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Koch Brothers, Grover Norquist Split On Ethanol Subsidies

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DAVID KOCH GROVER NORQUIST

WASHINGTON -- Opponents of ethanol subsidies got a boost Monday from Koch Industries as the company announced its opposition to the giveaways on the eve of a major vote in the Senate.

Sen. Tom Coburn (R-Okla.) is pushing a vote on an amendment Tuesday that would end ethanol subsidies and eliminate tariffs on foreign supplies of the biofuel. That would allow companies to use sugar-based Brazilian ethanol, which is cheaper than the domestic corn-based variety, though presents environmental challenges.

Ethanol is a key national issue for the GOP because of the importance of Iowa's early caucus to the presidential primary. Former Gov. Jon Huntsman (R-Utah) is skipping the state, he has said, because his opposition to the subsidies is toxic in the state. The issue has split the Republican Party, with free market advocates and deficit hawks pushing for elimination of the subsidies and corn-state politicians fighting back.

The conservative power broker Grover Norquist has battled Coburn, arguing that ending the handouts is equivalent to increasing taxes, meaning that candidates who signed a no-new-taxes pledge would be breaking their word. He has charged that Coburn "lied his way into office."

Norquist has been critical of Coburn and other Republicans who have highlighted the yawning federal deficit, arguing that the focus should be on reducing spending rather than trimming the national debt. He worries that if the American people are forced to choose between the two ways of reducing the deficit -- tax hikes or spending cuts -- they'll eventually pick tax increases.

While the Kochs are public about their politics and occasionally engage directly with legislation, it is rare for the Kochs to get in the trenches with a letter on a specific amendment as they've done in Coburn's case. But it might not be enough to get his amendment over the top. In order to get a vote on it, Coburn pulled a procedural move that irked Senate Majority Leader Harry Reid (D-Nev.), who responded by calling on his caucus to oppose the amendment on procedural grounds.

Coburn said that such a move will put Democrats on the wrong side of public opinion. "Go home and explain to your constituency you didn't vote on a bill, an amendment, because you didn't like the way it was brought up, regardless of the substance," he told HuffPost on Tuesday before the vote. "Rule 22 allows any senator to offer an amendment, so I didn't do anything out of the ordinary. The only reason I used that procedure is because they don't allow us to have any votes."

Coburn and Koch Industries have been in discussion about the political issue for several months. But ultimately, the company says, the Koch's commitment to free-market principles overrides the fact that their company benefits from the subsidies.

"Koch Industries has opposed federal mandates and subsidies for decades," the letter to Coburn, written by the Kochs' lobbyist, reads. "Our aim is to create a free market where consumers decide winners and losers based on which products they decide to buy, instead of government picking winners and losers based on which friends or products it chooses to subsidize. One such government intervention is the tax credit that provides about $6 billion each year to blenders of ethanol."

"We hold this position despite the fact that we benefit from these tax credits," the letter points out.

Koch Industries will, however, continue to exploit the credits, if they aren't repealed.

"We oppose ethanol subsidies because they distort economic signals about price and demand and create inefficiencies that divert resources from productive activities to politically favored ones. We have also opposed subsidies for natural gas vehicles and other biofuels for these same reasons," the Koch letter reads. "Still, our company now produces and blends ethanol, because while we would prefer that there be no government mandates or subsidies, once such laws are in place we will comply with them. We will not place our company or our employees at a competitive disadvantage in the mixed-market economy in which we compete."

The Kochs' entrance into the debate is unlikely to swing the vote toward Coburn on Tuesday, but threatens to reshape the long-term debate. The Koch brothers are among the biggest backers of the Republican Party and conservative groups.

The Koch Industries political action committee has been one of the biggest contributors to GOP lawmakers and candidates. From 2009 to 2010 the Koch PAC contributed over $1 million to Republicans.

The Koch PAC has already turned on the campaign money spigot for 2012. According to campaign finance records, it gave $299,000 to GOP lawmakers, candidates and party organizations through the end of April. That total far surpasses the PAC's giving in January through April 2009, the most recent election off-year, and comes close to the more than $300,000 the PAC gave to GOP lawmakers, candidates and party committees over the same time period in 2010.

The Koch brothers' importance has only increased in the wake of the Citizens United Supreme Court ruling, which allows the them to use their private company's money to secretly fund attack ads or prop up national organizations. They have given millions to conservative groups including policy think tanks, the Heritage Foundation, Cato Institute, and the Mercatus Center, Tea Party activist groups and Americans for Prosperity.

The Kochs have already promised to raise $88 million for conservative action around the 2012 election.

READ THE FULL KOCH LETTER TO COBURN:

June 13, 2011
Senator Tom Coburn
172 Russell Senate Office Building
Washington, DC 20510

Dear Senator Coburn,

Koch Industries has opposed federal mandates and subsidies for decades. Our aim is to create a free market where consumers decide winners and losers based on which products they decide to buy, instead of government picking winners and losers based on which friends or products it chooses to subsidize.

One such government intervention is the tax credit that provides about $6 billion each year to blenders of ethanol. Lawmakers in the Senate could take a sensible step by approving an amendment sponsored by Senator Tom Coburn (R-OK.) that would eliminate this credit. We hold this position despite the fact that we benefit from these tax credits.

We oppose ethanol subsidies because they distort economic signals about price and demand and create inefficiencies that divert resources from productive activities to politically favored ones. We have also opposed subsidies for natural gas vehicles and other biofuels for these same reasons.

Still, our company now produces and blends ethanol, because while we would prefer that there be no government mandates or subsidies, once such laws are in place we will comply with them. We will not place our company or our employees at a competitive disadvantage in the mixed-market economy in which we compete.

Our government and public affairs activities are based on principles of economic freedom and property rights that are core values recognized and held by the majority of Americans. Koch will continue to lobby for the repeal of energy subsidies and mandates. We will work to transform the current, mixed-market economy into a true free-market economy.

Sincerely,

Philip Ellender

President and COO Public Affairs

Koch Companies Public Sector, LLC


UPDATE:
Information gathered by Paul Blumenthal on Koch Industry PAC's campaign contributions and the Koch brothers' support for conservative organizations has been added to this report. It has also been updated to include an interview with Coburn and a report on the environmental consequences of ethanol production.

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