Votes to Cut Off $7 Billion Out of Fear of Spending Binge : Panel Acts to Forestall a Synfuels Spree

House-Senate conferees voted to eliminate funds for the Synthetic Fuels Corp. on Monday, amid concern that the beleaguered agency would undertake a spending binge as it goes out of business.

The conferees’ action, which is expected to gain final congressional approval today, would allow the corporation’s board of directors to operate for 60 days under tight restrictions and let the corporation keep its doors open for 120 days.

Synfuels, as the corporation is commonly known, was created five years ago and touted as the answer to America’s energy needs in its role of providing financial incentives to companies that use unconventional means to produce oil and natural gas.

Negative Reputation

However, the agency gained a reputation for inefficiency, and Monday’s action effectively would kill Synfuels by rescinding about $7 billion in unspent funds.

The unusual move of abolishing an agency had been in the making for some time, and critics in Congress had complained that, as it wound down its operations, Synfuels had rushed into signing new contracts guaranteeing federal funds for projects nationwide.

The corporation’s five-member board had scheduled for today a meeting to decide whether to finance a $184-million oil shale project in Seep Ridge, Utah, but the meeting was canceled late Monday after the conferees’ action.

Synfuels spokeswoman Karen B. Hutchison said that the meeting had not been rescheduled and that the project could not receive funds unless the board called a public meeting.

Although that project remained in doubt, the corporation recently signed several contracts after the House first voted, in late July, to cut off its funds. The new contracts prompted several House members to accuse the agency of a “blatant disregard of the public interest.”

Hutchison, responding to the criticism, said Monday that, at the time, there was “by no means any foregone conclusion” that Congress would abolish the agency and that Synfuels was “operating under the legal authority that existed at the time.”

Agency Studies Action

As for Monday’s developments, she said that Synfuels officials are still studying the conferees’ action and had not decided what action they would take in response.

A spokesman for Sen. Howard M. Metzenbaum (D-Ohio), who has been a harsh critic of the agency, said that the senator was pleased with the conference action and that “any expenditure of funds by the Synfuels Corp. to get around this process would be outrageous and should be beneath any federal agency. It is clear what the intent of Congress is.”

L. Geoffrey Webb, legislative director for Friends of the Earth, called the congressional action a “tremendous victory” and added: “Merry Christmas to the taxpayers. The Synfuels rip-off is over.”