How 'Big Corn' lost the ethanol battle to Philadelphia refiners
Six months ago the U.S. oil industry scored a surprise win against farm groups when the Obama administration proposed slashing the amount of ethanol refiners must blend into gasoline, a move that could save them billions of dollars.
Stunned by the reversal, producers of the corn-based biofuel and their supporters are now fighting back ahead of a June deadline for the Environmental Protection Agency (EPA) to make a final decision on the cut.
The clash has been portrayed as a battle between "Big Oil" and "Big Corn," two powerful and deep-pocketed lobbies. But a Reuters review of public records and interviews with lawmakers, lobbyists and executives reveals a more complex picture.
A private equity firm and an airline helped convince the Obama administration to backtrack, at least temporarily, 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 U.S. energy consumption toward renewable sources.
The ethanol industry, blindsided by the proposed cut, has said it was orchestrated by "Big Oil." However, some of the most effective players in the fight weren't traditional oil majors but rather The Carlyle Group and Delta Air Lines, owners of two Philadelphia-area refiners.
Together with their allies, the refiners helped convince policymakers that the rising mandates would cripple their businesses and threaten thousands of jobs.
For key White House officials including Gene Sperling, President Barack Obama's top economic adviser at the time, the pitch was familiar: a year earlier, many of the same players had worked with him to rescue Philadelphia refineries from closure, saving jobs and keeping a lid on East Coast gas prices.
In one exchange last July, Philadelphia Congressman Robert Brady contacted Vice President Joe Biden on behalf of Carlyle, which bought two struggling refineries in his district in 2012. They had been on the brink of closure due to lower margins then; now they were threatened by biofuel mandates, whose cost eclipses the salaries of all refinery workers combined.
"I talked to the vice president and I told him what the issue was, and he said, 'we've got to try to fix that,'" Brady said in an interview. "And we fixed it."
It is impossible to say how much impact any one group or company had on the decision to reduce the mandates. Carlyle and Delta acknowledged contacting lawmakers and regulators but declined to comment on specific meetings.
The EPA said it consulted with stakeholders and other arms of the federal government but made the final decision itself.
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