OBAMA CAMPAIGN HAS TIES TO ETHANOL INTERESTS

By LARRY ROHTER When VeraSun Energy inaugurated a new ethanol processing plant in Charles City, Iowa, last summer, some of that industry’s...

By LARRY ROHTER

When VeraSun Energy inaugurated a new ethanol processing plant in Charles City, Iowa, last summer, some of that industry’s most prominent boosters showed up. Leaders of the National Corn Growers’ Association and the Renewable Fuels Association, for instance, came to help cut the ribbon – and so did Sen. Barack Obama.

Then running far behind Sen. Hillary Rodham Clinton in name recognition and in the polls, Obama was in the midst of a campaign swing through the state where he would eventually register his first caucus victory. And as befits a senator from Illinois, the country’s second largest corn-producing state, he delivered a ringing endorsement of ethanol as an alternative fuel.

Obama is running as a reformer who is seeking to reduce the influence of special interests. But like any other politician, he has powerful constituencies that help shape his views. And when it comes to domestic ethanol, almost all of which is made from corn, he also has advisers and prominent supporters with close ties to the industry at a time when energy policy is a point of sharp contrast between the parties and their presidential candidates. In the heart of the Corn Belt that August day, Obama argued that embracing ethanol as a substitute for gasoline “ultimately helps our national security, because right now we’re sending billions of dollars to some of the most hostile nations on earth.” America’s oil dependence, he added, “makes it more difficult for us to shape a foreign policy that is intelligent and is creating security for the long term.”

Nowadays, when Obama travels in farm country, he is sometimes accompanied by his friend and surrogate, Tom Daschle. A former Senate majority leader from South Dakota, Daschle serves on the boards of three ethanol companies and works at a Washington law firm where, according to his online job description, “he spends a substantial amount of time providing strategic and policy advice to clients in renewable energy.”

Obama’s lead advisor on energy and environmental issues, Jason Grumet, came to the campaign from the National Commission on Energy Policy, an initiative associated with Daschle and with Bob Dole, also a former Senate majority leader and big ethanol backer, who had close ties to the agribusiness giant Archer Daniels Midland, or ADM.

Not long after arriving in the Senate, Obama himself briefly provoked a controversy when he twice flew at subsidized rates on corporate airplanes of ADM, which is the nation’s largest ethanol producer and is based in his home state.

Jason Furman, the Obama campaign’s economic policy director, said Obama’s policy decisions are based on the merits. “That is what has always motivated him on this issue, and will continue to determine his policy going forward,” Furman said.

Asked if Obama brought any predisposition or bias to the ethanol debate because he represents a corn-growing state that stands to benefit from a boom, Furman said: “He wants to represent the United States of America, and his policies are based on what’s best for the country.”

Daschle, who often serves as a surrogate for the Obama campaign, speaking for him on Sunday on “Fox News Sunday,” said his role advising the Obama campaign on energy matters is limited. He said he is not a lobbyist for ethanol companies, but does speak publicly about renewable energy options and works “with a number of associations and groups to orchestrate and coordinate their activities,” including the Governors’ Ethanol Coalition.

Of Obama, he said, “He has a terrific policy staff and relies primarily on those key people to advise him on key issues, whether energy or climate change or other things.”

Ethanol is one area in which Obama strongly disagrees with his Republican opponent, Sen. John McCain. While both presidential candidates emphasize the need for the United States to achieve “energy security” while also braking the carbon emissions that are thought to contribute to global warming, they offer sharply different visions of the role that ethanol, which can be made from a variety of organic materials, should play in those efforts.

McCain, who is not from a farm state, advocates eliminating the multi-billion-dollar annual government subsidies that domestic ethanol has long enjoyed. As a free trade advocate, he also opposes the 54-cent-a-gallon tariff that the United States imposes on imports of ethanol made from sugarcane, which packs more of an energy punch than corn-based ethanol and is cheaper to produce.

“We made a series of mistakes by not adopting a sustainable energy policy, one of which is the subsidies for corn ethanol, which I warned in Iowa were going to destroy the market,” and contribute to inflation, McCain said this month in an interview with a Brazilian newspaper, O Estado de Sao Paulo. “Besides, it is wrong,” he added, to tax Brazilian-made sugarcane ethanol, “which is much more efficient than corn ethanol.”

Obama, in contrast, favors the subsidies, some of which end up in the hands of the same oil companies he says should be subjected to a windfall profits tax. In the name of helping the United States build “energy independence,” he also supports the tariff, which some economists say may well be illegal under the World Trade Organization’s rules but which his advisers say is not.

Many economists, consumer advocates, environmental experts and tax groups have been critical of corn ethanol programs as a boondoggle more beneficial to agribusiness conglomerates than small farmers. Those complaints have intensified recently as corn prices have risen sharply upwards in tandem with oil prices, and corn normally used for food stock has been diverted to ethanol production.

“If you want to take some of the pressure off this market, the obvious thing to do is lower that tariff and let some Brazilian ethanol come in,” said C. Ford Runge, an economist specializing in commodities and trade policy at the Center for International Food and Agricultural Policy at the University of Minnesota. “But one of the fundamental reasons biofuels policy is so out of whack with markets and reality is that interest group politics have been so dominant in the construction of the subsidies that support it.”

Corn generates less than two units of energy for every unit of energy used to produce it, while the energy ratio for sugarcane is more than eight to one. With lower production costs and cheaper land prices in the tropical countries where it is grown, sugarcane is a more efficient source.

Furman said the campaign continues to examine the issue. “We want to evaluate all our energy subsidies to make sure that taxpayers are getting their money’s worth,” he said.

He added that Obama “favors a range of initiatives” which are aimed at “diversification across countries and sources of energy,” including cellulosic ethanol, and which, unlike McCain’s proposals, are specifically meant to “reduce overall demand through conservation, new technology and improved efficiency.”

On the campaign trail, Obama has not explained his opposition to imported sugarcane ethanol. But in remarks last year, made as President Bush was about to sign an ethanol cooperation agreement with his Brazilian counterpart, Obama argued that “our country’s drive toward energy independence” could suffer if Bush relaxed restrictions, as McCain now proposes.

“It does not serve our national and economic security to replace imported oil with Brazilian ethanol,” he argued.

Obama does talk regularly about developing switchgrass, which flourishes in the Midwest and Great Plains, as a source for ethanol. While the energy ratio for switchgrass and other types of cellulosic ethanol is much greater than corn, economists say that time-consuming investments in infrastructure would be required to make it viable, and with corn nearing $8 a bushel, farmers have little incentive to shift.

Ethanol industry executives and advocates have not made large donations to either candidate for president, an examination of campaign contribution records shows. But they have noted the difference between Obama, who changed his policy on travel on corporate jets after the flap in 2005, and his rival.

Brian Jennings, a vice president of the American Coalition for Ethanol, said he hopes that McCain, “as he pursues the highest office in the land, he would take a broader view of energy security and recognize the important role that ethanol plays.”

The candidates’ views were tested recently in the Farm Bill that Congress approved, extending both the subsidies for corn ethanol, though reducing them slightly, and tariffs on imported sugarcane ethanol. Because McCain and Obama were campaigning, neither voted. But McCain is on record as saying that if he were president he would have vetoed the bill, while Obama issued a statement praising it.

© The New York Times. All rights reserved. This article originally appeared in The New York Times.

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