Shuck and Jive

How industry and politicians are harvesting ethanol for all it's worth

Ethanol

illustration by Ellyn Lusis

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Behind the newly constructed Lincolnway Energy ethanol plant in Nevada, Iowa, harvested cornfields stretch to where brown meets blue at the horizon. While wind blows across the plains, bright sunlight catches the silver of tall silos full of liquid fuel made from corn.

Politicians tout this picturesque scene as the key to energy independence and small-town economic revival. Yet the veneer on this portrait of Midwestern know-how and environmental progress has started to crack. There is, after all, another part of the picture: the long cargo train that delivers the 275 tons of coal Lincolnway needs each day to generate power.

Though the truth about corn-based ethanol -- that it is, in fact, an inefficient way to produce energy -- is slowly trickling out, the great green hope has yet to be dashed in mainstream discourse. And with ethanol and the public still in their honeymoon phase, politicians and powerful lobbyists are mining the gilded promise of ethanol for political gold: votes and subsidies.

In the 2004 and 2006 election cycles, the National Corn Growers Association (a nonprofit that represents more than 300,000 farmers), the Renewable Fuels Association (a trade group), and the handful of companies building ethanol refineries gave a combined $1.2 million to political candidates, according to the Center for Responsive Politics, a nonpartisan group that tracks political donations. Federal legislators from Illinois and Iowa received the most funds.

As for money spent on lobbying -- as opposed to funds given to elect legislators -- the public interest watchdog group Public Citizen says the figures are grossly underreported by the ethanol industry. For example, until Public Citizen filed a complaint last summer with Congress, agribusiness giant Archer Daniels Midland Company (ADM), which controls 22 percent of the ethanol market, had stated that it did no federal lobbying at all. By the time ADM filed a spending report in February, it had registered a $300,000 lobbying tab in the six months between its report and Public Citizen's complaint.

Similarly, though the Renewable Fuels Association reports spending $500,000 on lobbyists from 2000 to 2005, lobbying firms reported that the trade group paid them $1.7 million in the same time frame.

Since this money has been flowing to Washington, politicians have implemented and sustained tax credits, tax exemptions, direct payments, and research grants for the ethanol industry that total between $5.1 billion and $6.8 billion a year.

Political ardor for ethanol, however, is as much about money as it is about votes and legislative power brokering. 'If you're a senator from New York, you vote for these ethanol subsidies because you need farm state votes for things you're hoping to get through the legislature,' says Jerry Taylor of the Cato Institute, a libertarian think tank based in Washington. 'Farm state [legislators] will trade anything for an ethanol and agricultural subsidies vote.'

The plight of countless dwindling rural Midwestern towns makes it easy for politicians to use the lure of ethanol-created jobs to net votes. In late January, the Des Moines Register reprinted an American Prospect opinion piece by Tom Daschle, former U.S. senator from South Dakota, claiming that the ethanol industry has created 200,000 jobs. Senator Tom Harkin of Iowa boasts on his website that ethanol will create more than 5,000 jobs for his constituents.

In fact, Iowa ethanol plants created fewer than 1,000 new jobs last year, according to a recent study by Iowa State University economist Dave Swensen. Unlike economic studies conducted by industry, his study excludes jobs related to corn farms, since those exist without ethanol. Furthermore, though community residents currently cooperatively own 40 percent of ethanol plants, which helps dollars stay local, Swensen and others expect that as the industry matures and takes the necessary risks to grow, only bigger corporations will be able to afford new technologies. As an aide to ethanol booster Senator Barack Obama of Illinois put it, within three decades consolidation will likely result in less than eight companies running all the ethanol plants in the country.

Given the disconnect between political and economic realities, industry support is poised to increase: In January's State of the Union address, President Bush announced plans to promote alternative fuels to help Americans cut back their gasoline use by 20 percent within the decade.

Legislators have introduced nearly 100 bills in Congress that provide funds to expand the ethanol industry. While there is much talk about replacing corn with cellulosic materials such as grasses and trees that produce more energy-efficient ethanol, there's no legislative mandate for when industry would have to make the switch.

Meanwhile, legislators who once provided informed skepticism of ethanol's cure-all credentials have sung its praises on the 2008 campaign trail: Hillary Clinton told Iowans at a town hall meeting in Des Moines in January that she wants to boost ethanol production; John McCain donned a hard hat and visited an Iowa ethanol refinery in October.

'Every four years you have the gift that God gave the corn industry, and that's the Iowa caucus. Six years ago a guy from the oil fields of Texas assured us that though he was an oil man, he would support ethanol and he certainly has,' says Jon Doggett of the National Corn Growers Association. 'We're looking forward to more of the same.'


This article was supported in part by a grant from the Fund for Investigative Journalism; http://fij.org.