Reagan plans cloud US future in synfuels

Synthetic fuels are much studied, but not much used. And their graduation from a subject of experimentation to a source of energy on which Americans can rely is proving difficult.

That is the lesson observers draw from the continuing problems faced by what was projected to be the nation's first commercial-size synthetic fuels plant -- the Great Plains Coal Gasification Project, to be built near Beulah, N.D.

"This is the flagship of the whole synfuels movement," assesses one analyst with a synfuels construction company. "if we could just get a plant like this built to demonstrate it is workable, we would have rounded an important corner," he said.

Sponsors of the plant claim it is jeopardized by the bureaucratic streamlining planned by the Reagan administration. The project has been under the wing of the US Department of Energy (DOE). But Secretary of Energy James Edwards wants to transfer it and similar projects to the Synthetic Fuels Corporation.

The move would "put the project on the shelf and maybe kill it," says a spokesman for American Natural Resources Company in Detroit, the main sponsor of the $2 billion facility. The firm is concerned that in transferring the venture to another govvernment agency for approvals and financial backing, the project would face new uncertainties and delays that could make it uneconomical.

The prospect of this transfer is the latest hurdle for the project, which appeared to be on the cutting edge of the nation's synthetic fuels development. But in recent months, this cutting edge has been blunted by setbacks.

A federal court ruled last December that the Federal Energy Regulatory Commission (FERC) had overstepped its authority in granting gas rate guarantees that were an integral part of the financing for the project. The guarantees, in part, allowed the project sponsors to levy a surcharge on existing gas customers which was demanded by those helping to finance the plant. But major gas users filed suit and the court nullified the guarantees.

The court ruling also jeopardized a conditional $1.5 billion DOE loan guarantee the sponsors had received.

American Natural Resources is seeking approval from the suit's plaintiffs and the FERC for a new financing plan, which no longer calls for gas surcharges. The company wants the federal loan guarantee raised to $1.8 billion, and it wants the users who brought suit to agree to a price, formula for selling the gas when the plant is complete. The price formula must also be approved by the FERC.

The spokesman for American Natural Resources says this delay is costing the company $7 million to $10 million a month just to maintain staff and fulfill previous contract commitments. Given that expense, he said the company must decide in the next several weeks whether to proceed with the project.

There also have been questions raised about whether the United States really needs the additional 125 million cubic feet of gas each day that the project would provide after its scheduled completion in 1984.

Although the plan for the coal gasification plant originated about eight years ago in an atmosphere of concern over US natural gas supplies, recently the attitude of most experts about US reserves has been more optimistic.

However, George H. Lawrence, president of the American Gas Association, is convinced the synthetic gas is still needed.

"We consider gas the premier synfuel," he said. While some energy analysts claim that what the nation needs most is new forms of liquid fuels to replace oil imports, Mr. Lawrence says there are plenty of applications for synthetic gas in the utility and industrial markets. Gas uses there could help stretch the domestic supplies of liquid fuels.

Aside from the synthetic coal gas it would produce, the Great Plains project is important for another reason, Lawrence says.

"As of now there is a reluctance on the part of the financial community to finance the first [synfuel] project," he said, because of the perceived risk. This project, he asserted, could pave the way for more rapid development of subsequent plants.