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.
Let’s examine some midwestern GOP politicians’ records on ethanol.
When Mitch Daniels was sworn in as governor in January of 2005, there was one ethanol plant in Indiana. Now there are twelve operating plants and a thirteenth set to start running early next year. This isn’t an accident: Daniels aimed to increase Indiana’s annual ethanol and biodiesel production to 1 billion gallons by 2008. Once that thirteenth plant begins producing, Indiana will have met the goal.
Under Daniels’s leadership, Indiana has aggressively courted the ethanol industry. “He’s been a huge supporter of building ethanol plants . . . and also [has tried] to encourage consumers to buy ethanol,” says Indiana political analyst Ed Feigenbaum, adding that much of the new industry “has come at the cost . . . of state subsidies.”
The Indiana Economic Development Corporation, which is chaired by Daniels, has offered ethanol plants tax credits and training grants. Consider the package offered to the Hartford-Bio-Energy ethanol plant. It included “up to $32,000 in training grants for Indiana resident employees, $100,000 in infrastructure assistance to the local community, and up to $1.4 million in tax credits based on anticipated employment and capital investment levels,” announced an IEDC press release. In 2006, Daniels signed SEA 353, which upped the maximum tax credit available for ethanol production and biodiesel production and blending from $20 million to $50 million.
As of this year, Indiana offers existing ethanol plants a tax credit of twelve-and-a-half cents per gallon produced, with production-based caps on the credit ranging from $2 million to $20 million.
Daniels has also actively promoted ethanol-based fuels. In 2005, he signed a law mandating that state employees operating government vehicles use ethanol or biodiesel fuel whenever possible. That same year, he announced the conversion of the rural town of Reynolds, Ind., to “BioTown, USA.” The plan was that BioTown would eventually use only renewable energy. The first phase included installing an E85 pump and encouraging residents to buy flex-fuel vehicles. Daniels hoped BioTown would become a model for other Indiana towns, but it’s now generally considered a failed experiment.