The Rich Men of Des Moines
Tensions rise in the heartland as Iowa’s political A-List conspires to build a controversial carbon capture pipeline that benefits no one but themselves.
For the past few days, a relatively unknown country music singer named Oliver Anthony has captured America’s attention with a breakout song called “Rich Men North of Richmond”, a cri de coeur that laments the sad state of America’s working class while the elites of DC enrich themselves:
Livin' in the new world
With an old soul
These rich men north of Richmond
Lord knows they all just wanna have total control
Far away from Anthony’s hometown in central Virginia, those lyrics could easily apply to an ongoing drama that is playing out in the fields of rural Iowa. Normally my home state only makes national headlines every four years, when aspiring presidential candidates descend on the State Fair and are compelled to endure the strange yet oddly satisfying ritual of eating fried food on a stick. However today Iowa is becoming a battleground between a “Who’s Who” of the state’s political insiders who want to build three carbon capture and storage (CC&S) pipelines, and a grassroots resistance of local farmers who are pulling out all the stops to prevent it from happening.
Of the three pipeline projects, the most contentious is operated by a company called Summit Carbon Solutions. Summit’s pipeline, if regulatory approval is received, would extend for 2,100 miles and operate under extremely high pressure in order to transport carbon dioxide (CO2) waste emissions from ethanol plants throughout four Midwestern states to a storage site deep underground in the remote oilfields of North Dakota, north of Bismarck.
Summit Carbon is a subsidiary of Summit Agricultural Group, whose founder Bruce Rastetter is best known for raising capital from Wall Street in the 1990s to consolidate the pork producing industry and subsequently driving thousands of independent farmers out of business. In the past couple of decades Rastetter has become highly influential in Iowa’s Republican party and now has his sights set on a much larger prize.
Today Summit intends to raise $4.5 billion from, among other investors, Morgan Stanley and Continental Resources. The company will then be eligible to claim billions of dollars in tax credits from the US government in return for building the ‘Midwest Carbon Express’ pipeline, a green energy project that offers no discernible public benefit while carrying profound environmental risks for residents who live anywhere near its intended route. Summit does not intend to offer royalty payments to affected landowners in return for the granting of easement rights.
The project’s risk-reward ratio is untenable for local landowners under whose property Summit intends to bury its pipeline – yet irresistibly high for Rastetter and his out-of-state financiers.
The ‘Rich Men’ (And Women) Behind Summit Carbon Solutions
Rastetter knows where to find the money he needs to build this pipeline. More importantly, he also knows that political influence is a far more valuable asset that will facilitate his acquisition of the necessary permits and eminent domain rulings that will enable him to seize property from its rightful owners against their consent. He has pulled no punches in this regard, and has built relationships with the region’s most connected politicians:
Kim Reynolds. Iowa’s governor is serving her second term, and as of March 2022 has accepted over $174,000 in campaign donations from Rastetter. According to public records, Rastetter is her largest individual donor. Reynolds recently appointed a new chairman of the Iowa Utilities Board (IUB), a committee of three unelected bureaucrats who will ultimately decide whether Summit will receive a permit to build in the state of Iowa. That incoming chairman, Erik Helland, was confirmed and immediately moved Summit’s permit request hearing two months ahead of schedule.
Terry Branstad. Most recently served as the US ambassador to China; served as Iowa’s governor for five terms and appointed two of the IUB’s three members. He is now Summit’s “senior policy advisor” and is well-known as an ardent supporter of the ethanol industry.
Jess Vilsack. Summit’s general counsel. His father is current US Secretary of Agriculture Tom Vilsack, the former two-term governor of Iowa and also a committed supporter of the state’s ethanol industry.
Kristi Noem. South Dakota’s governor is also in her second term, and carries a major conflict of interest with Summit – she is an investor in an ethanol plant that Summit lists as an active partner. Noem has on multiple occasions refused to meet with constituents who oppose pipeline legislation.
Summit needs this political firepower because it must acquire easement rights from thousands of property owners – almost all of them farmers. Here, then, is the company’s most significant obstacle. The Inflation Reduction Act has created billions of reasons for Summit to build its pipeline, but the property owners in its path see no such benefits – and potentially enormous environmental and safety risks.
The risks of ‘carbon capture’
Carbon capture pipelines are a highly controversial ‘green energy’ initiative that have generally failed to ‘capture’ volumes anywhere near their intended targets. Even within the broader renewable energy industry, where the vast majority of technologies (e.g. wind and solar power generation) cannot operate without tremendous government subsidies, carbon capture is a low-performing strategy. The primary beneficiaries of CC&S pipelines are oil producers, who can use liquefied CO2 in a process called enhanced oil recovery (EOR) to extract higher volumes of crude from the Dakota oilfields.
In this context, the business case for Summit’s pipeline becomes apparent – they want to connect producers of CO2 emissions in Iowa with buyers hundreds of miles away, in the oilfields of North Dakota. The Biden Administration provides further incentives through billions of dollars in ‘green energy’ tax credits.
CO2 pipelines transport liquefied carbon dioxide at extremely high pressures, and while CO2 is harmless in its natural state it can be deadly if released into the atmosphere under pressure. The resultant cloud can block out oxygen, making it impossible to breathe or for rescue vehicles to operate since internal combustion engines require oxygen.
Recently this became all too apparent in Mississippi, where in 2020 a ruptured carbon pipeline created a blast that left a crater forty feet deep and released a deadly cloud of liquefied CO2 and hydrogen sulfide into the air. The cloud, which was dense enough to block oxygen and asphyxiate people, swept over the town of Satartia and hospitalized 45 people. The Mississippi pipeline’s operator, Denbury Resources, never admitted wrongdoing and quietly settled with many of the town’s residents.
Denbury, it is worth noting, filed for bankruptcy shortly after the pipeline rupture and emerged later that year as Denbury Inc. Last month it was acquired by ExxonMobil for $5 billion. It now becomes clear that Summit Carbon Solutions has an exit strategy – a multi-billion dollar acquisition by a major oil company.
Rastetter and his team at Summit know that many local landowners will never cooperate with their plan. With all that money on the line, Summit has turned to an insidious yet entirely predictable strategy – they intend to use their political connections to force property owners into compliance.
Eminent domain for private gain: Life in the new America
Last week Bloomberg published a long article about the proposed CC&S pipelines and the uphill battle that their developers face in convincing landowners who are unconvinced of the risk-reward ratio that high-pressure pipelines present to their land and livelihood. However the Bloomberg article made no mention of the highly aggressive tactics that Summit has begun to use against non-compliant farmers in the pipeline’s intended path.
Summit has openly stated their intent to employ eminent domain against any landowners who oppose easement rights for their pipeline. That is a tall order in Iowa, where the Des Moines Register recently reported that Summit has only obtained 40% of the 1,200 easement agreements that they need to sign in order to move forward.
The company has been undeterred by the lack of public support. In fact on May 3rd, Summit decided to make an example of a South Dakota farmer who had openly campaigned against the pipeline. The farmer, Jared Bossly, had been an open and loud opponent of the pipeline until a local county judge had allowed Summit to survey private land without permission from landowners.
According to multiple news sources, a large convoy of Summit surveyors - flanked by hired security and local law enforcement - encroached upon Bossly’s property while he was away and began entering his buildings – an act which should have been considered outside the court order which allowed for survey drilling. Summit refused to provide comment to reporters outside of a prepared statement from the company’s regulatory affairs director.
Bossly is convinced, and has publicly stated, that the Summit incursion was meant to provoke a confrontation. As he puts it, “it was clear that they wanted to end the day with me in handcuffs.” He has claimed to local reporters that he was targeted, and meant to serve as a warning to other local landowners.
Summit’s heavy-handed tactics appear to have backfired as public opinion has turned against the company since the Bossly standoff. A recent demonstration in South Dakota’s state capitol building attracted over 700 local residents, who have called for a special legislative session to address their concerns regarding the pipeline. Resistance is growing in Iowa and North Dakota as more farmers and local legislators voice their opposition. Last week Robert F Kennedy Jr., who is becoming a dark horse in the Democratic presidential primary, called out Rastetter by name in a screed against ‘the corrupt merger of state and corporate power’, and publicly stated that he would shut down the Summit pipeline if he is elected.
If We Don’t Rob You, Then Someone Else Will…
When not threatening Midwestern farmers and landowners, Summit’s public relations campaign predicts economic disaster if they are not allowed to proceed with milking the American taxpayer for billions of dollars.
Central to their argument is a study that was published earlier this year by an Iowa thinktank called Decision Innovation Solutions. That study’s finding was that, if Summit was not allowed to build its pipeline, that the economic impact to the state would be devastating within a decade since its local ethanol processing plants would lose out on a major stream of Inflation Reduction Act government funding (I can’t bring myself to call it “revenue”).
The economists then argued that legislators in neighboring states like Illinois, who they presume are chomping at the bit to decree eminent domain over their farmers’ land, would thus build their own carbon pipelines and lay claim to billions of dollars in government handouts that the rubes in Iowa did not allow their own bureaucrats to claim.
The study infers that this tidal wave of capital would distort the market and that Iowa-based ethanol plants would be unable to compete with the more politically savvy plants in Illinois. All of that funding, once it begins flowing to the east side of the Mississippi River instead of to the west - would enable Illinois to pay above-market prices to farmers in Iowa, even after accounting for the cost of shipping that grain by rail. The study’s conclusion is that Iowa’s ethanol industry will be forced to fold within a decade because of the lost business that results from the state’s failure to claim the available government giveaways.
It doesn’t take a PhD in agribusiness to see how this survey’s findings are riddled with logical fallacies and unprovable assumptions. The most obvious absurdity is that of the “zero-sum game” (e.g. if the pipeline is not built in Iowa then other states will claim all of the federal tax credits that Iowa’s ethanol plants could have claimed). This is the classic yet highly flawed argument that claims that there is a fixed amount of capital in a market, and that the only way to make money is to take it from others in that market. The zero-sum argument has been the justification for all types of bad behavior over the years, mostly to legitimize the redistribution of wealth from one class or group of people to another.
The obvious failure of zero-sum thinking is that it fails to account for the mutual gains that people and businesses enjoy when they trade with each other. In this case, if Iowa refuses to allow Summit Carbon to build a pipeline then it is possible (though I assume also unlikely) that other states might decide to build it instead. However, this transfer of government largesse to one state from another does not guarantee that business will dry up for Iowa’s ethanol plants. There may, and likely will, be plenty of reasons for Iowa farmers to continue selling their corn locally. It is equally possible and entirely feasible that other external factors - perhaps a new business opportunity or more market distortion through government legislation - might come into existence that bring the interstate grain markets back into equilibrium.
Setting aside this study’s specious and logically thin findings, it is also useful to look at how it was funded. In this case, the study was commissioned by the Iowa Renewable Fuels Association, whose motives may not in this case be completely aligned with the public interest. Asking the IRFA whether another unprofitable renewable energy project is needed seems rather like asking Raytheon whether Ukraine needs another $100 billion of the American taxpayer’s money.
Motives Matter
Climate change and proposed mitigation strategies like carbon capture are highly controversial and complicated topics. Whatever your opinions on climate change and whether mitigation strategies are needed, it is clear that environmental impact is not remotely near the top of Summit Carbon’s list of priorities. The Summit spokesman can’t exactly say “we want to rip up our neighbors’ fields so that we can extract billions of dollars in tax credits from the federal government and sell our business to an oil major”. So they have to do what most rapacious American corporations do – that is, to make money at all costs while pretending that they care about the environment and their community.
The carbon capture opportunity is Summit’s raison d’etre not because of lofty enivronmental ideals, but because a stroke of Joe Biden’s pen enacted the Inflation Reduction Act and authorized $369 billion in ‘clean energy’ incentives, funded by the American taxpayer. Listed among those was the 45Q tax credit, which inflated the already artificial market for carbon from $50 per tonne to $85 per tonne - a 70% increase. Previously these payments had been doled out as tax credits. However the IRA provided further upside to carbon capture projects by enabling them to seek immediate cash payment from the US Treasury.
Summit estimates that, under the currently approved payment scheme, the company will be able to claim over $1 billion in tax credits annually, over a period of 12 years. When coupled with a likely acquisition by ExxonMobil or Occidental, it is easy to see why Rastetter is pulling out all the stops to close this deal.
Implications For the Rest Of Us
It is an uncomfortable truth in today’s America that government stimulus is designed to placate the masses with pennies while enriching those lucky few who are connected to the ruling regime. I am unable to think of a more accurate example of this trend than what the people behind Summit Carbon Solutions are attempting to do today at the expense of their neighbors.
The Inflation Reduction Act reminds me a lot of the Patriot Act, for two reasons. First, in retrospect their names could not be any more ironic. Just as the IRA has actually propelled inflation HIGHER, the Patriot Act had nothing whatsoever to do with patriotism and everything to do with enriching the military-industrial complex in America. It transformed Washington DC from a sleepy mid-Atlantic town into America’s wealthiest city per capita, and it did so by sucking trillions of dollars out of the American consumer’s wallet and depositing it with the employees and shareholders of America’s defense contractors.
Not to be outdone, Biden’s IRA aims to drive the American taxpayer further into poverty by transferring billions of dollars from taxpayers to projects like Summit, in the manner of ‘tax credits’ that Summit hilariously refers to as “revenue”. The government-led transfer of wealth from the many into the hands of the few is unfortunately a bipartisan problem.
As of today’s publishing date, Iowa’s Utilities Board has just opened a hearing ahead of its expected September vote on Summit’s pipeline permit. All signs indicate that the IUB’s unelected bureaucrats are in full support, and public opinion fully expects the outcome to be a ‘rubber stamp’ approval for Summit’s pipeline. There are many more obstacles to clear, though, and resistance is mounting in Iowa and in other states. It remains to be seen whether the “Rich Men of Des Moines” will be able to build their pipeline against such committed opposition from local voters.
Authors Note: Normally I like to write about crypto and global macro issues, however the rising political turmoil here at home has suddenly made America a very interesting place! I will be writing about this and other relevant issues, and will continue to provide updates on the carbon pipelines. Fill in your email address below if you would like to be added to my mailing list. I never send spam and will never share your info with a third party.
Great article. Came here after hearing you on Simon Conway WOC this afternoon. I am a conservative writing at veritaspac.com and have been also decrying Big Ethanol and Big Wind boondoggles. Rank and file Republicans I have every notion are opposed to this. It is entirely regrettable though how certain current and former Republican elected officials are violating established precepts in the party platform to grease the skids and perhaps their palms on this deal. Republicans from their opposition to subsidies, global warming nonsense, and eminent domain abuses know a corrupt boondoggle when they see it or smell it.
As for Iowa's corn farmers, their perceived dependence on ethanol, such that half of Iowa's corn acreage goes to ethanol largely to be burned in gas tanks is very sad situation. As you may have hinted at , if we are going to subsidize, that's at least subsidize right. Far better we buy the corn or otherwise incentivize the use of the land directly for food production in order to control escalating food costs. I would rather have us out of the subsidy racket but ethanol is just stupid macro-economically AND environmentally.
Ethanol subsidies and mandates (now called marketing mandates) were sold to the public back in the day as a wonderful symbiotic environmental green energy plan that would help stop global warming, and stop us from being dependent on fossil fuels. We are told that mankind is the chief instigator of global warming and fossil fuels cause global warming ergo ethanol is a wonderful elixir -- farmers win, air quality wins.
Then the "movement" found it necessary to define CO2 as the main culprit. I never remember hearing about how much ethanol production releases CO2 at the production site. Now it is as if it is a feature. Opponents to this environmental crap concentrated more on pointing out energy inputs or other downsides or maybe CO2 given off on the farm during corn production devoted to ethanol and other environmental harm to water tables, etc. in their critiques.
Big Ethanol made every effort to downplay if not hide how ethanol production was a heavy CO2 emitter. But now as you point out they have a business reason to exploit what was their embarrassment. Wow ethanol is a big CO2 polluter and the solution from these phonies is to be the savior and pipe that stuff to oil fields to help them produce more evil fossil funds and the CO2 from that. Incredible but true.
True environmentalists are waking up to the scam, a couple of the links you provided are evidence of that. To be sure they still want CO2 greatly curtailed but they see the pipeline as a scam and the reasons for it bogus. I read an article to that effect the other day at the respected publication WattsUpWithThat. It is actually a link to a video of an ardent believer in the "catastrophe" of man made global warming decrying CO2 capture, for sequestration or oil production, for the environmental boondoggles they are. See. https://wattsupwiththat.com/2023/09/01/carbon-capture-busted/
EOR, The Geophysics and Geochemistry of what happens when CO2 is injected into wells is likely 2 fold and if true is well guarded trade secrets.I will look into this. Thanks for the tip.