TCS Urges Senate to Oppose Amendments for Costly Synthetic Fuels

Oppose Amendments to Defense Authorization Bill Providing
Long-term Contracting Authority for Alternative Fuels

July 20, 2009

Dear Senator:

Taxpayers for Common Sense Action urges you to oppose amendments to the Defense Authorization Bill (S.1390) that would provide the Department of Defense (DOD) the authority to enter into long-term contracts for the purchase of coal liquids and other synthetic fuels.  Taxpayers were stuck with the tab after the synthetic fuels industry failed in the 1980’s and entering into long-term contracts for these fuels today is just as risky of an investment as it was two decades ago.

We already know of one synthetic fuels amendment. Senator Bunning (R-KY) has sponsored Amendment 1517, which would allow twenty year contracting authority with alternative fuels producers.  “Alternative” fuels could cover coal liquids and other costly, high-risk synthetic fuels.  We urge you to oppose Amendment 1517.

Because the success of synthetic fuels also depends heavily on volatile oil prices, entering into long-term contracts would be particularly risky for the federal government.  If oil prices continue on the roller coaster they have been on, with barrel prices half of what they were last summer, investments in coal liquids would be extremely risky.  When Congress created the $15 billion Synthetic Fuels Corporation in the 1980’s to fund coal liquids and other synfuel projects, volatile oil prices drove the coal liquids industry into near bankruptcy, wasting billions of dollars spent on capital.  This time around taxpayers would be locked into contracts requiring the purchase of uneconomical fuel.  Additionally, these fuels contribute more carbon emissions than conventional fuels which will lead to additional risks and costs for taxpayers down the road.

Synthetic fuels are not the solution to the nation’s energy woes and both industry and independent experts agree that this technology will require significant government support.  Taxpayers should not be forced to foot the bill for this expensive technology.  Furthermore, the Government Accountability Office (GAO) found that the success of DOD’s multi-year programs in saving taxpayers money has been inconclusive at best.

TCS Action urges you to oppose any amendments to provide authority to enter into long-term contracts with liquefied coal facilities or other subsidies for this technology.  The synthetic fuels push of the early 1980’s failed and there is no need to repeat this costly mistake. Again, we urge you to oppose Senator Bunning’s amendment and any other attempts to lock taxpayers into long-term contracts with synfuel producers.   If you would like additional information please contact me or Autumn Hanna at (202) 546-8500.

Sincerely,