Synthetic Fuels

In response to a congressional request, GAO provided updated information on the Great Plains Coal Gasification Project, including: (1) the loan default status; (2) the loan and gas pricing formula; (3) legal matters and agreements; (4) the Department of Energy's (DOE) options and actions; and (5) Great Plains operations.

GAO found that, in August 1985, the project contractor terminated its participation in the project and defaulted on the $1.54-billion DOE-guaranteed federal loan. To maintain continuity, DOE directed the plant operator to continue operations until the spring of 1986 to give DOE time to determine the plant's future. GAO found that DOE: (1) directed the plant operator to begin billing the pipeline companies purchasing gas from the plant using a substitute pricing formula to compute payments; (2) has broad authority to protect the government's interests in the project; (3) feels that a foreclosure sale could take place by late spring; (4) stated that it has no liability under current supply contracts; (5) billed the defaulting contractor for its remaining liability, which totalled about $44 million; (6) objectives are to transfer the plant's ownership, remove the federal government from the gas production business, recover as much of the federal funds provided to cover the loan default as possible, and ensure continued long-term operation of the plant; and (7) did not believe that operating the project during the transition period would result in further costs or economic risks to the government, as long as project revenues continued to exceed expenses.