RFS15 The Policy Origins of the Renewable Fuel Standard (aka, "Ethanol"): The Ethanol Pivot

August 07, 2023

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by Eric Vettel (Energy Today) ... Replacing lead with MTBE reduced emissions almost overnight. By 1995, the Sierra Club celebrated MTBE as the “innovation of the year,” and George H. W. Bush considered the reform one of the most notable accomplishments of his presidency. Meanwhile, MTBE leaked and spilled undetected into groundwater and soil, especially around refineries. Nearby residents complained that their drinking water tasted like “turpentine,” which doctors said would have been safer to ingest. Congress's attempt to clean the air with MTBE had actually made things worse.

Given the MTBE debacle, legislators went to great lengths to duck the clean air issue entirely. However, Brooke Coleman refused to back down to MTBE—it had been detected in Lake Tahoe and Donner Lake in California, his family’s favorite vacation destination. Fresh out of Northeastern Law School and eager to test his vocational training, Coleman founded the Bluewater Network, established himself as its director, and then immediately filed a series of nuisance lawsuits hoping to provide Lake Tahoe some measure of protection.

What started out as a modest environmental goal suddenly became a passionate cause when an oil industry representative acknowledged in deposition that MTBE had known "defectives” and admitted that “we always knew that ethanol biofuel would offer superior technological and environmental advantages.” At that moment, Coleman realized that ethanol was a valuable wedge issue: it could clean the air, repair the damage caused by MTBE, and also replace volumes of oil from the Middle East with equal volumes of corn from the US Midwest. He wasn't just another b-a-n-a-n-a environmentalist ("build absolutely nothing anywhere near anything"); instead, he had a cause with a solution that satisfied three important concerns.

Coleman fired first at big oil by defining the terms and the stakes: "Biofuels: cleaner air, cleaner water, and less dependence on foreign oil. What's not to like?" He identified the antagonists—the oil majors of course—but he also accused everybody's favorite foe, California Governor Gray Davis, of poisoning Lake Tahoe with MTBE. And Coleman gathered powerful allies, like Alan Zibel, a classic muckraker and personal friend who shared a similar loathing of big oil. With Zibel as a lead author, local papers relentlessly published scathing critiques. The San Francisco Examiner said MTBE was "dirty gas," the Los Angeles Times called it "a ticking bomb,” and the Contra Costa Times simply named it a poison, which it was. In the spring of 2002, a jury found Shell, Arco, and Tosco responsible for polluting Lake Tahoe; soon after, BP, Chevron, and Exxon announced plans to remove MTBE from gasoline as quickly as possible … before Coleman shined a spotlight on them.

“As quickly as possible” can mean many things to many people. To be fair, changing the refining process takes a lot of time and money. Refineries turn liquid crude petroleum into thousands of different products, each with different chemical compounds and boiling points—an extremely complicated scientific and engineering process. But it is also true that the oil industry dragged its collective feet, which benefited Tom Delay, the congressional representative from Sugarland Texas and House majority leader for the Republican Party. A social conservative, Delay was also a strong defender of traditional energy interests, and he used the extra time to carefully ensure that no federal legislation regarding MTBE saw the light of day. Years passed but MTBE reform did not. Then, seemingly out of nowhere, serious and indefensible ethics charges came down on Delay in late 2004. The Beltway responded as it often does when accusations fly—everyone avoided Delay and his pet issues. Now the war against MTBE had no resistance, and national syndicates and major newspapers leaned in. The New York Times called MTBE a “fiasco,” the Wall Street Journal called it a one-legged stool, and the Washington Post declared "MTBE DOA." From Maryland to California, state legislators demanded an immediate ban of MTBE without objections.

The attacks on MTBE were too much for Congressman Ralph Hall, an LBJ democrat representing East Texas, home district to the US headquarters of every major oil company in the world, and he determined to take charge before things really spun out of control. At the end of business on Friday, February 19, 2005, Congressman Hall sent an emergency notice to key powerbrokers from both parties and both chambers to meet in his office “5:30 am, first-thing Monday morning.”

A “little snowmageddon” fell on Capitol Hill over the weekend, and still on the scheduled Monday morning nine angry men crammed into the congressman’s tiny House office, all representing a variety of oil and auto manufacturing interests: on the House side, Joe Barton of Texas (the republican chairman of the Energy Committee), Ed Markey from Massachusetts (senior member of the House Energy and Commerce Committee for the democrats), and John Dingle the longest-serving representative from Michigan, who spoke for auto manufacturers. Coming down from the Senate was Jeff Bingaman of New Mexico, who chaired the Democratic Caucus. Also included were powerful lobbyists Charles Dibona, who spoke for refineries, and Charlie Drevna, director of policy for the American Fuel and Petrochemical Manufacturers trade association. Rather than ask a young staffer to oversee such a delicate issue, Hall also asked political consultant Mike McAdams, the top policy aide for BP and personal DC spokesman for its CEO, Lord Browne, to hold the coalition together with old-school legislative blocking and tackling. It was a bipartisan group of eight oil and auto guys, plus Tom Daschle, the Senate majority leader for the democrats, the lone ally representing the biofuel interests. He would be offered enticements to join the larger consensus on behalf of big oil. Just as important, Daschle had a powerful sidekick, Bob Dinneen, who had just taken over as president of the Renewable Fuels Association, a one-issue lobbying group that lived and breathed biofuels. Dinneen had a different style from his predecessor, who treated oil companies as the enemy; Dinneen treated oil companies as the customer. While Daschle held the line with Hall’s hand-picked team, Dinneen scheduled discrete meetings in coffee shops along K Street, Pennsylvania Avenue, and 17th Street, building a cozy rapport with oil and auto interests, who seemed a lot more supportive of ethanol fuel alternatives than MTBE in the shifting political climate. For 43 straight days, Hall and his colleagues drafted a variety of new gasoline bills that would be friendly to the oil interests. The sticking point was how much ethanol they would require. Hall pointed out the mathematically obvious: all of the refineries in the United States operating at full capacity could only produce 1 billion gallons of corn-ethanol each year, a drop in the proverbial bucket considering Americans consume about 134 billion gallons of gas per year. Rather than concede, however, Daschle and Dinneen demanded a 7.5 billion-gallon mandate, an absurd production number that did not add up—supply chain and infrastructure could not possibly support such an ambitious goal. But the political numbers did add up in Daschle's favor: 95 ethanol refineries spread across 19 states had the formal support of 32 governors. Ethanol already had a natural majority without a campaign. So, with political support and popular will in his favor, Daschle doubled down—the new bill was going to be 7.5 billion gallons of ethanol and not a drop less.

While the oil lobby dragged its feet, the rest of the Beltway reshuffled in support of ethanol. The American auto manufacturing lobby, more sensitive to shifting markets than their counterparts in oil, determined that they needed to come out in support of ethanol before their international competitors like Toyota or Honda. Gary Roe, president of the Auto Alliance International, and Michael Stanton, vice president of the American Auto Manufacturers, together announced their neutral positions on corn ethanol: "We will manufacture any car to run on whatever gasoline is available." That was enough for Michigan powerhouse Representative John Dingle, who in 1990 said he opposed the Clean Air Act because, “I don’t trust air that I can’t see." Dingle reversed his position in support of the 7.5 billion gallon corn ethanol mandate. Mike McAdams saw the writing on the wall and told Lord Browne that BP needed to “get on the right side” and immediately support ethanol. Lord Browne went further and said BP supported "home grown energy,” by which he must have meant “corn grown in America,” even though "home" to the Lord meant old-world Europe. Exxon executives were livid at BP, but then Chevron publicly announced its support of corn-ethanol blended gasoline too. The net effect of Michigan auto manufacturers' neutrality, Lord Browne's patriotic stance, and Chevron’s unexpected support signaled that ethanol had entered a new era.

Inspired and goaded by Congress, the White House determined that it too wanted an ethanol mandate in its 2005 legislative package. The decision was neither spontaneous nor superficial. George W. Bush was a second-term president, and he was already remaking his administration to favor new directions in energy. He replaced Colin Powell with Condoleezza Rice as secretary of state, and she immediately made her intentions perfectly clear. "Condi" would focus on “rebuilding relationships and trust,” starting with energy security: "the quicker we get about the business of reducing our reliance on foreign oil, the better we’re going to be.” Other nominations sailed through Congress, too, like Sam Bodman as secretary of energy, who had a strong technical background in Chemical Engineering from MIT, unlike his predecessor, Spencer Abraham, who had no prior experience in energy. Perhaps the administration's most important appointment flew under the proverbial radar -- Alexander "Andy" Karsner as Assistant Secretary for Energy Efficiency and Renewable Energy (EERE) and his extraordinary team (Michael Bruce, John Mizroch, Drew Bond, Wendolyn Holland, Carol Battershell, Steve Chalk, Amy Chiang, Jacques Beaudry-Losique...), who carried out a full slate of advanced energy technology and commercialization initiatives. The administration further committed to energy policy with the appointment of Claude Allen as director of the White House Domestic Policy Council, and moved Margaret Spellings and “No Child Left Behind” to Education. The silence from Vice President Cheney on behalf of new energy policy was deafening.

While the new energy security administration came together in haste, Director Allen commissioned a special energy security task force to study available options in advance of a new policy package, which President Bush wanted to unveil as soon as possible. Hearing that biofuels were gaining traction in Congress, Director Allen reached out to Brooke Coleman for advice. On April 23, 2005, the White House policy director met the young political consultant for a power lunch at the Old Ebbitt Grill. Coleman determined to give top legislative insights about the surging momentum in favor of biofuel. He told the Director that the signals were clear—the country had moved on from MTBE and his Advanced Biofuel Association and was going to exploit the “pro-environment/anti-foreign oil” wedge issue. The scientific and industrial position on biofuel may not have been definitive, but the popular support was obvious. There was no need to show polling numbers, Coleman said, because everyone knew conventional wisdom opposed oil from the Middle East. The additive that mattered most was corn ethanol, and he was presenting it as the responsible solution for the gasoline market. Coleman also signaled that the auto manufacturing lobby was not vigorously opposing the idea, which was almost as remarkable as the fact that the oil lobby was now seriously supporting ethanol as an acceptable legislative compromise.

In desperation, Ralph Hall asked Tom Delay as majority leader to carry his “must-have” pro-oil line-items through committee and into the bill. In normal times, Delay would have thought nothing about muscling the earmark into the legislation, but his ongoing ethics investigations put him on the defensive, so he called Red Cavaney at the American Petroleum Institute and asked if his trade association would be supportive. Red asked if he had options. Delay was frustrated and asked Red to be brutally honest. Red said that his industry would prefer liability protection from MTBE. Frustrated that MTBE was still in the conversation, Delay asked point-blank: “That’s a dead issue! It’s time to shit or get off the pot Red – can you support this?” Red hesitated again, so Delay contacted Hall and told him that his rider was dead. Hall was livid – he had fallen from author to irrelevance. In desperation, he threatened Delay with the ultimate political stick and carrot: either he would block the bill in committee (the stick), or he would switch his party allegiance from Democrat to Republican (the carrot). Delay stated the obvious: "There is nothing left for me to do. I have no influence. I'm a dead man walking."

And with that, the Energy Policy Act of 2005 cleared its last and only major hurdle and sailed through. READ MORE