The Synthetic Fuels Corp., which has not spent a dime on developing U.S. energy resources since it was founded in the wake of the 1979 oil crisis, plans to commit all $15 billion that Congress gave it to projects in the next nine months, according to its chairman.
Edward E. Noble, who as head of the Reagan administration transition team recommended shutting down the corporation before President Reagan named him to run it, said he expects to offer financial packages to a half-dozen oil shale and coal gasification projects that may each exceed the record $1.5 billion Chrysler loan guarantee.
The inducements to encourage companies to build synthetic fuel plants include not only loan guarantees for up to 75 percent of the investment, but also price supports that promise a company more than double the current market price of oil or gas for the first 30 million barrels each plant produces.
Noble noted that in the midst of a worldwide oil glut and falling oil prices, and with a variety of other interests competing for federal tax dollars, many people suggest that this may not be the time to launch a costly effort to develop synthetic fuels.
"But I think that now, when we don't have a crisis, the lead time is so great that we must go ahead to show the rest of the world that we can" exploit oil shale, tar sands and coal, which account for 90 percent of America's energy reserves, Noble said in an interview.
Noble conceded, however, that while Congress was told in 1980 that a synfuels industry could be created largely by offering private companies loan guarantees that "would cost the taxpayer little or nothing," it now is necessary to offer price guarantees that will cost taxpayers $7 billion to $10 billion.
Other senior officials of the Synthetic Fuels Corp. said they felt the price guarantees ultimately would cost the Treasury more like "80 to 90 percent" of the original $15 billion appropriation.
"I hope we won't spend it all," Noble said. "But I would say we would probably spent half to maybe 70 percent of the money. But these things that we are talking about, even if we spend the money, will impact the budget very little until 1987 and out."
The projects Noble expects to attract will be far smaller than the large commercial plants Congress envisioned when it passed the Energy Security Act. If all are operating as planned by 1991, officials say that even then they will produce only about one-third of the 500,000 barrels of fuel a day mandated by the law for 1987.
"Those goals were pretty unrealistic," Noble said. "You have to remember it was done in a time of crisis or panic."
Instead of attempting to launch huge 50,000-barrel-a-day synthetic fuels plants, the corporation now is attempting to find companies that will build a 10,000-barrel-a-day oil shale plant by 1990 and a similar-sized coal gasification plant by 1991. In each case it would provide loan guarantees of up to $1.6 billion that could be converted into price supports upon completion of the plant.
Although oil prices have fallen steadily over the last couple of years to a current average of under $29 per barrel, the Synthetic Fuels Corp. is offering price supports that will guarantee up to $67 in 1983 dollars per barrel, for the first 30 million barrels, to companies willing to build oil shale plants.
In a market where high-BTU (British thermal units) natural gas--the type people use in their homes--is expected by government analysts to sell this year at an average of $4.30 per thousand cubic feet, the Synthetic Fuels Corp. is offering up to $11 per thousand cubic feet to companies willing to build a plant that will convert coal into this type of gas.
Noble said that, in addition to launching three coal plants and three or four oil shale plants, the corporation hopes to make commitments to six to eight tar sands and heavy oil projects.
Paradoxically, the first contract that the Synthetic Fuels Corp. awards appears likely to go to a plant using none of these resources. Officials said they expect to award a $465-million contract in about a month to a North Carolina project that will convert peat into methanol.
A number of congressional critics have been particularly outraged over that plan, noting that peat is not one of the nation's major energy resources. CIA Director William J. Casey is one of the investors in the North Carolina project.
"I had a lot of agonizing about that project," Noble conceded. "But in relative terms, it's not that big a project. And the technology can be utilized with lignite and coal as well as peat."
Rep. Tom Corcoran (R-Ill.), a leading foe of the Synthetic Fuels Corp., has introduced a bill that would cut its authorization to $3 billion and shift its emphasis from launching commercial-scale plants to funding continued research and deveelopment.
"I think that would just be the worst kind of folly," Noble said. "There's just so far you can go with research and development. We are at the point now that we really have got to test these things on a commercial scale. You have got to go ahead and bite the bullet, so to speak, and do a few commercial plants."
Even White House officials who philosophically would prefer to see the corporation put out of business, despite the change of heart by the president's appointee, doubt that Congress will cut back the corporation.
But Rep. Mike Synar (D-Okla.), who has taken over as chairman of the House Government Operations subcommittee that monitors the corporation, has vowed to take a critical look at the projects it plans to launch in the months ahead.
House investigators have expressed concern as to whether the corporation, which did not enter into any contracts in its first 2 1/2 years, can negotiate sound agreements with a dozen companies in the next nine months.
But Noble expressed optimism that the corporation will commit the $15 billion by the end of 1983, "if we are able to maintain our present schedule."
"We've had a real learning curve here, just knowing how to get ourselves organized and what we had to do," he said. "But we've got to go ahead."