The federal government is moving into the energy business in an unprecedented and major way.
Before the summer is out, it will have laid billions of dollars in public money on the line to stimulate commercial development of synthetic fuels. The line is already forming at the money window.
The hope is that private industry will come up with billions more of its own money to build plants to turn the nation's abundant coal deposits into gas or liquid fuels, or use a variety of other sources to produce usable energy in order to reduce the United States' heavy dependence on imported oil.
The mining of enormous new volumes of coal and oil shale, as well as construction and operation of plants to squeeze the synthetic fuels from them, will raise major environmental questions.
The disruptive economic and social impact of moving large numbers of workers and their families into sparsely settled parts of the West, where most of the deposits are located, will bring headaches to the state and local governments involved.
Nevertheless, the country is about to be firmly launched on development of a synthetic fuels industry, much to the delight of many private companies.
Nearly 1,000 of them applied for part of the first $200 million the Department of Energy made available this spring. Within a few days, DOE is expected to solicit applications for up to $1.5 billion worth of loan guarantees for plant construction and another $1.5 billion in commitments either to buy the fuel a plant would produce or guarantee its price.
Meanwhile, Congress is putting the finishing touches on a major synthetic fuels bill that President Carter proposed nearly a year ago. The bill will provide authority for another $20 billion worth of loan, price and purchase guarantees, as well as possible direct federal involvement in a few plants.
If all goes as expected, Carter will sign the bill -- known as the Energy Security Act of 1980 -- on July 4 as a gesture toward reestablishing a different sort of independence. Among other things, the bill will create an independent Synthetic Fuels Corp. to dole out the guarantees.
Government subsides are not unique in the mixed U.S. economy. What is unusual in this case is the size of the program and the fact that its goal is the commercial production of a basic commodity.
At the same time, Congress has moved to minimize direct government involvement in the energy business, by making sure that most of the subsidies will be indirect. Loan and price guarantees keep the government out of the projects unless the projects fail.
The government may never have to spend a dime of the $20 billion -- or for that matter much of the first $3.2 billion -- if the loans are repaid on time or energy prices rise fast enough to make the price and purchase guarantees moot. But federal backing will help to marshal huge amounts of capital for the synfuels effort.
It represents a significant increase in the government's involvement in the energy business. For that reason some companies, particularly the cash-rich oil giants, may shun the guarantees and mount projects on their own.
Exxon Corp., for instance, has either announced in recent months or is considering more than $10 billion worth of synthetic fuels projects around the world, including a $4 billion plan to produce gas from deposits of lignite -- a form of low-heat-content brown coal -- in East Texas.
Last month Exxon Co. U.S.A. agreed to buy for $400 million Atlantic Richfield Co.'s 60 percent interest in the Colony Oil Shale project near Grand Valley, Colo. Exxon expects to put $1 billion into the project by the time it begins to produce 46,000 barrels of oil from shale in 1985. The other 40 percent is owned by Tosco Corp. of Los Angeles, which has been developing oil shale technology for years.
For each large oil company that can afford to go it alone if it chooses, however, there is a host of other firms, perhaps smaller or strapped for cash who see an almost unlimited opportunity in the new federal program. Included in this group are most of the country's electric and gas utilities.
And whether the plants have any federal backing or not, the engineering and construction firms that will build them will enjoy a bonanza. So will companies that produce components, such as the miles of pipe and the elaborate heat exchangers and pressure vessels needed for each plant, or the mining and earth-moving equipment needed for new coal and oil shale mines.
Conventional oil and gas drilling contractors will have a piece of the action, too, since the symthetic fuels umbrella also will cover so-called unconventional natural gas -- gas locked in coal seams or nearly impermeable stones -- that can be produced only after the rock has been fractured by using hydraulic techniques or explosives.
Above all, the synfuels effort will mean jobs. A recent DOE study found that designing and building a single 60,000-barrel-per-day plant for turning coal directly into liquid fuel would take 22 million man-hours of construction labor and 2.3 million man-hours of engineering time.
To meet Carter's goal of producing a million barrels of liquid fuel daily from coal by 1990 would take 17 such plants. This would mean a peak of 85,000 people employed at the construction sites by the middle of this decade, according to DOE estimates.
Some people would like to go further and faster. Top officials at Exxon, for example, have been making presentations to government and business leaders around the country arguing that the nation should work toward creating a synthetic fuels industry that could produce 15 million barrels of liquids annually by the year 2010 -- 30 years from now.
That would be "highly ambitious, but not beyond achievement by a determined America," Randall Meyer, president of Exxon U.S.A., told the American Mining Congress in a speech last month.
"The investment total required to reach such a volume is staggering," Meyer declared, "almost $800 billion in 1980 dollars. This expense would be spread over 30 years or more, however, and is within the capabilities of private companies."
Investment on this scale would represent about 1 percent of the country's gross national product annually Meyer said, or "roughly what is now expended for conventional domestic exploration and production of oil and gas."
Exxon is stepping up its investment in synthetic fuels partly because its top officers are less sanguine than most oil executives about how much conventional oil and gas will be found in the United States in coming years.
If they are right, the country will need a massive synfuels industry even if the direct use of coal increases sharply and construction of nuclear power plants proceeds at a steady pace.
Whatever the eventual size of the industry, it is an infant today. There are no commercial-size plants producing liquid fuels from coal, only pilot plants. Larger demonstration plants are about to be begun with large amounts of government money.
Simarly, only a small number of plants making gas from coal -- primarily on a small scale for local distribution -- are in operation across the nation.
DOE has been funding pilot plants for years, and more recently the demonstration plants that are the next stage. Just two weeks ago DOE and the city of Memphis, Tenn., signed an agreement to build a $700 million demonstration plant that is to turn 3,110 tons of Kentucky coal into a low-heat-value gas for use by local industry. It is scheduled to be completed in 1984.
Meanwhile, in the new push for commercial production, DOE solicited proposals from private industry for $100 million worth of grants for feasibility studies for synfuels plants, and another $100 million worth of cost-sharing grants. Nearly 1,000 applications are being evaluated and the first grants should be made in July, a DOE spokesman said.
Sometime this month a new solicitation for proposals to use the $1.5 billion in loan guarantee authority and $1.5 billion in price or purchase guarantees probably will be made, he added.
Because of the legislative history of the new Energy Security Act, up to $3 billion in added synfuels support is expected to be made available to private industry, not by DOE or the new Synthetic Fuels Corp. but by the Defense Fuel Supply Center, a Defense Department agency that buys most of the fuels used by the federal government.
The new corporation will take over when it is set up, probably no sooner than nine months after the bill is passed. In the meantime, as a result of House passage earlier of a synfuels bill tied to the Defense Production Act, the Pentagon will have a brief fling.
The fuel supply center will contract to buy fuel from plants, with potential suppliers bidding to provide it. If there are no acceptable bids, the center can negotiate the contracts.
When the new corporation takes over the emphasis will still be on purchase agreements or price guarantees -- which have virtually the same effect -- in order to leave most of the actual investment risk with the private company.
Loan guarantees will continue to be important for smaller companies, which otherwise could not raise the cash needed for construction.
Increasingly, the oil industry is becoming convinced that many synthetic projects -- with oil shale, the least expensive synthetic, heading the list -- are becoming viable on a straight commercial basis because of enormous increases in oil prices.
James Bowden, president of Conoco Coal Development Co., the synfuels arm of that major oil company, said Conoco is planning its projects without reference to the new bill. Conoco, however, would like to see legislation enacted that would give it and other companies a faster tax write-off on their new investments.
Bowden is concerned that government support will entice smaller companies into the field that lack the resources and ability to see projects through. In that case, he warned, "large portions of the government's money will be lost, and as a taxpayer that worries me."
But whatever the potential economic and environmental problems, synthetic fuels are about to go commercial.