Synfuel's future burns bright as lack of alternatives fans the flame
Washington — With one eye on Ronald Reagan, the nation's brand-new Synthetic Fuels Corporation (SFC) is beginning to grapple with the herculean task of getting liquid fuel out of coal and shale.
Thousands of new jobs, billions of dollars' worth of construction -- and possibly some damage to US air and water -- hang in the balance, as Americans assess President-elect Reagan's commitment to the vast endeavor.
Mr. Reagan may place a lower priority on synthetic fuels than did President Carter, when he proposed to invest up to $88 billion in a huge new industry that would dominate the domestic search for energy.
Several factors, however, including the following, indicate that synthetic fuels will play an important role in America's future:
* Many petroleum experts, noting that oil-drilling activity already is at an all-time high, doubt that a great deal of undiscovered domestic oil is out there to be tapped, at least in commercially recoverable form.
A variety of recent studies conclude that the United States will be hard pressed to maintain its present production of about 8.5 million barrels a day, down from a high of nearly 10 million a decade ago.
* Much expensive infrastructure must be built before coal can greatly enlarge its role as a fuel for utility and industrial boilers.
* Expansion of the nuclear power industry is doubtful, unless public hostility to this form of energy abates.
Meanwhile, Americans -- who import 50 percent of their foreign oil from Arab lands -- remain acutely vulnerable to supply interruptions in the Middle East.
Against this background, the SFC has been authorized by Congress to commit up to $17 billion to help US firms produce liquids from solids, principally, says corporation chairman John C. Sawhill, "gasoline from coal and oil from shale."
He finds the concept of gasoline from coal "attractive," because success in this field would directly lessen imports of foreign oil. One-third of all petroleum burned in the United States is in the form of gasoline.
Coal gasification, in Dr. Sawhill's view takes a lower priority because "first we need to learn more about the availability of natural gas."
Estimates on future supplies of natural gas in the US vary much more widely than estimates about the potential of domestic oil.
Americans might be pleasantly surprised to learn that many tax dollars allocated to synthetic fuels may never be spent, even if the various projects proceed full stream.
The SFC is not in the business of subsidizing companies to build and operate synthetic fuels plants, but rather, Dr. Sawhill says, "to lower the financial risk, remove some of the price uncertainty from the industry."
In a typical example, the SFC will guarantee up to 75 percent of the amount of money a firm needs to borrow from banks to build a plant. If the project turns out to be a viable, the builder repays his loans and the government guarantee is not invoked.
Obliging a firm to put up some of its own money (by limiting an SFC guarantee to 75 percent), Dr. Sawhill says, "gives a company every incentive to make a project work."
Similarly, a price guarantee would not be given "at a price higher than the anticipated market price" for a plant's eventual product.
For Dr. Sawhill himself -- formerly deputy energy secretary and before that president of New York University -- a personal uncertainty hangs over the future. As an interim appointee to the SFC by the President Carter, he says yet to learn whether Mr. Reagan will choose to retain him.