[Budget of the United States Government]
[VI. Investing in the Common Good: Program Performance in Federal Functions]
[15. Energy]
[From the U.S. Government Publishing Office, www.gpo.gov]


 
                               15.  ENERGY

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                               Table 15-1.  FEDERAL RESOURCES IN SUPPORT OF ENERGY                              
                                            (In millions of dollars)                                            
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                                                                               Estimate                         
               Function 270                   1997   -----------------------------------------------------------
                                             Actual     1998      1999      2000      2001      2002      2003  
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Spending:                                                                                                       
  Discretionary Budget Authority..........     4,222     2,823     3,500     3,164     3,111     3,015     3,009
  Mandatory Outlays:                                                                                            
    Existing law..........................    -3,431    -2,830    -4,569    -3,280    -3,337    -3,347    -3,268
Credit Activity:                                                                                                
  Direct loan disbursements...............     1,029     1,992     1,562     1,401     1,337     1,255     1,451
Tax Expenditures:                                                                                               
  Existing law............................     1,960     1,965     1,990     2,070     2,045     2,040     1,880
  Proposed legislation....................  ........       -10       411       563       556       776     1,183
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  Federal energy programs contribute not just to energy security, but to 
economic prosperity and environmental protection. Funded mainly through 
the Energy Department (DOE), they range from protecting against 
disruptions in petroleum supplies, to conducting research on renewable 
energy sources, to developing advanced semiconductors. The 
Administration proposes to spend $3.5 billion for these programs. In 
addition, the Federal Government allocates about $2 billion a year in 
tax breaks mainly to encourage development of traditional and 
alternative energy sources.
   The Federal Government has a longstanding and evolving role in 
energy. Most Federal energy programs and agencies have no State or 
private counterparts and clearly involve the national interest. The 
federally-owned Strategic Petroleum Reserve, for instance, protects 
against supply disruptions and the resulting consumer price shocks, 
while Federal regulators protect public health and safety and the 
environment and ensure fair, efficient energy rates. DOE's applied 
research and development (R&D) programs in fossil, nuclear, and solar/
renewable energy and energy conservation speed the development of 
technologies, usually through cost-shared partnerships with industry, 
that provide social benefits that industry would not undertake alone. 
The programs not only open new opportunities for American industry, but 
reach beyond what the marketplace demands today, putting the Nation in a 
better position to meet the demands of tomorrow.

Corporate Management

   Because DOE spends over 90 percent of its budget through management 
and operating (M&O) contracts, it is working hard to improve its 
management practices and achieve more for less cost. DOE is undertaking 
important, Department-wide management improvement initiatives in two 
areas--contract reform and information technology management:
   In 1999, to improve contracting practices, DOE will increase 
          competition and convert all M&O contracts as they are extended 
          or completed and half of its service contracts to performance-
          based contracts; and
   In 1999, to improve its management of information technology 
          systems, DOE will eliminate year 2000 computer problems for 
          all mission critical systems and integrate information 
          technology investment and management decisions under its Chief 
          Information Officer.

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   DOE corporate management also ensures that its work is done with a 
concern for the environment, safety, and health (ES&H) of its workers 
and the public. DOE is shifting from a reactive approach to ES&H matters 
to one that stresses prevention and integrates sound ES&H management 
practices into DOE's day-to-day work.
   In 1999, DOE will implement integrated safety management 
          systems at 10 priority facilities and in all major M&O 
          contracts.
   In 1999, DOE will conduct self-assessments at all DOE sites 
          to identify ES&H deficiencies and vulnerabilities, and develop 
          and pursue corrective action plans.

Energy Resources

   DOE maintains the Strategic Petroleum Reserve (SPR) and operates 
various R&D investments to protect against petroleum supply disruptions 
and reduce the environmental impacts of energy production and use. 
Created in 1975, the SPR now has 563 million barrels of crude oil in 
underground salt caverns at four Gulf Coast sites. The SPR helps protect 
the economy and provide flexibility for the Nation's foreign policy in 
case of a severe energy supply disruption. As the United States entered 
the Persian Gulf War in 1991, for instance, President Bush announced an 
energy emergency, prompting a SPR draw-down that--along with the Allied 
nations' early, overwhelming military success--caused oil prices to drop 
by $10 per barrel (or, by about a third of their price).
   In 1999, DOE will maintain its capability to reach its SPR 
          drawdown rate of about four million barrels a day within 15 
          days and to maintain this rate for at least 90 days.
   DOE's energy R&D investments cover a broad array of resources and 
technologies to make the production and use of all forms of energy--
including solar and renewables, fossil, and nuclear--more efficient and 
less environmentally damaging. As the President's Committee of Advisors 
on Science and Technology has noted, Federal R&D support can help 
develop these technologies that benefit society by cutting emission 
rates of greenhouse gases, acid rain precursors, and air pollutants. 
These investments not only lay the foundation for a more sustainable 
energy future but also open major international markets for 
manufacturers of advanced U.S. technology.
   Energy conservation programs, for which the budget proposes $809 
million, are designed to improve the fuel economy of various 
transportation modes, increase the productivity of our most energy-
intensive industries, and improve the energy efficiency of buildings and 
appliances. They also include grants to States to fund energy-efficiency 
programs, low-income home weatherization, and the administration of 
minimum energy-efficiency standards for many major home appliances. Each 
of these activities benefits our economy and reduces emissions of carbon 
dioxide and other greenhouse gases. Many of the programs rely on 
partnerships with the private sector to leverage Federal spending with 
industry cost-sharing and to increase the likelihood that the 
technologies will be used commercially. Energy-efficiency technologies 
that have already come to market include heat-reflecting windows, high-
efficiency lights, geothermal heat pumps, high-efficiency electric 
motors and compressors, and software for designing energy-efficient 
buildings. Meanwhile, five other technologies available for at least 
five years have generated over $11 billion in total consumer and 
business energy savings to date.
   In 1999, DOE's Energy Conservation program will:
   Expand the Clean Cities program to create continuous 
          corridors of alternative transportation fuel availability in 
          and between 10 major urban centers;
   Bring together over 600 utility partners in a Climate 
          Challenge forum in which the utilities exchange lessons-
          learned on voluntary efforts to reduce greenhouse gas 
          emissions; and
   Weatherize 77,000 low-income homes.
   Solar and renewable energy programs, for which the budget proposes 
$372 million, focus on technologies that will help the Nation use its 
abundant renewable resources such as wind, solar, and biomass to produce 
low-cost, clean energy that contributes no net carbon dioxide to the 
atmosphere. The United

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States is the world's technology leader in wind energy, with a growing 
export market and production costs that have fallen below five cents per 
kilowatt-hour. In addition, photovoltaics are becoming more useful in 
remote power applications, and construction is beginning on the first 
large-scale facilities to produce ethanol from cellulosic agricultural 
waste. DOE also is coordinating the President's Million Solar Roofs 
initiative, and States, cities, and Federal agencies to date have 
pledged 470,000 solar roof installations (a mixture of solar heat/hot 
water and photovoltaics) over the next 10 years.
  In 1999, DOE's Solar and Renewable Energy program will:
   Support the President's Million Solar Roofs initiative 
          through partnerships and technical assistance so that at least 
          7,000 solar roofs will be installed in 1999;
   Complete five commercial-scale demonstrations of the use of 
          biofuels in power-plants by co-firing coal with at least five 
          percent biomass fuel; and
   Install 20 manufacturing prototype and four advanced 
          prototype 25-kW dish/engine solar thermal systems at utility/
          field sites through the Utility-Scale Joint Venture Program.
   Both the energy-efficiency and renewable energy (EERE) programs have 
established goals to ensure that their research programs are cost-
effective and high quality.
   Performance measures include:
   Continued use of cost-sharing as a major program criterion in 
          cooperative agreements and industry partnerships. In 1999, 
          DOE/EERE will maintain an industry cost-share level of over 40 
          percent, when averaged across all work with industry.
   Every EERE program will develop progress milestones and 
          estimates of energy-related program benefits annually. At 
          least 25 percent of the milestones and estimated benefits will 
          undergo external peer review each year, with a goal of having 
          all milestones and estimated benefits peer-reviewed at least 
          once every four years.
   Cumulative consumer economic savings from past and current 
          EERE programs will exceed $11 billion in 1999.
   DOE's energy efficiency and renewable energy programs form a major 
part of the Administration's Climate Change Technology Initiative, which 
aims to find ways to reduce emissions of carbon dioxide and other 
greenhouse gases in ways that benefit our economy rather than constrain 
it. (For more details, see Chapter 6, ``Promoting Research.'') For most 
of this century, America's comparative advantage in international 
competition has been technology, and DOE's research and development 
programs are designed to maintain that advantage into the next century.
   Fossil fuel energy R&D programs, for which the budget proposes $383.4 
million, help industry develop advanced technologies to produce and use 
coal, oil, and gas resources more efficiently and cleanly. Federally-
funded development of clean, highly-efficient gas-fired and coal-fired 
generating systems aim to reduce greenhouse gas emission rates, while 
reducing electricity costs compared to currently available technologies. 
The programs also help boost the domestic production of oil and natural 
gas by funding R&D projects with industry to cut exploration, 
development, and production costs.
   In 1999, DOE will:
  Demonstrate four advanced drilling and completion technology 
          systems that could ultimately add six trillion cubic feet 
          (TCF) of domestic gas reserves, including one TCF through 
          1999;
  Demonstrate four advanced production enhancement technologies 
          that could ultimately add 190 million barrels of domestic oil 
          reserves, including 30 million barrels during 1999; and
  Complete full-scale component testing of two advanced, 
          utility-scale turbines with over 60 percent efficiency when 
          used in combined cycles and with ultra-low nitrogen oxides 
          emissions.
   Nuclear fission power is a widely used technology, with the potential 
for further growth, particularly in Asia. Fission technology provides 
over 20 percent of the electric

[[Page 170]]

power consumed in the United States and about 17 percent worldwide 
without generating greenhouse gases. If fossil plants were used to 
produce the amount of electricity generated by these nuclear plants, 
more than 300 million additional metric tons of carbon would be emitted 
each year. Since World War II, the United States has been the 
international leader in all nuclear energy matters. World leadership in 
nuclear technologies and the underlying science is vital to the United 
States from the perspectives of national security, international 
influence, and global stability. R&D will help determine whether nuclear 
fission can fulfill its potential as a contributor to the goal of 
reducing greenhouse gas emissions. In 1999, DOE will:
   Work with its laboratories, universities and industry to 
          develop a competitive R&D program to address problems that may 
          prevent continued operation of current nuclear plants and fund 
          the initiative at $10 million a year, to be matched by 
          industry.
   Establish a peer-reviewed Nuclear Energy Research Initiative, 
          initially funded at $25 million a year, for investigator-
          initiated ideas to address the difficult issues of waste, 
          safety, proliferation, and cost.
   Complete a demonstration of electrometallurgical methods to 
          permanently immobilize spent nuclear fuel from the shutdown 
          Experimental Breeder Reactor-II and evaluate whether the 
          technology is a cost-effective means of processing DOE spent 
          nuclear fuels.

Environmental Quality

   DOE manages the Nation's most complex environmental cleanup program, 
the result of over four decades of research and production of nuclear 
energy technology and materials at both Federal and private sector 
locations. (For information on DOE's Defense Environmental Management 
program, see Chapter 12, ``National Defense.'') The Department must also 
develop a long-term solution to the problem that the Nation's commercial 
spent nuclear fuel poses.
   In the area of Environmental Management, the budget proposes $934 
million to reduce environmental risk and manage the waste at: (1) sites 
run by DOE's predecessor agencies that involved researching and 
producing uranium and thorium; (2) sites contaminated with uranium 
production from the 1950s to the 1970s; and (3) DOE's uranium processing 
plants that the United States Enrichment Corporation runs. In recent 
years, the clean-up and safe disposal of radioactive and hazardous 
wastes and materials has progressed substantially.
   In 1999, DOE will:
   Have over 60 percent of the contaminated sites associated 
          with 11 large facilities cleaned up, allowing these sites and 
          facilities to return to productive use;
   Make ready for disposal about 70 percent of the high-level 
          waste at its West Valley, New York site; and
   Complete surface remediation of the eight remaining Uranium 
          Mill Tailings Remedial Action (UMTRA) sites to complete this 
          part of the UMTRA project.
   DOE's Civilian Radioactive Waste Management Program oversees the 
management and disposal of spent nuclear fuel from commercial nuclear 
reactors and high-level radioactive waste from Federal cleanup sites. 
With the completion of the viability assessment for Yucca Mountain in 
1998, DOE expects to emphasize data syntheses and analysis and 
engineering and design in 1999.
   In particular, in 1999, DOE will:
   Complete a draft Environmental Impact Statement for the Yucca 
          Mountain site for public review and comment, develop a more 
          complete design for a mined geologic disposal system at Yucca 
          Mountain, and complete independent expert reviews of overall 
          repository system performance models--further crucial steps in 
          the long process that eventually will produce a DOE site 
          recommendation to the President and a DOE license application 
          to the Nuclear Regulatory Commission.

[[Page 171]]

Energy Production and Power Marketing

   The Federal Government is reshaping programs that produce, 
distribute, and finance oil, gas, and electric power. The Naval 
Petroleum Reserve, commonly known as Elk Hills, is a federally-owned oil 
and gas field located in California. Set aside early this century to 
provide an oil reserve for Navy ships, Elk Hills is no longer needed for 
that purpose, and Congress voted in 1996 to require its sale. In October 
1997, DOE opened private-sector bids for Elk Hills and identified 
Occidental Petroleum's offer of $3.7 billion as the high offer. 
Following notification of Congress, the sale should be completed by 
February 1998, marking the largest privatization in U.S. history. It 
will allow DOE to maximize the productivity of Federal oil fields, one 
of its 1998 performance objectives.
   The five Federal Power Marketing Administrations, or PMAs, (Alaska, 
Bonneville, Southeastern, Southwestern, and Western) market electricity 
generated at 129 multi-purpose Federal dams over 33,000 miles of 
federally-owned transmission lines, in 35 States. The PMAs sell about 
six percent of the Nation's electricity, primarily to preferred 
customers such as counties, cities, and publicly-owned utilities and 
power authorities. The PMAs face growing challenges as the electricity 
industry moves toward open, competitive markets. Concerns focus on 
fundamental changes that may be required to integrate the PMAs into a 
deregulated industry. As authorized by Congress, the sale of the Alaska 
Power Administration to current customers and the State of Alaska will 
be completed in 1998.
   In 1999, each PMA will operate its transmission system to 
          ensure that service is continuous and reliable (that is, that 
          the system achieves a ``pass'' rating each month under North 
          American Reliability Council performance standards).
   The Tennessee Valley Authority (TVA) is a Federal Government 
corporation and the Nation's single largest electric power generator. It 
generates four percent of the electric power in the country and 
transmits that power over its 15,000 mile transmission network to 159 
municipal utilities and rural electric cooperatives that serve some 
eight million customers in seven States.
   The budget reflects specific cost-cutting measures that TVA 
          is taking to implement its 10-Year Business Plan and improve 
          its ability to supply power at competitive prices. For 
          example, TVA will cut costs by reducing its outstanding debt 
          by $2 billion by the end of 1999. It will cut its $28 billion 
          debt in half by 2007.
   TVA is working closely with regional stakeholders to develop 
          and recommend to DOE reform proposals to include in the 
          Administration's legislation to restructure the Nation's 
          electric power industry. The proposals will redefine TVA's 
          role, while preserving the value of the Government's 
          investment in TVA.
  (For information on TVA's non-power activities, see Chapter 20, 
``Community and Regional Development.'')
   In 1999, the Agriculture Department's Rural Utilities Service (RUS) 
will make $1.7 billion in direct loans to nonprofit associations, rural 
electric cooperatives, public bodies, and other utilities in rural areas 
for generating, transmitting, and distributing electricity. Its main 
goal is to provide modern, affordable electric service to rural 
communities.
   In 1999, the RUS will:
   Ensure that RUS borrowers continue to provide service in 523 
          of the 540 poorest counties in rural America and 655 of 700 
          counties suffering the most from population out-migration;
   Upgrade 116 rural electric systems, benefitting over 1.6 
          million customers and generating about 21,000 jobs; and
   Continue to cut the high cost of electric service to rural 
          customers that results from low customer density in rural 
          areas by charging interest at or below Treasury rates for debt 
          of comparable maturity.

Energy Regulation

   The Federal Government's regulation of energy industries is designed 
to protect public health and safety and promote fair and efficient 
interstate energy markets. For example, DOE seeks to improve the 
Nation's use of energy resources through its appliance energy efficiency 
program. Federal regulations

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specify minimum levels of energy efficiency for all major home 
appliances, such as water heaters, air conditioners, and refrigerators.
   The Federal Energy Regulatory Commission (FERC), an independent 
agency within DOE, regulates the transmission and wholesale prices of 
electric power, including non-Federal hydro-electric power, and the 
transportation of oil and natural gas by pipeline in interstate 
commerce. Over the long run, FERC seeks to increase economic efficiency 
by promoting competition in the natural gas industry and in wholesale 
electric power markets. FERC's recent reforms give consumers competitive 
choices in services and suppliers that were not available just a few 
years ago. Its actions will cut consumer energy bills by $3 billion to 
$5 billion a year.
   In 1999, to evaluate the success of its initiative to restructure 
interstate natural gas and electricity markets, FERC will measure:
   Increases in the number of new products and range of 
          suppliers customers may choose from in both the natural gas 
          and electric industries;
   The extent to which natural gas and electricity prices more 
          clearly and quickly reflect changing supply and demand 
          conditions;
   The extent to which natural gas prices within each trading 
          region will tend to converge, except where there are 
          demonstrable transportation constraints or costs; and
   The reduction in wholesale electricity price differences 
          among regions.
   The Nuclear Regulatory Commission (NRC), an independent agency, 
regulates the Nation's civilian nuclear reactors, the medical and 
industrial use of nuclear materials, and the transport and disposal of 
nuclear waste to ensure public health and safety and to protect the 
environment. Safety performance reflects the collective efforts of the 
NRC and the regulated nuclear community.
   The NRC has the following 1999 goals for safety performance:
   No civilian nuclear reactor accidents, and no deaths due to 
          radiation or radioactivity releases from civilian nuclear 
          reactors;
   No radiation-related deaths due to civilian use of source, 
          byproduct, and special nuclear materials, no increase in 
          significant radiation exposures due to the loss of such 
          materials, and no increase in misadministration events causing 
          significant radiation exposure;
   No significant accidental releases of radioactive material 
          from storage and transportation of nuclear waste, and no 
          offsite release of radioactivity beyond regulatory limits from 
          low-level waste disposal sites;
   The establishment of the regulatory framework for high-level 
          waste disposal consistent with current national policy;
   No loss or theft of special nuclear materials; and
   No offsite releases from operating facilities of radioactive 
          material that may adversely impact the environment, and no 
          release of sites until satisfactorily remediated in accordance 
          with NRC criteria.

Tax Incentives

   Federal tax incentives are mainly designed to encourage the domestic 
production or use of fossil and other fuels, and to promote the vitality 
of our energy industries and diversification of our domestic energy 
supplies. The largest incentive lets certain fuel producers cut their 
taxable income as their fuel resources are depleted. An income tax 
credit helps promote the development of certain non-conventional fuels. 
It applies to oil produced from shale and tar sands, gas produced from a 
number of unconventional sources (including coal seams), some fuels 
processed from wood, and steam produced from solid agricultural 
byproducts. Another tax provision provides a credit to producers who 
make alcohol fuels--mainly ethanol--from biomass materials. The law also 
allows a partial exemption from Federal gasoline taxes for gasolines 
blended with ethanol. The Climate Change Technology Initiative proposes 
$3.6 billion in new tax incentives over five years to help reduce 
greenhouse gases (see Table S-6 in ``Summary Tables.'')