With Congress threatening to put it out of business, the U.S. Synthetic Fuels Corp. announced yesterday its approval of $744 million in new federal subsidies for three synthetic fuel projects.
The disclosure of the contracts brought a flurry of charges from Capitol Hill that the agency was rushing to hand out taxpayers' dollars before the Senate can vote to shut it down, as the House has already done.
Sen. Howard M. Metzenbaum (D-Ohio) called the Synfuels Corp. a "desperate agency" and said its action was "an insult to every member of the Senate."
Synfuels Corp. vice chairman Tom Corcoran said there was "no connection" between the forthcoming Senate vote and the agency's action, noting that the three projects in question "have been here for more than two years" and were ready to be approved by the agency's board of directors.
He also said at a news conference that the agency was merely responding to a White House recommendation that the agency "provide limited support for several small-scale synthetic fuels facilities."
The new funds that the corporation approved in a Wednesday board meeting and announced yesterday included $184.3 million in subsidies for the Seep Ridge oil shale project in Utah and $60 million for the Forest Hill "heavy oil" project in Texas. In addition, the agency approved a further $500 million for the Union Oil Co.'s oil shale project in Parachute, Colo., a plant that has already received $400 million in synfuels subsidies but has yet to produce any oil.
Corcoran noted that the Union Oil project originally was supposed to receive an additional $2.7 billion, but the agency decided to reduce that to $500 million. "So we turned what could have been a $3.1 billion project into only a $900 million project," he said.
The agency directed that the contracts be signed by Sept. 13, a date that led critics to charge that the board was timing its action to influence the Senate vote that could determine its future. The agency's congressional support has been waning in recent months as declining oil prices and skyrocketing costs have made synthetic fuels projects less economic.
Last month, Energy Secretary John S. Herrington pulled the plug on the country's biggest synthetic fuels project, the $2.1 billion Great Plains coal gasification plant in North Dakota. Then, on July 31, shortly before adjourning for its summer recess, the House voted, 312 to 11, to strip the Synfuels Corp. of $6.9 billion of its remaining $7.9 billion, essentially leaving it with no money for new projects.
Adding to the debate yesterday was the disclosure of a recent internal agency memo, first reported in the trade publication Energy Daily, that appeared to be a lobbying plan designed to boost the Synfuels Corp.'s prospects in the Senate.
The memo, written by an unidentified staffer, called for the agency to "use August to build broad base of support in the West to reinforce Idaho Republican Sen. James A. McClure and New Mexico Republican Sen. Pete V. Domenici," who have supported the program. Listing the three projects announced yesterday, the memo also called for the agency to "develop a series of accomplishments for Congress by Sept. 15."
Corcoran, who released a copy of the memo at the news conference, said, "That memo contained a lot of ideas -- some are good, some are not so good -- but it was never acted on as a formal synfuel corporate policy."