Cruz victory threatens ethanol’s power

 Ted Cruz’s victory in the Iowa caucuses is casting doubt on the political potency of ethanol, an issue that had long reigned supreme in the Hawkeye State. 

Before Monday, every winner of the caucuses in both parties had supported the Renewable Fuel Standard (RFS). Opposing the mandate, it was long thought, would be political suicide in the state, which leads the country in the production of ethanol.  

{mosads}But Cruz defied the trend, triumphing over the Republican field despite his support for phasing out the standard, which defines how much renewable fuel must be blended into traditional fossil fuels.

It’s an outcome that many in Iowa tried to stop.

The state’s popular Republican governor, Terry Branstad, repeatedly warned that supporting Cruz would be a “big mistake for Iowa.” Asked directly whether he wanted Cruz to lose, Branstad replied, “Yes.”

But Branstad’s opposition did little two sway caucusgoers. Cruz finished with more than 27 percent of the vote on Monday, beating Donald Trump by 3 percentage points. Trump had attacked Cruz’s position on ethanol and promised voters he would keep the mandate in place.

Cruz’s victory, ethanol opponents say, could alter the conventional wisdom about the fuel’s currency as an electoral issue in the Midwest, which produces most of the agricultural products such as corn that become ethanol. 

“After last night, we can say that the corn lobby has really now suffered pretty much the biggest defeat that it ever has in history, and possibly the most resounding defeat that we’re going to see for years going forward,” said Liz Mair, a Republican strategist. 

“At the end of the day, it’s been pretty decisively shown that it is not necessary to support ethanol subsidies, whether in the form of mandates or otherwise, in order to win in Iowa.” 

Anti-ethanol forces, a coalition led by gasoline refiners, food groups, many free-market Republicans and some Democrats, were claiming victory on ethanol before the caucuses even began. 

The Des Moines Register poll released Saturday night showed Branstad’s opposition to Cruz didn’t matter to 77 percent of GOP voters in the state. The poll followed an industry-funded survey last month showing most Iowans don’t rank the ethanol mandate among their top three issue, and half of the voters there said they don’t care much or at all about the RFS. 

“I think a clear message coming out of Iowa is that whatever political influence ethanol used to have in the state, those days are now over,” said George David Banks, the vice president of the American Council for Capital Formation, which launched an anti-ethanol ad campaign worth at least $1 million in the state in January.

Bob Shrum, a Democratic strategist, said the true test of ethanol’s importance came when Branstad lashed out at Cruz.

“He obviously assumed that the ethanol mandate was a silver bullet,” Shrum said. “Instead, what the results suggest, and what Ted Cruz … has proved is that this is no longer a third rail in Iowa politics.”

Ethanol backers, however, say the meaning of the caucus results are being overhyped into a “false victory” for “Big Oil.” 

While Cruz won the caucuses, he received only 27 percent of the vote on the GOP side. More than 80 percent of Iowa caucusgoers in both parties chose candidates who support the ethanol mandate, they noted. 

“The facts are over 80 percent of the votes cast yesterday in Iowa were cast for candidates that are in favor of the RFS — some in favor of the status quo, some in favor of it through 2022 and even some who want to expand it,” said Tom Buis, the co-chairman of Growth Energy. “Those numbers are significant. Those are facts that can’t be disputed.” 

Cruz also made a slight shift in his position on ethanol as the campaign progressed. He now says he wants to phase out the mandate over time but had co-sponsored legislation a few years ago that would have ended it immediately. 

“This was not about Ted Cruz, and it was never about Ted Cruz. It was about moving everyone — and also, Ted Cruz moved,” said Eric Branstad, the state director of pro-ethanol group America’s Renewable Future and Terry Branstad’s son.  

“Big Oil is going to claim a false victory today, but I really believe that that rings hollow,” he added. “We’ve moved, especially Sen. Cruz, in a positive direction. He has moved closer to us with his new plan on ethanol, and moved further from oil.” 

The Iowa caucuses are not the end-all of ethanol politics.

Several lawmakers — both Republicans and Democrats — are pushing measures to end the federal ethanol mandate, including as amendments to the energy bill on the Senate floor this week.  

With Iowa a likely swing state in November’s general election, nominees of both parties will have to revisit the issue again this fall.  

Ethanol backers said that bodes well for them. 

“Looking toward November, if Ted Cruz is the nominee — and I hope he is — looking at these pro-RFS numbers I am happy to put Iowa in the Democratic column,” said Paul Tewes, a Democratic operative who heads the Smoot Tewes Group.  

“The RFS is a unique issue in rural America, and if the Democrat is for the RFS and the Republican is not, thank you, and we’ll take Iowa.”

Timothy Cama contributed to this report.