The Synthetic Fuels Corp., headed for extinction in less than three months, yesterday approved a $327 million loan guarantee for an oil-shale project in Colorado despite a congressional directive to stop spending money.
The corporation's five-member board voted unanimously to grant the assistance to Union Oil Co.'s plant in Parachute Creek, Colo., after agency lawyers said a case could be made that Union Oil had been promised the aid under an earlier contract.
The action was a reversal of the board's position less than a month ago, when it declined to approve the aid. This new step has reignited the controversy on Capitol Hill. Several of the agency's critics, who thought they had settled the question of Parachute Creek last year, wasted no time in accusing the administration of ignoring the deficit for the sake of special interests.
"There will be $1 billion cut from health programs on March 1 and yet this administration has committed almost that much to Union Oil for its uneconomic shale oil plant in Colorado," Rep. John D. Dingell (D-Mich.) said. "This brand of corporate socialism does seem bizarre to say the least."
Sen. Howard M. Metzenbaum (D-Ohio) said the subsidy "has elevated hypocrisy to new heights" and said he would seek to void it in court if possible.
Last December, despite prodding from the White House and intense lobbying by Sen. William L. Armstrong (R-Colo.), the synfuels board twice refused to call an emergency session to approve assistance to Parachute Creek before President Reagan signed the legislation that barred any additional subsidies. Agency officials said they needed formal authorization from the Office of Management and Budget to approve the assistance.
According to an agency spokesman, the board has not received any further authorization from OMB. The board based its decision on a 15-page legal opinion from synfuels corporation lawyers and an eight-page opinion from a Chicago firm specializing in contract law.
Both opinions argued that the board already had a "legally binding commitment" to Union Oil, and that Congress had exempted previous commitments from its general ban on additional subsidies.
The Synthetic Fuels Corp. already has approved $900 million in federal price supports for Parachute Creek, but Union Oil cannot take advantage of those subsidies because the plant does not work. The new loan guarantee will underwrite equipment the firm believes will get the plant into operation.
Since the synfuels corporation was created five years ago, falling oil prices have removed much of the sheen from synthetic fuels, and the four projects that the corporation managed to fund have come under increasingly critical scrutiny from Congress. Last year, Congress voted to abolish the agency and rescind its remaining $7 billion in budget authority. The agency goes out of business in April.