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Weapons of Mass Destruction (WMD)

[CRS Issue Brief for Congress]

96020: The Department of Energy's FY1997 Budget

Updated December 3, 1996

Marc Humphries, Coordinator
Environment and Natural Resources Policy Division

CONTENTS

SUMMARY

MOST RECENT DEVELOPMENTS

BACKGROUND AND ANALYSIS

Major Policy Proposals
Renewable Energy Budget
Energy Efficiency Budget

National Security Programs

Stockpile Stewardship
Nonproliferation
Nuclear Energy and Waste Disposal
Civilian Radioactive Waste Disposal
Environmental Management
Nuclear Energy Research and Development
DOE National Laboratories
Fossil Fuel Research, Development, and Demonstration and Clean Coal
The Naval Petroleum Reserves
DOE Budget Table


SUMMARY

The Department of Energy (DOE) and its funding continued to receive close scrutiny throughout the 104th Congress. While there appeared to be strong support for retaining DOE in some quarters, legislation to abolish it was introduced in the House and the Senate in the second session. A Senate proposal (S. 1678) would have transferred the majority of DOE's programs (National Security and Environmental Management) to the Department of Defense.

The Administration's FY1997 budget request of $16.3 billion for DOE was slightly less than the final FY1996 appropriations. The House and Senate voted to fund DOE programs at $15.3 billion and $16.1 billion respectively. The Administration has pledged to continue streamlining DOE and to reduce its costs by $14.1 billion ($8.4 billion in program reforms, and $5.7 billion from the sale of assets) over 5 years. Some of these proposed savings were realized in FY1996.

DOE continues to stress that it places its highest priorities with the renewable energy and energy conservation programs. The Administration sought $715 million for FY1997, for conservation, an increase of 37% over FY1996 funding.

The FY1997 budget request for DOE's national security programs was $5.2 billion, $340 million over last year's funding. The Nuclear Stockpile management ($1.8 billion) and stewardship ($1.6 billion) account for the majority of spending in this category. The goal of DOE Science and Technology programs is to lay the scientific basis for development of advanced energy technologies. The request for these programs, except basic energy sciences, was slightly higher than FY1996 appropriations at $2.56 billion.

The FY1997 budget request would have provided $400 million for DOE's program to develop a permanent repository for commercial nuclear reactor spent fuel and defense-related high-level nuclear waste. According to the DOE, that funding level would have allowed the Department by 1999 to complete a "viability assessment" of the proposed national disposal site at Nevada's Yucca Mountain. Nearly flat was the Administration's request for Environmental Management programs at $5.9 billion.

The Administration proposed a major reduction for fossil fuel R&D in FY1997, reducing its request by about $70 million, or 17%, less than FY1996 appropriations. Four of the five power marketing administrations (PMAs) are funded annually with appropriations, and related receipts are deposited in the federal Treasury. The fifth PMA, Bonneville Power, has been on a self-financed basis since 1974. Sale of the Alaska Power Administration (APA) had already been authorized. H.R. 310 and H.R. 1801 would have allowed the Secretary of Energy to divest the federal government of all the PMAs.

DOE budget authority is considered in two separate appropriations bills: Energy and Water Development, and Interior and Related Agencies.

On September 30, 1996, legislation for Energy and Water appropriations (P.L. 104-206) and for Interior appropriations (included in the Omnibus Consolidated Appropriations Act, P.L. 104-208) was enacted.


MOST RECENT DEVELOPMENTS

President Clinton sent Congress his $16.3 billion FY1997 budget request for the Department of Energy (DOE) on March 19, 1996. Many provisions in the budget reflected the Administration's objective to continue to streamline DOE's operations and eliminate redundant and low-priority programs. On June 20, 1996, the House approved funding for DOE programs contained in the Interior and Related Agencies appropriations bill, H.R. 3662 (H.Rept. 104-625), by a vote of 242 to 174. The Senate Committee on Appropriations reported out its version of the bill (S.Rept. 104-319) on July 16, 1996, which contained slightly under $1 billion in spending for DOE programs. The portion of the DOE budget contained in the Interior appropriations bill was approved through the omnibus appropriation bill enacted on September 30, 1996 (P.L. 104-208). The Energy and Water Development Appropriations bills (H.R. 3816 and S. 1959), which fund the bulk of DOE programs, were reported out of the House and Senate appropriation committees on July 16, 1996 (H.Rept. 104-679 and S.Rept. 104-320). On July 25, 1996, the House voted 391-23 to approve the Energy and Water Development appropriations and on July 30, 1996, the Senate approved its version of the bill by a vote of 93-6. Both chambers passed floor amendments to increase funding for solar and renewable energy. Legislation for energy and water appropriations reported out of conference was enacted on September 30, 1996 (P.L. 104-206).


BACKGROUND AND ANALYSIS

In the 104th Congress, DOE was the target of major budget cuts. DOE has promised to trim its budget by $14.1 billion over 5 years. It realized some of these savings in FY1996 through the downsizing of its staff and the closing of three field offices. Other savings were achieved through the reduction of service contracts. Its FY1997 request for $16.3 billion is about $300 million less than its FY1996 appropriations, but about $1.5 billion less than its FY1996 request. Congressional debate on the FY1997 request will probably be shaped by objectives to continue to reduce the deficit and downsize government. DOE has said that it will propose to eliminate programs that are not critical to the nation's needs.

There are proposals to eliminate DOE altogether. A proposal to eliminate DOE over 3 years (S. 1678), introduced by Senator Grams, states that DOE is without a "focused mission" and would transfer DOE programs to the Department of Defense (DOD) and the National Science Foundation. However, support for DOE remains strong among key Senate leaders, including Senator Dominici, Chairman of the Appropriations subcommittee on Energy and Water and the Senate Budget Committee. Proponents of keeping DOE intact emphasize the agency's effectiveness and efficiency in implementing its programs. Some also maintain that it is essential to keep DOE's nuclear weapons production and safety under civilian control and not under the control of the DOD, because of a potential conflict of goals. The House Budget Committee had language in its budget resolution to abolish DOE, but there was enough support to retain DOE in the House as well. Even if not abolished in FY1997, DOE will likely face further cutbacks.

DOE activities are structured into four major "business lines": National Security, Energy Resources, Science and Technology, and Environmental Quality. Two of these categories (National Security and Environmental Quality) account for about 70% of the DOE budget. DOE sought and received a significant increase in its National Security programs and a small increase in its Science and Technology programs, while the budget request proposed to decrease funding for Energy Resources and Environmental Quality activities. However, within the Energy Resources category, the Administration's energy efficiency and renewables request for FY1997 was 33% greater than FY1996 funding at $1 billion, while the fossil fuel request is 70% lower at $215 million.

This issue brief describes the FY1997 request for DOE's major programs, its implications, and congressional action on the DOE budget. Table 1 at the end of the issue brief highlights the FY1997 DOE budget request House and Senate marks and final budget enacted.

Major Policy Proposals

Renewable Energy Budget

The House Budget Resolution and DOE authorization bills targeted the Renewable Energy Program for major annual reductions. The FY1996 appropriation of $254 million was about $77 million or 23% lower than the FY1995 mark (including prior year balances lowers the appropriation to $238 million and deepens the cut to 28%). The FY1997 DOE Budget Request (excluding electric/storage and energy management) sought $327 million, a $73 million or 22% increase over the FY1996 mark. The Request included $27 million more for biofuels, $25 million more for photovoltaics, and $18 million more for wind.

For biofuels, the increase was targeted for two areas. An increase of $15 million was targeted for electric power production projects. Also, an increase of $12 million was sought for biochemical conversion to liquid fuels projects. For photovoltaics, DOE sought an increase over FY1996 appropriations of $5 million for collector research and an increase of $20 million for cost-shared projects with utilities and the photovoltaic industry. The cost-shared projects included an increase of $4.5 million for researching manufacturing process technologies (PVMat); an increase of $12 million for utility applications of photovoltaics systems (UPVG); and an increase of $4 million for products that can be integrated into buildings (BONUS). For wind, an increase of $5.3 million was aimed at applied research and an increase of $4.4 million was for cost-shared projects with utilities on turbine prototypes and small powerplants.

The House approved $241 million for the FY1997 DOE Renewable Energy Program ($273 million including electric/storage). A floor amendment (passed 279-135) led by a bipartisan group (Schaefer, Klug, Thurman, Minge, Salmon and Fazio) of House Renewable Energy Caucus Members (97 total Members as of July 15) added $42 million to the mark recommended by the House Appropriations Committee.

The Senate approved $236 million, including $22.1 million ($23.1 million including electric/storage and in-house management) added by the Jeffords-Roth amendment. The Senate mark was $5 million or 2% lower than the House mark. It included $6 million less for hydrogen, $3.3 million less (a zero appropriation) for the National Renewable Energy Laboratory (NREL), and $1.5 million less for the production incentive; but it also had $3 million more for wind, $2.2 million more for photovoltaics, and $1.5 million more for geothermal.

The Conference Committee recommended $238 million (without electric/storage), which was enacted as P.L. 104-206. The enacted FY1997 appropriation is $16 million or 6% lower than the FY1996 level and it is $89 million or 27% lower than the Administration Request. It includes $10 million less for deployment, $3.4 million less for geothermal, and $2.6 million less for wind energy; but it also has $1.6 million more for biofuels, $1.3 million more for the production incentive, and $1.3 million more for the National Renewable Energy Laboratory (NREL).

Combining the 26% real cut in FY1996 with the 9% real cut for FY1997 reduces the Program to about 2/3 (in real terms) its FY1995 capability. If continued, this downsizing trend would bring the Program to an end in FY2001. (For additional details, see CRS Issue Brief 93063.)

Energy Efficiency Budget

The Clinton Administration has made energy efficiency its top priority among energy options. The rationale for this commitment focuses on support for near-term economic growth while enhancing energy security, reducing pollution emissions, and increasing international competitiveness. The Administration's FY1997 DOE budget request reflected this priority by seeking $760 million ($715 million adjusted), a $207 million or 37% increase over the FY1996 funding level. The budget request included $148 million, a 35% increase, for R&D and $56 million, a 41% increase, for grants. The Request document includes several changes in the account structure. The proposed increase included program additions of: $44 million for the Partnership for a New Generation of Vehicles (PNGV), $24 million for "Industries of the Future," $52 million for climate change mitigation in industry and buildings, $13 million for federal energy management, $44 million for weatherization grants, and $14 million for state energy conservation grants.

The House Appropriations Committee recommended $500 million in FY1997 for DOE's Energy Efficiency Program, including $375 million for R&D and $125 million for weatherization and State energy grants. The Committee targeted several programs for elimination. However, the House approved nearly $524 million, by adding $24 million in floor amendments to the Committee's mark. This was still $237 million or 31% lower than the Administration's request.

The Senate Appropriations Committee recommended $571 million, which was $47 million or 9% more than the House mark. The Senate report states that the Committee mark sought to preserve core R&D programs at the FY1996 level, while providing "reasonable" increases for priority programs. The report notes some problems with carryover funds and found that the Request was "poorly justified" and concluded that such a large increase could not be "spent effectively."

The FY1997 Omnibus Appropriations Act (P.L. 104-208) provides $570 million for DOE's FY1997 Energy Efficiency Program. This is $14 million or 3% more than the FY1996 mark in current dollar terms, and includes $9 million more for Weatherization, $4 million more for Industries of the Future (crosscutting), and $4 million more for Combustion Engines. Also, this is $46 million or 9% more than the House mark, and about $1 million less than the Senate Interior Appropriations Committee's mark.

Combining the 29% real cut in FY1996 with the flat (after 3% inflation) funding for FY1997 leaves the FY1997 Program at about 70% (in real terms) of its FY1995 capability. If this downsizing trend continued at an average annual rate of about 15% in real terms, it would bring the Program to an end in FY2002. (For additional details, see CRS Issue Brief 95085.)

National Security Programs

The FY1997 budget request for DOE's national security programs was $5.2 billion. This amount was $340 million more than last year's appropriation. The end of the Cold War and consequent nuclear arms control agreements have prompted a general shift of resources from designing, testing and building nuclear weapons to other priorities such as environmental restoration and nuclear waste management. Arms control confronts DOE with new challenges, such as dismantling and storing retired nuclear warheads and deciding what to do with excess weapons materials, especially plutonium.

Stockpile Stewardship. DOE must downsize its weapons complex to maintain a much smaller nuclear stockpile and prepare to maintain the safety and reliability of the remaining arsenal within the limits of a probable comprehensive test ban treaty, which is supported by many in Congress and the President. Maintaining nuclear weapons without nuclear testing presents a major challenge for DOE. The FY1997 request includes $3.7 billion for its weapons program: $1.8 billion for weapons stockpile management and $1.6 billion for weapons stockpile stewardship. The conference agreement includes $3.9 billion spending for weapons programs: $1.9 billion for weapons management and $1.6 billion for stockpile stewardship. As a part of the stockpile stewardship program the funding request for the construction of the National Ignition Facility (NIF) is $190 million, about $130 million over its FY1996 funding. The conference agreement includes $131 million for the NIF. (See CRS Report 94-418.)

Nonproliferation. DOE retains its longstanding responsibilities in the field of nuclear nonproliferation. The largest account for DOE's nonproliferation activities is its Nonproliferation and Verification R&D program. This program includes support for treaty verification, export controls, international safeguards, intelligence , and dismantlement assistance to the former Soviet countries. Much of this work is conducted at the national laboratories. The FY1997 budget request for Nonproliferation and Verification is $195 million, roughly $15 million less than the FY1996 amount appropriated. The conference agreement funds the program at $212 million.

Nuclear Energy and Waste Disposal

Civilian Radioactive Waste Disposal. FY1997 funding of $382 million is provided for DOE's program to develop a disposal facility for commercial nuclear reactor spent fuel and defense-related high-level nuclear waste. That is the same as the House-passed level, while the Senate had provided the Administration's full request of $400 million.

The final FY1997 Energy and Water Development Appropriations bill requires DOE by September 30, 1998, to complete a "viability assessment" of the proposed national disposal site at Nevada's Yucca Mountain. If the site were found viable, an application for a disposal facility could be submitted to the Nuclear Regulatory Commission by 2002, according to DOE, and waste disposal could begin by about 2010.

During the past year, the DOE nuclear waste disposal program has been the subject of intense congressional debate. Congressional budget concerns and dissatisfaction with the repository schedule -- 12 years behind the 1998 date established by the Nuclear Waste Policy Act -- prompted efforts to redirect the program's emphasis from permanent disposal to the development of an interim storage facility that could be opened relatively quickly. Legislation to authorize an interim storage facility at Yucca Mountain passed the Senate July 31, 1996 (S. 1936), but the House, facing a veto threat, did not take up its version of the bill (H.R. 1020). Of the $400 million appropriated to the program for FY1996, $85 million was set aside for interim storage if subsequently authorized.

The Administration opposes the authorization of interim storage at Yucca Mountain before the site is found technically viable for a permanent repository, although DOE's latest program plan calls for designation of an interim storage site after the viability assessment is made.

Of the program's total FY1997 funding, $182 million is appropriated from the Nuclear Waste Fund, consisting of mandatory fees collected from nuclear power plants. The other $200 million comes from general revenues, to pay for disposal of nuclear waste from defense programs. The House had voted to withhold the FY1997 appropriation from the Nuclear Waste Fund until passage of an authorization bill, such as the pending nuclear waste legislation, but that restriction was dropped in conference. (For further background, see CRS Issue Brief 92059, Civilian Nuclear Waste Disposal.)

Environmental Management. A small funding increase was provided in FY1997 for DOE's environmental management program, which is responsible for environmental cleanup and waste management at the Department's nuclear-related facilities. A total of $6.41 billion was appropriated, a slight percentage reduction from the Administration request of $6.48 billion. The final FY1997 appropriation includes $160 million for the privatization of some DOE waste management activities.

Appropriations for the environmental management program are provided in three segments: defense, non-defense, and the Uranium Enrichment Decontamination and Decommissioning (D&D) Fund. Defense environmental management activities are related to current or former facilities in the DOE nuclear weapons complex, while non-defense activities are related to nuclear energy, physics, and other research programs. The Uranium Enrichment D&D Fund consists of contributions from the DOE defense-related environmental restoration program and from nuclear utilities. (For additional background, see CRS Issue Brief 90074, Nuclear Weapons Production Complex: Environmental Compliance and Waste Management.)

Nuclear Energy Research and Development. DOE is receiving $223 million for civilian nuclear energy programs in FY1997, down slightly from the comparable FY1996 level and from the Administration request. Funding would be used for development of improved commercial nuclear reactors, space power systems, operation of DOE research reactors, production of radioactive isotopes for medical and other purposes, and development of spent fuel treatment technology.

The FY1997 nuclear budget includes $38 million for development of improved versions of today's commercial light water reactors (LWRs), a slight cut from FY1996 and from the Administration request. The goal of the LWR program, which is cost-shared with the nuclear industry, is to make advanced LWRs available for utility orders by the end of the decade. Supporters of the program contend that the new reactors will be simpler, safer, and less expensive to build and operate than existing plants. Opponents call the program an unjustified subsidy to the nuclear industry, which they contend will be uncompetitive with future electricity generation alternatives.

Much of the nuclear energy program's current budget is devoted to shutting down facilities involved in the liquid metal reactor program (the former breeder reactor), an advanced nuclear technology effort that was halted in 1994; shutdown is expected to take several years. Some of the technology developed for the liquid metal reactor program is being modified for electrometallurgical treatment of various DOE spent fuel and other radioactive waste, a program for which $20 million was appropriated for FY1997. Opponents of the electrometallurgical technology program contend that it could provide a basis for future revival of the canceled liquid metal reactor program and undermine U.S. efforts to discourage foreign extraction of weapons-usable plutonium from spent nuclear fuel.

Science and Technology

The DOE science and technology programs are a broad array of research activities whose stated goal is to lay the scientific basis for development of advanced energy technologies and the understanding of environmental effects of energy production. Most are basic research programs, and for some, any applications are decades, at best, away. For others, potential applications are more near term and span a broad spectrum of industry and commerce. Most of the non-defense R&D carried out at DOE's ten national labs and at many of its single purpose labs comes under these programs.(For more details, see CRS Report 96-385 SPR, Department of Energy: FY1997 Research and Development Activities and Issues.)

The General Science and Research activity includes both the high-energy physics (HEP) and nuclear physics (NP) research programs. The former carries out experimental and theoretical research on the fundamental structure of matter and energy. The NP program supports research on the structure of the nucleus of the atom and the forces holding the nucleus together. Both programs are dominated by large research facilities located around the country. For FY1997, the General Science and Research program asked for a 2.7% increase over FY1996. The HEP program also asked for $15 million to begin negotiations for U.S. participation in the Large Hadron Collider (LHC), a major facility currently under construction at in Europe. The Congress appropriated funding for these programs near, but slightly below -- 1.3% -- the requested amount. The Congress expressed support for the federal role in funding the basic research in this program but stated that budget constraints prevented meeting the full budget requests. The report accompanying the Senate version of the bill urged DOE to enter into any new commitment, such as the LHC, with caution.

The Basic Energy Sciences (BES) program supports a wide range of basic research on materials, chemistry, engineering, energy biosciences and earth sciences. A new program for FY1997, the Computational and Technology Research (CTR) program, is responsible for basic research on mathematics and computer sciences, advanced energy projects spun off from the BES program, and the civilian technology transfer activities. The Biological and Environmental Research (BER) program supports research on the biomedical and environmental science including research on global climate change, radionuclide medicine, and DOE's portion of the human genome project. For FY1997, the BES and BER programs asked for a 0.1% and 6.7% decrease respectively compared to FY1996, and the CTR program asked for a 5.1% increase. Reflecting its continuing support for basic research, the final appropriation from Congress decreases BES by 0.6% and increases BER by 2.6% from the request. For the CTR program, the final appropriation is 2.9% below the request. In accompanying language with the bill, all of these programs received strong support for their contributions to basic research and the solution to important problems faced by the Department and the Nation.

The Fusion Energy Sciences (FES) program (formerly the Magnetic Fusion Energy program) is responsible for research on the plasma and fusion science and engineering underpinning attempts to harness fusion for the production of energy. Because of a large reduction in the program's budget in FY1996 and instructions from Congress, the program has shifted its goals toward basic science away from developing a fusion power demonstration reactor by 2025. Funding for U.S. participation in the International Thermonuclear Experimental Reactor is also part of the FES budget. For FY1997, the FES program asked for a 12.4% increase including $55 million for ITER, the same as FY1996. In addition, DOE requested $16 million for FES computational support and program direction which were included in other budget accounts. The Congress, however, included these items within the FES appropriation. As a result, the appropriation is 14.4% below the net request. The final amount is also below the FY1996 appropriation. While commending DOE on the restructuring, the Congress stated that funds were not available to meet the entire request. Finally, the appropriation included the full amount requested for ITER. (For more details, see IB91039, Magnetic Fusion: The DOE Fusion Energy Sciences Program)

DOE National Laboratories

The ten DOE national laboratories are the Argonne National Laboratory (IL), Brookhaven National Laboratory (NY), Idaho National Engineering Laboratory (ID), Lawrence Berkeley National Laboratory (CA), Lawrence Livermore National Laboratory (CA), Los Alamos National Laboratory (NM), Oak Ridge National Laboratory (TN), Pacific Northwest Laboratory (WA), Sandia National Laboratories (NM), and National Renewable Energy Laboratory (CO). In addition to these ten national laboratories, DOE has 17 smaller laboratories (including, for example, Fermilab and the Stanford Linear Accelerator Laboratory (SLAC)). Most of DOE's laboratories, including all of its national laboratories, are Federally Funded Research and Development Centers (FFRDCs). FFRDCs are owned and funded by the government, but are staffed with non-federal employees of universities or private corporations under contract with DOE.

DOE's estimated FY1997 funding of its ten national laboratories is $4.8 billion. This represents about 75% of total DOE laboratory funding. It also represents about 6.7% of the total FY1997 U.S. government budget request for federal research and development.

DOE and its laboratories have been subjected to increasing scrutiny in recent years, including DOE's "Galvin Committee" in 1995 and, in 1996, by its Laboratory Operations Board. These reports and recent congressional and other proposals have addressed a number of issue areas, including the laboratories' missions, their organizational affiliation, and their management.

A number of bills were introduced in the 104th Congress to abolish DOE and transfer its laboratories to other agencies; to close or reconfigure DOE laboratories; to transfer the three nuclear weapons laboratories to a new defense agency; etc. None of these bills were enacted. In the first session, one appropriations bill was enacted that decreased funding for some DOE programs, including solar and renewable energy, and another appropriations bill was vetoed that would have decreased funding for fossil energy and energy conservation, thus affecting those laboratories which receive significant funding through those programs. In the second session, a provision of the Fiscal Year 1997 House Budget Resolution and a Senate bill would have eliminated DOE, but were not enacted. The authorization act for DOE's defense R&D activities (P.L. 104-201) exceeds the Administration's request for Core Stockpile Stewardship and meets the request for the Technology Transfer program. The amounts of the Energy and Water Development Appropriations Act, 1997 (P.L. 104-206) are substantially lower than the Administration's request for most areas of Energy Supply R&D, except Biological and Environmental Research, are generally slightly lower than the request for General Science and Research, and exceed the request for Defense Core Stockpile Stewardship. The Department of the Interior and Related Agencies Appropriations Act for 1997 (part of the Omnibus Consolidated Appropriations Act, P.L. 104-208) exceeds the Administration's request for Fossil Energy R&D and Energy Conservation. (For more details, see CRS Issue Brief 95110, DOE Laboratory Restructuring Legislation.)

Power Marketing Administrations

The five power marketing administrations (PMAs) -- Alaska Power Administration (APA), Bonneville Power Administration (BPA), Southeastern Power Administration (SEPA), Southwestern Power Administration (SWPA), and Western Area Power Administration (WAPA) -- are separate and distinct organizational entities in DOE. The PMAs' mission is to market power generated at federal multipurpose water projects (about 6% of the nation's total electricity generation) at the lowest possible rates to consumers consistent with sound business principles. Each PMA has its own specific geographic boundaries, system of projects, statutory responsibilities, operation and maintenance responsibilities, and statutory history.

Four of the five PMAs are funded annually with appropriations, and related receipts are deposited in the federal Treasury. The fifth PMA, BPA, has been on a self-financed basis since enactment of Federal Columbia River Transmission System Act in 1974. BPA does have permanent Treasury borrowing authority, limited to $3.75 billion. For FY1997, the Administration is recommending the following funding levels for the PMAs (after adjusting for use of prior year balances): APA -- $4.0 million, SEPA -- $20.9 million, SWPA -- $26.9 million, and WAPA -- $217.9 million. BPA's budget submission noted its intention to use $287 million in new borrowing authority for FY1997. In the case of APA, the appropriation request represents the amount to continue operations as the sale takes place. Sale of the APA has already been authorized. DOE believes that the Eklutna project sale will be completed by early 1997. Negotiations on financial arrangements for the Snettisham project sale continue with no set date for completion.

Both Congress and the Administration are proposing to reduce the size and role of the federal government. Most of the congressional efforts in relation to PMAs have been tied in some manner to the budget process. H.R. 310 and H.R. 1801 would authorize the Secretary of Energy to divest the federal government of all the PMAs. Proceeds from the sale would be deposited in the U.S. Treasury. In addition, a group of freshmen Republican Congressmen introduced a bill (H.R. 1993) that calls for the dismantlement of the Department of Energy. Included in that proposal is a provision calling for the sale of all five PMAs.

The Administration's FY1996 budget request recommended the divestiture of four of the five PMAs, with consumer protection against significant rate increases. For FY1997, the Administration has abandoned its efforts to divest the PMAs, citing a lack of political acceptance. (For more details, see CRS Issue Brief, 95093, Power Marketing Administrations: Reassessing the Federal Role.)

In legislative action on the budget, the House Appropriations Committee reported out H.R. 3816 providing funds for part of DOE, including the PMAs. Although the Committee agreed with the PMAs' budgets as recommended by the Administration, Committee concern about the level of available prior year funds resulted in the Committee adjusting appropriations to reflect the availability of those funds. After adjusting for prior year balances, the appropriation levels recommended are as follows: APA -- $4 million, SEPA -- $18.9 million, SWPA -- $25.2 million, and WAPA -- $211.6 million. The Committee also reduced BPA's proposal to use $287 million in borrowing authority for FY1997 by $20 million, and prohibited BPA from making any new direct loans during FY1997 (H. Rept. 104-679). The full House passed H.R. 3816 on July 25, 1996.

In the Senate, the Senate Appropriations Committee reported out S. 1959, providing appropriations for the same departments as H.R. 3816. Like the House Appropriations Committee, the Senate Appropriations Committee agreed with the PMAs' budgets as submitted, but adjusted recommended appropriations levels to reflect the availability of prior year balances. After adjustment the appropriation levels recommended are as follows: APA -- $4 million, SEPA -- $13.9 million, SWPA -- $25.2 million, and WAPA -- $201.6 million. The Senate Appropriations Committee agreed to BPA's proposal to use $287 million in borrowing authority for FY1997. The Committee also included a prohibition on new direct loan obligations during FY1997, and required the Northwest Power Planning Council to appoint an Independent Scientific Review Panel to review proposed projects to be funded by BPA as part of the Council's annual fish and wildlife program (S. Rept. 104-320). The full Senate passed S. 1959 on July 30, 1996.

The conference report on H.R. 3816 was passed by the House on September 12 and by the Senate on September 17 (H. Rept. 104-782). On items in disagreement, the conference decided on the following funding levels: SEPA -- $16.4 million, WAPA -- $193.6 million, and BPA -- $277 million (borrowing authority). The conferees also modified the Senate language with respect to reviewing proposed fish and wildlife projects.

Fossil Fuel Research, Development, and Demonstration and Clean Coal

The Clinton Administration's FY1997 budget request for fossil fuel research and development (R&D) represented a continuing realignment of its budget priorities that began with the FY1994 budget request. Environmental issues, particularly global climate change concerns, drive the FY1997 budget request for maintaining natural gas R&D funding near current levels and for decreased coal R&D funding. The Administration is also requesting a significant rescission in funding for the Clean Coal Technology Program. Overall, the proposal requests a 17.3% decrease from the estimated FY1996 appropriation for fossil energy. Coal R&D would drop 15.4%. In contrast, natural gas R&D would decrease 4.4%, fuel cells R&D would decrease 11.1%, and petroleum R&D would decrease 5.7%.

This shift in focus to natural gas is based on the current outlook for fossil fuel availability and current prices, as well as environmental advantage versus coal or petroleum. Critics question the extent to which fossil fuel R&D should be based on current trends and natural gas viewed as a "transition fuel" to non-fossil fuels. Is the Administration taking too narrow a view of coal's potential for electric generation and technology exports? Would these proposed changes have a negative impact on jobs and the economy or would they develop new markets and opportunities? As debate begins on the FY1997 budget, questions about fossil energy R&D priorities are likely to be raised again. (For more details, see CRS Issue Brief 94020, Fossil Energy Research and Development: Whither Coal?)

In legislative action on the FY1997 budget, the House Appropriations Committee approved an appropriation of $358.8 million for fossil energy, 14% below FY1996 levels, but 3% above the level recommended by the Administration. Compared with FY1996 levels, the Committee would have reduced coal research by 14%, oil research by 24%, and fuel cell research by 3%. In contrast, natural gas research, led by advanced turbine systems, would have increased by 24%. Like the Administration, the Committee provided no new budget authority for the Clean Coal Technology Program, instead relying on previously enacted advanced appropriations to fund the program in FY1997. However, the Committee did not include the Administration's proposed rescission of $325 million and deferral of $312.8 million for the program. In floor action on H.R. 3662, several amendments to reduce fossil energy funding were debated, but only one passed. An amendment by Representative Skaggs reduced proposed funding for the advanced natural gas turbine by $4 million. The amendment was accepted by voice vote.

In Senate action, the Senate Appropriations Committee reported out H.R. 3662 with an appropriation of $367.5 million for fossil energy, 12% below FY1996 levels, but 4% above the level recommended by the House. Compared with FY1996 levels, the Committee would have reduced coal research by 15%, oil research by 12%, and fuel cell research by 5%. In contrast, natural gas research, led by advanced turbine systems, would have increased by 17%. For the Clean Coal Technology Program, the Committee agreed to a $150 million rescission, less than recommended by the Administration, but more than recommended by the House.

In September, Congress passed an omnibus appropriations bill containing a conference agreement on H.R. 3662. As enacted, the law provides an appropriations of $364.7 million for fossil energy, 13% below FY1996 levels. Compared with FY1996 levels, the law reduces coal research by 15% (to $103 million), oil research by 18% (to $45.9 million), and fuel cell research by 5% (to $50.1 million). In contrast, natural gas research, would increase by 17% (to $70.1 million). For the Clean Coal Technology Program, the Congress agreed to a $123 million rescission, less than that recommended by the Administration.

Strategic Petroleum Reserve

The Strategic Petroleum Reserve (SPR) program was authorized in 1975 to protect the nation from oil supply disruptions. Fill of the SPR was an urgent and uncontroversial policy during the late 1970s and early 1980s when the risk of interruptions in oil supply from the Middle East and accompanying sharp increases in the price of oil were perceived to be high. But congressional interest in the SPR declined during the 1990s as a number of developments intersected: (1) a consensus to cut federal spending; (2) declining likelihood of crippling oil supply interruptions; (3) unregulated oil markets that appear to operate efficiently and effectively in allocating and pricing oil; and (4) a developing consensus that, at nearly 600 million barrels, the SPR was adequate insurance; the cost/benefits tradeoff does not justify financing additional fill. Oil purchases for the SPR were suspended in FY1995.

The President's FY1997 budget requested $221.3 million in new authority for operation and maintenance of the SPR. The House Interior Appropriations Subcommittee recommended that the SPR be financed in FY1997 from a sale of $220 million of SPR oil. The committee's authority to include the sale in the appropriations bill was challenged, and the provision was stripped. The Senate Appropriations Committee, however, included the sale, and it was enacted as part of an omnibus spending bill (P.L. 104-208) enacted in the final days of the 104th Congress. (For more details see CRS Issue Brief 87050, The Strategic Petroleum Reserve.)

Congress has already authorized sales of SPR oil to raise revenues. The Balanced Budget Downpayment Act II, (P.L. 104-134) authorized a sale during FY1996 of 7 million barrels of oil from the storage site at Weeks Island, Louisiana. A sinkhole at the site makes it unlikely the site could sustain cycles of drawdown and replenishment. The Administration proposed the oil sale to generate $100 million to defray the cost of transferring oil from Weeks Island and decommissioning the site.

The proposal drew opposition from two directions--some arguing that more should be sold and others arguing that sale of any SPR oil to support program spending set a bad precedent. Indeed, Congress approved sale of an additional $227 in H.R. 3019 (P.L. 104-134). The President took advantage of this enactment by announcing sale of SPR oil on April 29, 1996, to help blunt recent crude and product price increases. Sale of $227 million worth of SPR oil was completed in early August.

The Naval Petroleum Reserves

The Naval Petroleum and Oil Shale Reserves (NPR) are oil fields set aside in the early 1900s to assure availability of oil fuels for the Navy, which was converting its vessels from coal to oil prior to World War I. There was some production from the NPR during the 1920s, World War II, and the 1950s, but the Reserves were essentially shut in until Congress enacted the Naval Petroleum Reserves Production Act (P.L. 94-258) in 1976. The Act ordered production from the fields at a maximum efficient rate and provided that NPR oil would be sold in the U.S. market. Since production was authorized in the mid-seventies, net U.S. government revenues from NPR production have exceeded $13 billion. However, these are old fields; NPR production will continue to decline.

Language authorizing sale of the Elk Hills field (NPR-1) within 2 years of enactment was passed in the FY1996 Defense Authorization Act, signed into public law (S. 1124, P.L. 104-106) by the President on February 10, 1996. The Administration request for FY1997 was $149.5 million for continued operation, maintenance and regulatory compliance, pending sale. This was a modest increase over the $148.8 million appropriated for FY1996.

However, the Interior Committee transferred $5 million to the National Park Service, reducing the appropriation for the NPR to $143.8 million. Then, on June 20th, an amendment was passed (215-206) on the floor of the House to reduce the NPR budget an additional $11.7 million and transfer that sum to the weatherization program. The Administration opposed the amendment, arguing that this additional cut would eliminate new drilling activity in 1997, and have a revenue cost of $14 million in 1997 and $31 million in 1998. Others argued that cutting the NPR budget would jeopardize the value of the NPR as an asset; however, proponents of the amendment cited estimates made in the past by Chevron that the NPR's costs could be reduced by $30-40 million without jeopardizing its operation. Ultimately, the spending level of $143.6 was approved in P.L. 104-208.

DOE Budget Table

DOE budget authority is considered in two appropriations bills: Energy and Water Development, and Interior and Related Agencies. Table 1 shows DOE's FY1996 and FY1997 budget requests for the 11 accounts in the Energy and Water bill and the 9 accounts in the Interior bill, as reflected in the Department's FY1996 and FY1997 budget justifications.

***TABLE or GRAPHIC not shown here***






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