Expiring Synfuels Agency Accused of Spending Spree

The Synthetic Fuels Corporation, targeted for shutdown by the House, has embarked on a hurry-up plan to sign contracts guaranteeing about $3.5 billion in synfuels subsidies to private industry before Congress can cut its funding off altogether.

The proposed outlay--about triple what the controversial corporation has spent in its five-year history--has outraged critics on Capitol Hill, some of whom have appealed to President Reagan to “place an immediate hold on the corporation’s spending spree.”

The accelerated operation is being coordinated by the corporation’s chairman, Edward Noble, a Reagan appointee who once called for the abolition of the corporation but now believes it ought first to help fund a small number of projects to give the nation the capability of producing synthetic fuel on a commercial scale.

In an internal memorandum earlier this month, Noble suggested that contracts for three priority projects could be signed as early as Sept. 13.

Such action could commit the funds before the Senate, which is in recess until after Labor Day, has time to consider a measure similar to one approved overwhelmingly in the House last month. That measure would rescind the corporation’s authority to spend most of its remaining loan guarantee and price support funds--leaving it with no money for new projects.

“I want to meet personally with each negotiating team . . . at the end of each day that talks occur,” Noble stated in the memorandum.

Among the projects given priority status--and scheduled to be reviewed at a meeting of the corporation’s board of directors this week--is the Los Angeles-based Unocal Corp.’s oil shale conversion plant in Parachute Creek, Colo., which has been troubled by technical problems and will be shut down for repairs for the next five months.

“It’s been said by at least some of our detractors that we’re just trying to shovel some money out the door before Congress shuts the door,” Noble said in a recent interview. “Believe me, there is not one director here who is willing to sign a contract before it’s ready to go.”

But he said he believes that the corporation has a “good-faith obligation” to sign contracts with companies like Unocal because they have been “enticed by Congress and this corporation” into spending “millions and millions of dollars of their own money” in the expectation of getting federal funding.

Against Pulling the Rug

“If we just pull the rug out from under them, I think it’d be a long time before you’d ever get the private sector back on this kind of basis again,” Noble said.

Rep. Mike Synar (D-Okla.), the corporation’s leading critic in the House, said: “I wasn’t convinced the synfuels corporation would be stupid enough to try and rush out the money before Congress could act. Now, my worst fears have been realized.”

Synar was the author of a letter, signed by four leading House Democrats, that urged Reagan “to contact your appointees on the (corporation) board and place an immediate hold on the corporation’s proposed spending spree.”

“These five telephone calls,” the letter said, “may prove more beneficial to the taxpayer and the long-term health of this nation’s economy than any prospective appropriations vetoes contemplated in the near future.”

Flurry of Letters

Two other congressional letters--part of a flurry that is rare for August--will be sent today, according to spokesmen for their authors. One, from House Republicans, reminds Reagan that he asked Congress last year to rescind $9 billion of the corporation’s funds; the other, from members of both parties in both houses, warns Noble that his proposed spending would be “improper” and “irresponsible.”

Although the corporation has powerful allies in the Senate, the measure to reduce its funding drastically is expected to be approved, likely as part of a comprehensive spending bill, just before the fiscal year ends on Oct. 1.

Under the terms of both the House and Senate measures, Congress would have to honor any contract signed before Congress takes final action on the synfuels corporation. Synar, who has introduced a measure enabling Congress to review the contracts, warned: “Any corporation that signs a contract with the Synthetic Fuels Corporation signs at their own risk.”

Established by Carter

The quasi-governmental synfuels corporation, established in 1980 as part of President Jimmy Carter’s “moral equivalent of war” on oil imports, was granted $20 billion to provide loan and price guarantees to promising commercial ventures aimed at new ways of extracting energy from coal, shale and tar sands.

But, as the price of oil fell, many of the projects were criticized as extravagant and unnecessary government subsidies of large firms, and the corporation scaled back its plans. In addition, Congress already has rescinded more than one-quarter of the original spending authority.

Over its five-year history, the corporation has committed only $1.1 billion of its initial $20-billion authorization for synfuels projects. And, although it has signed letters of intent agreeing tentatively to provide $6 billion or $7 billion more, officials now say that they expect to spend no more than the $3.5 billion.

White House OK Sought

That figure was first mentioned earlier this summer in a letter from Noble to White House Chief of Staff Donald T. Regan. In the letter, Noble sought White House support for a plan that would have allowed the corporation to spend $3.5 billion to fund two or three new projects before the end of the year--and then go out of business by next June.

Such action, he wrote, would allow a core group of six or seven pioneer synfuel projects to provide “a thorough strategic synfuels option for our nation” at a total cost of $5 billion.

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