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


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                               14.  ENERGY

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                               Table 14-1.  Federal Resources in Support of Energy
                                            (In millions of dollars)
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                                                                               Estimate
               Function 270                   1999   -----------------------------------------------------------
                                             Actual     2000      2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
Spending:
  Discretionary Budget Authority..........     2,863     2,569     2,943     3,342     3,142     3,219     3,311
  Mandatory Outlays:
    Existing law..........................    -2,217    -4,473    -3,759    -3,924    -3,699    -4,012    -3,971
Credit Activity:
  Direct loan disbursements...............     1,128     1,719     1,623       N/A       N/A       N/A       N/A
  Guaranteed loans........................        16       133       176       N/A       N/A       N/A       N/A
Tax Expenditures:
  Existing law............................     1,880     1,930     1,940     1,955     1,305     1,350     1,380
  Proposed legislation....................  ........  ........       198       371       652     1,143     1,561
----------------------------------------------------------------------------------------------------------------
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 $2.9 
billion for these programs. In addition, the Federal Government 
allocates about $1.9 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, 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, frequently 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 and R&D

  Strategic Petroleum Reserve (SPR): DOE maintains SPR and invests in 
R&D to protect against petroleum supply disruptions and reduce the 
environmental impacts of energy production and use.
  SPR was authorized in 1975, in response to the oil embargoes of the 
early 1970s. The Reserve now holds 567 million barrels of crude oil in 
underground salt caverns at four Gulf Coast sites. SPR helps protect the 
economy and provide flexibility for the Nation's foreign policy in case 
of a severe energy supply disruption.
   In 2001, DOE will maintain its capability to reach a SPR 
          drawdown rate of about four million barrels a day within 15 
          days and to maintain that rate for at least 90 days.

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  Applied R&D: 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. 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.
  DOE's energy efficiency, renewable energy, and electric energy systems 
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 5, ``Promoting Research.'')

Energy Conservation

  Energy conservation programs, for which the budget proposes $851 
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, and many rely on partnerships with the private sector 
for cost-sharing and commercialization.
  Past Results: 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. These five 
technologies alone have saved consumers and industry over $33 billion in 
energy costs. In 1999, commercialization efforts were completed for 
geothermal heat pumps, and full-size electrochromic windows (which 
darken electrically) and spectrally-selective windows (which block 
ultraviolet and infrared light) were demonstrated.
  In 2000:
   Daimler-Chrysler, Ford, and General Motors have recently 
          shown the concept cars that represent the first major results 
          of the Partnership for a New Generation of Vehicles.
  In 2001:
   The Federal Energy Management Program (FEMP) will exceed the 
          original Energy Policy Act of 1992 goal of a 20-percent 
          reduction in the Government's energy use per square foot of 
          office space (relative to 1985) by reaching a 22-percent 
          reduction. (In 1999 FEMP nearly reached that goal a year ahead 
          of schedule, achieving a 19.6 percent reduction.)
   Industry will produce 45,000 vehicles that incorporate light-
          weight materials whose development was supported by DOE's 
          Office of Transportation Technologies.
   Alcohol-fuel companies will produce six million gallons of 
          cellulose-derived ethanol, based on DOE technologies.
   The Office of Industrial Technologies will see 10 of their 
          technologies commercialized, bringing the total to 144. Annual 
          energy savings to the U.S. economy from technologies they have 
          supported will reach 170 trillion Btu, with another 90 
          trillion Btu saved annually from their industry assessment and 
          technology-transfer programs.
   Local recipients of DOE grant funds will weatherize 76,000 
          low-income homes.

  Solar and Renewable Resources: Solar and renewable resources programs, 
for which the budget proposes $334 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 dramatically. 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, whose goal is to facilitate 
the installation of one million solar roof installations

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(a mixture of solar heat/hot water and photovoltaics) by 2010. Two 
programs that were formerly presented as part of Solar and Renewable 
Energy are now presented separately: electric energy systems ($48 
million) and hydrogen R&D ($23 million). Departmental energy management 
is a new line-item ($5 million).
  Past Results: The DOE wind energy program developed a new generation 
of airfoil designs for wind turbine blades, which have been incorporated 
into U.S.-made wind turbines in the 1990s, resulting in up to 30 percent 
better efficiency. The cost of wind-generated electricity has dropped 
from 35 cents per kilowatt-hour (kWh) in 1980 to less than five cents 
per kWh in 1999. (The program has set a very ambitious goal of reducing 
those costs to 2.5 cents by 2002.) From 1990 to 1999, the production 
cost per watt of photovoltaic (PV) panels has dropped by a factor of 
six, and shipments of PV panels have roughly tripled. The cost of 
geothermal electricity dropped by half from 1980 to 1990 (from 12 to six 
cents per kWh), and has dropped another one-third between 1990 and 1999, 
to less than four cents per kWh. States, cities, and Federal agencies to 
date have pledged 912,000 ``solar roofs'' over the next eight years, 
including 200,000 new pledges in 1999.
  In 2001, DOE's Solar and Renewable Resources program will:
   support the President's Million Solar Roofs initiative 
          through partnerships and technical assistance so that at least 
          40,000 solar roofs will be installed in 2001 (51,000 
          installations have been completed, an increase of 26,400 in 
          1999).
   aid in the expansion of non-hydropower renewable energy 
          capacity in the U.S. to 10.9 gigawatts.
   continue pushing the technological state-of-the-art:
          -- achieve 14 percent stable efficiency in a thin-film 
          photovoltaic module;
          -- complete a second commercial-scale test of co-firing 
          switchgrass with coal; and,
          -- reduce the cost of geothermal power from ``binary'' plants 
          to 3.5 cents/kWh.

  Electric Energy Systems: The budget proposes $48 million for these 
activities, which in previous years have been described as part of the 
solar and renewable energy budget. These programs focus on technical 
advances in electricity transmission and storage and on the efficiency 
and reliability of the nation's electrical grid. The largest activity is 
in high-temperature superconductivity R&D, which can greatly increase 
the efficiency of generators and heavy electrical machinery, and which 
can dramatically increase the carrying capacity of high-voltage 
transmission lines.
  In 1999, for the first time in the world, a high-temperature 
superconducting cable provided commercial grid electricity to a 
manufacturing plant--enough electricity to power a small town.
   In 2001, DOE will make available ``second generation'' high-
          temperature superconducting wires in continuous lengths.

  Fossil Energy R&D: Fossil fuel energy R&D programs, for which the 
budget proposes $376 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. These programs also include efforts 
to discover effective, efficient, and economical means of sequestering 
carbon dioxide. 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.
  Past Results: In 1999, DOE demonstrated a more efficient and less 
costly drilling and completion technology that could ultimately add six 
trillion cubic feet (TCF) of domestic gas reserves; demonstrated four 
advanced oil production enhancement technologies that contributed to 
adding 46 million barrels of incremental domestic oil reserves; and 
began full-scale component testing of two advanced, utility-scale 
turbines that are more efficient and less polluting than current 
technologies.
  In 2001, DOE will:

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   Demonstrate the feasibility of effectively separating 
          hydrogen and CO2 from synthetic gas using both high-
          temperature hydrogen separation membranes, and low-temperature 
          CO2 hydrate technology to meet the long-term goals of 
          providing low-cost hydrogen for high-efficiency fuel cells and 
          for concentrating CO2 into forms that can be ``sequestered,'' 
          e.g., buried or otherwise kept out of the atmosphere;
   Complete evaluation of the results of an international 
          collaborative research project on CO2 injection into deep, 
          unmineable coal seams for sequestration; and
   The advanced research materials program will test a high gas 
          flux oxygen separation device that promises more efficient, 
          less expensive gas separation techniques that can improve 
          powerplant efficiency, and can aid carbon sequestration 
          efforts.

  Nuclear Energy R&D: Nuclear fission power is a widely used technology, 
providing about 19 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 nuclear 
fission can continue to supply increasing amounts of economically-price 
energy while reducing greenhouse emissions.
  In 2001, DOE will:
   complete identification of feasible and important new reactor 
          and fuel cycle concepts to help improve the cost, performance, 
          safety, or proliferation-resistence of civilian nuclear power 
          for continued development;
   maintain the advanced radioisotope power system program and 
          facility operations and capabilities for current and future 
          space and national security missions;
   complete the National Environmental Policy Act review of the 
          environmental impacts of returning the Fast Flux Test Facility 
          (FFTF) at Hanford to operation and issue a record of decision; 
          and,
   initiate design of two facilities for processing depleted 
          uranium hexafluoride (DUF6) at Paducah, Kentucky and 
          Portsmouth, Ohio.

Environmental Quality

  Environmental Management: In the Non-Defense Environmental Management 
and Uranium Enrichment Decontamination and Decommissioning Fund, the 
budget proposes $589 million to manage the Nation's most complex 
environmental cleanup program, the result of more than five decades of 
research and production of nuclear energy technology and materials. (For 
information on DOE's Defense Environmental Management program, see 
Chapter 11, ``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; (3) DOE's inactive uranium processing plant; and, (4) the 
gaseous diffusion plants operated by the now-private United States 
Enrichment Corporation.
  Past Results: In 1999, DOE completed remediation of three sites: Ames 
Laboratory in Iowa, Sandia National Laboratory in California, and 
Princeton Plasma Physics Laboratory in New Jersey. Through 1999, a total 
of 69 sites have completed remediation.
  In 2000:
   DOE plans to complete remediation of two geographic sites.
  In 2001, DOE will:
   complete remediation at three geographic sites;
   increase the total number of geographic sites completed to 74 
          of 113; and,
   fill five canisters with high-level waste at the West Valley 
          Demonstration Project in New York for long-term storage.

  Radioactive Waste: DOE's Civilian Radioactive Waste Management Program 
oversees the management and disposal of spent nuclear fuel from 
commercial nuclear reactors and

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high-level radioactive waste from Federal cleanup sites. In 2001, DOE 
will:
   conduct public hearings on the Secretary's consideration of 
          the possible recommendation of the Yucca Mountain, Nevada site 
          for development as a repository;
   complete a review of the Site Recommendation Report that will 
          provide the technical bases for a Site Recommendation 
          Statement;
   complete a Site Recommendation Statement for the Secretary to 
          submit to the President and then the Congress, if the 
          Secretary and the President decide to recommend the site; and,
   if the President and Congress approve the Site 
          Recommendation, work on completing a License Application to 
          the Nuclear Regulatory Commission.

Energy Production and Power Marketing

  Power Marketing Administrations: The Federal Government is reshaping 
programs that produce, distribute, and finance electric power. The four 
Federal Power Marketing Administrations, or PMAs, (Bonneville, 
Southeastern, Southwestern, and Western) market electricity generated at 
127 multi-purpose Federal dams and manage 33,000 miles of federally-
owned transmission lines in 34 States. The PMAs sell about five 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 electricity industry moves toward open, competitive 
markets.
   In 2001, each PMA will operate its transmission system to 
          ensure that service is continuous, reliable, and balanced--
          that is, that the system achieves a ``pass'' rating each month 
          under the North American Electric Reliability Council 
          performance standards. Each PMA received a ``pass'' rating 
          every month during 1999. These measures are used industry-wide 
          and indicate the reliability and quality of power provided by 
          utilities.

  Tennessee Valley Authority (TVA): 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 maintain its ability to 
supply power at competitive prices. The agency is now engaged in a major 
effort to cut its debt. TVA has cut its debt by $1.3 billion in the past 
three years.
   In 2001, TVA will reduce its debt by over $750 million.
  (For information on TVA's non-power activities, see Chapter 19, 
``Community and Regional Development.'')

  Rural Utilities Service: In 2001, the Agriculture Department's Rural 
Utilities Service (RUS) will make $1.6 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 
$400 million for private sector guarantees, which will help rural 
utility borrowers position themselves to be viable in a competitive, 
deregulated environment. RUS borrowers continue to provide service in 
the poorest counties in rural America and to the majority of counties 
suffering the most from population out- migration.
   In 2001, RUS will upgrade 169 rural electric systems, which 
          will benefit over 1.8 million customers and create or preserve 
          approximately 40,250 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.

  Appliance Efficiency Rules: DOE improves the Nation's use of energy 
resources through its appliance energy efficiency pro

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gram, which specifies minimum levels of energy efficiency for major home 
appliances, such as water heaters, air conditioners, and refrigerators, 
and for commercial-scale heating and cooling components. The initial 
efficiency standards were established in legislation, and DOE 
periodically issues rules to revise those standards or to create 
standards for new categories of equipment.
  Past Results: In 1999, DOE issued six new proposed rules. In previous 
years DOE has issued eight final rules. As a result of the appliance 
efficiency rules that DOE administers, consumers are saving 
approximately $4.7 billion annually in reduced energy costs. In 2001:
   DOE will issue one final rule and three proposed rules and 
          determinations on different categories of appliances.

  Federal Energy Regulatory Commission (FERC): FERC, an independent 
agency within DOE, regulates the transmission and wholesale prices of 
electric power, including non-Federal hydroelectric power, and the 
transmission 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 to $5 billion per year.
  In 2001, FERC, in order to promote competitive, well-functioning 
energy markets, will measure the response of prices to external 
conditions in natural gas and electricity, the level of price volatility 
and changes in price volatility in electricity and gas, and the 
correlation of commodity prices across regions.

DOE Corporate Management

  Program and contract management at DOE is a Priority Management 
Objective of the Administration because more than 90 percent of the 
Department's budget is spent on contracts to operate its facilities (see 
Chapter 31, ``Improving Government Performance through Better 
Management.'')
  All DOE programs may be affected by a proposed consolidation of its 
security activities within one departmental budget account. The 
Administration anticipates transmitting a budget amendment to propose 
this consolidation in early 2000.

Nuclear Regulatory Commission (NRC)

  NRC, an independent agency, regulates the Nation's civilian nuclear 
reactors and the medical and industrial use of nuclear materials and 
their safeguards, and the disposal of nuclear waste in order to ensure 
public health and safety and to protect the environment. NRC 
international activities also promote adequate protection of U.S. 
interests in nonproliferation and the safe and secure use of nuclear 
materials in other countries. To meet the challenges of a restructured 
and deregulated electric utility industry, NRC is committed to adopting 
a more risk-informed and performance-based approach to regulation. This 
regulatory framework will focus NRC and licensee resources on the most 
safety-significant issues, while providing flexibility in how licensees 
meet NRC requirements.
  Past Results: In 1999, NRC and the U.S. nuclear industry achieved the 
same goals as listed below for 2001: zero radiation-related deaths or 
illnesses from the operation of civilian reactors or the use and 
disposal of nuclear materials, and zero significant adverse impacts on 
public health and safety and the environment from the recovery, cleanup, 
and disposal of radioactive wastes.
  In 2001:
   NRC's nuclear reactor safety goal is for there to be zero 
          radiation-related deaths and illnesses in connection with the 
          operation of civilian reactors.
   NRC's nuclear materials safety goal is for there to be zero 
          radiation-related deaths and illnesses in connection with the 
          use of nuclear materials.
   NRC's nuclear waste safety goal is for there to be zero 
          significant adverse impacts to the current and future public 
          health and safety and the environment from radioactive wastes.

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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 direct funding in the Climate Change Technology Initiative is 
complemented by a $4 billion, five-year package of tax incentives that 
will help reduce greenhouse gas emissions by spurring the purchase of 
energy-efficient products and the use of renewable energy. For homes and 
buildings, the incentives provide tax credits for the purchase of new 
energy-efficient homes; for purchase of highly energy-efficient 
equipment like heat-pump water heaters, natural-gas heat-pumps, and fuel 
cells; and, for purchases of rooftop photovoltaic and solar hot-water 
systems. For vehicles, the incentives extend the current tax credit for 
electric and fuel-cell vehicles, and create a new system of tax credits 
for hybrid vehicles. To promote renewable energy, the provisions extend 
the current tax credits for power produced from wind and ``closed loop'' 
biomass, and create new credits for certain ``open loop'' biomass 
projects, methane from landfills, and co-firing of biomass with coal in 
existing powerplants. To encourage more industrial use of distributed 
power generation, a uniform 15-year cost-recovery period is proposed for 
distributed-power property.
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