Opinion ID: 392942
Heading Depth: 1
Heading Rank: 2

Heading: background regarding the synthetic fuel industry

Text: 31 At this point we believe it useful briefly to summarize certain pertinent developments concerning the emergence of this nation's synthetic fuel industry. Synthetic fuel (synfuel) is a catch-all term for a wide variety of non-nuclear, non-solar energy products which have the potential for serving as substitutes for petroleum or natural gas. 17 32 The federal government's interest in synfuel began as far back as 1944, when a comprehensive synthetic fuel program was undertaken by the Department of the Interior under the O'Mahoney-Randolph Synthetic Liquid Fuels Act of 1944, P.L. 78-290, 58 Stat. 190 (1944). Demonstration plants were constructed and operated to produce synthetic liquid fuels from coal, oil shale, agricultural and forestry products, and other substances, in order to conserve and increase the oil resources of the United States. 18 33 In the early 1970s Congressional interest in liquid and gaseous synthetic fuels was revitalized as American dependence upon foreign oil increased while the price of such oil began to rise dramatically. In the 93rd Congress, Senator Henry Jackson introduced the National Energy Research and Development Act of 1973, which provided for the establishment of joint federal-industrial corporations to foster commercial-scale demonstrations of coal gasification, oil shale, and coal liquefaction. This measure, later enacted as the Federal Non-Nuclear Energy Research and Development Act of 1974, P.L. 93-577, 88 Stat. 1878 (1974) (FERDA), authorized the Department of Energy (then the Energy Research and Development Administration) to undertake a wide range of joint government and industry energy research and development activities. 34 In 1977, the Senate approved an amendment to the fiscal year 1978 FERDA authorization bill providing a case-by-case procedure for Congressional approval of loan guarantees for individual synthetic fuel projects. 19 The Senate amendment was incorporated into the 1978 authorization bill and was subsequently enacted into law, P.L. 95-238, 92 Stat. 47 (1978). That law provided the Department of Energy with loan guarantee authority to complement the earlier enacted powers to provide loans, price guarantees, and purchase agreements, and to undertake government-owned contractor-operated synthetic fuel projects, FERDA, P.L. 93-577, supra. 35 As American dependence on foreign petroleum reached crisis proportions in the late 1970s, the urgency for synfuel development increased. In 1979, a report of the Senate Committee on Energy and Natural Resources declared: 36 The United States faces an unprecedented threat to its national security and to its economic and political future .... Conservation alone cannot satisfy our future energy needs. The United States will need large amounts of new liquid fuel sources. Since there is no practical substitute for our present transportation system, it would not be prudent to delay now the development of new liquid fuel sources. Synthetic fuels have the potential for providing significant amounts of such future energy supplies but, the establishment of a synthetic fuels industry, unlike previous experiences with rubber or other critical materials, is far too large an undertaking to be implemented in a few months under emergency, embargo or war conditions. Despite increased national attention, the commercialization of synthetic fuels such as coal gasification and liquefaction, oil shale, and biomass, in the absence of a national synthetic fuels effort will continue to be plagued by uncertainty. 37 S.Rep.No. 96-387, 96th Cong., 1st Sess. 129-30 (1979). Federal participation in synfuel promotion was necessary, according to the Senate report, because 38 (t)he private sector has not as yet been willing to invest the approximately $2 billion necessary to build a synfuel plant large enough to take advantage of the economies of scale common to such processes. This is because they feel that the various risks involved are too high. Not only are there technological, cost, and regulatory risks, but there is also uncertainty about the future level of prices set by the Oil Producing and Exporting Countries (OPEC). 39 Id. at 130. 40 On June 30, 1980, the President signed into law the Energy Security Act, P.L. 96-294, 94 Stat. 611 (1980) (to be codified at 42 U.S.C. § 8701 et seq.) (ESA). Under the Act, a new Synthetic Fuels Corporation was created, with the responsibility to achieve a domestic production capability equivalent to at least 500,000 barrels per day of crude oil by 1987, and at least 2 million barrels per day of crude oil by 1992. ESA at § 125. As part of a multifaceted effort to foster a substantial synthetic fuel capability in the United States, Congress referred specifically to coal gasification plants as a target for federal support in both the ESA and the earlier FERDA statute. See P.L. 96-294 at §§ 112, 126, 127(e); P.L. 93-577 at § 6; see generally pp. 1149-1151 infra. 41