More Ethanol Handouts on the Table as DC Pols Go 'Corny'

Last month, Capitol Confidential reported that the Environmental Protection Agency (EPA) could be set to give the already well-subsidized ethanol industry a big boost by approving an increase in the amount of ethanol blended into gasoline from 10 percent to 15 percent. That item sits at the top of the agenda of Washington, D.C.’s powerful ethanol lobby; a decision is expected to be reached on it later this year.

However, it is not the only handout to what critics dub “Big Corn” that may be on the table. Sources tell Capitol Confidential that pro-ethanol groups are also actively pushing for legislation that critics charge constitutes more government meddling in both the auto industry and the energy sector–and that they have some powerful advocates in Congress and the administration on their side.

About a week ago, Sen. Richard Lugar, an Indiana Republican, unveiled a “cap-and-trade alternative,” among whose key provisions would be one to push automotive manufacturers to increase the number of flex-fuel vehicles they build. Flex fuel vehicles are designed to run on E85, which is 85 percent ethanol. Consequently, critics charge, it would be a huge boon to ethanol producers–and also to government-controlled General Motors, a big producer of flex fuel vehicles–were Lugar’s legislation to pass and be signed into law.

That, in turn, is an outcome that ethanol critics tell Capitol Confidential Agriculture Secretary Tom Vilsack would strongly support.

Vilsack has reportedly been loudly advocating for pro-ethanol policies, including using government’s hand to force more flex fuel vehicle production, for months. In fact, sources say, Vilsack’s pro-ethanol advocacy has in effect set up something of an intra-Cabinet cage match with Energy Secretary Steven Chu.

Ethanol advocates, including Vilsack, view Chu as insufficiently ethanol-friendly, despite him reportedly having said in June of last year that all American cars should be E85 capable.

Vilsack, a former Iowa Governor, long-time friend of the ethanol and biofuels lobby, has been described by the American Coalition for Ethanol’s Executive Vice President Brian Jennings as “a very effective advocate” for the food-based-fuel.

Indeed an effort, announced last week, to turn the U.S. Navy into a major consumer of biofuels, seems to bear that out. Vilsack’s Agriculture Department has partnered with the U.S. Navy on the initiative, which would entail the development of so-called “Green Strike Groups” and “Great Green Fleets” comprising biofuel nuclear ships and aircraft powered by biofuels, and increased reliance on–you guessed it– flex fuel vehicles. The move has been cheered by ethanol fans.

For his part, President Obama is also seen as a friend of ethanol by key players in the industry, including Renewable Fuels Association President Bob Dinneen who attended and live-tweeted his recent energy speech, noting his appreciation for Obama’s support for ethanol, and indeed Obama’s support for flex-fuel vehicles. Critics charge that that friendliness could translate into additional, major handouts to the ethanol industry as November nears: Setting aside Vilsack and many congressmen’s predisposition to backing ethanol giveaways, they note that several of the Democratic Congressional Campaign Committee’s designated Frontline Democrats are from Midwestern districts where the ethanol industry plays an important role.

Observers say that over the next few weeks, the administration’s intentions with regard to policy impacting the ethanol industry are likely to become clear. Ethanol skeptics are closely monitoring developments.