[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
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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.
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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.'')