[Budget of the United States Government]
[III. Creating a Better Government]
[5. Energy]
[From the U.S. Government Publishing Office, www.gpo.gov]
5. ENERGY
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Table 5-1. Federal Resources in Support of Energy
(In millions of dollars)
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Estimate
Function 270 2000 -----------------------------------------------------------
Actual 2001 2002 2003 2004 2005 2006
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Spending:
Discretionary Budget Authority.......... 2,706 3,095 2,773 2,869 3,100 3,199 3,299
Mandatory Outlays:
Existing law.......................... -4,019 -3,701 -3,296 -3,150 -3,704 -3,626 -3,582
Credit Activity:
Direct loan disbursements............... 1,423 1,896 2,246 2,461 2,735 2,817 2,907
Guaranteed loans........................ 152 52 105 100 100 100 100
Tax Expenditures:
Existing law............................ 2,030 2,100 2,120 1,930 1,620 1,770 1,890
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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 nearly
$2.8 billion for these programs. In addition, the Federal Government
allocates about $2.1 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. The federally-owned Strategic Petroleum Reserve, for
instance, protects against supply disruptions and the resulting price
shocks. DOE's applied research and development (R&D) programs in fossil,
nuclear, solar/renewable energy, and energy conservation are intended to
speed the development of technologies to use energy more cleanly or
efficiently, often through cost-shared partnerships with industry.
Energy Reserves
Strategic Petroleum Reserve (SPR): DOE maintains SPR to protect
against petroleum supply disruptions and reduce the economic impact of
any disruptions. SPR was authorized in 1975, in response to the oil
embargoes of the early 1970s. The Reserve now holds 541 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, the two-million barrel Northeast Home Heating Oil Reserve was
established. Operated by the private sector, the Reserve helps ensure
adequate supplies of heating oil in the event that colder than normal
winters occur in the Northeastern United States. The President has
committed to continue support for the Reserve.
In 2002, 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
more environmentally sound. The applied R&D programs fund research at
DOE's national labs and engage in a variety of partnerships with
industry for technology development and deployment.
Energy Conservation: DOE's energy conservation programs, for which the
budget proposes $795 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. The
weatherization program is slated for a significant increase in 2002, as
part of the President's commitment to increase funding for the program
by $1.4 billion over 10 years. Each of these activities benefits our
economy and the environment. Many rely on partnerships with the private
sector for cost-sharing and commercialization.
In 2002:
The world's first automotive-scale (50 kilowatt, (kW)), fully
integrated, gasoline-powered fuel-cell system will be
delivered by a contractor to the DOE test facility at Argonne
National Laboratory. Validation of low-cost ($10/kW) fuel-cell
technology will be completed.
Initial testing will be completed on light trucks with
advanced diesel engines that provide a 35 percent improvement
in fuel economy while meeting Tier 2 emissions standards.
The Office of Industrial Technologies will continue R&D
partnerships with energy-intensive industries, resulting in an
estimated additional $200 million energy savings and
productivity gain.
Local recipients of DOE Weatherization Assistance program
grant funds will weatherize approximately 116,000 low-income
homes, improving their energy efficiency, and safety, and
reducing the residents' energy bills. This is an increase of
approximately 51,000 homes over 2001.
Solar and Renewable Resources: Solar and renewable resources programs
focus on technologies that will help the Nation use its renewable
resources such as wind, solar, and biomass to produce energy. 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 (PV) are becoming more useful in remote power
applications, and new biofuels plants are being constructed.
Solar and renewable energy will benefit from the Administration's
legislative proposal to open a small part of the Arctic National
Wildlife Refuge (ANWR) to oil and gas leasing and production. This
process will generate bidding bonuses for the Federal government
estimated at $1.2 billion, to become available in 2004, which will be
made available over a series of years to increase the funding for solar
and renewable energy technologies.
In 2002:
A 100 kW cold-weather wind-turbine, winner of an ``R&D 100''
award in 2000, will begin experimental operation and testing
in an Alaskan village. These turbines are expected to provide
reliable power options for small villages and remote
installations in extremely harsh arctic environments.
DOE's biofuels program will complete development of a yeast
that can ferment most biomass-derived sugars to meet the cost
goals for production of ethanol from cellusic feedstocks.
The PV program will develop a 17-percent efficient cadmium-
telluride thin-film PV cell. This laboratory achievement will
be about seven percent more efficient than the best available
commercial thin-film PV units of any type.
The biopower program will complete technical feasibility
testing of using closed-loop, short-rotation wood (fast-
growing willows) as a dedicated fuel source for power
generation at two retrofitted coal power plants in New York
State.
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Electric Energy Systems: These activities are managed by DOE's Office
of Energy Efficiency and Renewable Energy. The 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 dramatically increase the carrying capacity of high-voltage
transmission lines.
In 2002, operational testing will be completed on the world's
first commercial-service superconducting utility power cable.
This single cable has four times the electrical capacity of
the copper cable it replaced, and will supply power to 14,000
residents in a Detroit neighborhood.
Fossil Energy R&D: Fossil fuel energy R&D programs, for which the
budget proposes $449 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 aims to reduce 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. In the past, the oil and gas program has funded research on
activities that had already been commercialized by the private sector.
The budget targets funds to projects that will not compete with private
sector investment and will improve the longer-term technologies to
foster increased, environmentally sound, domestic energy production.
Through a new $150 million Clean Coal Power initiative, the Department
will create an industry consortium to direct research toward the most
critical barriers to expansion of coal use for power generation in the
United States. This cooperative effort, totaling more than $2 billion
over 10 years, will require industry to share in the cost of the
research work, with the industry share increasing as technologies
approach commercial stages. Participating companies will be asked to
take part in selection of technologies and evaluate the progress of R&D
efforts, with the goal of accelerating development and deployment of
coal technologies that will economically meet environmental standards.
In 2002, DOE will:
develop a new consortium of coal companies, utilities, and
generating equipment vendors to direct coal research toward
the most important problems faced by the entire industry;
complete technology evaluations to make available, by 2003,
advanced control technologies seeking to achieve cost
competitive, deep nitrogen oxides (NOx) reductions in power
plant flue gas emissions in response to the Clean Air Act
standards, at 25 percent lower cost than available technology;
and
conduct integrated research and field demonstrations of carbon
dioxide (CO2) sequestration in deep, unminable coal
seams and depleted oil reservoirs and develop sufficient data
to determine reservoir integrity and fate of injected
CO2. If the CO2 does not escape the
formations where it is injected, a safe and economical method
of disposal might be developed based on this knowledge.
Nuclear Energy R&D: Twenty percent of our Nation's electricity and
about 17 percent worldwide is made today with nuclear power plants. 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-priced
energy while reducing emissions.
In 2002, DOE will:
continue peer-reviewed, competitively-selected R&D projects
that address nuclear energy's cost-effectiveness and
acceptability, including plant economics, operational safety,
proliferation, and waste disposal;
maintain the advanced radioisotope power system program and
facility operations and capabilities for current and future
space and national security missions, and explore fission
power systems to support future human exploration of space;
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manage its resources and capabilities at Nuclear Energy (NE)
managed sites to ensure that the Department can meet its
mission requirements, that the NE sites are maintained in a
safe, secure, environmentally-compliant and cost-effective
manner, and ensure the protection of the workers, the public,
and the environment; and
continue to provide, through the isotope program, a supply of
radioactive and stable isotopes for medical and other
research.
Environmental Quality
Environmental Management: For the Non-Defense Environmental Management
and Uranium Facilities Maintenance and Remediation programs, the budget
proposes $592 million to manage part of 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. 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 facilities; and 4) the Paducah Gaseous Diffusion Plant
operated by the United States Enrichment Corporation. (For information
on DOE's Defense Environmental Management program and performance
measures, see Chapter 2, ``National Defense.'')
Office of Civilian Radioactive Waste Management
This office is responsible for ensuring the safe, geologic disposal of
radioactive wastes from civilian and defense uses. The budget increases
funding for DOE's Civilian Radioactive Waste Management Program in order
to help the program stay on schedule toward a formal Site Recommendation
in 2002, and a formal License Application at the end of calendar year
2003. In addition, the budget request will enhance the program's effort
to achieve a competitive design effort, leading to a robust license
application. This design effort will include: 1) an analysis of concepts
that span the full range of repository operating conditions, and 2) the
development of modular concepts that will lead to outyear budgetary
savings for the program.
In addition, the Administration supports efforts to use the nuclear
utilities' budgetary receipts for their intended purposes. DOE will
submit to Congress an updated report regarding alternative approaches to
finance and manage the program by June 30, 2001, as directed by the
House report language accompanying the 2001 Energy and Water Development
Appropriations Act. DOE will identify in this report models of effective
organizations that might benefit the operation of its civilian program.
Energy Production and Power Marketing
Power Marketing Administrations: The Federal Government operates
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
131 multi-purpose Federal dams and related facilities, and manage more
than 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 2002, each PMA's goal is to 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. 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 one of the five largest electric power companies in the
country. It generates three percent of the Nation's electric power and
transmits that power over its 17,000-mile transmission network to 158
municipal utilities and rural electric cooperatives that serve eight
million people in seven States. TVA also promotes economic activity in
the area it serves by operating a complex river management system that
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provides navigation, flood control, hydropower, water supply, and
recreation services.
The Nation's electric power industry is changing so that customers
benefit from competition in the industry. To prepare for that change,
TVA is cutting its costs wherever possible. In the past four years, TVA
has paid down its outstanding debt by over $1.7 billion, roughly six
percent.
In 2002, TVA will:
reduce its debt by an estimated $260 million; and
keep the navigable waterway TVA manages on the Tennessee River
open to commercial traffic 99 percent of the time, up from the
94 percent level TVA achieved in 2000.
Rural Utilities Service: In 2002, the Agriculture Department's Rural
Utilities Service (RUS) will make $2.6 billion in direct and guaranteed
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 is $100 million loans originated by the private
sector and guaranteed by RUS, which will help rural utility borrowers
better position themselves in a competitive, deregulated environment.
RUS will also make $495 million in direct loans to companies providing
telecommunications services to rural communities, and $27 million in
grants and $400 million in loans for distance learning, telemedicine,
and broadband technology. RUS borrowers continue to provide service in
some of the poorest counties in rural America and to the majority of
counties suffering from recent population out-migration.
In 2002, RUS will:
upgrade 187 rural electric systems, which will benefit over
2.8 million customers and create or preserve approximately
60,000 jobs;
provide more than 50 telecommunication systems with funding
for advanced telecommunications services benefiting more than
300,000 rural customers by providing broadband and high-speed
Internet access; and
provide distance learning facilities to 300 schools,
libraries, and rural education centers, and telemedicine
equipment to 150 rural health care providers, benefiting
millions of residents in rural America.
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 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.
In 2002, DOE will issue a final rule for residential air
conditioning products for specialized applications, and will
begin rulemakings for residential furnaces and boilers,
commercial air conditioning products, and electrical
distribution transformers--all of which are scheduled to be
completed by the end of 2004.
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.
In 2002, in order to promote competitive, well-functioning energy
markets, FERC 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.
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Nuclear Regulatory Commission (NRC): NRC, an independent agency,
regulates the Nation's civilian nuclear reactors, the medical and
industrial use of nuclear materials and their safeguards, and the
disposal of nuclear waste to ensure adequate protection of the public
health and safety, to promote the common defense and security, and to
protect the environment. NRC international activities support 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.
The budget increase accommodates the increasing demand NRC is facing
to renew nuclear power plant licenses for an additional 20 years of
plant operations, approve reactor license transfers associated with
electricity industry restructuring, and support industry initiatives to
increase the Nation's electricity supply. In addition, the budget
proposes to reduce the burden on licensees to pay fees for NRC expenses
that do not provide a direct benefit to them. In 2002, the NRC will
recover approximately 96 percent of its total costs through licensee
fees, and this will decline to 90 percent by 2005.
In 2002:
NRC's nuclear reactor strategic goal is to prevent radiation-
related deaths and illnesses, promote the common defense and
security, and protect the environment in the use of civilian
nuclear reactors;
NRC's nuclear materials strategic goal is to prevent
radiation-related deaths and illnesses, promote the common
defense and security, and protect the environment in the use
of source, by-product, and special nuclear material; and
NRC's nuclear waste strategic goal is to prevent significant
adverse impacts from radioactive waste to the current and
future public health and safety and the environment, and
promote the common defense and security.
Management and Procurement Reform
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. DOE
has made insufficient use of competitive, performance-based contracts,
and the Administration will increase the use of such contracts for DOE
in 2002.
Industry cost-sharing requirements in DOE's applied R&D programs have
not been uniformly implemented, and in some programs as few as 20
percent of the projects obtain any cost-sharing. In 2002, DOE's applied
energy R&D programs will be implementing a rigorous and consistent cost-
sharing policy that applies to all contracts, grants, cooperative
agreements, or other funding mechanisms for industry-performed R&D. The
cost-sharing policy will provide for an absolute minimum requirement for
industry cost-sharing in any project, with graduated steps based on
technological maturity and risk, up to a requirement for more than 50
percent cost-sharing for demonstration or commercialization activities.
The policy will also include explicit consideration of factors such as
estimated time to a commercialization decision, technical progress and
change in risk as a result of previous funding phases, and existence of
external incentives for industry to perform similar work.
More aggressive and consistent cost-sharing will reduce corporate
subsidies, free up funds for other priority projects, and create an
internal incentive for industry to terminate projects that are not
making adequate progress or are not meeting performance goals.
DOE will also better define its performance measures across the
Department, and particularly in its R&D programs. In the past, some
performance measures were outside the scope of the Department's
influence and gave a distorted vision of the role of the Government and
its ability to affect outcomes (e.g., ``Ensure a competitive electricity
industry is in place that can deliver adequate and affordable supplies
with reduced environmental
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impact.'') Future performance measures will better match the strategic
goals identified by DOE.
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 existing 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.
Provide Tax Credit for Residential Solar Energy Systems: Current law
provides a 10-percent investment tax credit to businesses for qualifying
equipment that uses solar energy to generate electricity, to heat or
cool or provide hot water for use in a structure, or to provide solar
process heat. No credit is available for non-business purchases of solar
energy equipment. The Administration proposes a new tax credit for
individuals that purchase solar energy equipment used to generate
electricity (PV equipment) or heat water (solar water heating equipment)
for use in a dwelling unit. The credit would be available only for
equipment used exclusively for purposes other than heating swimming
pools. The credit would be equal to 15 percent of the cost of the
equipment and its installation. The credit would be nonrefundable and
the lifetime maximum credit allowed to an individual would be limited to
$2,000 for PV equipment and $2,000 for solar water heating equipment.
The credit would apply only to solar water heating equipment placed in
service after December 31, 2001, and before January 1, 2006, and to PV
systems placed in service after December 31, 2001, and before January 1,
2008.
Extend and Modify the Tax Credit for Producing Electricity from
Certain Sources: Current law provides taxpayers a 1.5-cent-per-kilowatt-
hour tax credit, adjusted for inflation after 1992, for electricity
produced from wind, closed-loop biomass (organic material from a plant
grown exclusively for use at a qualified facility to produce
electricity), and poultry waste. The electricity must be sold to an
unrelated third party and the credit is limited to the first 10 years of
production. The current credit applies only to facilities placed in
service before January 1, 2002. The Administration proposes to extend
the credit for electricity produced from wind and biomass to facilities
placed in service before January 1, 2005. In addition, eligible biomass
sources would be expanded to include certain biomass from forest-related
resources, agricultural sources, and other specified sources. Special
rules would apply to biomass facilities placed in service before January
1, 2002. Electricity produced at such facilities from newly eligible
sources would be eligible for the credit only from January 1, 2002,
through December 31, 2004, and at a rate equal to 60 percent of the
generally applicable rate. Electricity produced from newly eligible
biomass co-fired in coal plants would also be eligible for the credit
only from January 1, 2002, through December 31, 2004, and at a rate
equal to 30 percent of the generally applicable rate.
Modify Treatment of Nuclear Decommissioning Funds: Under current law,
deductible contributions to nuclear decommissioning funds are limited to
the amount included in the taxpayer's cost of service for ratemaking
purposes. For deregulated utilities, this limitation may result in the
denial of any deduction for contributions to a nuclear decommissioning
fund. The Administration proposes to repeal this limitation. Also under
current law, deductible contributions are not permitted to exceed the
amount the IRS determines to be necessary to provide for level funding
of an amount equal to the taxpayer's post-1983 decommissioning costs.
The Administration proposes to permit funding of all decommissioning
costs (including pre-1984 costs) through deductible contributions. The
IRS would continue to determine the amount necessary to provide for
level funding of the taxpayer's decommissioning costs. The
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Administration also proposes to permit a nuclear decommissioning fund
to receive transfers from certain funds that do not qualify as nuclear
decommissioning funds for Federal tax purposes (nonqualified funds).
Under this proposal, a taxpayer would be permitted to transfer amounts
that have been irrevocably set aside in a nonqualified fund pursuant to
the requirements of a State or Federal agency exclusively for the
purpose of funding the decommissioning of the nuclear power plant. Any
portion of the amount transferred that exceeds the amount deducted (or
excluded from the taxpayer's gross income) on account of transfers to
the nonqualified fund would be allowed as a deduction ratably over the
remaining useful life of the nuclear power plant. These proposals would
be effective for taxable years beginning after December 31, 2001.