s going to be important for Perry to articulate how he feels about these things.’’

When passing the renewable-fuels-standard law in 2005, President Bush hailed it as a way to wean the country off foreign oil. President Obama says the same thing today as he continues to support the mandate.

Perry acknowledged that bipartisan goal when he petitioned EPA in 2008 to cut out the corn-based ethanol part of the mandate. Since corn ethanol accounts for most of the biofuel in the country, that basically meant he was seeking to abolish the mandate. Perry said the economic harms it was causing overshadowed the goals of energy independence.

“While I have no doubt this mandate was a well-intentioned effort to move our country toward energy independence, it is doing more harm than good and must be modified before our livestock industry suffers permanent damage,” Perry said at a June 24, 2008, press conference, joined by a coalition of livestock and food groups that opposed the mandate.

In a letter dated April 24, 2008, to then-EPA Administrator Stephen Johnson, Perry lamented over high corn prices: “Corn prices are up 138 percent globally over the past few years, and global food prices have increased 83 percent over the same time period, in part because of the artificial economic forces created by the RFS.”

Responding to an inquiry from National Journal, Perry spokesman Mike Miner said Perry's position on the mandate is the same as it was in 2008.

“When it comes to ethanol, the governor's position is well-known and based in part on the concerns of my own state’s agriculture producers," Miner said in a written statement on the governor’s behalf.

He also said Perry supports "a phase-out of those tax credits now that the industry is mature and efficient," and looks forward to discussing the issue with Sen. Charles Grassley, R-Iowa, and other Iowans.

Grassley couldn’t be reached on Tuesday for comment. When EPA rejected Perry’s 2008 request to cut the ethanol mandate in half, he said: “Today’s ruling is a victory for clean energy, rural America, and national security and blow to those who have used ethanol as a scapegoat for rising fuel and food prices.’’

Supporting Perry’s efforts was the National Cattlemen’s Beef Association, which blamed the mandate for tight corn supplies and high prices for feed. The group commended Perry for his “exceptional leadership’’ in 2008.

“Cattlemen aren’t opposed to ethanol. We’re opposed to government intervention in the marketplace via mandated production, protective tariffs and subsidies for a mature industry that has received government support for more than 30 years,’’ said an NCBA spokeswoman, Kristina Butts, in a statement. “We commend all common-sense elected officials who agree it’s time to level the playing field and move to a market-based renewable-fuels policy.”

The debate reveals the extraordinary pressures facing presidential candidates, who have to balance the conflicting interests of their home state against the states that host early nominating contests.

While eliminating the mandate is controversial in Iowa, Perry’s market-based approach may appeal to fiscal hawks and independents influential in the New Hampshire and South Carolina primaries.

"If you run around telling everyone, ‘I’m a conservative who believes in small government,’ that mandate is indefensible,’’ said Republican strategist Mike McKenna, who specializes in energy issues. “He is much better off staying where he was on ethanol and not trying to weasel out of it."

source: nationaljournal