Message to the Congress Transmitting Proposed Legislation To Implement the National Synthetic Fuels Program

May 25, 1984

To the Congress of the United States:

Today I am pleased to transmit to the Congress the ``Energy Security Reserve Amendments of 1984,'' legislation to implement the new synthetic fuels policy that I announced on May 14, 1984.

This legislation reaffirms the Nation's commitment to a long-range program of developing a private-sector synthetic fuels industry while recognizing that improvements in the energy outlook can permit us to achieve a major reduction in Federal spending through prudent realignments in the program.

When the Congress established the Synthetic Fuels Corporation in 1980, making available a total of $19 billion for related activities, oil prices were projected to reach $75 to $125 per barrel by 1990; America was dependent on imported oil for 18 percent of its energy supply; and the memories of gas lines lingered.

Synthetic fuels held promise as an economically competitive alternative to traditional fuel sources. Proponents of the current law argued that the Federal program would have little or no impact on the deficit and established an extremely rapid and ambitious schedule for developing a commercial synthetic fuels industry.

In the intervening years, the energy outlook has improved dramatically. The price of imported crude oil has declined more than 25 percent since I took office, and our oil imports are down 33 percent compared to 1980 levels. The Strategic Petroleum Reserve, at nearly 400 million barrels, provides more than 80 days protection against a total disruption of our imports and over 200 days if OPEC halted supplies -- in 1980, it provided less than 17 days protection. The energy conservation efforts of the American people have far exceeded expectations, further enhancing our energy situation.

As a consequence of these major changes, the presumptions that underlie the current synthetic fuels program have proven at variance with the realities of the market place. It is now apparent that developing a commercial synthetic fuels industry at the pace envisioned by the Energy Security Act of 1980 would require enormous direct budget outlays that would not be offset by any economic benefits.

Proceeding down the path set by current law would thus result in the inefficient use of billions of dollars. It would also grossly distort the market place for synthetic fuels, possibly creating an industry that would be permanently dependent on government subsidies, not the commercially-viable industry envisioned by Congress in 1980.

The ``Energy Security Reserve Amendments of 1984'' reflect an effort to strike a balance between avoiding wasteful expenditures and preserving an appropriate national synthetic fuels program. The legislation would rescind $9 billion of the $19 billion originally appropriated. It would also require that projects supported by use of the remaining funds be limited to those that produce fuels whose prices will not be significantly above projected market prices of competing fuels.

At the same time, the legislation leaves completely intact the administrative structure for the synthetic fuels program. By continuing to use the Synthetic Fuels Corporation, we can avoid unnecessary delay and disruption in the national effort of ensuring synthetic fuels commercialization.

Swift passage of this legislation will make a major contribution to reducing the Federal deficit in the years ahead while putting the synthetic fuels program on a sounder footing.

I urge the Congress to act expeditiously in its consideration of this legislation.

Ronald Reagan

The White House,

May 25, 1984.

Note: The text of the proposed legislation was included in the White House press release.