Washington Insider--Wednesday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Senate Bill Would Overturn Ban on Government Purchases of 'Unconventional' Energy

A bill introduced last week in the Senate would repeal a section of the Energy Independence and Security Act of 2007 that prohibits the Defense Department and other federal agencies from buying transportation fuels produced from "unconventional" sources unless the purchase contract specifies that the life-cycle greenhouse gas emissions of that fuel are no greater than the amount that would be produced from conventional petroleum.

The reason for the change is that new technologies are becoming more widely available that will allow "unconventional" fuels to be produced from coal-to-liquid processes, oil sands and oil shale. Not surprisingly, the legislation was sponsored by Republican Sen. John Barrasso whose state of Wyoming is far and away the nation's largest coal producer.

The provision that Barrasso's bill seeks to overturn is intended to keep the federal government from using taxpayer dollars to buy high-carbon fuels such as Canadian tar sands, liquid coal and oil shale, according to the Natural Resources Defense Council.

House Republicans in the past have approved several bills that would have repealed the "unconventional" fuels provision, but all of those died in the Senate, which in previous Congresses was controlled by Democrats. With Republicans now the Senate's majority party, the Barrasso proposal has a better chance of passing, if it can withstand an expected filibuster by Democrats.

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Canadian Grain Companies Investing Millions in Export Infrastructure

Canadian grain companies have been making multi-million dollar investments aimed at improving the supply chain in Western Canada, even as the U.S. transportation infrastructure continues to suffer for want of needed federal funding.

Richardson International, Canada's largest privately owned agribusiness, is spending C$120 million to build an additional 80,000-ton grain storage annex at its port terminal facility in North Vancouver, British Columbia. At the same time, Viterra, a grain handling company with operations in both Canada and the United States, is investing more than C$100 million to upgrade the Pacific Terminal at the Port of Vancouver, which will more than triple the company's grain handling capacity next year.

Both companies are also directing substantial dollars for country elevator improvements and new processing facilities, and are pressing the nation's two major railroads –– Canadian Pacific and Canadian National –– to increase investments aimed at moving grain and other freight to market more efficiently. Should these and other improvements come online in the next few years, Canadian grain producers are likely to become even more competitive with their counterparts to the South.

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Washington Insider: Renewable Fuels Policies as Political Issues

It is far from clear just what's happening to one key aspect of the nation's ethanol policy — and what its future political clout might be. The issue becomes more intense as the political season opens and GOP hopefuls head to Iowa's first-in- the-nation Republican primaries, generally to pander to ethanol groups there who are as aggressive as ever.

For example, the Wall Street Journal reports that one of the sponsors of the recent political "summit," America's Renewable Future, is planning a multimillion-dollar media blitz to promote candidates who support the fuel standard and attack those who don't in the run-up to state's presidential caucuses. "They're going to be in real trouble if they don't [support ethanol], because we're going to educate people on where the candidates stand," said Eric Branstad, the son of Iowa's governor and the director of the pro-ethanol campaign.

Still, the Journal itself downplayed that rhetoric with the suggestion that several current candidates backed sunsets of subsidies, and some oppose the Renewable Fuels Standard itself. So, the newspaper sees the issue as a litmus test: how the likely White House contenders navigate the issue will signal how much Republican politics are now driven by the party's conservative base, which balks at government interference in the marketplace. Two GOP contenders who want to phase out the renewable-fuel standard, Florida Sen. Marco Rubio and Louisiana Gov. Bobby Jindal, skipped the event.

Texas Sen. Ted Cruz is co-sponsoring legislation to repeal the renewable-fuel standard, drawing praise at a recent Club for Growth event. In response, Cruz was challenged last year by a veterans group who ran a newspaper ad demanding, "Do you want to import more oil from dangerous parts of the world?"

Jindal proposed phasing out the fuel standard as part of his energy plan released last year. A spokesman for Rubio said recently that the standard "cannot be permanent policy."

Former Texas Republican Gov. Rick Perry unsuccessfully sought federal waivers from the fuel standard for his state, saying it had a negative economic impact. Wisconsin Gov. Scott Walker declined to join a group of governors from corn-producing states, including Iowa, which urged the Obama administration in 2013 to maintain the fuel standard.

Former Florida Gov. Jeb Bush, who is made his first trip to Iowa since announcing his White House ambitions, doesn't appear to have publicly commented on the fuel standard, which was signed into law by his brother, former President George W. Bush. However, Jeb Bush in 2011 praised Republican presidential candidate Tim Pawlenty for "truth-telling" when he advocating phasing out ethanol subsidies.

When Jeb Bush helped launch the Inter-American Ethanol Commission in 2006 to promote sugar-based ethanol from Brazil, he quipped that the unpopularity of his efforts in the Midwest was "living proof that I'm not running" for president, the Journal noted.

The key theme in the Journal's report was the observation that support among presidential candidates for Iowa's agricultural interests began to crack in the 2008 campaign, when GOP Sen. John McCain of Arizona opposed federal ethanol subsidies that totaled $6 billion a year. Amid the tea party's fight to trim government spending, a few GOP presidential candidates came out against the subsidies in 2011. One of them, former Utah Gov. Jon Huntsman, suggested his position made it impossible for him to compete in the Iowa caucuses.

Republican candidate Mitt Romney declared his support for the renewable-fuel standard one month before the 2012 caucus.

In a sign that the issue still carries political weight, however, Iowa Republican Sen. Joni Ernst felt compelled to highlight her support for the renewable-fuel standard in her 2014 campaign after she was criticized for saying she was "philosophically" opposed to energy subsidies.

Right now, there is talk in Congress and among politicians about changing the Renewable Fuels Standard. Recently, the New York Times ran an op-ed piece that called the 10% blend mandate a tax since ethanol contains less energy per gallon than gasoline and the required blends cut mileage a few percentage points, thus increasing drivers' fuel costs.

Among ethanol groups and many farm organizations, however, support for the RFS remains strong — although some former supporters now would end the policy. For political budget hawks, political support for ethanol seems to be an increasingly tough call, and Iowa Democrats likely are enjoying the traditional election parade of worried out-of-state RFS supporters, even while wondering how their candidate or candidates will juggle the same issue.

It is still a powerful litmus test at least in the primaries, even if that clout has faded a little, Washington Insider believes.

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(GH/CZ)

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