The spectacular
Policies directing conservation and
The result was the $88 billion federal
efficiency programs over the past 20
Synthetic Fuels Corporation, established in
and costly failure
years have changed from "use less
1980 as "the cornerstone of U.S. energy poli-
of syn-fuels is a
fuel" to "use energy more effective-
cy." The corporation set a production goal of
lesson that has
2 million barrels of syn-fuel a day by 1992.1 9 3
ly." . . . Sustainable changes in the
energy services market . . . favor the
Shell, Exxon, Mobil, Chevron, Union Oil,
been ignored by
voluntary adoption of more efficient
Occidental, Ashland, Tenneco, Transco, and
today's energy
products and services.1 9 0
other firms championed the effort from the
private side with their own investments,
planners.
sometimes without government help. Exxon
A representative of the South Coast Air
chairman C. C. Garvin in 1980 reflected
Quality Management District in California
industry opinion when he estimated that
testified before Congress in 1993 that
U.S. syn-fuel production could reach as high
between 10 percent and 30 percent of the
as 4 million to 6 million barrels per day by
state's transportation market would be pow-
2000.1 9 4 His company's planned international
ered by an alternative fuel by the turn of the
century.1 9 1 A small fraction of 1 percent of
syn-fuel investments of $18 billion, almost
double that amount in today's dollars,
the market is now expected to be powered by
reflected his belief.1 9 5
natural gas, methanol, and electricity com-
bined. This collapse of the alternative-fuel
Falling crude oil prices in the early 1980s
market is not cause for environmental regret,
shook the popular vision. Planned invest-
given the positive contribution of reformu-
ments were scaled back or scrapped, and the
lated motor fuels and changes in engine
Synthetic Fuels Corporation was abolished
design. This is not to say that challenges do
in December 1985 with most of its monies
not remain but that traditional alternatives
unused. Some projects lingered as technolog-
can be revamped to be the least cost solution
ical successes before economic reality won
in a technologically dynamic world.
out. Shell, for instance, did not close its pri-
vately funded coal gasification project until
Synthetic Fuel Production
1991, and Unocal terminated its oil shale
Although it is hardly part of the "alter-
plant a year later. The only syn-fuel project
native energy" dialogue today, the cam-
left today is the $2.1 billion Great Plains Coal
paign to promote renewable energy is strik-
Gasification Project in North Dakota, which
ingly similar to the campaign a few decades
survived on the strength of $700 in federal
ago to promote synthetic fuels. The spec-
tax credits and a high-priced syn-gas pur-
tacular and costly failure of syn-fuels, how-
chase contract after the original owners lost
their equity investment.1 9 6 The plant was sold
ever, is a lesson that has unfortunately been
ignored by today's energy planners.
by the Department of Energy to a consor-
Synthetic fuels attracted many of the
tium of North Dakota electric cooperatives
"biggest and brightest" energy investors in
for a mere $85 million. The difference was a
the 1970s and 1980s. The idea of converting
combination of investor ($550 million) and
coal and other solids into oil, despite having
taxpayer loss.1 9 7
failed as a U.S. government program
The failed economic experiment with syn-
between 1944 and 1955,1 9 2 was considered
thetic fuels can be blamed on the technologi-
cal limitations of synthetic fuel processes.
ripe for technological exploitation, given
But the deeper reasons for failure are relevant
high and rising oil and gas prices under the
to today's subsidized renewable energy
"theory of exhaustible resources." Producing
debate:
synthetic oil and gas was thought of simply
as an engineering challenge, solvable by new
·
increments of entrepreneurial will and
Pervasive government intervention
financial capital.
made oil and gas prices artificially high
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