News that doesn't receive the necessary attention.

Friday, May 30, 2014

Before going to jail, lobbyist Jack Abramoff said of Thad Cochran's longtime assistant, "She gets everything she wants." Cochran's assistant who pled guilty before a judge delivered the Senator's support via taxpayer dollars to Abramoff clients. Why hasn't Cochran resigned in disgrace for his part in making the country's voters think even hard core leftists should be in charge of the US before Republicans?

5/29/14, "‘She Gets Everything She Wants’," Erick Erickson, RedState.com

"“She gets everything she wants,” Jack Abramoff said in an email. He was referring to Ann Copland who spent 29 years working for Thad Cochran, working her way into the position of his Executive Assistant. An Abramoff associate was complaining that Ms. Copland wanted to see Paul McCartney, Green Day, and others. She was demanding. But she got everything she wanted because she delivered Thad Cochran’s support for tax payer dollars funneled to Abramoff clients.
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My friend Charles Johnson has documented much of what Cochran did for Abramoff’s clients.
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"In 2001, Cochran wrote a letter on behalf of the Choctaw Indians to Interior Secretary Gale Norton. The Choctaw were then one of Abramoff’s biggest clients. Cochran, for his troubles, “received about $82,500 from Abramoff, his lobbying partners and tribal clients between 2001 and 2004, including roughly $8,000 in the period around which the letter was sent.” (Associated Press, 11/17/05) 
In 2006, Cochran did the tribes bidding once more and placed a hold on an Indian gaming bill that John McCain pushed in the wake of the Abramoff scandals to help the Choctaw. Indeed Cochran’s much advertised beef with Senator John McCain wasn’t over anything principled at all. Cochran—the king of pork—objected to McCain’s opposition to earmarks."
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Cochran has extremely cozy relationships with lobbyists, donors, and banks.

As I have already mentioned, Cochran lives in a multi-million dollar home on Capitol Hill shared with his current Executive Assistant Kay Webber. The home is in Ms. Webber’s name. There are questions grassroots activists are asking about the home that Democrats are going to keep asking through November. 

The chief question is this one: how does an Executive Assistant making approximately $72,000.00 a year afford a house worth $1,000,000.00 at the time of purchase and now worth more than a million dollars?

There does not appear to be an apartment in the home according to District of Columbia records, though Cochran says he rents and Ms. Webber’s personal financial disclosure shows rental income

According to individuals who have reviewed the transaction, when Webber purchased the house, she had a co-signor on the home who was a donor to Cochran and who listed her own occupation as homemaker. So a congressional staffer making $72,000.00 and a homemaker who donated to Cochran went in together and bought a million dollar home. 

That homemaker’s husband, William Shows, was the head of the Pearl River Valley electric cooperative. Electric cooperatives have been the number one source of campaign contributions to Thad Cochran over the years. Sources tell me the homemaker’s husband also sat on the board of the bank that helped finance the transaction.

That would be Trustmark Bank, which is currently having FEC trouble over a campaign loan to benefit Cochran.

Likewise, Trustmark’s CEO’s Richard Hickson, contributed to Cochran’s campaign in 2000, 2001, and 2007. In 2008, Trustmark got $215 million in TARP funding from the federal government.

Now, here’s the real kicker. Ms. Webber and Mrs. Shows bought the house for $1 million with, it appears, $200,000.00 down and an $800,000.00 mortgage in 2001. At the time Ms. Webber’s congressional salary was less than $100,000.00 a year and Mrs. Shows, who only had a 1% interest in the home according to individuals who have seen the paperwork, listed her occupation as a homemaker. A year after the purchase, Mrs. Shows gave Ms. Webber her interest in the home making Ms. Webber the sole owner.

Surely there must be an innocent explanation to all this — how do a congressional staffer and homemaker get a loan for a million dollar home? How does a Senator rent an apartment when the District of Columbia seems to have no record of an apartment? Why did they open the home for a Sheila Jackson Lee fundraiser?

Surely there are innocent answers. But Democrats are going to keep asking these questions long after Republicans stop. And the specter of Thad Cochran’s relationship with Jack Abramoff will live on."

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29 year Cochran aid pled guilty in Abramoff scandal in 2009, was "particularly demanding" in her requests in exchange for helping him with a top client, the Mississippi Band of Choctaw Indians:

3/10/2009, "Ex-Cochran aide pleads guilty in corruption probe," AP via wlox.com
 
"A former longtime aide to Mississippi Sen. Thad Cochran pleaded guilty Tuesday to swapping legislative favors for event tickets and other gifts from disgraced lobbyist Jack Abramoff's firm.  

Ann Copland wiped tears from her eyes as she admitted to U.S. District Judge Richard Roberts that she took the gifts in exchange for helping one of Abramoff's top clients, the Mississippi Band of Choctaw Indians.
Copland is the latest among more than a dozen congressional aides, lobbyists, lawmakers and Bush administration officials convicted as part of a lobbying scandal spawned by Abramoff, a former high-flying influence peddler now serving a four-year prison term.


 E-mails disclosed in court documents that Copland sent to Abramoff's firm show she was particularly demanding in what she wanted from the lobbyist. At one point she sent a long list of ticket requests that included several concerts, hockey, ice skating and the circus. At other times she sent e-mails from inside the firm's luxury box seats complaining about the food and drinks.

Among the e-mails filed in court was one from lobbyist Todd Boulanger to his boss saying they should go out of their way to keep Copland happy because "she's more valuable to us than a rank-and-file House member."

Another e-mail from Kevin Ring, an Abramoff associate, included a list of events Copland wanted to attend and how many tickets she wanted for each event. She asked to see singer Paul McCartney, an ice skating event, musical acts 'NSync and Green Day and a hockey game. She also asked for two to six tickets to see the circus, but only if they were floor seats. Abramoff responded: "She'll get everything she wants."

Copland worked for Cochran for 29 years, then abruptly left his office last spring after Abramoff prosecutors had netted a dozen convictions in the scandal.


In Tuesday's hearing, Copland admitted she understood that Senate rules prohibit staffers from soliciting gifts from lobbyists but still secretly did so."
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Added: Unfortunately for all Americans, Thad Cochran is a longtime friend of the ethanol industry:

Thad Cochran voted in 2005 and 2007 to approve and expand ethanol mandates. He had a 100% rating from the ethanol industry even back in 2002.

Cochran's 2007 vote included ordering the EPA to establish and run a non-public ethanol credit commodity trading market. It invited millions in fraud, speculation, and raised our gas prices:

"The RINs story began in 2005, when the Bush administration joined Democrats in Congress to pass an energy bill mandating renewable fuel standards. That law was broadened in 2007."  


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"At the heart of the RFS (ethanol and biofuel) is a credit trading program based upon the Renewable Identification Number (RIN)."...1/15/2008.

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10/15/12, "The Great Ethanol Scam," CNS News, Alan Caruba



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4/25/14, "Partners in Ethanol Crime," Wall St. Journal Editorial, "The corn-fuel mandate has been an invitation to mass fraud."

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9/14/13, "Wall St. Exploits Ethanol Credits, and Prices Spike," NY Times, by and


"It was supposed to help clean the air, reduce dependence on foreign oil and bolster agriculture. But a little known market in ethanol credits has also become a hot new game on Wall Street

The federal government created the market in special credits tied to ethanol eight years ago when it required refiners to mix ethanol into gasoline or buy credits from companies that do so. The idea was to push refiners to use the cleaner, renewable fuel, or force them to buy the credits. 

A few worried that Wall Street would set out to exploit this young market, fears the government dismissed. But many people believe that is what happened this year when the price of the ethanol credits skyrocketed 20-fold in just six months, according to an analysis of regulatory documents and interviews with more than 40 people involved in the market, including industry executives, brokers, traders and analysts. 

Traders for big banks and other financial institutions, these people say, amassed millions of the credits just as refiners were looking to buy more of them to meet an expanding federal requirement. Industry executives familiar with JPMorgan Chase’s activities, for example, told The Times that the bank offered to sell them hundreds of millions of the credits earlier this summer. When asked how the bank had amassed such a stake, the executives said they were told by the bank that it had stockpiled the credits. 
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A spokesman for JPMorgan, when asked about the exchange with the executives, disputed the account, saying the bank does not trade ethanol credits for a profit in the way it trades other securities, but is registered to deal in credits through its energy business. From time to time, the spokesman, Brian J. Marchiony, said in a statement that the bank also purchased credits “on behalf of clients who need to fulfill their E.P.A.-mandated obligations,” though it had not done so in the past year.
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But other market participants, including Thomas D. O’Malley, chairman of PBF Energy in Parsippany, N.J., identified JPMorgan Chase and other financial institutions as being active sellers of the credits this year.
 
He said the institutions had helped transform an environmental program into a profit machine, contributing to the market frenzy this year. “These things were designed to monitor the inclusion of ethanol in the gasoline pool,” Mr. O’Malley said. “They weren’t designed to become a speculative item. For the life of me I can’t see the justification for it.”
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While banks are by no means the largest player in ethanol credits, Wall Street’s activity in this market reflects a larger effort by financial institutions to exert their influence over loosely regulated markets for basic commodities, from aluminum to oil. The opacity of the ethanol credit market makes it difficult to determine the extent to which large financial actors have profited.
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The banks say they have far less influence in the market than others are suggesting, and are doing nothing wrong. But the activities, while legal, could have consequences for consumers. In the end, energy analysts say, the outcome will be felt at the gas pump — as the higher cost of the ethanol credits gets tacked onto the price of a gallon of gasoline. (The credits, which cost 7 cents each in January, peaked at $1.43 in July, and now are trading for 60 cents.)
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The Valero Energy Corporation, a refiner that owns thousands of gas stations, says the squeeze in ethanol credits might cost it $800 million. PBF Energy, also a refiner, puts its bill at about $200 million. A review by The Times of a federal registry of nearly 1,500 businesses and individuals in the renewable fuel market found big Wall Street banks as well as a handful of people with troubled legal histories among the participants. Several high-profile cases of fraud have emerged.
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Scott Mixon, the acting chief economist of the Commodity Futures Trading Commission, said in an interview Friday that the issue of banks’ involvement in this market was something the agency was tracking and might look into more deeply because of the ethanol component. The commission regulates the commodities futures market, including trading in ethanol and gasoline.
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Though the ethanol credits are traded by many major investment houses, they were created not on Wall Street but in Washington, on Capitol Hill and at the Environmental Protection Agency. At its inception, the so-called Renewable Fuel Standard was promoted as a means to reduce the nation’s reliance on foreign oil, fight global warming and provide a boost to farmers. The rules call for a set amount of ethanol, most of which is made from corn, and other renewable fuels to be blended with fossil fuels each year, with quotas assigned to individual refiners and importers.
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Every time they mix ethanol into gas, or import fuel already blended with ethanol, energy companies get a credit from the government, and that credit can be sold to other companies that don’t blend ethanol to help them meet federal requirements. If refiners fall short of their obligation, they can face fines of $32,500 a day. To monitor compliance, each gallon of ethanol is assigned a 38-digit Renewable Identification Number, or RIN. Six billion of them were generated in the first six months of this year.
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The E.P.A. makes sure participants comply with the fuel standard. But rules that apply to almost every other market — on transparency, disclosure and position limits, for example — are not imposed on the trade of RINs, making Wall Street’s role harder to gauge.
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If Wall Street traders take a 5 percent stake in a public company’s stock, for instance, they are required by law to flag that they have acquired a sizable stake in a filing with the Securities and Exchange Commission. There is no such obligation for traders buying RINs.
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Like JPMorgan, other big banks downplay their involvement, contending that they are in the market primarily because their firms, through subsidiaries and other arrangements, have ownership interests in gasoline and other energy production and therefore are required to participate in the federal renewable fuels program. 
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Until 1999, regulations barred banks from owning nonfinancial companies like commodities operations. This was meant to keep banks from self-dealing or pursuing monopolistic practices in their financial operations that could benefit their nonfinancial affiliates. Separating these operations, regulators believed, would also protect a bank’s core lending and deposit-taking businesses from risky trading by nonfinancial units.  Those restrictions fell by the wayside with the passage of the Gramm-Leach-Bliley Act, which struck down Depression-era banking laws. Now, however, the Federal Reserve is reviewing commodities ownership by banks. 
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In the case of JPMorgan, the industry executives familiar with its activities in the RINs market said they were told by a top banker in its commodities operation about the stockpiling. The executives said the banker maintained that one of JPMorgan’s traders had urged the bank to buy up every available credit. The executives spoke on the condition of anonymity for fear of harming business relationships.
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Through a spokesman, the banker denied that the conversation took place. Mr. Marchiony, the JPMorgan spokesman, characterized the report as a misunderstanding. He denied the bank had stockpiled the credits. He added that the bank mainly dealt in RINs as a byproduct of its joint venture with a refiner in Philadelphia. “The fact of the matter is, we simply don’t trade RINs, nor do we carry an inventory other than a marginal amount for compliance purposes,” the statement said.
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Morgan Stanley also generates RINs through TransMontaigne, a subsidiary with 21 blending facilities, and it trades the credits via the Morgan Stanley Capital Group. According to regulatory filings, TransMontaigne’s biggest customer for its energy products is the commodities unit of the Morgan Stanley Capital Group, a trading operation that runs out of the former Texaco headquarters in Purchase, N.Y.
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Mark Lake, a spokesman for Morgan Stanley, said that the firm had not benefited from the increase in RIN prices in 2013. “The firm’s obligation to purchase RINs as part of our importing and blending of gasoline exceeded the RINs we have received from our wholesale business,” he said. 
Mr. Lake declined to discuss Morgan Stanley’s holdings of RINs or to say whether the bank’s traders used market information received from TransMontaigne.
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Trading on information gleaned from a subsidiary like TransMontaigne would be illegal in the stock market, but there are no rules against it in commodities. (Morgan Stanley also holds a stake Heidmar Holdings, of Norwalk, Conn., which owns a fleet of oil tankers.) 
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Saule T. Omarova, an associate professor of law at the University of North Carolina at Chapel Hill, said Morgan Stanley’s overlapping activities illustrate how large financial institutions have become deeply entwined in every aspect of the commodities markets. 
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“In the trading chain between the oil well and the gas station,” Ms. Omarova said, Morgan Stanley is clearly accumulating as many stakes along the way as possible because that is what gives them the most flexibility of control.”
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Seizing an Opportunity 
 
The market in ethanol credits is exactly the kind Wall Street loves: opaque, lightly regulated and potentially very lucrative. 
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Officials at the E.P.A., which oversees the market, say they have seen no evidence of improper trading, like hoarding, in the market. But they do not police the RIN market as a financial regulator would.  
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“If there were any evidence now or in the future that that was happening, we have the ability to amend the regulation to constrain that,” said Christopher Grundler, director of E.P.A.’s office of transportation and air quality, which oversees the renewable fuels program.
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It is difficult for outside groups, or even other regulators and law enforcement agencies, to keep tabs on the market, because the E.P.A. declines to disclose who actively trades the credits, or how much they trade, citing the confidentiality of refiners and other participants
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Trading is a private affair, usually conducted by phone, and just about anyone can participate. In creating the market, the E.P.A. says it did not limit the market for RINs to refiners and other energy companies because it wanted to encourage a free market. 
Price movements on other commodities futures are limited by the exchanges on which they trade as a check on speculation. But the biofuel credits are not traded on an exchange: their prices are unbridled. And, unlike in the broader financial industry, no formal qualification or license is required before a broker can start trading. 
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“There is a RINs trading desk at any major brokerage now,” said Paul Niznik, bio-fuels manager for Hart Energy, based in Houston. “There are people who are not refiners that are buying and selling RINs like a commodity. They treat it like something to be traded, to be day-traded.” 
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The RINs story began in 2005, when the Bush administration joined Democrats in Congress to pass an energy bill mandating renewable fuel standards. That law was broadened in 2007 to establish requirements for the amount of biofuel to be blended into gasoline annually through 2022. This year, refiners and importers are required to blend 13.8 billion gallons of ethanol, up from 13.2 billion last year. For 2014, the figure is 14.4 billion.
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But the estimates Congress used about how much gas Americans would keep buying were wrong. When the biofuel credits were created, gasoline consumption was projected to grow 6 percent by 2013. But thanks in large part to the recession and more fuel-efficient cars, consumption has actually fallen. 
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As a result, refiners this year began hitting what is known as “the blend wall,” meaning that the amount of ethanol the government is requiring them to use is close to the maximum amount that can be blended into gasoline without creating problems for gas stations and motorists.
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Distributing gasoline with greater levels of ethanol is more costly and corrodes gas station pumps and tanks. Raising the ethanol level in gasoline, therefore, would require gas stations across America to install new systems. Therefore, refiners have turned to RINs to meet their government obligations rather than blend more ethanol into gasoline.
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Some say financial players saw it coming, and jumped into the market. 
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When you see something change as rapidly as this, somebody’s hoarding them, somebody’s buying them, somebody’s making big bucks,” said Senator Thomas A. Coburn, Republican of Oklahoma, a big oil state. After his staff examined the run-up in prices this summer, he said he was concerned that “big moneyed interests” were gaming the credits. 
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For now, companies like Valero say that they are eating the cost of high RIN prices, which are still eight times more expensive than they were in January. But industry analysts, executives and even researchers at the investment banks predict the cost of the RINs’ surge will be passed along to consumers by increasing the price of gasoline, if not later this year then next year.
Mr. O’Malley, the chairman of PBF Energy, likens the outcome to a hidden tax on the public. Unlike other taxes, which go to the government, this one goes to the speculators. 

Double-Dipping on Credits 
Every day, RINs are born in places like Fort Lauderdale, Fla., Chesapeake, Va., and Bainbridge, Ga. Across a network of 45 fuel terminals in the Southeast, and along the Mississippi and Ohio rivers, Morgan Stanley’s TransMontaigne stores, blends and distributes gasoline and other fuels.  
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Even though it is based in Denver, TransMontaigne sits at the center of a powerful Wall Street energy operation. It delivers 200,000 barrels of refined petroleum products each day, just under 2.5 percent of the total market, and plays a role in the RINs market in addition to any trading its parent, Morgan Stanley, might do. Morgan Stanley bought TransMontaigne in 2006. 
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For banks, trading RINs for clients can be lucrative. A big reason is that the credits are far more difficult to buy and sell because they are not traded on exchanges like stocks. As a result, the difference between the price at which one party is willing to sell and another is willing to buy is unusually wide. Those fat spreads mean big money for anyone serving as a middleman.
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At a hearing in late July at the Commodity Futures Trading Commission, Mr. Mixon, the commission’s acting chief economist, estimated that RIN spreads were 4 percent of a transaction’s value. That is far more than the average stock commission. 
In addition to Morgan Stanley and JPMorgan Chase, other big banks, like Citigroup and Barclays, are also registered with the E.P.A. to trade the credits.

Edward Westlake, an analyst at Credit Suisse, said many big financial firms have gone beyond RINs trading and pushed into blending fuel to create them as well. “Building a tank and blending doesn’t cost a lot of money,” Mr. Westlake said, “and there are folks on Wall Street who own tanks who are benefiting from the RINs.” 
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Bank research departments are also trying to pique investor interest in this market. Goldman Sachs and Bank of America Merrill Lynch recently published bullish reports on the market. In July, Morgan Stanley published a report predicting that RIN prices would keep rising —  
Officials at the E.P.A. do not see excessive influence by financial speculators. They suggest the price spikes in RINs this year reflect the expectation of a shortage of the credits because rising renewable fuel mandates are occurring as consumer demand for gasoline is falling. “The market is expecting this future scarcity as the statutory mandates continue to increase,” Mr. Grundler said. 
Others say that prices are up mostly because the oil industry has refused to invest in renewable energy. For example, Jeremy Martin, a clean energy expert for the Union of Concerned Scientists, said many of the complaints about the credits come from industry players who want to see the renewable fuels program killed.
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“It was meant to change behavior, and it was understood that if it was to be binding, RIN prices would not be close to zero,” Mr. Martin said.
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In fact even before RINs took off, they had become a contentious issue within the energy industry. Ethanol producers like the renewable fuel standards because they essentially guarantee a market for their product. But refiners — particularly those without operations to blend the fuel — regard the standards as an onerous and unnecessary business cost. 
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The Impact at the Pump 
 
Margo T. Oge, who oversaw the creation of the ethanol credit program at the E.P.A., says that the rising price of RINs — no matter the cause — is good news and an indication that the program’s goals are being met.
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As the credits get more expensive, she says, oil and gas companies have a financial incentive to add more ethanol to fuel rather than buy credits. That, in turn, reduces oil imports and emissions — which was the point of creating the system in the first place.
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Ms. Oge, who retired from the E.P.A. last year and is now a visiting scholar at the International Council on Clean Transportation, a research group in Washington, said RINs were never supposed to affect the price of gasoline at the pump. If that is the result of the price run-up this year, as many energy analysts predict, it would be an unwelcome outcome, she said. “The last thing we wanted in implementing this program is to get price increases for the consumer,” she said.
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Even beyond the likely rise in gasoline prices, critics of the RINs market say it is deeply flawed, and they do not share Ms. Oge’s optimistic takeaway of this year’s market frenzy.
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First, by allowing anyone to trade, including those with no real interest in energy, the E.P.A. encouraged speculation, the critics say. Second, the market operates largely in the dark, leaving it vulnerable to manipulation. Third, and perhaps most significant, the federal requirement for ethanol in gasoline means oil companies are captive buyers — meaning they are required to buy the credits when they do not or cannot blend their own fuel — a fact that savvy traders use to their advantage.  
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“The problem the E.P.A. had is they opened up the market on the trading side, but restricted it on the obligated side to refiners and importers,” said Lawrence J. Goldstein, the former president of the Petroleum Industry Research Foundation, a nonprofit bipartisan group.
Analysts and others say the market is vulnerable to questionable practices like short squeezes, where prices are pushed up by holders of the credits to benefit their positions. 
“Anybody who’s participating in these markets has the opportunity to throw their weight around,” said David J. Hackett, president of Stillwater Associates, a transportation energy consulting firm. 
“Whether it’s a hedge fund or a refiner or ethanol producer, they would tend to drive the market in directions that are beneficial for whatever their goals.” 
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An examination by The Times of participants registered with the E.P.A. found several people with troubled pasts, including one who was accused of helping run a Ponzi scheme, and another who pleaded guilty to illegal storage of hazardous waste. 
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The RINs market has come off the boil recently, but at 60 cents apiece the credits still cost far more than they did at the beginning of the year. While the E.P.A. says the market is sound, W. David Montgomery, an economist at Nera Economic Consulting, a unit of Marsh & McLennan, said the agency should install an overseer
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The E.P.A. disagrees, but said it was considering providing more data on who trades and holds RINs and had instituted a voluntary certification system for participants.
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“We are exploring things like increasing the regularity of updating the transactional data system and providing more information about production volumes,” Mr. Grundler, the E.P.A. official, said. “All are aimed at increasing confidence in this market and increasing compliance, which is our major concern.”
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But Tom Kloza, an analyst at the Oil Price Information Service, a leading source of petroleum pricing, said the potential for abuse will not disappear on its own
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You could conceivably have a company in the middle holding millions of RINs,” Mr. Kloza said.
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“Any entity could have a 1, 2 or 5 percent market share in RINs and is waiting to sell them at some explosive gain. I wonder, who’s got the score card?”"
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11/15/11, "Energy license fines fuel industry ire," Politico, Darren Goode

"The Environmental Protection Agency last week sent out 24 notices of violations to companies linked to the purchase and use of what turned out to be fake “renewable identification numbers” sold by Clean Green Fuel. A RIN is a 38-digit number required by the EPA to document the production of a certain amount of renewable-blended fuel."....

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Ethanol has also harmed the environment. "
If they do change the fuel standard, you’ll see the price of corn come down overnight,he (farmer Leroy Perkins) said." (end of article)

11/12/13,The secret, dirty cost of Obama's green power push
AP, by Dina Cappiello and Matt Apuzzo, Corydon, Iowa

The hills of southern Iowa bear the scars of America’s push for green energy: The brown gashes where rain has washed away the soil. The polluted streams that dump fertilizer into the water supply.

Even the cemetery that disappeared like an apparition into a cornfield.
 

It wasn’t supposed to be this way.

With the Iowa political caucuses on the horizon in 2007, presidential candidate Barack Obama made homegrown corn a centerpiece of his plan
  • to slow global warming.
And when President George W. Bush signed a law that year requiring oil companies to add billions of gallons of ethanol to their gasoline each year, Bush predicted it would make the country
  • “stronger, cleaner and more secure.”
But the ethanol era has proven far more damaging to the environment than politicians promised and much worse than the government admits today.

As farmers rushed to find new places to plant corn, they wiped out millions of acres of conservation land, destroyed habitat and polluted water supplies, an Associated Press investigation found.


Five million acres of land set aside for conservation — more than Yellowstone, Everglades and Yosemite National Parks combined —
  • have vanished on Obama’s watch.
Landowners filled in wetlands. They plowed into pristine prairies,
  • releasing carbon dioxide that had been locked in the soil.
Sprayers pumped out billions of pounds of fertilizer, some of which seeped into drinking water, contaminated rivers and worsened the huge dead zone in the Gulf of Mexico where marine life can’t survive.

In Kansas, for instance, farmers planted 1.35 million more acres of corn last year than they did the year before the ethanol mandate was passed.
  • More than 560,000 acres of conservation land were lost.
The consequences are so severe that environmentalists and many scientists have now rejected corn-based ethanol as bad environmental policy. But the Obama administration stands by it, highlighting its benefits to the farming industry rather than any negative impact.

Farmers planted 15 million more acres of corn last year than before the ethanol boom, and the effects are visible in places like south central Iowa.

The hilly, once-grassy landscape is made up of fragile soil that, unlike the earth in the rest of the state, is poorly suited for corn. Nevertheless, it has yielded to America’s demand for it.

“They’re raping the land,” said Bill Alley, a member of the board of supervisors in Wayne County, which now bears little resemblance to the rolling cow pastures shown in postcards sold at a Corydon pharmacy.

All energy comes at a cost. The environmental consequences of drilling for oil and natural gas are well documented and severe. But in the president’s push to reduce greenhouse gases and curtail global warming, his administration has allowed so-called green energy to do not-so-green things.

In some cases, such as its decision to allow wind farms to kill eagles, the administration accepts environmental costs because they pale in comparison to the havoc it believes global warming could ultimately cause.

Ethanol is different.

The government’s predictions of the benefits have proven so inaccurate that independent scientists question whether it will ever achieve its central environmental goal: reducing greenhouse gases. That makes the hidden costs even more significant.

“This is an ecological disaster,” said Craig Cox with the Environmental Working Group, a natural ally of the president that, like others, now finds itself at odds with the White House.

But it’s a cost the administration is willing to accept. It believes supporting corn ethanol is the best way to encourage the development of biofuels that will someday be cleaner and greener than today’s. Pulling the plug on corn ethanol, officials fear, might mean killing any hope of these next-generation fuels.

“That is what you give up if you don’t recognize that renewable fuels have some place here,” EPA administrator Gina McCarthy said in a recent interview with AP. “All renewable fuels are not corn ethanol.”

Still, corn supplies the overwhelming majority of ethanol in the United States, and the administration is loath to discuss the environmental consequences.

“It just caught us completely off guard,” said Doug Davenport, a Department of Agriculture official who encourages southern Iowa farmers to use conservation practices on their land. Despite those efforts, Davenport said he was surprised at how much fragile, erodible land was turned into corn fields.

Shortly after Davenport spoke to The Associated Press, he got an email ordering him to stop talking. “We just want to have a consistent message on the topic,” an Agriculture Department spokesman in Iowa said.

That consistent message was laid out by Agriculture Secretary Tom Vilsack, who spoke to ethanol lobbyists on Capitol Hill recently and said ethanol was good for business.

“We are committed to this industry because we understand its benefits,” he said. “We understand it’s about farm income. It’s about stabilizing and maintaining farm income which is at record levels.”

The numbers behind the ethanol mandate have become so unworkable that, for the first time, the EPA is soon expected to reduce the amount of ethanol required to be added to the gasoline supply. An unusual coalition of big oil companies, environmental groups and food companies is pushing the government to go even further and reconsider the entire ethanol program.

The ethanol industry is fighting hard against that effort. Industry spokesman Brooke Coleman dismissed this story as “propaganda on a page.” An industry blog in Minnesota said the AP had succumbed “to Big Oil’s deep pockets and powerful influence.”

To understand how America got to an environmental policy with such harmful environmental consequences, it’s helpful to start in a field in Iowa.

Leroy Perkins, a white-haired, 66-year-old farmer in denim overalls, stands surrounded by waist-high grass and clover. He owns 91 acres like this, all hilly and erodible, that he set aside for conservation years ago.

Soon, he will have a decision to make: keep the land as it is or, like many of his neighbors, plow it down and plant corn or soybeans, the major sources of biofuel in the United States.
“I’d like to keep it in,” he said. “This is what southern Iowa’s for: raising grass.”

For decades, the government’s Conservation Reserve Program has paid farmers to stop farming environmentally sensitive land. Grassy fields naturally convert carbon dioxide into oxygen, which helps combat global warming. Plus, their deep root systems prevent topsoil from washing away.

For Perkins and his farmer neighbors in Wayne County, keeping farmland in conservation wasn’t just good stewardship. It made financial sense.

A decade ago, Washington paid them about $70 an acre each year to leave their farmland idle. With corn selling for about $2 per bushel (56 pounds) back then, farming the hilly, inferior soil was bad business.

Many opted into the conservation program. Others kept their grasslands for cow pastures.
Lately, though, the math has changed. “I’m coming to the point where financially, it’s not feasible,” Perkins said.

The change began in 2007, when Congress passed a law requiring oil companies to blend billions of gallons of ethanol into gasoline.

Oil prices were high. Oil imports were rising quickly. The legislation had the strong backing of the presidential candidate who was the junior senator from neighboring
  • Illinois, the nation’s second-largest corn producer.
“If we’re going to get serious about investing in our energy future, we must give our family farmers and local ethanol producers a fair shot at success,” Obama said then.

The Democratic primary field was crowded, and if he didn’t win the Iowa caucuses the road to the nomination would be difficult.
  • His strong support for ethanol set him apart.
“Any time we could talk about support for ethanol, we did,” said Mitch Stewart, the battleground states director for Obama’s 2008 campaign. “It’s how we would lead a lot of discussions.”

President Bush signed the bill that December. It would fall on the next president to figure out how to make it work.

President Obama’s team at the EPA was sour on the ethanol mandate from the start.
As a way to reduce global warming, they knew corn ethanol was a dubious proposition. Corn demands fertilizer, which is made using natural gas. What’s worse, ethanol factories typically burn coal or gas, both of which release carbon dioxide.

Then there was the land conversion, the most controversial and difficult-to-predict outcome. Digging up grassland releases greenhouse gases, so environmentalists are skeptical of any program that encourages planting more corn.

“I don’t remember anybody having great passion for this,” said Bob Sussman, who served on Obama’s transition team and recently retired as EPA’s senior policy counsel. “I don’t have a lot of personal enthusiasm for the program.”

At the White House and the Department of Agriculture, though, there was plenty of enthusiasm.
One of Obama’s senior advisers, Pete Rouse, had worked on ethanol issues as chief of staff to Sen. Tom Daschle of South Dakota, a major ethanol booster and now chair of the DuPont Advisory Committee on Agriculture Innovation and Productivity.

Another adviser at the time, Heather Zichal, grew up in northeast Iowa — as a child, she was crowned “sweet corn princess” — and was one of the Obama campaign’s leading voices on ethanol in her home state.

The administration had no greater corn ethanol advocate than Vilsack,
  • the former Iowa governor.
“Tom understands that the solution to our energy crisis will be found not in oil fields abroad but in our farm fields here at home,” Obama said in 2008. “That is the kind of leader I want in my Cabinet.”

Writing the regulations to implement the ethanol mandate was among the administration’s first major environmental undertakings. Industry and environmental groups watched closely.
The EPA’s experts determined that the mandate would increase demand for corn and encourage farmers to plow more land. Considering those factors, they said, corn ethanol was only slightly better than gasoline when it came to carbon dioxide emissions. Sixteen percent better, to be exact. And not in the short term. Only by 2022.
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By law, though, biofuels were supposed to be at least 20 percent greener than gasoline.
From a legal standpoint, the results didn’t matter. Congress exempted existing coal- and gas-burning ethanol plants from meeting this standard.
.
But as a policy and public relations issue, it was a real problem. The biofuel-friendly Obama administration was undermining the industry’s major selling point: that it was much greener than gasoline.
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So the ethanol industry was livid. Lobbyists flooded the EPA with criticism, challenging the government’s methods and conclusions.
.
The EPA’s conclusion was based on a model. Plug in some assumed figures — the price of corn, the number of acres planted, how much corn would grow per acre — and the model would spit out a number.
To get past 20 percent, the EPA needed to change its assumptions.
The most important of those assumptions was called the yield, a measure of how much corn could be produced on an acre of land. The higher the yield, the easier it would be for farmers to meet the growing demand without plowing new farmland, which counted against ethanol in the greenhouse gas equation.

Corn yields have inched steadily upward over the years as farms have become more efficient. The government’s first ethanol model assumed that trend would continue, rising from 150 bushels per acre to about 180 by the year 2022.

Agriculture companies like Monsanto Co. and DuPont Pioneer, which stood to make millions off an ethanol boom, told the government those numbers were too low.

They predicted that genetically modified seeds — which they produce — would send yields skyrocketing. With higher yields, farmers could produce more corn on less land, reducing the environmental effects.

Documents show the White House budget office also suggested the EPA raise its yield assumptions.
When the final rule came out, the EPA and Agriculture officials added a new “high yield case scenario” that
  • assumed 230 bushels per acre.
The flaw in those assumptions, independent scientists knew, was that a big increase in corn prices would encourage people to farm in less hospitable areas like Wayne County, which could never produce such large yields.

But the EPA’s model assumed only a tiny increase in corn prices. “You adjust a few numbers to get it where you want it, and then you call it good,” said Adam Liska, assistant professor of biological systems engineering at the University of Nebraska. He supports ethanol, even with its environmental trade-offs.

When the Obama administration finalized its first major green-energy policy, corn ethanol barely crossed the key threshold. The final score: 21 percent.

“If you corrected any of a number of things, it would be on the other side of 20 percent,” said Richard Plevin of the Transportation Sustainability Research Center at the University of California, Berkeley. “Is it a coincidence this is what happened? It certainly makes me wonder.”

It didn’t take long for reality to prove the Obama administration’s predictions wrong.

The regulations took effect in July 2010. The following month, corn prices already had surpassed the EPA’s long-term estimate of $3.22 a bushel. That September, corn passed $4,
  • on its way to about $7, where it has been most of this year.
Yields, meanwhile, have held fairly steady. But the ethanol boom was underway.

It’s impossible to precisely calculate how much ethanol is responsible for the spike in corn prices and how much those prices led to the land changes in the Midwest. Supporters of corn ethanol say extreme weather — dry one year, very wet the next — hurt farmers and raised prices.

But diminishing supply wasn’t the only factor. More corn than ever was being distilled into ethanol.

Historically, the overwhelming majority of corn in the United States has been turned into livestock feed. But in 2010, for the first time, fuel was the No. 1 use for corn in America. That was true in 2011 and 2012. Newly released Department of Agriculture data show that,
  • this year, 43 percent of corn went to fuel and 45 percent went to livestock feed.
Forty-four percent last year’s corn crop was used for fuel, about twice the rate in 2006, according to the Department of Agriculture.

The more corn that goes to ethanol, the more that needs to be planted to meet other demands.
Scientists predicted that a major ethanol push would raise prices and, in turn, encourage farmers like Leroy Perkins to plow into conservation land. But the government insisted otherwise.

In 2008, the journal Science published a study with a dire conclusion: Plowing over conservation land
  • releases so much greenhouse gas that
  • it takes 48 years before new plants can break even and start reducing carbon dioxide.
For an ethanol policy to work, the study said, farmers could not plow into conservation land.
The EPA, in a report to Congress on the environmental effects of ethanol, said it was “uncertain” whether farmers would plant on farmland that had been set aside for conservation.

The Department of Energy was more certain. Most conservation land, the government said in its response to the study, “is unsuitable for use for annual row crop production.”

America could meet its ethanol demand without losing a single acre of conservation land, Energy officials said.
  • They would soon be proven wrong.
Before the government ethanol mandate, the Conservation Reserve Program grew every year for nearly a decade. Almost overnight, farmers began leaving the program, which simultaneously fell victim to budget cuts that
  • reduced the amount of farmland that could be set aside for conservation.
In the first year after the ethanol mandate, more than 2 million acres disappeared.
Since Obama took office, 5 million more acres have vanished.

Agriculture officials acknowledge that conservation land has been lost, but they say the trend is reversing. When the 2013 data comes out, they say it will show that as corn prices stabilized, farmers once again began setting aside land for conservation.
Losing conservation land was bad. But something even worse was happening.
Farmers broke ground on virgin land, the untouched terrain that represents, from an environmental standpoint, the country’s most important asset.
The farm industry assured the government that wouldn’t happen. And it would have been an easy thing for Washington to check.
.
But rather than insisting that farmers report whenever they plow into virgin land, the government decided on a much murkier oversight method: Washington instead monitors the total number of acres of cropland nationwide. Local trends wash away when viewed at such a distance.
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“They could not have designed a better approach to not detect land conversion,” said Ben Larson, an agricultural expert for the National Wildlife Federation. Look closely at the corn boom in the northern Great Plains, however, and it’s clear. Farmers are converting untouched prairie into farmland.
.
The Department of Agriculture began keeping figures on virgin land only in 2012 and determined that about 38,000 acres vanished that year.
.
But using government satellite data — the best tool available — the AP identified a conservative estimate of 1.2 million acres of virgin land in Nebraska and the Dakotas alone that have been converted to fields of corn and soybeans since 2006, the last year before the ethanol mandate was passed.

“The last five years, we’ve become financially solvent,” said Robert Malsam, a farmer in Edmunds County, S.D., who like others in the central and eastern Dakotas has plowed into wild grassland to expand his corn crop.

The price of corn is reshaping the land across the Midwest. In Wayne County, Iowa, for example, only the dead can stop the corn.

A gravel road once cut through a grassy field leading to a hilltop cemetery. But about two years ago, the landowners plowed over the road. Now, visiting gravesites means walking a narrow path through the corn. People have complained. It’s too narrow for a hearse, too rutted for a wheelchair, too steep for the elderly. But it’s legal, said Bill Alley from the board of supervisors.

“This is what the price of corn does,” he said. “This is what happens, right here.”

When Congress passed the ethanol mandate, it required the EPA to thoroughly study the effects on water and air pollution. In his recent speech to ethanol lobbyists,
  • Vilsack was unequivocal about those effects:
“There is no question air quality, water quality is benefiting from this industry,” he said.

But the administration never actually conducted the required air and water studies to determine whether that’s true.

In an interview with the AP after his speech, Vilsack said he didn’t mean that ethanol production was good for the air and water. He simply meant that gasoline mixed with ethanol is cleaner than gasoline alone.

In the Midwest, meanwhile, scientists and conservationists are sounding alarms.

Nitrogen fertilizer, when it seeps into the water, is toxic. Children are especially susceptible to nitrate poisoning, which causes “blue baby” syndrome and can be deadly.

Between 2005 and 2010, corn farmers increased their use of nitrogen fertilizer by more than one billion pounds. More recent data isn’t available from the Agriculture Department, but because of the huge increase in corn planting, even conservative projections by the AP
  • suggest another billion-pound fertilizer increase on corn farms since then.
Department of Agriculture officials note that the amount of fertilizer used for all crops has remained steady for a decade, suggesting the ethanol mandate hasn’t caused a fertilizer boom across the board.
But in the Midwest, corn is the dominant crop, and officials say the increase in fertilizer use — driven by the increase in corn planting — is having an effect.

The Des Moines Water Works, for instance, has faced high nitrate levels for many years in the Des Moines and Raccoon Rivers, which supply drinking water to 500,000 people. Typically, when pollution is too high in one river, workers draw from the other.
This year, unfortunately the nitrate levels in both rivers were so high that it created an impossibility for us,” said Bill Stowe, the water service’s general manager.
For three months this summer, workers kept huge machines running around the clock to clean the water. Officials asked customers to use less water so the utility had a chance to keep up.
Part of the problem was that last year’s dry weather meant fertilizer sat atop the soil. This spring’s rains flushed that nitrogen into the water along with the remnants of the fertilizer from the most recent crop.

At the same time the ethanol mandate has encouraged farmers to plant more corn, Stowe said, the government hasn’t done enough to limit fertilizer use or regulate the industrial drainage systems that flush nitrates and water into rivers and streams.

With the Water Works on the brink of capacity, Stowe said he’s considering suing the government to demand a solution.

In neighboring Minnesota, a government report this year found that significantly reducing the high levels of nitrates from the state’s water would require huge changes in farming practices at a cost of roughly $1 billion a year.

“We’re doing more to address water quality, but we are being overwhelmed by the increase in production pressure to plant more crops,” said Steve Morse, executive director of the Minnesota Environmental Partnership.

The nitrates travel down rivers and into the Gulf of Mexico, where they boost the growth of enormous algae fields. When the algae die, the decomposition consumes oxygen, leaving behind
  • a zone where aquatic life cannot survive.
This year, the dead zone covered 5,800 square miles of sea floor, about the size of Connecticut.
Larry McKinney, the executive director of the Harte Institute at Texas A&M University-Corpus Christi, says the ethanol mandate worsened the dead zone.

“On the one hand, the government is mandating ethanol use,” he said, “and it is unfortunately coming at the expense of the Gulf of Mexico.”

The dead zone is one example among many of a peculiar ethanol side effect:
  • As one government program encourages farmers to plant more corn,
  • other programs pay millions to clean up the mess.
Obama administration officials know the ethanol mandate hasn’t lived up to its billing.
The next-generation biofuels that were supposed to wean the country off corn haven’t yet materialized. Every year, the EPA predicts millions of gallons of clean fuel will be made from agricultural waste.
  • Every year, the government is wrong.
Every day without those cleaner-burning fuels, the ethanol industry stays reliant on corn and the environmental effects mount.

The EPA could revisit its model and see whether ethanol is actually as good for the environment as officials predicted.
  • But the agency says it doesn’t have the money or the manpower.
Even under the government’s optimistic projections, the ethanol mandate wasn’t going to reduce greenhouse gas right away. And with the model so far off from reality, independent scientists say it’s hard to make an argument for ethanol as a global warming policy….

In June, when Obama gave a major policy speech on reducing greenhouse gas, he didn’t mention ethanol. Biofuels in general received a brief, passing reference.

What was once billed as an environmental boon has morphed into
  • a government program to help rural America survive.
“I don’t know whether I can make the environmental argument, or the economic argument,” Vilsack said in an interview with the AP. “To me, it’s an opportunity argument.”

Congress and the administration could change the ethanol mandate, tweak its goals or demand more safeguards. Going to Congress and rewriting the law would mean picking a fight with agricultural lobbyists, a fight that would put the administration on the side of big oil companies, which despise the ethanol requirement.

So the ethanol policy cruises on autopilot.

Bob Dinneen, president of the Renewable Fuels Association, the ethanol lobbying group, said there’s no reason to change the standards. Ethanol still looks good compared to the oil industry, which increasingly relies on environmentally risky tactics like hydraulic fracturing or pulls from carbon-heavy tar sands.

Leroy Perkins, the farmer agonizing about what to do with his 91 acres, says he likes ethanol as a product and an industry. But he knows it fuels the corn prices that are transforming his county.

If they do change the fuel standard, you’ll see the price of corn come down overnight,he said. “I like to see a good price for corn. But when it’s too high, it hurts everybody.”

Investors from as far away as Maryland and Pennsylvania have bought thousands of acres in Wayne County, sending prices skyrocketing from $350 per acre a decade ago to $5,000 today.
  • One in every four acres of in the county is now owned by an out-of-towner.
Those who still own land often rent it to farming companies offering $300 or more per acre. Perkins could make perhaps $27,000 a year if he let somebody plant corn on his land. That’s nothing to dismiss in a county where typical household income is $36,000.

But he knows what that means. He sees the black streaks in his neighbor’s cornfields, knowing the topsoil washes away with every rain. He doesn’t want that for his family’s land.

You have to decide, do you want to be the one to..." He doesn’t finish his sentence.

“We all have to look at our pocketbooks.”"






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I'm the daughter of an Eagle Scout (fan of the Brooklyn Dodgers and Mets) and a Beauty Queen.