Treasury Secretary James A. Baker III yesterday jumped into the dispute over the U.S. Synthetic Fuels Corp. by telling Synfuels Chairman Edward E. Noble that his agency's approval of a controversial $500 million oil shale contract with Unocal Corp. was not valid because he failed to consult the Treasury Department.

The letter appears to put at least a temporary crimp in the Unocal project, which has been sharply criticized by Secretary of Energy John Herrington. In a letter to Noble, Baker invoked an obscure section of the Energy Security Act requiring the Synfuels Corp. to consult with Treasury before approving federal subsidies to determine the impact on the "capital markets."

Baker said that Treasury is analyzing the contract, and "we will notify you in writing at the completion of this process," Baker said.

The Baker letter was dismissed as a technicality by Synfuels Vice Chairman Tom Corcoran. He said that Treasury has no veto power over the project and that the agency fully expects to receive a formal green light from Treasury before its loan agreements with Unocal are signed, probably in December.

However, some Synfuels critics say the Baker letter could delay the project, giving congressional opponents more time to kill the agency.