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The U.S. Synthetic Fuels Corporation: 1981–86 (yes, federal agencies can be abolished)

By Robert Bradley Jr. -- September 13, 2018

Government agencies are easily born, but they never seem to die. Rarely do they even fade away. But at 5 P.M. today the Government’s Synthetic Fuels Corporation closed its doors forever.”

– “U.S. Synthetic  Fuel Corporation Shuts Down,” New York Times, April 19, 1986, p. 46.

Only occasionally in U.S. energy history has a government energy agency disbanded. Almost all have been after wartime when bureaucracies were disbanded (such as World War II’s U.S. Petroleum Administration for War).

The demise of the United States Synthetic Fuels Corporation (SFC) in 1986 was a rarity. Established under the Energy Security Act of 1980, and called by President Jimmy Carter “the cornerstone of U.S. energy policy,” the SFC was premised on a belief in the increasing scarcity of crude oil and natural gas–and thus the need to turn coal into (synthetic) oil and gas.

To critics, the SFC was was a “cookie-jar bill” that would scarcely achieve its goals of 500,000 barrels per day by 1987 and two million barrels per day by 1992 in return for its $88 billion authorization. And the critics were right–and more so than anyone could have imagined.

As detailed in Oil, Gas, and Government: The U.S. Experience (pp. 568–85), a languishing synfuel program was resuscitated in 1981 when President Ronald Reagan broke a deadlock between White House aides to approve major DOE subsidies for three projects, including $2.02 billion for the ill-fated Great Plains Coal Gasification Project (described in Edison to Enron, pp. 333–34, 344, 353).

But with falling oil and gas prices in the early 1980s, and the price crash of 1986, private-sector interest in government loans where stockholders were also at risk disappeared. It was all over and time to close the doors.

This April 19, 1986 New York Times article is reprinted in its entirety below.

Government agencies are easily born, but they never seem to die. Rarely do they even fade away. But at 5 P.M. today the Government’s Synthetic Fuels Corporation closed its doors forever.

The few employees who were still around the modern office at 2121 K Street packed up the last boxes, transferred the few remaining files for caretaking by the Treasury Department and turned off the lights. The normal hustle and bustle of a Washington bureaucracy had been replaced by empty offices and deserted hallways.

The Congressionally chartered corporation was plagued by controversy since its creation in 1980 by the Carter Administration to provide financial incentives, such as loan guarantees and a guaranteed purchase price, to the private sector for creation and production of synthetic fuels.

Doubts About Function

But the decline of oil prices over the last few years led members of Congress members to question the wisdom of pouring millions of dollars into what have been termed questionable projects. The agency was also a victim of the drive to balance the budget, facing criticism for what were deemed unrealistically high salaries for corporation officials.

”It was politically expedient to criticize because it didn’t cost anyone any votes – we never had a really viable lobbying operation,” said Richard E. Miller, comptroller and vice president of the defunct agency.

At the end, the mood of the few employees still left was as gloomy as the empty offices and hallways, plastered with signs and banners reading, ”It’s All Over, Baby!” and ”Empty the House.” 

”A lot of us worked pretty hard and believed thoroughly in what we were doing,” said Mr. Miller. ”There was a very talented and dedicated staff. Now it’s a little traumatic to see all these empty offices.”

Despite the problems, some employees said they were surprised on Dec. 19, 1985, when Congress, in effect, signed the agency’s death certificate. ”It was somewhat of a shock because they had down-scaled the agency in 1984 and allowed us to continue,” a former employee said. Congress reduced the agency’s original budget of $20 billion to $14 billion in 1984 and to $7.89 billion in 1985. The original staff of 225 employees was also reduced.

Notice From Congress

But unlike other agencies in Washington that seem to hang on with little money and small staffs, Synfuels was not able to do so. The corporation was given 120 days to close down.

”It’s been a complex process,” said Catherine McMillan, a corporation official. ”We’ve had to do everything from the mundane things like deciding what to do with personnel records up to what to do with historical records and active files.”

Only 8 of the 130 employees who were with the corporation when its charter was revoked will be retained by the Government. The rest will seek, or have already sought, work in the private sector.

The eight employees being kept will be transferred to the Treasury Department to monitor four Synfuel projects still outstanding. These include the Coolwater Coal Gasification Program in southern California, which was completed in May 1984 ahead of schedule and $16 million below cost.

Three other projects are still under construction. They are the Dow Syngas Project in Louisiana, which will convert coal into fuel for industrial use; the Forest Hill Heavy Oil Project in Texas, which will attempt to recover heavy oil deposits; and the Parachute Creek Program, which will produce synthetic fuel from oil shale deposits in Colorado.

Even though one Government agency closed its doors today, another agency will soon reopen them. Synfuel’s K Street facility, which the Government has leased until 1987, will be used by the Department of Agriculture while its building at 14th and C streets is being renovated.

One Comment for “The U.S. Synthetic Fuels Corporation: 1981–86 (yes, federal agencies can be abolished)”

  1. Sean  

    I remember the Synthetic Fuels project. Essentially pyrolizing and partially oxidizing coal (potentially in the ground) then converting that to oil. I recall bringing it up at the NY Times Dot Earth blog when people made the case that some problems are so big it has to be handled by the government. If Syn Fuels had gone ahead, it would have produced twice as much CO2 for ever barrel of petroleum liquids as standard extraction. Half the energy and double the pollution.


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