The US Department of Energy's latest fiscal 2002 budget proposal would dramatically reduce research on oil, natural gas, and renewable fuels in favor of clean-coal technologies.
Energy Sec. Spencer Abraham indicated last week that the budget is a work in progress until the White House unveils an interagency task force's energy policy recommendations.
He said, "This budget sets a sensible course by clearly fulfilling commitments and establishing key priorities but at the same time signals our intention to rethink a host of programs while we craft the Bush administration policy."
Vice-President Dick Cheney is leading the task force, and recommendations are due before summer (OGJ Online, Apr. 3, 2001). Republican lawmakers plan to retool their own budget and policy proposals to dovetail those recommendations.
Budget breakout
Overall, DOE requested $19.2 billion for fiscal year 2002, up a slight $300 million from the level appropriated in fiscal 2001. Most of the funding, as in years past, will go for nuclear weapons and atomic waste programs.
Budget authority for fossil energy research and development is $449 million, up $2 million from last year. However, the majority of that money is earmarked for clean-coal initiatives, agency officials said. Research for oil and gas falls by 50% from $112 million in 2001 to $51.5 million in fiscal year 2002. Items targeted for elimination include:
- National Laboratory-Industry Oil & Gas Partnership Program. This program teams national labs with the industry to use lab expertise to solve petroleum engineering problems.The FY 2001 appropriation was $8.4 million.
- Secondary Gas Recovery Program. This program develops ways to find and produce natural gas from existing fields that conventional technology misses.The FY 2001 appropriation was $800,000.
- Natural gas treating and coal mine methane recovery. A fourth of all US gas has to be treated before it can be delivered through a commercial pipeline. This program was intended to develop lower-cost, more effective gas treating technologies, plus develop ways to produce and treat coal mine methane. Appropriations for FY 2001 totaled $3.5 million ($1.6 million for gas treating, $1.9 million for coal mine methane recovery).
- Ultraclean fuels research and development. This program seeks to develop a new generation of fuel processing technologies to meet new low-sulfur diesel standards and other future fuels specification changes mandated by the US Environmental Protection Agency. The FY 2001 appropriation was $10 million.
Other programs
The energy department budget proposal also would reduce funding involving independent producers, gas hydrate research, environmental compliance technology development, and coordination with states and other agencies to streamline oil and gas environmental regulations.
DOE officials also note that some efforts will be deferred beyond 2002. They include a planned field test of methane hydrate production, field tests of deep drilling systems, research to improve gas storage deliverability and pipeline integrity, and a program to examine the resource potential on Indian tribal lands.
Some of those programs could be reinstated, however, pending the outcome of the task force recommendations or budget negotiations with Congress.
DOE did not propose to buy oil for the Strategic Petroleum Reserve but did earmark $169 million for its maintenance. SPR is 80% full and holds about 541 million bbl of oil. DOE could receive more oil through expanded royalty-in-kind proposals pending at the US Department of the Interior. Estimates on how much oil may be collected for the SPR were not detailed in the budget.
Other departments
Outside of DOE, the Bush administration's first formal budget request to Congress would extend all tax breaks currently scheduled to expire this year. Included in that list are tax incentives for marginal wells.
Bush's plan also preserves the tax credits US energy companies receive on their foreign oil and gas extraction income. Currently, firms are eligible for the foreign tax credit if a foreign fee is the equivalent of an income tax and not compensation for a specific economic benefit that the foreign government provides.
For natural resources and environmental programs, the White House is requesting $26.4 billion, about $2 billion less than the Clinton administration sought in 2001. Most of those cuts are at DOE, although EPA would also be affected. Global warming research would be cut about 4% across various government agencies, including EPA, DOE, and the Department of Commerce.
Overall spending at EPA would fall by $500 million under the budget proposal.
Interior
At Interior, the budget is $10 billion, $347 million less than what Congress appropriated last year.
That budget assumes the government would collect bonuses from a sale of Arctic National Wildlife Refuge coastal plain leases beginning in 2004. Up to $1.2 billion of the expected bonuses paid by winning ANWR bidders would be set aside to help fund enhanced research on alternative energy technologies.
Interior's FY 2002 budget provides increased funding for energy resource programs in the Mineral Management Service and the Bureau of Land Management.
MMS oversees oil and natural gas production in the Outer Continental Shelf and collects onshore and offshore federal royalties. BLM is responsible for oversight of oil and gas production on federal lands.
Interior Sec. Gale Norton said, "The FY 2002 budget proposes a program increase of $15 million for BLM to expand energy and mineral activities, including energy resource surveys, coalbed methane permitting preparation, preparation for lease sales in the National Petroleum Reserve-Alaska, and planning for leasing in the 1002 area [coastal plain] of ANWR, should such leasing be authorized by Congress.
"An increase of $14.7 million is requested for MMS to meet increased workload brought about by OCS program services and to implement a royalty-in-kind program."
"This budget sets a sensible course by clearly fulfilling commitments and establishing key priorities but at the same time signals our intention to rethink a host of programs while we craft the Bush administration policy."
