[Request for Opinion on the Legality of U.S. Synthetic Fuel Corp.'s Price Guarantees]

In response to a congressional request, GAO gave its opinion on the legality of the U.S. Synthetic Fuels Corporation's providing price guarantees for a coal gasification project under the Energy Security Act. GAO found that the Corporation has the authority to provide the project with requested financial assistance as long as such aid does not effect a transfer of responsibility from the Department of Energy to the Corporation and the project meets the act's requirements for assistance. If price guarantees are awarded, the Corporation must charge the dollar amount estimated to be the Corporation's maximum potential liability under such an award against its obligational ceiling at the time the financial agreement is entered into. While it would be possible for the Corporation to draft a price guarantee agreement with the project's sponsor which is compatible with Energy's commitment to the sponsor, the Corporation must carefully structure its agreement to avoid any potential conflict with Energy's supervision of its loan guarantee agreement. GAO concluded that Energy and the Corporation must retain jurisdiction over their respective agreements for financial assistance.