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Want to Drain the Swamp? Trump Should Start With Ethanol Reform

In Washington, several of Donald Trump’s nominations to key federal government positions are being held up for political reasons. Among them is that of William H. Northey, who was appointed by the White House to the post of Under Secretary of Agriculture for Farm Production and Conservation. Northey’s confirmation is currently being blocked by Senator Ted Cruz over the Trump administration’s silence regarding the recent altering of the U.S. Renewable Fuel Standard (RFS).

The blockade came after Cruz and Senator Mike Lee, along with seven others, sent a letter asking [1] for an urgent meeting on environmental policies concerning biofuels (they later got it). The lawmakers believe the Renewable Fuel Standard needs a serious overhaul, and, in order for the White House to live up to its rhetoric on battling special interests in Washington, fundamental reform of America’s wasteful ethanol policy must be made a key priority.

The role of overturning the RFS mandate—which dates back to 2005 and makes it compulsory for producers to add 15 million gallons of ethanol to gasoline—would ultimately fall on the Environmental Protection Agency, currently headed by Scott Pruitt. There is precedent for progress on this matter. In 2013, the Obama administration reduced the amount of mandated ethanol from 18 million down to the current 15 million, due to the fact that there wasn’t nearly enough gasoline to mix it into.

The nine senators are very concerned about the issue. They write in their letter:

We request that within the next three weeks, you convene a meeting regarding the RFS and pro-jobs policies with us, our Senate colleagues who previously lobbied you on behalf of the ethanol industry, and relevant members of your administration to discuss a pathway forward toward a mutually agreeable solution that will also save refining jobs and help unleash an American energy renaissance.

Their worries are indeed well-founded. Small producers, for whom the cost of mixing the mandatory amount of ethanol is extraordinarily high, tend to opt out of their obligations by referring to Renewable Identification Numbers (RIN), which allow them to pay for the production of their ethanol by larger operators. What sounds incredibly nonsensical is indeed no less than that: it’s a 15-million-gallon guarantee for the ethanol lobby, which has effectively persuaded multiple past administrations to write their market-distorting priorities into American law. This system is a drain on the performance of small- and medium-sized businesses and the jobs that they create. Between February and August, a price hike of 200 percent on biofuel credits made it clear that the big winners are actually hedge fund managers, not the ethanol farmers working in the business. The system ends up benefitting Wall Street, not Iowa.

Trump was voted into office on the promise that he would drain the swamp—meaning rid Washington of its damaging lobbying sector and create public policy in the interest of the people rather than whoever is best at peddling influence. One of the many ways to do that would be to get rid of the Renewable Fuel Standard altogether, which would see the energy market become fairer. Right now, the crony capitalism of the ethanol quota is causing small refineries to lose their ground to large companies, and is costing the United States thousands of jobs.

Senators who succumb to the ethanol industry’s lobbying are also holding up key nominations; they want not only to maintain the RFS, but to expand it. The most astonishing part of their stance is how blatantly obvious it is that they’ve been bought off, as it makes no sense, either from a jobs, business, or environmental perspective, to support the current framework.

The RFS is a crony creation, and while it would ideally disappear altogether, other solutions are possible. There is a middle ground between abolishing it completely and expanding it: amending the RINs system to allow exports. By permitting exports to regions such as Europe, which is consistently keen on the use of ethanol, the Trump administration could boost agricultural production in the United States and put job creation back on track. The United States is already creating thousands of jobs through Europe’s demand for biomass products such as wood pellets, which present a more environmentally friendly alternative to coal. This is a result of Europe’s increasing skepticism of nuclear energy, which has powered much of the continent for so long.

It stands to reason that an amendment to the Renewable Fuel Standard is the least that the Trump administration could do to stand against crony capitalism and say yes to market reforms. However, in order to that, the president first needs to say no to corporate lobbyists and the senators who are in their back pockets.

This is a key area in which Donald Trump really can drain the swamp while keeping his promises on job creation. What is he waiting for?

Bill Wirtz is a Young Voices advocate. His work has appeared in Newsweek, the Washington Examiner, CityAM, CapX, the Mises Institute, Le Monde, and Le Figaro.

15 Comments (Open | Close)

15 Comments To "Want to Drain the Swamp? Trump Should Start With Ethanol Reform"

#1 Comment By Jason C. On December 5, 2017 @ 10:25 pm

There is a middle ground between abolishing it completely and expanding it: amending the RFS to allow exports

What exactly are you talking about exporting here? We export lots of ethanol from the US every day.

#2 Comment By Youknowho On December 5, 2017 @ 10:28 pm

What makes you think that Trump wants to drain the swamp?????

#3 Comment By Ken T On December 6, 2017 @ 12:29 am

The ethanol industry – which is really just Big Ag by another name – doesn’t want to be “allowed” to do anything – they want a guaranteed Federally-mandated market right here. The party that cuts that off will write off at least half of the plains states for the next 50 years.

Break up ADM and Cargill first, and you MIGHT stand a chance. I’m not going to hold my breath.

#4 Comment By Richterrox On December 6, 2017 @ 9:11 am

Ethanol additives make for terrible gasoline, it should be removed for that reason alone

#5 Comment By Corny On December 6, 2017 @ 9:48 am

Amen, amen, amen!

Here in corn country — where I live and have close relatives who grow corn and soybeans — I have seen firsthand the damage done by the ethanol subsidies.

Fields that should not have “row crops” growing on them because of erosion problems have been planted with corn. Some results: streams filling with silt; wind-blown erosion; destruction of native grasses, sedges, flowers and shrubs; less food, cover and nesting habitat for native birds, small mammals, butterflies, bees and other beneficial insects.

Don’t think for one second I am some tree-hugging environmentalist. I am not. But I have eyes and can see the damage done to natural areas by putting marginal farm land into production to pick up the money that comes from demand for corn to make ethanol. I see the huge amounts of water sucked out of the ground to grow that corn and make it into ethanol at the ethanol facilities.

Also: Several years ago a friend of mine told me about a vacation he took. He drove through the South and found a gas station that sold pure gasoline. His car’s gas tank was nearly empty. He filled it with the pure gasoline and checked his mileage. He got almost three miles a gallon more burning pure gasoline than he got using gasoline with a 10 percent ethanol blend. Imagine how many billions of dollars Americans could save using pure gasoline! Imagine how much closer car fleets would come to meeting government mileage requirements!

If people want to burn ethanol in their cars, should be allowed to do that. People who want to burn pure gasoline, they also should be allowed to do that. The demand for ethanol should be determined by what the American motoring public wants to buy.

#6 Comment By Michael Kenny On December 6, 2017 @ 11:07 am

Would it not be better for us in Europe if we produced the ethenol we need ourselves?

#7 Comment By Thaomas On December 6, 2017 @ 11:54 am

This is the tip of the tip of the iceberg. The ethanol requirement is among the most inefficient ways of reducing CO2 emissions [it may in fact not reduce them at all!] All these “green energy” subsidies and regulations need to be replaced with a carbon tax that give each gasoline mixer, fossil fuel producer or user that proper incentive to adjust their behavior.

#8 Comment By Will Harrington On December 6, 2017 @ 11:57 am

Michael Kinney

Sure it would. Where do you plan to plant all the extra fields?

#9 Comment By LouisM On December 6, 2017 @ 1:59 pm

Ethanol is a big part of the economy for many states so its not an easy fix. However, much of the corn grown for ethanol is by big agra conglomerates which could easily switch to other cash crops or export markets.

Its also worth remembering the history why ethanol was mandated. The gasoline industry came up with a concoction to mix with gasoline that would meet the clean air standards but this polluted ground water and made it undrinkable and when that ground water surfaced it polluted streams, rivers, lakes…because it never broke down. Eventually the backlash was so strong ethanol was decided as the solution…it was later that the argument for renewables came to the fore.

That said, ethanol should not be mandated by a total quantity per year but by the total gasoline produced. The law is written poorly, its out of date and it needs a rewrite.

#10 Comment By JeffK On December 6, 2017 @ 4:19 pm

Ethanol mixed with gasoline is a horrible fuel for small internal combustion engines. I have 5 motorcycles, a lawn mower, and a snow blower. If I don’t drain the tanks and run the carburetors dry after using them they will be very difficult to start if let sit for more than 3 weeks. What a pain.

But the bigger issue is the damage to the environment caused by planting marginal acreage with corn. I spent a summer in Indiana corn country. Seems like every possible square foot of it is planted with corn. The streams run brown every time it rains, and one of our most precious natural resources (great topsoil) eventually ends up in the Gulf of Mexico.

Every summer the gulf experiences a huge dead zone where fish just cannot survive due to the nitrogen in the water from the fertilizers and livestock of the midwest.

Ethanol in fuel is a mechanical and environmental disaster, but like another poster says. But just try to get rid of it. Lobbyists for Archer Daniels Midland and Cargill will absolutely not allow it to happen.

#11 Comment By Tony D. On December 6, 2017 @ 6:16 pm

Ken T nails it: “The party that cuts that off will write off at least half of the plains states for the next 50 years.”

The ethanol mandate isn’t going anywhere as long as farm state Republican congressmen want to keep their jobs.

#12 Comment By Tyro On December 6, 2017 @ 7:45 pm

I feel like a call to end ethanol subsidies is perhaps the most banal and well trodden territory you could cover. It’s not that anyone disagrees, it’s that their are already well known and heavily covered structural impediments. A libertarian or paleo conservative call to end them is pretty much something we have heard a million times before.

What is new is how a president who came into office with a call to “drain the swamp” plays into this, and that you missed completely. When Trump says, “drain the swamp,” he doesn’t mean, “clear out the lobbyists and BigAg subsidies and defense contractors.” He means, “get those liberals off the gravy train [that more properly belongs to us].”

“Drain the swamp” means taxing grad students on their tuition waivers, ending food stamps, and getting all those scientists out of government while cutting NIH and NSF spending.

To associate “drain the swamp” with the hope or possibility of ending ethanol subsidies strikes me as naive or deliberately obtuse.

#13 Comment By D On December 6, 2017 @ 10:06 pm

Tyro is right on point. Few people not in big ag would disagree with the ethanol critique at this point, nor the need for reform. But to suggest that this was the kind of swamp Trump intended to drain is the height of naïveté.

#14 Comment By Mark D. On December 8, 2017 @ 8:33 am

“Crony capitalism is a big problem — but only when they’re not MY capitalist cronies”

– going unsaid by every politician and pundit ever.

#15 Comment By Clique777 On December 9, 2017 @ 9:31 pm

What a red herring article! The Swamp is populated by people, criminals and traitors.

Ethanol may be a problem but not as bad a problem as the existence of the IRS or Federal Reserve. Until you get rid of those two you don’t have a Republic.

You do understand under Admiralty Law, which is the basis for the IRS, you are nothing but chattel of foreign lenders, right? No, I suspect none of you have ever even suspected that, but its as true as the Sun rising in the East in the morning.