LAST WEEK the Senate passed its version of the president's proposed synthetic fuels program. According to the Senate's plan, a government corporation would be created whose goal would be to build a synthetic fuels industry capable of producing 1.5 million barrels of oil per day by 1995. To do this, the corporation would be authorized to spend $20 billion of the taxpayers' money. It would also be directed to present to Congress within five years a plan for a much more expensive second-stage program, which would bring synthetic fuels into full-scale commercial production.
In reaching its final judgment, the Senate displayed some caution. It delected $68 billion in funds and said the new corporation would have to win approval from Congress before going on to the second-stage commercialization effort. But in leaving the prosposed government corporation intact, the Senate may be repeating some fundamental errors whose consequences should already be all too obvious. We have in mind the shortcomings that over the years became apparent in the way the country organized its efforts to oversee and promote nuclear technology. The industry was too much insulated from oversight, accountability and competition. And something similar seems to be lurking in the Senate synthetic fuels program.
In its frustrated search for a quick and easy way to win independence from oil imports, in other words, the country may now be on the verge of again fostering the birth of an industry exempt from the usual checks of the political process and immune from the healthy rigors of economic competition. Just as with nuclear power, synthetic fuels pose awesome environmental, health and safety issues. And just as with nuclear power, the costs are likely to be a good deal higher than now predicted -- perhaps large enough to be non-competitive with alternative sources of energy.
The worst possible outcome of the past year's floundering search for an energy policy would be to spend the next decade building a synthetic fuels industry, at huge public expense, only to discover that it could not survive without a steady diet of government subsidies and was the center of constant controversy over health and environmental concerns. In its consideration of the synthetic fuels proposal, the Senate Banking Committee rejected the idea of a government corporation for just these reasons -- believing that the country would better served in the long run by an industry tht grew up in the competitive marketplace. That view did not prevail on the Senate floor, but there is still time to think twice about how, and how not, to develop synthetic fuels.