The U.S. Synthetic Fuels Corp. was a good idea whose time never came. Congress now appears likely to kill it. A year ago we still thought it would be wrong to do that. But the world oil market is too weak and the budget too tight to justify the effort any longer.
The corporation was created in 1980 as the most ambitious of several means of achieving energy independence. The humbling Arab oil embargo, the emergence of OPEC, the crippling energy price increases and long gasoline lines of the 1970s were all recent memories. The government was encouraging conservation and moving toward the creation of a strategic petroleum reserve. It sought to create an instant synthetic fuels industry as well. If the nation was running out of oil and natural gas, it still had vast reserves of coal and, in the West, literally mountains of oil shale. Federal loan and price guarantees would induce the energy companies to convert these resources into liquid fuels and gas.
No sooner was the corporation set up than the economy began to conspire against it. The high prices of the 1970s had the classic effect of reducing energy demand. The deep recession of the early 1980s reduced it even further. The weakened world market and other factors then drew down prices. Synfuels projects that had seemed to make sense in a world of soaring prices and tight supply became white elephants in a world of glut. The major oil companies backed out of their sizable projects or asked for larger subsidies that not even true believers could support. The corporation, already under fire on various lesser grounds -- high salaries, conflict-of-interest questions -- turned to increasingly improbable alternatives. It toyed with a project involving peat, looked to the Japanese to invest, thought the Pentagon would provide a market. There were, and are, no takers.
Last week Energy Secretary John Herrington balked at further subsidization of the largest remaining project, a coal gasification plant in North Dakota. The corporation has been unable to find other worthy projects to fund. Last year Congress took away some of its funding authority. The House, in an appropriation bill passed just before it went home, has now voted to take away almost all the rest.
There probably will be a day in the future when synfuels make sense; that day is not now. The deficit is a greater threat than a weak OPEC. Some senators will want to keep the synfuels corporation alive. They, too, should throw in the towel.