Synfuels Corp. Gives Union Oil More Funding : $500 Million OKd for Colorado Oil-Shale Plant

Times Staff Writer

The U.S. Synthetic Fuels Corp., rushing through its business as Congress moves to abolish it, voted Wednesday to award Union Oil of California $500 million in loan and purchase guarantees for an oil-shale plant in Colorado.

The unanimous vote by the agency board brings to $900 million the amount of government aid that it has approved for Union Oil's troubled plant in Parachute Creek, Colo. Union Oil, a wholly owned subsidiary of Los Angeles-based Unocal, sought the government guarantees to replace a shale disposal system that has failed to operate properly since the plant was completed in 1983.

Energy Secretary James S. Herrington strongly opposed the agreement, which provides $300 million in loan guarantees and pledges the rest to ensure that the company receives $67.87 a barrel for the fuel that is produced. A barrel of oil now sells for about $25.

Herrington has argued that the technological benefits in proceeding with the plant are too small and that the price guarantees too high to justify the federal involvement.

Senator Critical of Accord

Sen. Howard M. Metzenbaum (D-Ohio), who is expected to lead efforts in the Senate to abolish the agency, denounced the agreement as a "Union Oil bail-out." He called on President Reagan to bring the agency under control. It was created in 1980 to provide incentives for private companies to improve synthetic fuels technology on a commercial scale.

The House voted 312 to 111 in July to put the agency out of business. A fight over its future is expected on the Senate floor during the next several days.

"The nation cannot afford this kind of waste and irresponsibility," Metzenbaum said. "The SFC board members are like the Keystone Kops with a key to the federal Treasury."

But Edward E. Noble, chairman of the board, described the criticism by Herrington and others as "loose talk and misrepresentations."

"Union and a few other operating commercial synthetic fuel projects will give the United States the option of choosing between oil imports and domestic production," Noble said.

However, Rep. Mike Synar (D-Okla.) called the corporation a "renegade agency" and the agreement "an unconscionable act of desperation." Synar is sponsoring legislation that he says would allow Congress to rescind all awards made by the board since April.

"They're trying to shovel as much money out the door as quickly as possible because they know Congress is going to put a stop to it," said Geoffrey Webb, a director of Friends of the Earth, an environmental group. "This award is particularly offensive because Union Oil already got a $400-million purchase commitment, and their plant doesn't work."

The earlier $400 million in aid was provided in the form of price supports.

But board Vice Chairman Tom Corcoran, defending his agency's fiscal responsibility, noted that the corporation had considered providing Union Oil with $2.7 billion but cut that amount back to $500 million in Wednesday's action. "That's hardly evidence that we're trying to shovel money out the door," said Corcoran, a former Republican congressman from Illinois.

The corporation was established with a one-time appropriation of $16 billion, but Congress, faced with mounting budget deficits, later stripped it of $7.4 billion. The agency now has about $7.3 billion in remaining funds.

The corporation's directors are appointed by the President and are given wide independence. Unlike other government agencies, the corporation is permitted to spend its funds without scrutiny from Congress or the Administration's Office of Management and Budget.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World
70°