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


 
                               16.  ENERGY

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                               Table 16-1.  FEDERAL RESOURCES IN SUPPORT OF ENERGY
                                            (In millions of dollars)
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                                                                               Estimate
               Function 270                   1998   -----------------------------------------------------------
                                             Actual     1999      2000      2001      2002      2003      2004
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Spending:
  Discretionary Budget Authority..........     3,077     2,888     2,836     3,169     3,020     2,992     2,965
  Mandatory Outlays:
    Existing law..........................    -2,440    -3,184    -5,142    -4,404    -4,336    -4,244    -4,281
Credit Activity:
  Direct loan disbursements...............       992     1,592     1,295       N/A       N/A       N/A       N/A
  Guaranteed loans........................  ........  ........  ........       N/A       N/A       N/A       N/A
Tax Expenditures:
  Existing law............................     1,535     1,575     1,625     1,630     1,635     1,450     1,200
  Proposed legislation....................  ........         1       379       671       660       787     1,040
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N/A = Not available

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  Federal energy programs contribute to energy security, 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 cleaning up DOE facilities contaminated by years of nuclear-
related research activities. The Administration proposes to spend $2.8 
billion for these programs. In addition, the Federal Government 
allocates about $1.6 billion a year in tax benefits, 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 (SPR), for instance, protects against 
supply disruptions and the resulting consumer price shocks, while 
Federal regulators protect public health and the environment and ensure 
fair, efficient energy rates. DOE's applied research and development 
(R&D) programs in fossil, nuclear, solar/renewable energy and energy 
conservation speed the development of technologies, usually through 
cost-shared partnerships with industry. 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.

Energy Resources

  DOE maintains the SPR and invests in R&D to protect against petroleum 
supply disruptions and reduce the environmental impacts of energy 
production and use. The SPR was created in 1975 and now holds 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.
   In 2000, DOE will maintain its capability to reach its SPR 
          drawdown rate of about four million barrels a day within 15 
          days and to maintain that 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

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environmentally damaging. 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 and enhance our 
Nation's energy security.
  Energy conservation programs, for which the budget proposes $838 
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 and low-income home weatherization. Each of these activities 
benefits our economy and reduces emissions of carbon dioxide and other 
greenhouse gases. Many rely on partnerships with the private sector for 
cost-sharing and commercialization. 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.
  In 2000, DOE's Energy Conservation program will:
   demonstrate low-cost, high-volume manufacturing processes for 
          key components of fuel cells for ultra-clean automobiles;
   complete the development of advanced industrial turbines for 
          efficient in-plant generation of electricity and steam;
   arrange for $400 million worth of energy-efficiency 
          improvements at Federal facilities to be financed through 
          regional and national energy-savings performance contracts; 
          and
   weatherize 70,000 low-income homes.
  Solar and renewable energy programs, for which the budget proposes 
$399 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 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 new biofuels 
plants are being constructed. DOE also is coordinating the President's 
Million Solar Roofs initiative, which was introduced in the 1999 Budget, 
and States, cities, and Federal agencies to date have pledged 710,000 
solar roof installations (a mixture of solar heat/hot water and 
photovoltaics) over the next nine years.
  In 2000, 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 
          29,000 solar roofs will be installed in 2000; and
   complete demonstrations of full-scale biomass co-firing with 
          coal, commercial-scale conversion of agricultural wastes to 
          ethanol, an advanced geothermal power cycle, and dispatchable 
          power from a solar ``power tower.''
  DOE's energy efficiency and renewable energy programs form a major 
part of the Administration's Climate Change Technology Initiative, which 
is intended 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 7, ``Promoting Research.'')
  Fossil fuel energy R&D programs, for which the budget proposes $364 
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. 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 2000, DOE will:
   complete demonstration of new tertiary oil recovery 
          technologies;
   begin testing the first commercial prototype solid-oxide fuel 
          cell for distributed power generation; and

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   verify the design of a fuel-cell/turbine hybrid power plant.
  Nuclear fission power is a widely used technology, providing over 20 
percent of the electric 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. Continued R&D addressing the issues that 
threaten the acceptance and viability of nuclear fission in the United 
States will help determine whether fission can fulfill its potential for 
supplying economically-priced energy while reducing greenhouse gas 
emissions.
  In 2000, DOE will:
   receive Nuclear Regulatory Commission approval to test 
          advanced ``chip''-based nuclear plant instrumentation and 
          control technology for increased reliability and safety;
   complete validation of artificial intelligence software for 
          steam-tube inspection;
   and identify new reactor and/or fuel-cycle concepts that may 
          improve the cost, performance, safety, or proliferation-
          resistance of civilian nuclear power.

Environmental Quality

  In Non-defense Environmental Management, the budget proposes $331 
million to manage the Nation's most complex environmental cleanup 
program, the result of more than four decades of research and production 
of nuclear energy technology and materials. (For information on DOE's 
Defense Environmental Management program, see Chapter 13, ``National 
Defense.'') This will reduce environmental risk and manage the waste at: 
(1) sites run by DOE's predecessor agencies; (2) sites contaminated by 
uranium and thorium production from the 1950s to the 1970s; and (3) 
DOE's uranium processing plants operated by the recently privatized 
United States Enrichment Corporation.
  In 2000, DOE will:
   complete remediation at four geographic sites;
   increase the total number of geographic sites completed to 76 
          of 113; and
   make ready for disposal about 87 percent of the high-level 
          waste at the West Valley, New York site.
  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. 
Following completion of the Viability Assessment for storing nuclear 
waste in Yucca Mountain, DOE plans to:
   complete an Environmental Impact Statement (EIS) in 2000 for 
          use of the Yucca Mountain site;
   complete scientific and technical work identified in the 
          Viability Assessment as necessary for the Secretary to make a 
          nuclear waste site recommendation to the President in 2001; 
          and
   if the site is determined to be suitable for a permanent 
          nuclear waste repository, submit a license application to the 
          Nuclear Regulatory Commission in 2002.

Energy Production and Power Marketing

  The Federal Government is reshaping programs that produce, distribute, 
and finance oil, gas, and electric power. In February, 1998, DOE sold 
the Naval Petroleum Reserve, commonly known as Elk Hills, for $3.7 
billion--the largest privatization of a federal entity in U.S. history. 
Elk Hills had been set aside early this century to provide an oil 
reserve for Navy ships, but in recent years was being operated by DOE as 
a commercial oil and gas field because it was no longer needed for its 
original purpose.
  The four Federal Power Marketing Administrations, or PMAs, 
(Bonneville, Southeastern, Southwestern, and Western) market electricity 
generated by 127 multi-purpose Federal dams and manage 33,000 miles of 
federally-owned transmission lines in 34 States. The PMAs sell about six 
percent of the Nation's electricity, primarily to preferred customers 
such as counties, cities, and publicly-owned utilities. The PMAs face 
growing challenges as the

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electricity industry moves toward open, competitive markets.
   In 2000, 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 17,000 mile transmission network to 159 
municipal utilities and rural electric cooperatives that serve some 
eight million customers in seven States.
  TVA is responding to changes that are bringing greater competition to 
the electric power industry by taking steps to increase its ability to 
supply power at competitive prices. The agency is now engaged in a major 
effort to cut its debt in half, from $28 billion in 1997 to $14 billion 
in 2009.
   In 2000, TVA will reduce its debt by $700 million.
  (For information on TVA's non-power activities, see Chapter 21, 
``Community and Regional Development.'')
  In 2000, the Agriculture Department's Rural Utilities Service (RUS) 
will make $1 billion in direct loans to rural electric cooperatives, 
public bodies, nonprofit associations, and other utilities in rural 
areas for generating, transmitting, and distributing electricity. Its 
main goal is to finance modern, affordable electric service to rural 
communities. Included within this funding amount is a new $400 million 
Treasury rate loan proposal, which will help rural utility borrowers 
position themselves to be viable in a competitive, deregulated 
environment RUS borrowers continue to provide service the poorest 
counties in rural America and counties suffering the most from 
population out-migration.
   In 2000, RUS will upgrade 130 rural electric systems, 
          benefitting over 1.6 billion customers and generating nearly 
          21,000 jobs.

Energy Regulation

  The Federal Government's regulation of energy industries is designed 
to protect public health, achieve environmental and energy goals, and 
promote fair and efficient interstate energy markets. DOE improves the 
Nation's use of energy resources through its appliance energy efficiency 
program, which specifies minimum levels of energy efficiency for 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 hydroelectric power, and 
the transportation of oil and natural gas by pipeline in interstate 
commerce. FERC promotes competition in the natural gas industry and in 
wholesale electric power markets. Recent FERC reforms to give consumers 
competitive choices in services and suppliers will cut consumer energy 
bills by $3 billion to $5 billion per year.
  In 2000, DOE will issue three final rules and three proposed rules and 
determinations on different categories of applicants. FERC will measure 
the extent to which natural gas and electricity prices more clearly and 
quickly reflect changing supply and demand conditions and will measure 
the reduction in wholesale electricity price differences among regions, 
to evaluate the success of its initiative to restructure interstate 
natural gas and electricity markets.

DOE Corporate Management

  Acquisition Reform at the Department of Energy is a high priority of 
the Administration. Because more than 90 percent of the Department's 
budget is spent on contracts to operate its facilities, improving 
management and oversight of these contracts can improve mission support 
and save taxpayer dollars. DOE has established a Department-wide system 
to evaluate and use past performance data for contractor selections and 
will work with OMB to achieve short-term PBSC successes in 2000 and 
create incentives for more conversions.

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Nuclear Regulatory Commission (NRC)

  NRC, an independent agency, regulates the Nation's civilian nuclear 
reactors and the medical and industrial use of nuclear materials to 
ensure public health and safety and to protect the environment. NRC 
international activities also promote U.S. interests in nonproliferation 
and the safe and secure use of nuclear materials in other countries. NRC 
safety performance goals for 2000 include:
   no civilian nuclear reactor accidents;
   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.

Tax Incentives

  Federal tax incentives are mainly designed to encourage the domestic 
production of fossil and other fuels, and to promote the vitality of our 
energy industries and diversification of our domestic energy supplies. 
Certain fuel producers many 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 to help reduce greenhouse gases (see Table 33-4). These 
incentives provide for purchases of energy-efficient homes and heating/
cooling equipment, electric and hybrid vehicles, rooftop solar systems, 
and combined heat-and-power systems. They also extend wind and biomass 
tax credits.