Ethanol Boon Shows How Archer-Daniels
Gets Its Way in Washington With
Low-Key Lobbying

TIMOTHY NOAH / Wall Street Journal 29dec1993

[More on ethanol]

WASHINGTON — When it comes to lobbying, less is more fog Archer-Daniels-Midland Co.

Seemingly without lifting a finger, the agriculture giant this month received from the Clinton administration a major government-mandated expansion in the market for ethanol, a corn-derived product that is blended with gasoline to reduce smog. The decision could be enormously profitable for the politically influential ADM, which makes most of the ethanol manufactured in the U.S.

Yet ADM achieved this coup without the help of a registered lobbyist, or even, it seems, an unregistered Washington law firm. Moreover, officials at the White House and the Environmental Protection Agency say they had no discussions about the matter with anyone from ADM.

ADM officials refuse to discuss the company's efforts on the ethanol issue. But a look behind the scenes offers a rare glimpse into how the company achieves such success-in the Washington arena.

Serene Detachment

The company's stance of serene detachment toward a government decision affecting its vital economic interests is, of course, mainly a pose. It is also standard operating procedure for ADM, which when pulling strings in Washington always affects an outward aspect of Buddha-like indifference to worldly gain. But scratch below ADM's surface and you'll get a decidedly different picture. "ADM has been the major architect" of the ethanol lobby effort, says A. Blakeman Early, a Washington representative of the Sierra Club.

Central to the ADM's Washington clout is its veteran chairman, Dwayne O. Andreas. Although ADM is based in Decatur, IL., Mr. Andreas is as much a fixture here as the Washington Monument. A longtime, heavy political contributor to Democrats and Republicans alike, Mr. Andreas has a knack for showing up in the right company. Besides participating in a number of meetings between business leaders and President Clinton, "he has socialized with the first family: A 75th-birthday party he threw in October in Washington for ADM board member Robert Strauss was attended by Hillary Rodham Clinton. ADM was also a key Clinton ally in passing the North American Free Trade Agreement.

Personal Contributions

Then there is money. Federal Election Commission records show that ADM, which has long had close ties to such prominent Republicans as Senate Minority Leader Robert Dole of Kansas, favored the  GOP in its corporate contributions for 1992. During that two-year election cycle, ADM gave $772,000 to the Republicans, compared with $136,500 to the Democrats. But ADM's loyalties appear to have shifted this year; records for the first half of 1993, the most recent data available, show that the company gave far more to the Democrats ($46,500) then it gave to the Republican candidates in 1992, weighed in a mere six days before the presidential election with a $50,000 contribution to the Democrats' congressional campaign committee. (Mr. Andreas's contributions for 1993 were, negligible. according to the. not-yet-complete data, consisting thus far only of a $5,000 contribution to the Texas Republican congressional committee.)

The ethanol policy from which ADM stands to benefit has its origins in the 1990 Clean Air Act, which requires service stations in the nation's nine smoggiest cities, starting in 1995, to reduce smog by mixing gasoline with either ethanol or methanol.

In this prospective market, methanol, which is cheaper to produce, has the edge. But the EPA this month proposed a rule requiring that 30% of all gasoline sold under the reformulated-gas program — roughly one-tenth of all gasoline sold in the U.S. — must be blended with ethanol.

Didn't Have to Lobby

One reason ADM did no lobbying on the ethanol policy is that it didn't have to. Instead, its case was pressed by the Renewable Fuels Association, a trade group that lobbied the White House for months on the issue. Competing industry groups complain that the Renewable Fuels Association is dominated by ADM. Eric Vaughn, president of the trade association, disputes that, insisting that ADM has "equal standing" with the other 70 companies that are paying members. But he acknowledges that ADM is represented on his group's board, and even Clinton administration officials say they assume the association acts as a proxy for the company.

The Renewable Fuels Association actually pushed a proposal that would benefit ADM even more than the EPA's guaranteed market-share plan: an easing of environmental restrictions on ethanol's summertime use. (The. EPA believes that,  use of ethanol's evaporative properties blending it with gasoline in hot weather actually increases smog.) But because ADM makes somewhere between 50% and 70% of all the ethanol in the U.S., the EPA decision should still be a tremendous boost for the company.

'"If you're an ethanol producer, it's pretty hard to be unhappy," says Doug Durante, executive director of the Clean Fuels Development Coalition.

Administration officials deny that helping ADM was on their mind. They argue that the decision, which makes good on a campaign promise by President Clinton to promote ethanol use, will encourage use of a domestic, renewable resource — corn — and, unlike an earlier ethanol proposal floated by President Bush during the 1992 a campaign won't harm the environment

Although ADM could benefit handsomely from the EPA proposal as it stands, the company's allies haven't given up hope of moving things still further in its direction. Sen. Dole, for example, pressed a variation of the Renewable Fuels Association's plan on the EPA, and is now, assuming a defiant all-or-nothing stance in opposition to the EPA's proposed regulation, which believes violates free-market principles. He claims that the evidence that ethanol evaporation contributes to summertime smog is inconclusive. "It's like what causes cancer," says Dole aide Jim Whittinghill. "Who the hell knows?"