Obama Camp Closely Linked With Ethanol

When VeraSun Energy inaugurated a new ethanol processing plant last summer in Charles City, Iowa, some of that industry’s most prominent boosters showed up. Leaders of the National Corn Growers Association and the Renewable Fuels Association, for instance, came to help cut the ribbon — and so did Senator Barack Obama.

Then running far behind Senator Hillary Rodham Clinton in name recognition and in the polls, Mr. Obama was in the midst of a campaign swing through the state where he would eventually register his first caucus victory. And as befits a senator from Illinois, the country’s second largest corn-producing state, he delivered a ringing endorsement of ethanol as an alternative fuel.

Mr. Obama is running as a reformer who is seeking to reduce the influence of special interests. But like any other politician, he has powerful constituencies that help shape his views. And when it comes to domestic ethanol, almost all of which is made from corn, he also has advisers and prominent supporters with close ties to the industry at a time when energy policy is a point of sharp contrast between the parties and their presidential candidates.

In the heart of the Corn Belt that August day, Mr. Obama argued that embracing ethanol “ultimately helps our national security, because right now we’re sending billions of dollars to some of the most hostile nations on earth.” America’s oil dependence, he added, “makes it more difficult for us to shape a foreign policy that is intelligent and is creating security for the long term.”

Nowadays, when Mr. Obama travels in farm country, he is sometimes accompanied by his friend Tom Daschle, the former Senate majority leader from South Dakota. Mr. Daschle now serves on the boards of three ethanol companies and works at a Washington law firm where, according to his online job description, “he spends a substantial amount of time providing strategic and policy advice to clients in renewable energy.”

Mr. Obama’s lead advisor on energy and environmental issues, Jason Grumet, came to the campaign from the National Commission on Energy Policy, a bipartisan initiative associated with Mr. Daschle and Bob Dole, the Kansas Republican who is also a former Senate majority leader and a big ethanol backer who had close ties to the agribusiness giant Archer Daniels Midland.

Not long after arriving in the Senate, Mr. Obama himself briefly provoked a controversy by flying at subsidized rates on corporate airplanes, including twice on jets owned by Archer Daniels Midland, which is the nation’s largest ethanol producer and is based in his home state.

Jason Furman, the Obama campaign’s economic policy director, said Mr. Obama’s stance on ethanol was based on its merits. “That is what has always motivated him on this issue, and will continue to determine his policy going forward,” Mr. Furman said.

Asked if Mr. Obama brought any predisposition or bias to the ethanol debate because he represents a corn-growing state that stands to benefit from a boom, Mr. Furman said, “He wants to represent the United States of America, and his policies are based on what’s best for the country.”

Mr. Daschle, a national co-chairman of the Obama campaign, said in a telephone interview on Friday that his role advising the Obama campaign on energy matters was limited. He said he was not a lobbyist for ethanol companies, but did speak publicly about renewable energy options and worked “with a number of associations and groups to orchestrate and coordinate their activities,” including the Governors’ Ethanol Coalition.

Of Mr. Obama, Mr. Daschle said, “He has a terrific policy staff and relies primarily on those key people to advise him on key issues, whether energy or climate change or other things.”

Ethanol is one area in which Mr. Obama strongly disagrees with his Republican opponent, Senator John McCain of Arizona. While both presidential candidates emphasize the need for the United States to achieve “energy security” while also slowing down the carbon emissions that are believed to contribute to global warming, they offer sharply different visions of the role that ethanol, which can be made from a variety of organic materials, should play in those efforts.

Mr. McCain advocates eliminating the multibillion-dollar annual government subsidies that domestic ethanol has long enjoyed. As a free trade advocate, he also opposes the 54-cent-a-gallon tariff that the United States slaps on imports of ethanol made from sugar cane, which packs more of an energy punch than corn-based ethanol and is cheaper to produce.

“We made a series of mistakes by not adopting a sustainable energy policy, one of which is the subsidies for corn ethanol, which I warned in Iowa were going to destroy the market” and contribute to inflation, Mr. McCain said this month in an interview with a Brazilian newspaper, O Estado de São Paulo. “Besides, it is wrong,” he added, to tax Brazilian-made sugar cane ethanol, “which is much more efficient than corn ethanol.”

Mr. Obama, in contrast, favors the subsidies, some of which end up in the hands of the same oil companies he says should be subjected to a windfall profits tax. In the name of helping the United States build “energy independence,” he also supports the tariff, which some economists say may well be illegal under the World Trade Organization’s rules but which his advisers say is not.

Many economists, consumer advocates, environmental experts and tax groups have been critical of corn ethanol programs as a boondoggle that benefits agribusiness conglomerates more than small farmers. Those complaints have intensified recently as corn prices have risen sharply in tandem with oil prices and corn normally used for food stock has been diverted to ethanol production.

“If you want to take some of the pressure off this market, the obvious thing to do is lower that tariff and let some Brazilian ethanol come in,” said C. Ford Runge, an economist specializing in commodities and trade policy at the Center for International Food and Agricultural Policy at the University of Minnesota. “But one of the fundamental reasons biofuels policy is so out of whack with markets and reality is that interest group politics have been so dominant in the construction of the subsidies that support it.”

Corn ethanol generates less than two units of energy for every unit of energy used to produce it, while the energy ratio for sugar cane is more than 8 to 1. With lower production costs and cheaper land prices in the tropical countries where it is grown, sugar cane is a more efficient source.

Mr. Furman said the campaign continued to examine the issue. “We want to evaluate all our energy subsidies to make sure that taxpayers are getting their money’s worth,” he said.

He added that Mr. Obama favored “a range of initiatives” that were aimed at “diversification across countries and sources of energy,” including cellulosic ethanol, and which, unlike Mr. McCain’s proposals, were specifically meant to “reduce overall demand through conservation, new technology and improved efficiency.”

On the campaign trail, Mr. Obama has not explained his opposition to imported sugar cane ethanol. But in remarks last year, made as President Bush was about to sign an ethanol cooperation agreement with his Brazilian counterpart, Mr. Obama argued that “our country’s drive toward energy independence” could suffer if Mr. Bush relaxed restrictions, as Mr. McCain now proposes.

“It does not serve our national and economic security to replace imported oil with Brazilian ethanol,” he argued.

Mr. Obama does talk regularly about developing switchgrass, which flourishes in the Midwest and Great Plains, as a source for ethanol. While the energy ratio for switchgrass and other types of cellulosic ethanol is much greater than corn, economists say that time-consuming investments in infrastructure would be required to make it viable, and with corn nearing $8 a bushel, farmers have little incentive to shift.

Ethanol industry executives and advocates have not made large donations to either candidate for president, an examination of campaign contribution records shows. But they have noted the difference between Mr. Obama and Mr. McCain.

Brian Jennings, a vice president of the American Coalition for Ethanol, said he hoped that Mr. McCain, as a presidential candidate, “would take a broader view of energy security and recognize the important role that ethanol plays.”

The candidates’ views were tested recently in the Farm Bill approved by Congress that extended the subsidies for corn ethanol, though reducing them slightly, and the tariffs on imported sugar cane ethanol. Because Mr. McCain and Mr. Obama were campaigning, neither voted. But Mr. McCain said that as president he would veto the bill, while Mr. Obama praised it.