Tap dancing around the ethanol lobby.

Photographer: Steve Pope/Getty Images

Cruz Was Against Ethanol Before He Was for It

Paula Dwyer writes editorials on economics, finance and politics for Bloomberg View. She was London bureau chief for Businessweek and Washington economics editor for the New York Times, and is a co-author of “Take on the Street: How to Fight for Your Financial Future.”
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Ted Cruz had an excellent idea. It would reduce corporate welfare, save consumers money and curtail greenhouse-gas emissions. It could also cost him votes in Iowa, where polls make him the front-runner ahead of the Feb. 1 caucuses, the first U.S. presidential selection contest.

So he's shifting his oratory, though maybe not his view, to camouflage opposition to an ethanol mandate that benefits corn farmers. 

Since 2013, Cruz has been calling for an end to the Renewable Fuel Standard. That's the law that has required petroleum refiners since 2007 to add biofuels, usually ethanol, to gasoline. Iowa produces 14 percent of U.S. corn, more than any other state, and half of it becomes ethanol. Iowa makes 30 percent of the nation's ethanol, and about 50,000 Iowans' jobs depend on it. 

That makes ethanol the third rail of Iowa politics, across party and socioeconomic lines. Among the Republican candidates this year, only Cruz, Ben Carson and Senator Rand Paul oppose the biofuel rule. Nobody has won the Iowa caucus vote without endorsing ethanol. Hillary Clinton and Bernie Sanders, the leading Democrats, are ethanol-friendly, although Clinton's support has been lukewarm. 

The issue is especially resonant as Iowa's economy turns shaky: A slowdown in manufacturing and farming put the state's 2014 economic growth at just 0.4 percent, much slower than the U.S.'s overall 2.2 percent. Iowa ranks 45th among the states in economic growth.

In 2014, Cruz offered a Senate measure to phase out the biofuels mandate over five years. That inflamed the ethanol lobby, a group called America's Renewable Future and led by Eric Branstad, the son of Iowa's Republican governor, Terry Branstad. The lobbyists have been trailing Cruz at every campaign stop and handing out anti-Cruz pamphlets. 

Cruz now says it's "utter nonsense" to assert that he opposes ethanol. In a Des Moines Register op-ed on Wednesday, he said "I'm fighting for farmers against Washington," explaining that, in his view, eliminating the federal rule would free refiners to put more ethanol into gasoline. The Environmental Protection Agency rule "makes it functionally illegal to sell mixes of gasoline with mixes higher than" 10 percent or 15 percent, he told an Iowa farmer this week. 

It's not exactly a flip-flop, but it's certainly a stretch. Iowa gas stations routinely sell blends with more than 15 percent ethanol. One in 10 vehicles sold in Iowa can run on fuel containing between 30 percent and 70 percent ethanol. 

If Congress lifted the biofuels mandate, refiners would still add ethanol, though perhaps not as much. They want less ethanol diluting their petroleum product, not more, which is why some of the biggest ethanol opponents are ExxonMobil and other oil industry majors. Their lobby, the American Petroleum Institute, this week said rolling back the renewable-fuel standard was its top priority in 2016.   

Automobile manufacturers would also be happy to see the end of the biofuel mandate, which requires them to develop engines that can burn ethanol without reducing gas mileage at a time when the U.S. is asking them to make cars that get 54.5 miles to the gallon by 2025. Ethanol burns less efficiently than gasoline, making it harder for auto makers to reach that goal. Food manufacturers that use corn would also like to see the end of the biofuels mandate, which drives up the crop's price. 

Cruz has said that his opposition to the ethanol rule is based on his dislike of Washington mandates and corporate subsidies. It's safe to assume that environmental considerations had nothing to do with it, since he's a self-described climate-change denier. But his end-the-mandate position happens to coincide with that of climate scientists, who tend to think that using ethanol in auto fuel doesn't reduce greenhouse-gas emissions. Growing corn, turning it into ethanol and transporting it to refineries uses a lot of fossil fuel. 

Cruz often accuses "Democrats and lobbyists" of falsely portraying him as anti-ethanol. On this topic, though, his real opponents are the oil industry, private equity funds invested in biofuels, automakers, food processors and others more likely to favor Republicans. And his unlikely allies are environmentalists

(Corrects 9th paragraph in article published Jan. 8 to clarify that refiners would continue adding some ethanol to gasoline.)

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Paula Dwyer at pdwyer11@bloomberg.net

To contact the editor responsible for this story:
Jonathan Landman at jlandman4@bloomberg.net