Four members of an advisory group established by the U.S. Synthetic Fuels Corp. have written a report questioning whether the corporation should even exist.
The Synthetic Fuels Study Panel, made up of industry, business, academic and government representatives, met last month to discuss issues confronting the Synfuels Corp. In a majority report, eight members of the group said the government should continue to provide support for the development of synthetic fuels, even though industry is abandoning the field.
National security concerns are sufficient reason for continuing government support, they said.
But a minority report filed by four other members, who a Synfuels spokesmen said were principally academic economists, said those concerns might be better addressed by such measures as deregulating natural gas prices to reduce demand or abolishing the "so-called windfall profits tax" on crude oil to encourage production.
"If investments are not made in the synfuels industry without government support, this is a sure sign that the resources are more efficiently used in other industries," according to the minority view. "Diverting resurces into the synfuels industry is inefficient and costly to the nation's economic growth when private investors cannot make sufficiently profitable investments to be enticed into the industry without government inducement."
The split within the advisory group reflects the split in Congress over the synfuels issue and a debate that has grown steadily, fueled first by reports of billions of dollars in projected cost overruns in the Tosco Colony oil shale project in Parachute, Colo., then by the withdrawal from that venture by Exxon Corp.
The split has produced increased efforts to abolish or take away funding from the Synfuels Corp. "Some see the Colony experience as proving that Exxon's interests are not necessarily consistent with the American public's interests and that the government must therefore shoulder the burden of building a synthetic fuel industry," said Rep. Tom Corcoran (R-Ill.). Corcoran made a recent attempt to divert funding from synfuels into housing. "Others of us think that if synthetic fuels are too risky for Exxon, they are too risky for the American taxpayers."
The two reports agreed on one point: that the array of alternate technologies considered should be widened.
The majority report emphasized the need for research and development and said that the SFC should lead an effort to provide solid information about technical, environmental and health effects related to synfuels. Doing so would help the industry avoid "possible mistakes made during the development of the commercial nuclear energy industry."
The minority report said that SFC should minimize any role in regulating or overseeing actual production of synfuels and should shy away from loan guarantees, which require a high degree of monitoring.
It also suggested auctioning off contracts under which the SFC would provide price supports at a fixed level. Doing so would provide an incentive to the contractor to hold down production costs and would mean that SFC would spend no money until production was underway, the report said.
Price guarantees are a device used by SFC, although they have not been auctioned.
This week the Synfuels Corp. will announce the names of companies applying for a second round of government support. Fewer bids are expected than the SFC had originally anticipated. An SFC spokeswoman said that is because tighter rules for applying mean more work and money must be spent initially. That has discouraged bidders who might have applied when application standards were looser, she said.