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2 Pa. congressmen play key role in ethanol cuts

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By Reuters
Monday, May 12, 2014, 9:45 p.m.

WASHINGTON — Six months ago, the oil industry scored a surprise win against farm groups when the Obama administration proposed slashing the amount of ethanol that refiners must blend into gasoline, a move that could save them billions of dollars.

Stunned, producers of corn-based biofuel and their supporters are fighting back as a June deadline nears for the Environmental Protection Agency to make a final decision.

The clash has been portrayed as a battle between “Big Oil” and “Big Corn,” two powerful and deep-pocketed lobbies. But a review of public records and interviews with lawmakers, lobbyists and executives reveal a more complex picture.

A private equity firm and an airline helped persuade the Obama administration to backtrack on a policy it has supported for years: requiring steadily rising volumes of ethanol to be blended into gasoline each year, a key to shifting energy consumption toward renewable sources.

Some of the most effective players weren't traditional oil majors but The Carlyle Group and Delta Air Lines, owners of two Philadelphia-area refiners, who helped convince policymakers the mandates would cripple their businesses and threaten thousands of jobs.

For key White House officials, the pitch was familiar: A year earlier, the same players had worked to rescue Philadelphia refineries from closure, saving jobs and keeping a lid on East Coast gas prices.

The efforts of this informal coalition help explain how an industry with few open allies in Washington prevailed over the once-invincible farm lobby, whose sway has faltered.

“For thirty years, you would have lost a lot of money betting against ethanol, which usually wins,” said Bob McNally, former White House energy adviser under President George W. Bush. “This time was different.”

Tom Buis, CEO of Growth Energy, one of Washington's top two ethanol groups, pins the proposed cut on the oil industry's heavy spending and a “misinformation” campaign about the ethanol mandates' impact on gasoline prices.

Refiners spent upward of $81 million on lobbying last year, triple that of biofuel producers, data from the Center for Responsive Politics show.

As oil and biofuel groups vied for the White House's attention, the Philadelphia refiners had an advantage.The White House was familiar with their issues, coaxed along by two Philadelphia-area congressmen: Robert Brady, a nine-term congressman with deep ties to the city's labor unions, and Delaware County's Patrick Meehan, both trying to save refineries in their districts.

By fall 2012, the deals were done, saving 1,200 jobs and averting a possible gasoline price spike just before the election, which Obama won.

But by early 2013, those refineries and others like them were in trouble because of an obscure market for RINs, or Renewable Identification Numbers, used to show compliance with the mandates.

Suddenly, they were in short supply as refiners began to hoard them amid fears the rising mandates would force them to blend gasoline with more than 10 percent ethanol, exceeding the level most car makers' warranties and gas stations allow.

The credits surged from a nickel in December 2012 to $1.05 in March 2013. Refiners are warning that the economy would fall into a “death spiral” unless the biofuel mandates were reduced.

Biofuel supporters are trying to make up lost ground, buying ads addressing oil industry “misinformation.”

In 1999, gasoline stations in a seven-county region around Pittsburgh were required to switch to a “summer blend” from May to mid-September.

The state House approved a bill on April 5 to seek an end to the regulations, and the state Senate approved House amendments to its measure on Wednesday. If approved, the change would have to be approved by the federal Environmental Protection Agency.

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