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Iowa Senators See Deadlock Over Northey and Ethanol

Texas Senator Ted Cruz is sitting on the nomination of Bill Northey for USDA undersecretary in hopes of winning destructive changes in U.S. ethanol policy, said Iowa Senator Charles Grassley during a telephone news conference. “We’re doing everything we can to get [Northey] approved,” said Grassley, but Cruz’s idea of a cap on the price of RINs — credits refiners can buy to comply with the ethanol mandate — “makes negotiations a dead end.”

Grassley’s fellow Iowa senator, Joni Ernst, said Cruz refuses to admit the RIN cap is unacceptable. “We have the meeting [to hear his plan] and then he tries to set up another meeting. No more … until we see Bill Northey confirmed,” Ernst said after a town hall meeting in Boone, Iowa, according to a tweet by news site Iowa Starting Line.

Cruz put an informal “hold” on the Northey nomination last fall while trying to influence the administration’s decision on the ethanol mandate for 2018. He says independent refiners, who are obligated to blend ethanol into gasoline or buy credits to comply with the EPA targets, spend tens of millions of dollars to buy RINs, creating a threat to blue-collar jobs. The oil industry says the gasoline market is saturated with ethanol at the traditional 10% blending rate, so RINs are the safety valve for refiners.

“He’s sticking pretty much to a cap on RINs, and my position is that’s going to destroy the ethanol industry,” said Grassley, who suggested year-round sales of E15, gasoline that is 15% ethanol, as a solution. “I have some hope that the EPA will come to the conclusion they can do it through regulation.”

Grassley said he spoke to Cruz at some length recently and “didn’t make much progress.” Without providing details, he said some other ideas would be tried.

Northey, who’s serving his third term as the elected state agriculture secretary in Iowa, was cleared for a floor vote by the Senate Agriculture Committee in mid-October after a friendly confirmation hearing. If confirmed, he would direct the USDA’s farm subsidy, crop insurance, and land stewardship programs under a reorganization plan announced by Agriculture Secretary Sonny Perdue last May. He would be one of the most powerful officials at the USDA.

Cruz, the winner of the 2016 Iowa presidential caucuses, has suggested the EPA sell RINs at a fixed price of 10¢ a gallon, with the proceeds used to pay for equipment and facilities to blend renewable fuels into gasoline and diesel fuel. A RIN is created for each gallon of renewable fuel produced in the U.S. or imported. The price suggested by Cruz is far below the trading price of RINs and the wholesale price of ethanol.

“Win or lose on the ethanol fight, it’s all win-win for Cruz as he goes into a potentially more competitive reelection bid than Texas Republicans are used to,” said a Houston Chronicle blog. Just as ethanol and the Renewable Fuel Standard are popular in farm country, they are detested in oil states like Texas.

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