Photo Credit: Gage Skidmore
President Donald Trump nominated Iowa Secretary of Agriculture to serve as Under Secretary of Agriculture for Farm and Foreign Agricultural Services at the U.S. Department of Agriculture. The Senate Agriculture Committee voted unanimously in October 2017 to send the nomination to the full Senate.
Northey’s confirmation has been kept from a vote in the Senate since October 2017 due to an objection from U.S. Senator Ted Cruz (R-TX). U.S. Senator Chuck Grassley (R-Iowa) said he has worked to clear the objection with Cruz. He said that it was based on an accusation that the Renewable Fuel Standard (RFS) caused Philadelphia Energy Solutions (PES), an oil refinery in Pennsylvania, to file for bankruptcy because of the cost of Renewable Identification Number credits (RINs). Grassley said in his appointed role, Northey will not be involved with that issue at USDA. Cruz continues to object to the vote.
“I’m very disappointed that a highly qualified and honorable man like Bill Northey is being held up for an issue unrelated to his position. Secretary Northey enjoyed unanimous support from the Senate Agriculture Committee and has the support of numerous agriculture groups from around the country,” Grassley said.
“There is a manufactured and baseless rumor that the RFS has caused an oil refinery in Pennsylvania to file for bankruptcy. This example has been cited repeatedly as a justification for forcing RFS supporters to agree to sudden and drastic changes in how the RFS was designed. I have been trying to work in good faith with the senator from Texas and have offered several options that would result in lower prices for RINs, the compliance credits for the RFS,” he added.
“However, I keep being told I need to accept his proposal for a guaranteed cap on RIN prices in the short term to save PES.”
Grassley released an internal analysis earlier this week, which he says corroborates numerous independent studies regarding the RFS and the PES bankruptcy, showing no link between the success of refineries and RIN costs.
U.S. Senator Joni Ernst (R-Iowa) also spoke on the Senate floor in support of Northey’s confirmation.
Ernst stressed the need to move forward with Mr. Northey’s placement at USDA to allow the extremely qualified nominee to “work on matters that truly are important, not just to Iowans and the Midwest, but to all of America.”
Update: I was sent the transcript of Cruz’s speech in response. Here it is in full:
Reserving the right to object. I thank my friend from Iowa for his continued efforts both on behalf of Mr. Northey and working to find a commonsense solution to the issue that has thus far delayed Mr. Northey’s confirmation. You know, the phrase “my friend” is used often in this body. Sometimes it is used in a hollow manner, but in this instance, Senator Grassley is my friend. He and I have worked together closely on a great many matters, especially on the judiciary committee, and I have every confidence that we will continue to work together closely for many years to come.
On this issue, Mr. Northey could have been confirmed in November. He could have been confirmed in January. He could have been confirmed this month, but that has not happened yet. It is my hope that Mr. Northey will be confirmed. It is my hope that he will be confirmed swiftly and expeditiously. But the critical element for that to happen is for us to find a solution to a problem that is threatening tens of thousands of jobs across this country. That problem arises from what’s known as the Renewable Fuels Standard. The Renewable Fuels Standard established through the EPA, a system called RIN. Most people don’t know what a RIN is a renewable identification number. It is something made up by the EPA. They didn’t use to exist. They created RIN’s and they sell RIN’s to refineries. And RIN’s are designed to be an enforcement mechanism for the Renewable Fuels Standard. But there is a problem. RIN’s, when they were first introduced, sold for a penny or two pennies each. The EPA assured everyone they would continue to sell for one or two cents each. But since then, we have seen the market for RIN’s break. RIN’s have skyrocketed in price to as high as $1.40 each. What does that mean? What does it mean for this fiat governmentally created artificial license to be selling at $1.40 a piece as they hit at their high point? Well, it means that thousands upon thousands of blue-collar union jobs are at risk.
And, Mr. President, this is not a hypothetical threat. Just last month, Philadelphia Energy Solutions, owner of the largest refinery on the East Coast, announced that it was going into bankruptcy, and they pointed the finger squarely at the broken RIN’s system. In their bankruptcy filing, they explained that, quote, “the effect of the RFS program on the debtor’s business is the primary driver behind the debtor’s decision to seek relief under the bankruptcy code.” Now, that’s not a surprising statement, given what’s happened in the artificial and broken RIN’s market. In 2012, Philadelphia Energy Solution paid roughly $10 million for the RIN’s, for the licenses they needed to run their company. By 2017, “The Wall Street Journal” was estimating they would pay $300 million. That’s $10 million to $300 million. $300 million is more than double their total payroll. Mr. President, you spent many years in business. Can you imagine running a business where you spend more than double your payroll to write a check not to buy anything, not to pay anybody, not to buy any supplies, but simply to purchase a government license, so to speak, that is crushing and it is destroying jobs. With respect to Philadelphia Energy Solutions, just now in bankruptcy, we’re talking about 1,100 jobs here. These are blue-collar, working-class jobs, the kind that are the backbone of our economy, the kind that keep refineries going.
Ryan O’Callahan who heads the steelworkers local that represents 650 refinery workers said that the RFS is, quote, “a lead weight around the company.” He also said that a great many of the union members supported President Trump in the 2016 election because of his promise to reform harmful regulations. Indeed, the President of that union demonstrated great courage in supporting President Trump because he believed the President and the administration would stand for working class voters, would stand for the working men and women and would pull back regulations that are killing jobs.
The American people will be rightfully angry if we don’t fix this problem. It’s not just one refinery. Nationwide, experts have estimated anywhere from 75,000 to 150,000 American jobs are potentially at risk if U.S. independent refineries go out of business. 75,000 to 150,000 jobs. My own state of Texas would be deeply affected if we don’t take action immediately. Texas’ oil and gas sector employs 315,000 people, 100,000 of whom are in the refining and petrochemical production. We have 29 refineries that produce over 5.1 million barrels daily. 22 of these 29 refineries are hurt directly by the artificially high RINs prices. That’s why this past December, Texas governor Greg Abbott wrote to the EPA asking for relief from this federal mandate. He explained that, quote, “current implementation of this dated federal mandate severely impacts Texas’ otherwise strong economy and jeopardizes the employment of hundreds of thousands of Texans.” Mr. President, let me underscore that. Jeopardizes the employment of hundreds of thousands of Texans. If you want to know why I am fighting so hard to reach a good solution, you need look no further than that statement. I am elected, like each of the members of this body, to represent my constituents. In this case, 28 million Texans, and seeing hundreds of thousands of blue-collar workers driven out of business because of a broken regulatory system makes no sense.
Well, perhaps one might think this is simply an instance of parochial differences, of the battles between one state or another, one industry or another. Well, Mr. President, that’s not the case because on substance, there is a win-win solution here. I want a win for blue-collar refinery workers, and I want a win for Iowa corn farmers. I believe there is a win for both. I believe there is a policy solution that results in Iowa corn farmers selling more corn and also results in more blue-collar jobs. That should be a solution that makes everybody happy. However, there is a third player in this equation which consists of Wall Street speculators who were betting on this artificial government-created market and driving the prices up. The important thing to realize when I talked about Philadelphia Energy Solution paying $300 million. That $300 million did not go to Iowa farmers. It didn’t go to ethanol producers. It went to speculators and large companies outside of Iowa. We can reach a solution that ends the speculating, ends the gamesmanship in this artificial government market and saves jobs.
And with respect to Mr. Northey, I will say I don’t know Mr. Northey personally. I have heard from a number of people who do. By all accounts, Mr. Northey has a good and strong reputation in the state of Iowa. He is a fourth generation farmer. He has impressed many people with the job he has done as the Secretary of Agriculture in the state of Iowa. And I have made clear from the beginning that I was happy to see Mr. Northey confirmed in November, in December, in January, in February, and indeed I have laid out how to make that happen. November 14, 2017, I wrote a letter to Iowa governor Kim Reynolds laying out how Mr. Northey could be confirmed, which is namely to have the stakeholder sit down, collaboratively together and solve this problem in a win-win solution that helps Iowa corn farmers and also doesn’t bankrupt refineries and drive blue-collar workers out of business. Indeed, in December, I met with both of the Senators from Iowa, along with Senator Toomey, to discuss exactly that, how we can move forward with Mr. Northey’s confirmation promptly, efficiently, and also solve this problem. At that time it was suggested that we bring the stakeholders together, that we actually have the players and the ethanol industry actually talk with the refiners and find a solution that results in more corn being sold and refiners not going out of business. We left that meeting on December 21st with a plan to have that meeting of stakeholders. Mr. President, I’m sorry to tell you 48 days have passed and that meeting still hasn’t taken place, because unfortunately a handful of lobbyists representing the ethanol industry have taken the position that they are unwilling to meet, they are unwilling to speak, they are unwilling to discuss anything with anybody, and apparently if thousands of people lose their jobs in refineries, that’s not their problem. Mr. President, quite frankly, that’s not a reasonable position. That is not a reasonable or rational position. Mr. Northey would have been confirmed long ago had the lobbyists for the ethanol industry been willing to come to the table and reach a commonsense solution that would have resulted in more money for their industry, more ethanol, more corn. But their position is they are not interested in a win because their position has been they’re not willing to talk. Well, I think that is unfortunate, but it’s also unacceptable. So indeed, I continue to have productive conversations with the president, with the EPA, with the Department of Agriculture, with the administration about finding a win-win solution, a solution that is good for everyone, and if a handful of lobbyists refuse to come to the table, then they should not be surprised to see the solution proceed without them. We can find a good, positive solution that benefits the farmers of Iowa, that sells more corn.
You know, Mr. President, in 2015 and 2016, I spent a lot of time in the great state of Iowa. Indeed, I had the great privilege and blessing of completing what is affectionately known in that state as the full Grassley. What is the full Grassley? There are 99 counties in that beautiful state. Every year, the senior Senator goes to all 99. Now, I can tell you the full Grassley is a herculean accomplishment, rendered all the more remarkable by the fact that the senior Senator does it not once but every year. Well, on election day, I completed the full Grassley, having visited every county in the state of Iowa. I have visited with many wonderful people, including many wonderful corn farmers who I want to see selling more and more corn. We can have a solution that’s a win for those corn farmers but also doesn’t bankrupt refineries and drive a bunch of blue-collar workers out of work. It’s important to understand, by the way, that these high RIN’s prices don’t benefit corn farmers at all. In fact, if you look at RIN’s prices, they are not remotely correlated to the price of corn. If anything, they are inversely correlated. What does that mean, Mr. President? It means when RIN’s were selling for one and two cents each, corn was way up here. And when RIN’s skyrocketed to a $1.40 each, corn plummeted. So not only is this not benefiting Iowa corn farmers, you could argue it may even be hurting them. The money that is bankrupting refineries and costing people their jobs is not going to the farmers, and so my hope is we reach a solution that lifts regulatory barriers at the EPA so that the Iowa corn farmers can sell more corn in the market in response to real demand, not a government mandate, but there are EPA barriers that stand in the way that cap the sales of ethanol. I see no reason to artificially cap it. If there is demand in the marketplace, they should be able to sell more and more and more corn, expand their market. But they are not benefiting from crushing regulatory costs that are driving people out of business. We can reach a solution and can do both. And with respect to Mr. Northey, if and when we see the players come together in a positive way to solve this problem, I will more than readily lift my objection and I hope Mr. Northey is confirmed quickly. I look forward to working with Mr. Northey in the Department of Agriculture. But first, we need to stop this regulatory failure that is threatening thousands if not hundreds of thousands of jobs. Therefore, looking to find a cooperative win-win solution for everyone. I object.