Synfuel Sets Funding for 3 Projects : Unocal to Get Bulk of Price Supports, Loan Guarantees
Directors of Synthetic Fuels Corp. agreed in closed session Wednesday to draw up contracts providing more than $700 million in price supports and loan guarantees for three major synthetic fuels projects, it was learned.
The contracts--the largest of which commits about $500 million to a troubled oil shale conversion project in Colorado sponsored by Los Angeles-based Unocal--are scheduled to be ready for signing by the second week of September.
The action comes in the wake of strongly worded congressional criticism that the corporation had embarked on a “spending spree” and that the agency--targeted for extinction by the House--should make no further funding commitments until the Senate has time to act. The Senate, currently away on recess, will return Sept. 9.
Just hours before the Synfuels board made its decision, Chairman Edward Noble read a statement denying that the corporation had embarked on any “rush to judgment” to sign contracts before Congress could cut off its funding.
‘Based Solely on Merit’
“Any commitments the corporation might conclude over the next weeks or months will be . . . tough and based solely on merit,” Noble said.
In addition to the $500 million for Unocal’s plant in Parachute Creek, Colo., the tentative contracts provide $150 million for Geokinetics’ oil shale plant in Seep Ridge, Utah, and about $60 million for Greenwich Oil’s heavy-oil project in Forest Hill, Tex., the sources said.
Karen Hutchinson, a spokesman for Synfuels, confirmed that its staff had been directed to prepare the contracts and said the numbers given The Times were “about right.” She said additional details would be provided at a news conference this morning.
A letter sent Wednesday to Noble by a dozen congressmen and senators said the 312-111 House vote last month to rescind nearly all Synfuels funding--in effect, abolishing the corporation--was an “emphatic vote of ‘no confidence’ ” in the corporation’s program and performance.
“This is an unwarranted giveaway by a desperate agency and a crude usurpation of administrative authority,” said Sen. Howard M. Metzenbaum (D-Ohio), a principal author of the letter. “It is now up to the Reagan Administration to stop this renegade agency from wasting billions of taxpayers’ dollars.”
Letters sent last week by House Democrats and Republicans appealed to President Reagan to “place an immediate hold on the corporation’s spending spree.”
The $500-million figure for Parachute Creek is substantially lower than the $2.7 billion that Synfuels had tentatively promised Unocal in December, 1983, to support a future price of as much as $67 a barrel for oil from shale. The Parachute Creek facility is designed to extract crude oil that is locked in shale deposits at the Colorado site.
Most of the reduction results from Unocal’s recent decision not to build a proposed second-phase plant. The company has completed its $850-million, first-phase plant but has run into problems disposing of the shale after oil is extracted. It has thus far been unable to produce oil in commercial quantities as a result and will be shut for repairs for the next five months.
The new Synfuels money--which is in addition to $400 million previously committed to support a $42.50-per-barrel price once oil is successfully produced at the first-phase plant--will be used to help finance new technology for the current plant.
A Unocal spokesman Wednesday declined to comment.
