Facing revolt, GOP spares ethanol in drive to cut spending

WASHINGTON — House Republicans are touting their debt limit package as a first step toward fiscal restraint, saying it’s past time for Congress to reduce the swelling deficits that they warn are threatening the fiscal health of the country.

But when a group of Midwestern Republicans went marching this week into the office of House Speaker Kevin McCarthy, it wasn’t spending cuts they wanted to talk about.

They were on a mission to preserve billions of dollars in federal support for biofuels and ethanol.

The bloc of lawmakers, with Iowa's four Republicans at its core, forced McCarthy to make revisions to the legislation in the hours before it headed to a floor vote, even after the speaker had insisted changes were off the table. The concession amounted to a $38.6 billion carve-out to safeguard the incentives for biofuels, carbon capture projects and the ethanol industry, and helped the bill pass by a narrow 217-215 margin.

The episode highlighted how, even as Republicans decry the massive spending packages passed under President Joe Biden, their opposition to federal spending often fades when it comes to money flowing to their communities. The dust-up also amounts to a warning of sorts for GOP leaders as they seek a debt-limit deal with Biden, showing that attempts to slash government programs could quickly face opposition in their own ranks.

“This bill is to get us to the negotiating table,” McCarthy said ahead of the vote this week. “It’s not the final provisions and there’s a number of members that will vote for it going forward and say there are some concerns they have.”

For the Republicans who adamantly defended the tax incentives, the political turnaround was especially stark. The Iowa Republicans railed against the $740 billion price tag of Democratic priorities like the Inflation Reduction Act last year, which extended tax breaks for clean energy projects.

But the federal assistance for energy is popular back home in the Corn Belt, where a boom in energy projects is underway.

“I’m thrilled everyone is talking about biofuels,” said Rep. Ashley Hinson, an Iowa Republican who fought to save the energy provisions.

The biofuel industry contributes over $6 billion to Iowa’s economy and uses 60% of the corn it produces, Iowa Gov. Kim Reynolds, a Republican who also lobbied for the carve-out, said in a statement this week.

Incentives in the Biden bill, which Democrats called the Inflation Reduction Act, have spurred growth in the production of ethanol and biofuels, said Tristan Brown, director of the Bioeconomy Development Institute at SUNY College of Environmental Science & Forestry. As auto manufacturers move towards electric cars, the next generation of the ethanol industry will revolve around manufacturing sustainable aviation fuel.

The impact of the spending is noticeable all across the region. A series of projects aimed at producing sustainable jet fuel have been announced, and plans are underway for a pair of carbon sequestration pipelines, which tap into tax credits by capturing carbon dioxide at ethanol refineries and pumping it to sites where it can be stored underground.

Geoff Cooper, president of ethanol lobbyist Renewable Fuels Association, pointed to investments in agriculture communities across the country as he warned against the repeal of the Inflation Reduction Act’s clean energy tax provisions this week.

“Repealing those incentives midstream would rip the rug out from underneath the U.S. bioenergy sector, leave a wake of stranded investments, and undermine the rural communities that are leading the low-carbon energy transition,” he said in a statement.

But when Democrats' marquee climate legislation came before House Republicans last year, they all opposed it, often in strenuous terms.

In an August speech on the House floor, Hinson decried the Inflation Reduction Act as “wasting hundreds of billions of taxpayer dollars on Green New Deal priorities.”

Rep. Mariannette Miller-Meeks had similar criticism last year, saying, “This enormous spending package is bad for Iowans, bad for the economy and bad for hardworking Americans and bad for the future of American innovation.”

Brown, the economics and agriculture professor, said it is not surprising that the Republican members of Congress would broadly oppose a Democratic-backed spending package while supporting and defending pieces that benefit the economies of their home state.

Plus, ethanol has long enjoyed political favor from both parties. And Iowa ethanol in particular has played an outsized role in politics as presidential hopefuls make appearances at fairs and ethanol refineries ahead of the state's first-in-the-nation caucuses.

Agriculture groups also hold significant political sway in Midwestern politics. For example, one of the carbon capture pipelines based in Iowa, called the Midwest Carbon Express, is backed by the Summit Agriculture Group. The corporation’s CEO, Bruce Rastetter, is a major Republican donor who this year alone made campaign contributions of $11,600 to Hinson, $5,800 to Miller-Meeks and $6,600 to Iowa Rep. Zach Nunn.

“The biofuels industry drives the Iowa economy and is vital to our nation’s energy security,” the Iowa House delegation, which also includes Rep. Randy Feenstra, said in a joint statement this week defending the energy provisions.

Repeal of the green energy tax credits was not part of McCarthy's initial proposal to raise the debt ceiling. But as he tried to sell the package to the wider GOP conference, a group of hard-right Republicans had insisted that repeal of the green energy tax credits be included in the proposal.

Republicans from coastal states also objected to the repeal of tax incentives for green energy projects like wind power.

“These credits have been very beneficial to my constituents, attracting significant investment in new manufacturing jobs for businesses in southeast Virginia,” said Rep. Jen Kiggans in a floor speech.

The first-term Republican voted for the bill, even as she urged for the tax credit repeal to be taken out of any final legislation.

Members of Iowa congressional delegation, however, would not budge until the bill was changed to protect the ethanol and biofuel industry.

After the bill was revised, the four Iowa Republicans released their joint statement saying they were proud to deliver a “major victory” for the industry and state.

Looking ahead, they added, “As negotiations continue, we have made it crystal clear that we will not support any bill that eliminates any of these critical biofuels tax credits."