The White House, overriding the objections of its key inflation watchdog agency, has decided to award a $12.6 million coal liquefaction development contract to a firm found to be out of compliance with its price guidelines.
The decision, made over the weekend, was based on a recommendation by the Energy Department, which cited the project as too important to the nation's energy needs to be delayed because of the guidelines flap.
The dispute involves a proposal by W.R. Grace Co. to build a plant in Baskett, Ky., designed to convert coal into gasoline -- one of a handful being put up as pilot projects across the United States.
The White House had intended to award the contract formally on Aug. 28 but canceled the ceremony at the last minute after Grace was declared in violation of the guidelines by the Council on Wage and Price Stability.
Yesterday's move reversed that earlier action. The Energy Department, which announced the White House decision, said the Grace project was "of significant importance in this nation's energy program" and should not be delayed.
Wage-price council officials had been negotiating with Grace for weeks in an effort to work out a compromise on the guidelines issue but apparently were unsuccessful.
The company formally appealed the coucil's initial decision after the finding of noncompliance, but the inflation agency reached the same set of findings on the second review of the case.
In an earlier price guidelines case involving Mobil Oil Corp., the two sides worked out a compromise under which Mobil agreed to provide modest rebates to consumers if the council would drop its charges.
Denying federal contracts to guidelines violators is the strongest weapon the administration has to enforce its wage-price standards, but so far the White House has not used it, although President Carter has threatened it several times.
Grace now has two years under the new synthetic fuels development contract to build the coal liquefaction plant.