After years of dancing around the issue, the White House yesterday urged Congress to abolish the Synthetic Fuels Corp., a move that could make the quasi-governmental agency the first victim of the Gramm-Rudman-Hollings balanced-budget law.
"The administration no longer believes continued funding of the Synthetic Fuels Corp. serves any useful purpose," Office of Management and Budget Director James C. Miller III said in letters to Rep. Jamie L. Witten (D-Miss.) and Sen. Mark O. Hatfield (R-Ore.), chairmen of the House and Senate Appropriations committees.
In the past, administration officials denounced the corporation's choice of synthetic fuel projects but never called for killing the agency.
Miller said the administration favors rescinding the corporation's remaining budget of $7.3 billion and "opposes any efforts to use such monies to fund any other programs."
The House has voted to abolish the Synfuels Corp. and transfer $500 million of its remaining funds to the Energy Department for synthetic fuels research. The Senate voted to retain the agency but cut its funding to $3.6 billion.
According to administration officials, the White House wants to head off any congressional notions about using the savings from killing the agency to ward off cuts in more politically favored programs.
The OMB letter was sent after Energy Secretary John S. Herrington raised the issue at a Cabinet meeting yesterday morning and urged the administration to "take a more forthright position" on the fate of the Synfuels Corp., according to a DOE official.
While Herrington and other officials have long had the green light to criticize the corporation, the White House has been reluctant to take a more direct stand for fear of antagonizing the agency's key congressional supporters.
Administration officials said that those concerns have been put aside because of the "new financial realities" posed by enactment of the Gramm-Rudman-Hollings deficit-reduction legislation, which the president signed yesterday. Funding for the Synfuels Corp. is considered particularly sensitive because its contracts, once signed, would be exempt from cutbacks.
"We're running out of time to fool around," said one official.
The Synfuels Corp. was created in 1980 as part of a massive government push for energy independence for the nation. Initially funded at $17 billion, the agency was to provide loan and price guarantees to companies producing alternatives to imported oil.
In the last five years, however, a softening oil market removed most of the incentive for synthetic fuels; at the same time, the corporation has come under heavy attack for allegedly pouring millions of dollars into questionable projects.
Earlier this year, Herrington bitterly attacked a proposal to give an additional $500 million in federal subsidies to a Unocal Corp. oil shale project in Parachute Creek, Colo. The synfuels board approved the contract anyway, guaranteeing Unocal nearly $68 a barrel for oil that is selling on the open market for less than $30 a barrel.
The corporation has narrowly survived congressional assaults in the last two years, most recently when the Senate narrowly voted last Friday to reject a House plan to abolish it.
A spokesman for the corporation declined to comment on the White House's decision.
According to congressional aides, abolishing the corporation and its $7.3 billion budget would not reduce the deficit by that amount because most of the corporation's expenditures would occur over many years.