Did Trump cut a secret ethanol deal with Iowa's governor?

Over the summer, I wrote about how the President needs to climb down off the ethanol teeter-totter and pick one energy policy he can stick with. The competing interests of the ethanol lobby in corn-growing states and the oil and gas industry in the states with lots of refineries have had Donald Trump doing a political zig-zag routine that would make an NFL running back proud.

Unfortunately, we’ve seen no signs of progress on this front. The President has continued to hand out favors to both sides, resulting in a situation where both sides are perpetually angry. This pattern appeared to continue last week when Iowa Governor Kim Reynolds announced that she’d spoken to Trump and they were “close” to a deal that sounded good to her. And if it sounds good to Reynolds, you know it will sound terrible to the oil and gas folks. (Des Moines Register)

Gov. Kim Reynolds expressed optimism about a deal negotiated with President Donald Trump last week to mitigate the damage to Iowa’s ethanol industry caused by federal waivers for oil refineries, but cautioned that she’s still waiting to see the final version on paper.

“We’re waiting to see that in writing and hopefully we’ll get that sooner rather than later,” Reynolds told reporters on a conference call Wednesday. “And we’ll continue to touch base with the administration and just see where they’re at on it. But I take them at their word. It was a really, really good meeting with a good dialogue and ideas committed to the farmers.”

This sounds like a very dangerous meeting if you ask me, particularly if there’s nothing “on paper” yet. Reynolds is talking about a “fix” for the exemptions granted to 31 refineries under the Renewable Fuel Standard (RFS). King Corn sees those exemptions as damaging the market for ethanol. The refineries see them as a way to avoid bankruptcy caused by the crushing burden of costs from the government’s artificial “market” for ethanol, generated by mandates rather than demand.

So what could a “fix” for the exemptions look like? The most obvious choice is to take back some or all of the exemptions, throwing the refineries (and the jobs they support) under the bus. If that’s the President’s approach it’s not a very good one because it just puts him right back where he was before the most recent round of negotiations. He’ll temporarily make the people in Iowa happy while once again ticking off the folks in Pennsylvania, Louisiana and Texas (among others).

Perhaps there’s a better solution out there just waiting to be taken up. Rather than continuing to beat up American interests, if Trump really wants to come up with a gift for King Corn, how about a plan to vastly ease the ethanol industry’s ability to sell to Brazil? Only a few weeks ago that country significantly increased the cap on the amount of tariff-free ethanol they will allow to be imported. Why not make sure that our ethanol producers scoop up those export opportunities?

Shipping a few hundred million more gallons of ethanol out of the country would ease the pressure to force even more of that garbage fuel into our gasoline supply. And as a bonus, you’d be sending it to somebody who actually wants it rather than making companies buy it via government mandates. This would still be a “solution” arrived at by having the government pick winners and losers (which is bad) but you could at least put the battle for the President’s soul between King Corn and the fossil fuel industry into some sort of truce for a while.