ADM's Ethanol Gets By with Help from Its Friends

January 01, 1997  ·  Michael Fumento  ·  Fuel

Long before the current price-fixing scandal rocked the halls of Archer Daniels Midland, the self-styled "supermarket to the world," was a super rip-off for the public. And its co-conspirators in this scandal are the likes of President Bill Clinton and presidential wannabe Kansas Republican Senator Robert Dole.

The tool used to siphon hundreds of millions of dollars yearly from the taxpayer to ADM is ethanol, alcohol distilled from corn. When mixed with gasoline, ethanol is called gasohol. About 55% of the ethanol produced in this country is manufactured by ADM, based in Decatur, Ill. With sales of about $11 billion a year, ADM is the largest grain-processing company in the world.

But gasohol has problems at the pump. First, it hurts mileage. Second, it’s considerably more expensive than gasoline. Nobody is going to buy a fuel that both costs more and hurts mileage unless either A) the fuel is subsidized so that it doesn’t cost more, or B) they are forced to. In this case, ADM has arranged through its friends in high places to make it C) both of the above.

In addition to myriad state tax breaks, gasoline blended with ethanol is eligible for a federal tax credit of 5.4 cents a gallon, totalling an estimated $770 million a year. Over half that goes straight into ADM CEO Dwayne Andreas’s coffers.

Introducing that law was Dole, ADM’s point man for its assault on the taxpayers. Dole has introduced over two dozen bills to help the ethanol industry and lobbied fiercely for it outside of Senate chambers as well.

ADM needs people like Dole because ethanol is not only too expensive, it’s worthless.

Ethanol is touted as cleaner than gasoline. Indeed, it can reduce emissions of carbon monoxide, a fairly minor pollutant. While harmful in enclosed areas, carbon monoxide never causes serious health problems even at the very highest levels found in outdoor air.

Moreover, ethanol only reduces carbon monoxide emissions from cars built before oxygen sensors were made mandatory in 1983 or whose oxygen sensors are broken. Repeated studies at the University of Denver using a remote testing device invented there have found that out of 250-300 late model vehicles tested, at most one will put out significant carbon monoxide emissions.

Ethanol is also said to reduce ground-level ozone pollution, but a study by Sierra Research of Sacramento, California found that it would actually slightly INCREASE ozone production and increase smog. Indeed, in 1992 the EPA declared it could not be certified as a pollution-fighting fuel for use in the nation’s smoggiest cities. Immediately, as the Wall Street Journal put it, Dole "lobbied the administration from President Bush on down." Dole won, ADM won, and air breathers lost as the EPA relented and certified ethanol. Ethanol is also presented as a way to prop up corn prices by increasing corn demand. It does do that, but a by-product of its production is a corn mash sold as feed. That reduces the demand for soybeans, a crop corn farmers grow as part of crop rotation.

In any case, it would be far cheaper to just funnel a subsidy directly to corn farmers rather than funnel it through ADM.

The real reason for ethanol’s continued blessed existence isn’t amber waves of grain but ample waves of cash. "Dwayne Andreas just owns me," former Democratic Party Chairman Robert Strauss once told the Washington Post. It turns out Andreas actually owns lots of other important people, too.

Since just 1991, Andreas and his family, ADM, and the ADM PAC have contributed over $1.18 million to the Republican Party and $1.05 million to the Democrats.

But nobody has benefited from this largesse more than Bob Dole. To date, ADM has contributed over $85,000 to Dole’s various campaign bids, along with various other perks.

The most lucrative contribution to Dole was ADM’s co-sponsorship of "Face-Off," a daily three-minute radio debate between Dole and Massachusetts Democratic Sen. Ted Kennedy from 1984 to November 1987, when Dole declared his presidential candidacy. A spokesman for the show told me the value of this free advertising for Dole was about $840,000.

Even while he denies being Andreas’s chief lackey, it is a position Dole jealously guards. In August, speaking of the ethanol industry, Dole told an audience at the Illinois State Fair, "So far, we’ve been shut out by this administration."


Last year, shortly after Dwayne Andreas served as co-chairman of a Democratic Party fundraiser and personally donated $100,000, the Clinton Administration, via the EPA, tried to mandate that about 10% of all gasoline sold nationally contain ethanol. But in May a federal appeals court declared the administration "exceeded its authority" in so doing.

With that shot down, the ethanol lobby demanded a different gift, insisting that an ethanol-containing gasoline additive called ETBE receive the same tax break that pure ethanol gets. The Treasury Department quickly granted it. The ADM-supported American Corn Grower’s Alliance then announced, "Agriculture owes the President many thanks for seeing him continue to fulfill his pledge to be an advocate for ethanol, ETBE, and oxygenated fuels."

(Note to the tobacco companies: If you want Clinton off your backs, just lace your cigarettes with a little ethanol.) The ADM executive who blew the whistle on its alleged price-fixing scheme says that the company’s philosophy is: "The competitor is our friend; the consumer is our enemy." They could add to that another one: The politician is our lackey; the public is our sucker.