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By Robert Rapier on Mar 13, 2007 with no responses

Conflicts of Interest

Critics often charge me with a conflict of interest for my position on grain ethanol. They suggest that I have something to gain by opposing grain ethanol. Often, a charge of bias will be the extent of my opponent’s argument, which is of course an ad hominem fallacy. While it is certainly fair to suggest that I might have a bias, at the end of the day it is the arguments that must be addressed. This is true whether I am employed by Greenpeace, or on the staff of Dick Cheney.

Furthermore, as I have pointed out, ethanol producers use a lot of natural gas, and my company sells a lot of natural gas to them. Given our market share of the natural gas business, if ethanol producers displace some gasoline by making ethanol from natural gas, there will likely be a net benefit to my company. That may change in the future if ethanol producers start turning to coal in larger numbers, but the current situation is such that increases in grain ethanol production have the potential to actually benefit my personal finances (although the trickle-down effect either way would be exceedingly small).

But consider the following hypothetical situation. Let’s say that I am a lawmaker, and I have an investment in a small oil and gas producer. Furthermore, let’s say that I sponsor and promote a bill that will increase the business prospects of small oil and gas producers in my state. Is this a conflict of interest? Is it a lapse of ethics? It would seem so to me. Now replace “oil and gas producer” with “grain ethanol producer”, and the hypothetical situation is real.

Ethanol Bill Poses Conflicts

The two lead sponsors of a bill in the Wisconsin Legislature promoting the use of ethanol and the purchase of cars that run on an 85% blend of the corn-based fuel have financial ties to the ethanol and automotive industries, records show.

State Rep. Eugene Hahn (R-Cambria) bought $20,000 in shares of United Wisconsin Grain Producers LLC under his wife’s name when the company was starting up in 2003. The Friesland-based company produces 40 million gallons of ethanol a year, and the plant is under construction to double its capacity.

“This ought to set off flashing red lights. It ought to set off warning bells for citizens,” said Mike McCabe, executive director for Wisconsin Democracy Campaign, a non-partisan organization advocating government accountability. “This is the kind of thing that has been too tolerated and has degraded our ethical climate in Wisconsin politics.

“Whenever a legislator has a personal financial stake in an industry that stands to gain from particular legislation, it raises legitimate questions about their motivation about advancing that legislation, and the public needs to be aware of that.”

Jay Heck, executive director of the Wisconsin chapter of Common Cause – a national, non-partisan, citizens lobbying group also promoting government accountability – called it a problem.

“These are definitely conflicts,” Heck said. “In the case of Hahn, he ought to divest himself of the stock in ethanol companies, or the public perception will be that he will benefit personally by passing this legislation.”

Heck said the situation was particularly problematic because Hahn and Sheridan, as the lead authors and sponsors, are actively pushing for passage of the bill. No votes have yet been cast on the bill, and a hearing has not been set.

“There is some distinction between being supportive and voting and being the lead proponents,” he said.

Hahn has made out pretty well on the deal already:

Hahn said he’s already received an 80% return on his ethanol investment.

Hahn also recently invested $2,000 in a start-up biodiesel plant, he said.

Maybe I’ll have to convert that to my wife’s name,” he said.

Hahn also voted in 2005 for a bill that would have mandated that 10% ethanol be blended into all gasoline in Wisconsin. The bill later stalled in the Senate.

Yes, convert it to your wife’s name. That should resolve those ethical issues, because clearly you would no longer have a vested interest. Politics. What a hoot.