At midnight on March 31, with little fanfare, one of the greatest pork-barrel sweepstakes in American history began. That was the deadline for applications to the U.S. Synthetic Fuels Corporation for financial assistance to build synthetic fuels plants. The corporation will provide up to $17.5 billion in assistance over the next four years -- the first installment in an $88 billion, 10-year program. That is more than three times the cost of the Apollo space program, $10 billion more than the entire federal interstate highway program.
The federal government is creating a new industry. Although not one commercial-scale synthetic fuels plant is now under construction in the United States using private funds, 66 firms submitted applications to the SFC for asssitance. Many of the proposed plants carry multi-billion-dollar price tags and will be 1,000 times as large as the experimental facilities previously built in this country.
The SFC probably will choose fewer than a half dozen of these projects for assistance. The competition will be fierce, and that suggests the intriguing possibility that the attraction of federal largess might be used as an incentive for industry creativity in resolving troubling environmental, safety, health and socio-economic problems associated with synthetic fuels development.
The SFC's choice of which projects to assist will largely determine the shape of the synthetic fuels industry. But the choice will not be easy, for there are too many uncertainties. Indeed, we have a federal synthetic fuels program only because the economic and technological uncertainties associated with synthetic fuels production completely deterred private investment. To choose among projects, the SEC must confront those uncertainties.
Some of the most serious of them concern regulatory standards. Most of the potential hazards from synthetic fuels plants have not been closely studied and are not now regulated. A few weeks ago, for example, Science magazine carried a cover-picture of a cricket with an extra set of eyes. The magazine reported that researchers had discovered that exposure of cricket eggs to minute amounts of certain synthetic fuels products and a compound found in the wastes from synthetic fuels plants resulted in an increased incidence of birth defects in the exposed population. Neither the technology nor regulatory standards now exist to protect the public from this hazard or many other health hazards indicated by the research that has been done so far.
The SFC is thus caught between the pressure to act in haste to meet production goals and the need for time and research to resolve critical uncertainties. If the SFC moves too fast and plants are built that endanger workers and the public, the costs of rectifying the mistakes will be high and the public reaction may be lethal to the industry. Yet the SFC has neither regulatory authority nor the capacity to perform scientific research, and the two regulatory agencies with authority to address synthetic fuels problems are under attack. Their resources are being reduced by massive budget cuts and the political pressures against new regulatory initiatives are enormous.
The SFC does, however, have immense power with its control of federal subsidies. In a world dominated by the "bottom line," there is little hope that industry will make the necessary investments in health and safety research without clear economic or regulatory inducements. But $17.5 billion in subsidies could provide some very substantial inducements. The SFC need only establish that, in selecting projects for assistance, it will weigh heavily evidence of the extent, innovativeness, quality and thoroughness of the sponsor's efforts to identify and develop means of mitigating potential adverse effects on human health, safety, communities and the environment.
However, the SFC has received and begun to review the initial batch of 66 proposals, but has not established the criteria by which the proposals will be evaluated. While the officers of the SFC have publicly said that environmental, safety and health issues are important, they have done little to reflect that concern other than to reiterate the requirement imposed by law that proposed plants comply with existing regulatory requirements. That, of course, begs the issue. There is no synfuels industry yet and few regulatory requirements are in place. The SFC has not focused on those hazards that can be identified but have yet to be fully assessed, let along regulated. Yet we know from past experience that the new problems that emerge with a new technology can be the most critical.
The SFC does not even have the staff to evaluate the quality and resourcefulness of a project's sponsor's efforts to address environmental, safety and health problems. At present, they could not credibly suggest that they will weigh each applicant's environmental work. No one would believe them. The opportunity to provoke competition among applicants is swiftly passing. It is already too late for significant research or data collection in connection with the first batch of applicants.
The synthetic fuels program could be the opportunity to test the rhetoric of those who attack health and safety regulations as inefficient, unnecessary and stifling to innovation. Given incentives and flexibility, will industry find ways to build clean, safe and efficient plants? If there is genuine competition among the sponsors of synfuels projects to prove which of them can build the safest and cleanest plant, the profits will accrue to all of us.