Energy Secretary John S. Herrington, declaring that the economic justification for synthetic fuels has collapsed, said yesterday he was opposed to two large projects slated to receive up to $684 million in new federal subsidies later this month from the U.S. Synthetic Fuels Corp.
In a letter to Congress, Herrington put the Reagan administration on record for the first time against funding the controversial projects. In addition, Herrington said he had "strong reservations about continued funding" of the Synthetic Fuels Corp. as a whole.
The Senate is scheduled to take up legislation next week that would strip the agency of virtually all of its remaining money. Similar legislation was approved by the House in August. But last week, the Synthetic Fuels Corp. granted a $60 million contract to a heavy oil project in Texas and announced it would approve additional subsidies for projects in Colorado and Utah at an Oct. 16 meeting.
Noting that oil prices have dropped more than 30 percent since the Synfuels Corp. was created in 1980, Herrington said that "virtually no large-scale synthetic fuels projects are likely to become economical in the forseeable future." The Texas project that the agency funded last week would receive government price guarantees of $55 per barrel of oil produced -- more than twice the market price, Herrington said.
In addition, a $500 million contract would go to a Union Oil Company project in Colorado that, Herrington said, "has yet to demonstrate technological feasibility.