Tuesday, June 24, 2008
Picture Credit to Kevin Woster
I asked the following questions to Rob Skjonsberg, Vice President of Government Affairs at Poet.
Rob served as Chief of Staff to Governor Mike Rounds for five years and prior to that was Vice President and Community Development Representative for Wells Fargo in Pierre.
Q. What is Governor Mike Rounds single most important accomplishment?
A. As governor, without question, the transfer of the Homestake gold mine from Barrick Gold Corporation to the State of South Dakota and the National Science Foundation’s designation as the nation’s site for the Deep Underground Science & Engineering Laboratory.
Elected leaders before him certainly deserve great credit. And, our delegation’s support will be critical as the site moves forward. But, Mike Rounds was the guy that got it over the hump and frankly, kept it alive. I was in the room when that project could have been declared dead on several different occasions. The governor just wouldn’t give up on it. We always found a way to move forward.
A big part of that success was top-shelf people. Guys like Dave Snyder, Dave Bozied, Casey Petersen, Jason Dilges and others – they all played critical roles. We forget about the workers sometimes – but without them turning the wrenches, it never would have happened.
Those days will always be embroidered in my mind, as the most exciting, challenging, game-changing moments during my tenure in government. It’s very similar – I suspect - to the types of discussions that took place when Citibank came to South Dakota. Those opportunities don’t come along very often – maybe once or twice in a lifetime. So it’s important to have people in place that can close the deal.
Today, we can’t even fathom the magnitude of this project. It has the potential to improve the quality of life in every corner of our state and region. I look forward to the day I can take my sons to Lead and tell them the story of how it all came together.
Q. Part of your responsibilities at Poet is to lobby Government. When you were with the Governor’s Office you were on the receiving end of lobbyists’ efforts, are there any similarities in these jobs?
A. Public policy is public policy. Whether you’re an elected official, government employee, private citizen or industry representative – good government should be the goal. The process can get a bit messy and conversations can be fierce – but at the end of the day positive things will happen if those involved start and end with that basic principle. I think most of us involved in the process have that as a common viewpoint.
Q. The tax credits and subsidies for ethanol and ethanol plants were established when crude petroleum was $20 per barrel or less. Today oil prices are north of $130, setting aside the energy independence argument, with petroleum at these historic high prices how do you justify Government support of ethanol?
A. I’ve always been intrigued by this argument. Let me put it this way; if ethanol ceased to exist oil would be north of $150 and gas would be 60 cents more per gallon. Not only should those original lawmakers be commended for their vision when oil was $20 per barrel – current policy makers should be doing everything they can to strengthen the renewable fuels movement. Ethanol is the only immediate alternative to high oil prices. The country’s return on investment has been and will remain phenomenal as long as good policies are in place.
But, I think it’s important to understand the overall tax structure and how it really applies from an economic standpoint.
For example, South Dakota’s fuel tax code has numerous tax rates for different fuels. Jet fuel, off-road diesel, off-road gas, aviation gasoline, compressed natural gas, liquid petroleum gas, and E10 & E85 all have a different tax rate than unleaded gasoline. I don’t consider off-road diesel to get a “subsidy” because it’s not taxed the same as unleaded gasoline. Simply put, I don’t consider it a “subsidy” if the tax is different than a comparable, in this case unleaded fuel.
Actually, South Dakota has a myriad of tax rates, tax refunds, and tax exemptions for almost everything. Take residential, commercial and agricultural land for instance. If we tax residential property less than what we tax commercial property – should we abolish the “subsidy” for residential home owners and hike up everyone’s taxes across the board in order to achieve tax parity? Of course not, because it doesn’t make sense. That’s not good policy.
I’d rather just have the real discussion. If someone wants to make a case that unleaded fuel and ethanol blended fuel should be taxed the same – they should just say that and call it a tax increase on consumers at the pump. That’s a more reasonable approach and helps facilitate an honest dialog about the intent. I’ll gladly have that debate.
Secondly, as it relates to tax credits, at the federal level the blender currently receives a 51 cent per gallon tax credit. The ethanol and corn producer don’t receive that credit. And actually, the recent farm bill reduces that blender’s credit to 45 cents.
Lastly, as it relates to taxation I have a very simple philosophy. We don’t tax chewing gum and chewing tobacco the same, we shouldn’t tax foreign oil and homegrown, clean, renewable ethanol the same either. One costs Americans nearly $2 billion a day and one is reducing the price of gas by 60 cents per gallon. Again, good tax policy takes all things into account.
Q. The Chief Operations Officer of Smithfield Foods (owner’s of John Morrell and Company) recently blamed Smithfield’s extreme drop in profitability (profits plunged 94%) on the consumption of corn for ethanol saying ethanol “is having a substantially adverse effect on our business… and it’s going to cause food prices in this country to go up.” How do you respond to the growing claims that corn should be used for feedstuffs and not energy?
A. I empathize with ranchers who are paying the same prices that we are for corn and we’re constantly looking at partnership opportunities from that standpoint. I have less empathy for folks like the Grocery Manufacturer’s Association that have yet to actually defend their stance. When Senator Grassley attempted to meet with them to discuss their position only one CEO agreed to meet. To me, that speaks volumes about their weak position.
Let’s talk about the facts. The President’s Council of Economic Advisors has stated that ethanol accounts for between 2 and 3 percent of the overall increase in food prices. That means 97% of the inflationary factor is being caused by something else. If this gives you additional insight, in 1947 a bushel of corn and a barrel of oil were priced the same at $2.16. It’s not that hard to figure out what’s driving price increases.
A farmer receives less than 20 percent of the total food costs paid by consumers. More than 4 out of every 5 cents of the cost of food, including transportation, processing, packaging, marketing, distribution and retailing are added to the commodity after it leaves the farm.
That’s why, in an 18 ounce box of cereal priced at $4.95 the farmer gets about 16 cents. In a one pound sirloin priced at $7.99 the farmer gets about 85 cents. Somebody is making money at those prices and it surely isn’t the farmer.
Ethanol has been blamed for everything from the increased price of gummi bears to male pattern baldness. And, I’m only half joking. Saying that ethanol is primarily responsible for increasing food prices, is ludicrous.
Q. Several years ago you were mentioned as a possible candidate for public office, is that something that could still be in your future?
A. I was humbled by the suggestion. But, it just wasn’t practical at the time – I’m pretty sure I’d have lost the popular vote in my own home.
Right now, my hands are full with two young boys, a new career and a new community. Once I’ve mastered those priorities, I’ll worry about the next chapter.
I’ll always be involved to some extent – I imagine.
Q. What would we be surprised to know about you?
A. My mother is a Sisseton-Wahpeton tribal member. With a name like mine – most people are surprised to know that. As unoriginal as it sounds, my family literally has deep ties to this state and I just can’t imagine being anywhere else.