The Oil Shale Corporation Loan Guarantee Contract

摘要

The loan guarantee contract with The Oil Shale Corporation (Oil Shale) is generally consistent with the requirements of The Defense Production Act of 1950, as amended, (DPA). However, it is questionable whether three aspects of DPA were fully adhered to. The first relates to the requirement that financial assistance be for synthetic fuels to meet national defense needs. Although on June 27, 1981, the Secretary of Defense certified that the Department of Defense (DOD) needs the project's synthetic fuel product for the national defense, we noted that the contract suggests otherwise. The contract calls for DOD to purchase from Oil Shale fuels at market prices which are not necessarily derived from the syncrude, unless DOD exercises an option to purchase the syncrude directly. The second aspect regards whether immediate actions were taken to achieve synthetic fuels production for national defense needs. While immediate actions were taken after enactment of the DPA amendments to set a process in place for implementing the program authorized, it is questionable whether the process was as timely as possible. Due to time constraints, we were unable to analyze the potential advantages and disadvantages of alternative approaches which might have reduced the overall time frame for making awards. The policy statement regarding geographic dispersion of facilities was not met because the two awards under DPA are in the same geographic area. However, the Department of Energy (DOE) stated the facilities are the first to be able to start construction in the next year and a practical problem exists.