One Senate aide calls it "the new Laetrille." Deputy Energy Secretary John F. O'Leary says it's "a pipe dream." Despite the gibes, gasohol has become one of the country's fastest-growing new energy sources, and one of the most intensely lobbied energy issue in Congress.

Consider what has happened in the past two years: As a result of legislation and federal rulings, gasohol today receives more federal subsidies for every unit produced than any other non-nuclear energy source, including oil, natural gas, or oil shale.

Gasohol distribution has spread from being a cottage industry to serving as the supplier for nearly 500 service stations in the Midwest.

Gasohol, a fuel mix of 10 percent alchol and 90 percent gasoline, is now about to get another unexpected boost. Despite O'Leary's skeptical view of gasohol's long-term prospects, the Department of Energy's Alcohol Fuels Policy Review report, soon to be released endorses it.

According to DOE, alcohol fuels "can play an important role in our national energy strategy." DOE's 18 month, government-wide study also concludes that:

While only about a million gallons of gasoline have been replaced by gasohol in the last few years, alcohol fuels could reduce annual demand for gasoline by at least 10 billion gallions - about 9 per cent of U.S. gasoline consumption today.

Gasohol today sells competitively at about the price of unleaded premium gasoline. Because alcohol fuels boost gasolina octane, they "could help alleviate shortages of unleaded gasoline."

Alcohol fuels get identical or better mileage than gasoline, and can be burned in existing car or truck engines withiut damaging them.

Most importantly of all, alcohol fuels can be distilled from nearly any animal or vegetable product containing starch and sugar, such as grain, cheese whey, wood, garbage, or paper. By increasing gasohol consumpution, the United States could reduce its dependence on imported oil.

A draft of DOE's alcohol fuels report has been obtaioned by The Washington Post.

Techonology to produce alcohol fuels is hardly new. During the 1930s gasohol was sold at nearly 2,300 service stations in the Midwest. Germany's tanks ran on alcohol distilled from potatoes during World War II's final years. And the Sun Oil Co. used alcohol as a "gasoline extender" during the 1974 Arab oil embargo.

Gasohol's backers, such as Scott Skylar of the National Council for Appropriate Technology, point out that anyone who questions whether gasohol works needs only to look at Brazil.

Brazil has committed $800 million to it gasohol program, which distills alcohol from sugar cane. Brazil expects to produce a billion gallons of alcohol by 1980. (This year, by comparison of its nearly $10 billion budget on alcohol research.)

Despite its promise, gasohol's strongest advocates concede it is unlikely to pick up 10 per cent of the gasoline market until the mid-1980s. Nevertheless, the gasohol lobby is becoming one of the most powerful in Congress.

Skylar, a former aide to Sen. Jacob Javits (R.N.Y.), explains: "It is an issue that attracts right-wing farmers, urban liberals, timber, coal and agribusiness, along with solar energy advocates."

While on Javits' staff, Skylar helphed push a waiver of the 4-cent-a gallon federal excise tax on gasohol through the Senate Finance Committee. The measure won by a vote of 22 to 1. It later was enacted by both houses.

The waiver applies to alcohol fuels. Because gasohol is 10 percent alcohol, the waiver, in effect, amounts to a 40-cent-a-gallon subsidy for alcohol, or $16.80 per 42-gallon barrel.

Meanwhile, under pressure from gasohol supporters in Congress, DOE granted an additional $2 a barrel subsidy under its oil regulations for alcohol producers.

The gasohol lobbyy says the $18.80 a barrel in available subsidies - compared with the $16 a barrel cost set for foreign oil - is not enough.

Sen. Frank Church (D-Idaho) introduced legislation again this year to mandate that 10 percent of the fuel used by autos in 1990 should be gasohol. Not coincidentally such a law, requiring the oil industry to accomodate gasohol, would also benefit Church's Idaho sugar beet farmers.

Rep. Berkley Bedell (D-Iowa) has a bill to eliminate the Agriculture Department's corp subsidy program. The move would provide added incentives for Iowa's corn producers to grow crops for gasohol on lands now idle. While ending the set-aside program. Bedell's bill would guarantee farmers new and higher profits with price supports for gasohol corps.

Other lobbyists and farm state congressmen are putting pressure on Agriculture Secretary Bob Bergland to allow farmers who now receive "set-aside" payments for idle acreage to grow sweet sorghum to make gasohol instead. They, too, would continue to collect millions of dollats in farm subsidies.

A Bedell aide, David Halburg, says "Bergland is under strong pressure" to use his set-aside subsidies for gasohol crop growers under existing legislative authority. As for gasohol's political appeal in Farm Belt states, he says: "It is very popular. It is almost like motherhood."

Gasohol is not without its problems. DOE's report concludes that on a net energy basis - energy spent to produce alcohol versus the energy it yields - the economics "fluctuate between being favorable and unfavorable." Oil industry critics, such as Standard Oil Co. of Calif., have repeatedly made this charge.

While avoiding the question of whether crops should be devoted to fuel instead of food - another oil industry objection - DOE notes that a massive gasohol program would require "manipulating" the agriculture industry, land availability and Department of Agriculture policy to produce new grain.

Phillips Petroluem's J. W. Davison, for example, argues: "Since it comes from farm productss, we'd pratically have to give up eating corn, wheat and potatoes if we went the gasohol route."

Energy and Agriculture officials consider this to be a broad exaggeration.

Oil company opposition to gasohol appears to have helped, rather than hindered, the alternative fuel's political base in Congress. Sen. Birch Bayh (D-Ind.) opens his arguments in favor of gasohol by reminding people. "The oil companies are not interested in developing alcohol fuels."

But not all oil companies are opposed to gasohol. Gulf Oil Chemicals Co. testified before a Senate Energy Subcommittee last year in support of alcohol fuels. Gulf is developing a pilot plant that converts solid waste into alcohol. The company says that New York City alone, which produces 8.8 million tons of trash a year, could supply 27 medium-sized alcohol plants.

Gasohol enjoys the support of other industrial giants.Holly Sugar, Georgia Pacific, Standard Brands (the makers of Fleischmann's gin), and Archer-Daniel Midland, the nation's leading corn sweetener producers, are some few of the large companies anxiously eyeing policy shifts that could generate profits by producing gasohol.

Skylar says gasohol's future is promising and that it could reduce oil imports by as much as 500,000 to 1 million barrels a day by 1985 - about 5 percent of the nation's projected oil consumption for allpurposes.