President Carter agreed yesterday to slow down his synthetic fuels program, telling Senate leaders he would accept a two-stage synfuels strategy in place of the $88 billion crash program he proposed only two months ago.
Senate Energy Committee Chairman Henry M. Jackson (D-Wash.) said the compromise means that Carter is "going to get the bulk of what he's asked for" in synthetic fuel legislation.
Later in the day, however, the House Budget Committee slashed the first-year synfuels appropriation from the $22 billion voted by the Senate to $12 billion as committee members flashed still more go-slow signs at the White House.
The phased-in synthetic fuels program endorsed by Carter leaves in place the goal he set July 15 -- to cut the nation's oil imports 50 percent by 1990 by producting 1.75 million barrels a day of synthetic fuels.
Congressional sources, however, said they believe it will take until 1995 -- as much as five years longer than Carter proposes -- to get significant synthetic fuels production.
Slowing down the development of synthetic fuels also takes away a major political justification for the president's windfall profits tax on oil company earnings, much of which is earmarked for synfuels financing.
White House officials insisted yesterday that the windfall tax still is needed to pay for synthetic fuels. But Sen. J. Bennett Johnston (D-La.), a key backer of the administration's synthetic fuels program, said he and others in the Senate will resist any attempt to make the synthetic fuels program dependent on the windfall tax.
Johnston, who along with other Energy Committee members met with Carter yesterday, predicted the committee soon will approve a synthetic fuels bill.
"I have no doubt we will come up with legislation within the next very few weeks that will give us both a synthetic fuels program and a cut-through-the-red-tape Energy Mobilization Board," Johnston said.
In the meeting with the Senate committee, Carter offered another compromise, saying he would not insist that the government own any of the synthetic fuels plants, Senate sources said. The president asked two months ago for authority to build and run up to three of the billion-dollar plants with federal funds.
In a later meeting with a colaition of state and local officials, Carter also said the proposed Energy Mobilization Board should not have the power to override state water laws, a key issue in Western states.
The phased-in synthetic fuels program agreed to yesterday by Carter and the Senate Energy Committee members would begin with a $20 billion to $30 billion program to build about a dozen pioneer plants.
Congress then would have a chance to make what White House officials called "a mid-course adjustment" before expanding the program to build the total of 80 or 90 plants needed to meet the 1.75-million barrel-a-day goal.
The compromise removed not only the political problem of getting Congress to endorse a massive $88 billion synfuels program, but also the technological problem of building the complex and unproven plants as rapidly as Carter wants to build them.
Senate energy committee staff members said the $20 billion or $30 billion first phase should provide enough money to build full-size commercial plants, using each of about a dozen competing processes for producing synthetic fuels. The processes can make liquid fuels from coal or oil shale and a fuel similar to natural gas from coal.
White House officials sought to minimize the extent of the compromise reached in the meeting with Senate energy leaders. "We never expected an $88 billion blank check," said W. Bowman Cutter, executive associate director of the Office of Management and Budget.
Cutter said the decision to move the synthetic fuels program through Congress in phases does not mean that the White House is backing off from its 1990 synfuels production goals, as many congressional leaders have demanded.
He said the administration is not willing to build the first group of plants and run them for several years before building more. "We're not going to wait for operating experience, that would add seven years" to the timetable, he said.
White House and congressional sources said they have agreed that the chief method of financing synthetic fuels production should be government purchase guarantees or price supports, rather than government loans or loan guarantees or government operated plants.
Under a purchase guarantee program, the government would promise to buy synthetic fuels at a specified price, from any company willing to build the plants.
Cutter said the president's meeting with Senate energy committee leaders indicated the White House will achieve the three major goals it targeted when Carter announced his synthetic fuels program two months ago.
Those goals, Cutter said, were general agreement on the need for a strong synthetic fuels program, creation of an independent agency to get the program off the ground -- the Energy Security Corp. and the Energy Mobilization Board -- and a major budget commitment to synfuels development.
The next major congressional action on Carter's synthetic fuels program is expected to come early next week, when a special Senate subcommittee headed by Gary Hart (D-Colo.) issues a report on the economic and environmental aspects of synfuels production.