The fate of the Great Plains coal gasification plant, the country's most ambitious experiment in synthetic fuels production, is under a new cloud because of conflict-of-interest questions raised at the U.S. Synthetic Fuels Corp.
Two new members of the agency's board of directors, energy consultant Eric H. Reichl and economist Paul W. MacAvoy, have financial interests in companies involved in the Great Plains project, according to financial disclosure statements submitted to the corporation.
Agency ethics officer Owen J. Malone has warned the board that these interests may be significant enough to bar Reichl and MacAvoy from participating in any votes on the project.
The implications for Great Plains could be significant, according to agency and congressional sources. Last year, the corporate sponsors of the huge North Dakota project received a tentative "letter of intent" from the Synfuels Corp. for $790 million in new federal subsidies, funds they said were essential if the $2.1 billion plant was to stay in business.
But the Synfuels Corp. never got around to giving final approval to the Great Plains grant. The reason: The board lacked a quorum after agency president Victor M. Thompson resigned last April amid charges of ethical improprieties.
Now that the board has enough members once again, another thorny set of conflict questions has been raised. Reichl's wife owns stock worth about $76,000 in two companies -- American Natural Resources Co. and the Midcon Corp. -- that are among the five principals in the Great Plains consortium.
MacAvoy, who was a member of President Gerald R. Ford's Council of Economic Advisers, sits on the board of Combustion Engineering Inc., whose subsidiary, C.E. Lummus Inc., has been the contract manager on the Great Plains project. He has received $46,000 in directors' fees from Combustion Engineering over the past two years, according to his disclosure statement.
When questions about both men's financial interests were first raised in December, agency sources said they expressed resentment that their integrity might be questioned. Since then, they have not divested themselves of all their interests in the Great Plains companies.
"That stock is a fraction of what my family owns," said Reichl in a telephone interview last week. "It's inconsequential . . . . As a matter of principle, I don't think I should have to sell it."
Reichl, whose financial statement shows large stock holdings in numerous energy firms, said he told White House personnel officials nearly a year ago that he had no intention of selling the stocks just because he was taking a part-time job as a member of the agency's board of directors. His wife's trust, however, has sold about 1,200 of the 1,650 shares of American Natural Resources stock that it owned.
"The problem is really generic," Reichl said. "If you want a person who is supposed to be knowledgeable in the field, it's likely he's going to have something to do with the companies that are before the corporation."
MacAvoy has been even more emphatic. After Malone first raised the problem at the board's December meeting, MacAvoy fired off an angry letter denying that there was any conflict and rebuking the ethics official for raising the issue.
"That this was delivered as a public lecture in a board meeting was a piece of grandstanding totally out of keeping with operations in a corporation," MacAvoy wrote Malone.
Now the full five-member board must vote on whether Reichl and MacAvoy have legitimate conflicts or, in the language of the law that created the agency, whether their interests are "too remote or too inconsequential" to justify disqualification.
But the board faces another major problem. Approval of the $790 million in subsidies for Great Plains would require four affirmative board votes. If Reichl and MacAvoy are disqualified, the five-member board would be reduced to three members and won't be able to act.
Rep. Mike Synar (D-Okla.), chairman of the House Government Operations subcommittee on environment, energy and natural resources, raised this question last week in a letter to Synfuels chairman Edward E. Noble: Should Reichl be permitted to vote on MacAvoy's potential conflict and vice versa?
"This is potentially a serious problem," one agency official said when asked about the conflict question last week. "It could become a real aggravation."