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DAVID KRUSE
March 9, 2018

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My Congressman, Steve King, led support for Texas Senator Ted Cruz, helping him win the IA GOP Caucuses in his run for President in 2016. At the time many in the ethanol industry thought that King was nuts as Cruz was blatantly anti-ethanol and King was stabbing the ethanol industry in the back by supporting Cruz. The health of the Iowa ag economy is predicated on over five billon bushels of corn demand coming from the ethanol industry under protection of the RFS that Cruz had expressed interest in eliminating.

King's district is heavily ag oriented so having our Congressman throw us under the bus, choosing Cruz over his constituent's economic interest was rather disconcerting. King can do that because he represents a district that will choose ideology over all else in who they vote for. King attempted to soft soap Cruz's anti-ethanol positions at the time, which we knew was political malarkey intended to deceive voters. It worked for the primary caucus, but events since have shown just how big a traitor King was to the ag sector with his support of Cruz.

Ted Cruz did not become President, thank goodness, but he is back in the U.S. Senate and there is no bigger opponent to the ethanol industry and RFS than Ted Cruz in Washington today. He is leading the charge against the RFS (renewable fuel standard). Cruz has been financed with Big Oil money and he is earning his keep. DTN reported that Cruz received $688,486 in contributions from oil and gas interests 2013-2018 and has nearly a half million dollars invested personally in fossil fuel energy companies.

Oil refiners are loath to buying RINs (renewalable identification number) with which they comply with the RFS by doing when they refuse to blend biofuel. Carl Icahn's petroleum refinery company last owed something in the neighborhood of $200 millon in un-funded RINs. He temporarily joined the Trump administration with a personal agenda of eliminating the refinery RIN obligation before leaving in blatant conflict of interest. He had the White House going along with him until Chuck Grassley stopped it by calling out Trump for his support of the RFS, which he had campaigned on. Yet Trump has never tweeted his support for the RFS.

Icahn heavily promoted Scott Pruitt as EPA administrator because Pruitt was also in the tank for big oil having allowed oil companies to use his letterhead when Oklahoma Attorney General. He used his Oklahoma office to battle the RFS for petroleum interests and then got put in charge of EPA like the fox in a henhouse. Someday he will go back to the private sector and get rewarded with board seats and stock options from big oil companies after five years. According to Grassley, Pruitt lied during his confirmation meetings with Grassley and Ernst when he pledged that he would support the RFS. What he did was attempt to shift the RIN obligation from refiners to blenders, assign RINs to exports which was not done before in order to inflate the number therefore cheapening them, reduce CAFE standards which reduces the need for ethanol octane, while stalling on approving a vapor waiver for E-15 allowing year-a-round sales expanding market access for ethanol.

Grassley went to the Senate floor to blast Pruitt and to President Trump to stop him, which he partially did. Again, no tweet though. That is when Senator Ted Cruz stepped in and put a hold on the confirmation of the nomination of Iowa Secretary of Agriculture, Bill Northey, to a USDA post thinking that would be leverage on the state and on Grassley thinking that the Senator's grandson wanted Northey's job. That was all off base. Trump suggested the two Senators should talk it out but Grassley has stuck to his guns and refused to concede on anything relative to the RFS. Cruz too has been unrelenting in his offense against the RFS.

If Ted Cruz ever sets foot back in the state of Iowa again, Governor Reynolds should inform him that he is person-non-grata in this state and ask him to leave. Cruz ended any possible pretense of support for Midwest ag when he told an audience at a defunct east coast refinery that refused to blend ethanol that he would have ended the RFS had he become President.

Bill Northey was confirmed as USDA Undersecretary seemingly like minutes ahead of the White House meeting on the RFS, after Ted Cruz released his 179 day hold on the nomination.

As to the meeting, Ag secretary Purdue was not as strong for ethanol as was hoped, as he proposed attaching RINs to ethanol exports. As noted, this would inflate the number of RINs reducing their value. That would also lower the incentive to blend ethanol which is what the RFS is all about.

Grassley's tweet from the White House meeting was, "Just left WH mtg on the RFS. Some discussion again. No deal made. RFS program design destroyed by RIN Cap/waiver. Not 'win win' promised. Would destroy ethanol demand making benefits of RVP useless." He is right. Ethanol could cure cancer and cost a nickel per gallon and the petroleum industry would not blend it because they do not make it. This is all about market share. Some refineries thought that they could get rid of the RIN obligation by exerting political pressure on the administration which they have had some success doing but so far, Grassley is standing like a stone wall.

This is not over. Cruz is not going to quit and Trump tweeted support for his re-election but not for the RFS. We know now we can't depend on Sonny Purdue. We do have Northey at USDA so finally have a pro-ethanol voice there. Grassley and Ernst are earning their pay fighting for the Midwest ag economy. Sarah Huckabee described the meeting as productive and said talks would continue. If Trump really supported the RFS these negotiations would be over. His refinery-owning-buddies have gotten to him.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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