Bloomberg News

Ethanol Rule Pits Gephardt Against Lott in High-Octane Lobby (1)

December 05, 2013

While renewable fuels have so far failed to reach production levels envisioned by supporters, they’re an undisputed hit with one group: Washington lobbyists.

Dozens of companies and trade groups have ramped up their lobbying ahead of a U.S. Environmental Protection Agency decision on scaling back requirements for the use of gasoline alternatives. Many were represented at an EPA hearing today on the matter.

In the quarter ended Sept. 30, about 200 companies and other entities reported hiring lobbying firms for the issue, including those led by former lawmakers Richard Gephardt and Trent Lott, almost double from two years ago, Senate records show. The companies include chicken producer Sanderson Farms Inc. (SAFM:US), refiner Valero Corp. and hamburger-seller Wendy’s Co. (WEN:US)

“It would be positively irrational for these companies not to lobby as hard as they can on this issue,” Jeffrey Berry, a political science professor at Tufts University who studies lobbying, said in an interview. “The amount of money they will spend on lobbying is a small percentage” of what’s at stake.

$79 Million

Because groups aggregate their lobbying expenditures in the Senate records, it’s impossible to say exactly how much was spent on this issue alone. All told, records show the groups or companies spent $79 million lobbying in the previous quarter, compared to $46 million in the same period in 2011.

At issue in today’s hearing is a draft rule released by the EPA Nov. 15 that would require between 15 billion to 15.52 billion gallons of renewable fuels such as corn ethanol and biodiesel in 2014. That compares with 18.15 billion gallons set in a 2007 law, making it the first time the legal mandate would be cut since it became law six years ago.

The renewable fuels fight is the kind of battle -- important to companies’ bottom lines but largely ignored by the public -- that can put a premium on inside-the-Beltway skills.

Corn growers support ethanol, which accounts for 40 percent of corn use in the U.S. Chicken producers and chain restaurants such as Wendy’s oppose it, saying expanded ethanol production is increasing the cost of corn fed to chickens.

Refiners that blend ethanol and other renewable fuels into gasoline say complying with the EPA’s rising quota risks damaging car engines. The American Petroleum Institute, which represents large oil producers such as Exxon Mobil Corp. (XOM:US), has led the charge to get the EPA to scale back its requirements, and is pushing Congress to scrap the program altogether.

‘Very Draconian’

“We’re doing some advertising, mobilization, grassroots” efforts, Jack Gerard, the head of the Washington-based group, said yesterday at a meeting with reporters on the subject. “Time is clearly on our side.”

Gerard declined to say how much API is spending to lobby on the issue. In total, the group spent more than $2.5 million lobbying in the third quarter, according to Senate records.

The lobbying hasn’t been confined to businesses. Iowa’s Republican Governor Terry Branstad flew into Washington to testify on behalf of ethanol, and against the EPA proposal, at the hearing the agency held in suburban Virginia today.

Representative Peter Welch, a Vermont Democrat and opponent of corn ethanol, is also testifying today, and said he is working to pull together legislation to change the 2007 law.

“EPA has taken some of the pressure off, but what it has also done is validated the call for reform,” Welch said in an interview. “And that’s not going to go away.”

Corn Husks

Makers of fuels from corn husks or algae that want to keep raising the mandated levels to build a market for their fledgling products.

“We view this proposed rule as very draconian,” Michael McAdams, president of Advanced Biofuels Association, told reporters yesterday on a conference call in advance of the EPA hearing. If it holds up, “EPA’s proposal will devastate any future investment” in biofuels, he said.

A final rule is due in the first quarter of 2014. EPA officials have said they are listening to those concerns and have pledged to preserve a market for what are dubbed “next generation fuels.”

Breaux Lott

Chicken producer Sanderson paid the Breaux Lott Leadership Group, run by Lott, a former Mississippi Republican Senator, and former Louisiana Democratic Senator John Breaux, $80,000 to lobby on this and other issues. Trestle Energy LLC, a biofuel maker, hired the Gephardt Group, run by the former House Democratic leader, for $50,000 in the third quarter.

Telephone messages left at the offices of Lott and Gephardt weren’t immediately returned. Valero, which wants the standard overhauled, paid $30,000 to the Lincoln Policy Group, run by former Arkansas Democratic Senator Blanche Lincoln, to lobby on this issue.

“Our point is that if you are going to have a renewable fuel standard, it needs to be realistic,” said Bill Day, a spokesman for San Antonio, Texas-based Valero.

As gasoline demand falls, rising requirements for renewable fuels are boosting the percentage of those fuels in the total mix. That puts the amount of ethanol near the 10 percent level known as the blend wall, above which refiners and auto makers say vehicle engines can be damaged.

Even with the EPA’s proposed changes, “my problem hasn’t gone away, and I’m not leaving the Hill until it’s fixed,” said Mike Brown, president of the National Chicken Council.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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Companies Mentioned

  • SAFM
    (Sanderson Farms Inc)
    • $101.04 USD
    • -1.13
    • -1.12%
  • WEN
    (Wendy's Co/The)
    • $8.23 USD
    • -0.07
    • -0.85%
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