By Nan Swift
October 25, 2018 at 5:00 am ET
The White House’s recent announcement permitting year-round sales of fuel with 15 percent ethanol content may appear on the surface to be another deregulatory win in what has been a string of successes in striking down burdensome government rules. But outside the context of comprehensive reform to the broken Renewable Fuel Standard and its costly corn ethanol mandate, this decision is little more than deckchair maneuvers on a ship that could take taxpayers down.
Fifteen percent ethanol fuel, known as E15, is a higher ethanol blend than the 10 percent found at the majority of gas stations. Farmers in corn country see year-round E15 sales as the answer to what they consider to be a corn price crisis, calling above-historical-average prices a “five-year recession.” Today’s $3.68 per bushel is far below the record-high $8 per bushel farmers received in 2012, but that was an outlier triggered by a historic drought, not the new normal.
Though commodity prices have dipped (largely as a result of high productivity, making farmers a victim of their own success), farm finances are the envy of other industries and individuals: Median farm household income remains well above the median household income of all other Americans; debt-to-asset ratios are low, and only 0.3 percent file for bankruptcy each year. This is not a Depression-era scenario. Not only are farm households doing extremely well, they do so in the environment of a generous taxpayer-funded safety net of subsidy payments, crop insurance support and new Market Facilitation Program payments directly from the U.S. Department of Agriculture as a response to retaliatory tariffs.
Despite this lack of fiscal crisis, corn growers are still clamoring for a bigger share of an already-guaranteed market. This is bad news for taxpayers.
E15 boosters claim that the only impediment to higher blends of corn ethanol is market access both year-round and at the pump. The truth is there is no indication that consumers want to put more ethanol in their fuel tanks; if this were the case, markets would respond by increasing its availability. In fact, in Iowa — where President Donald Trump made his E15 proclamation — ethanol-free fuel, or “E0,” outsold E15 and all other flex-fuels combined.
Consumers recognize that higher blends come with a higher price tag. Mounting costs from increased trips to the pump, engine damage, misfueling of motorcycles, boats and other small engines, environmental impact mitigation, and risks to the food supply together constitute a hidden tax on virtually all facets of life.
Taxpayers could also end up footing the bill for the necessary upgrades to gas station infrastructure to dispense E15. The fuel’s highly corrosive nature makes it incompatible with most current systems.
In the past, Congress has rightly recognized that this sort of capital investment should be the responsibility of the private companies that benefit and prohibited the USDA from funding matching grants for the necessary blender pumps. Still, the USDA found workarounds in the past by deploying funds via the Commodity Credit Corp., which has an independent line of credit with the U.S. Treasury and is currently footing the bill for the tariff-related direct payments. Under the circumstances, there’s a clear risk that taxpayers could once again be on the hook.
The mission of the CCC, according to the USDA, is to stabilize, support and protect farm income and prices. The same could be said for this E15 scheme. If Trump’s move was truly about deregulation and consumer choice, eliminating mandates and reforming the RFS would be a logical first step. Instead, it’s clear the true agenda is to prop up farm income and prices at the expense of taxpayers.
Nan Swift is director of federal affairs for the National Taxpayers Union.
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