Maureen Lorenzetti
OGJ Online
WASHINGTON, DC, Feb. 4 -- The Bush administration's fiscal 2003 budget proposal would require the Department of Energy to overhaul how it funds oil and gas research.
The White House again would slash oil and gas research spending by 50% -- a proposal that Congress overrode last year.
The administration asked, for the fiscal year beginning Oct. 1, to cut natural gas research from $45.2 million to $22.6 million and oil technology research from $56 million to $35.4 million.
The White House's Office of Management and Budget (OMB) said some projects are more effective than others and DOE needs to find a better way to prioritize value.
An industry analyst familiar with the White House's thinking said more performance data also is needed on existing programs to determine what works and what doesn't.
"They [the White House] are questioning management's overall approach and demanding improvement. They want a clearer justification for government involvement and taxpayers ought to salute that," said Bob Hirsch, senior energy analyst at Rand Corp. and chairman of the board of energy and environmental systems at the National Academy of Sciences (NAS).
To that end, DOE will meet Mar. 4-5 with interested parties on how to improve research programs based on suggestions made last year by NAS, industry, and others.
Hirsch agreed with the administration's approach, saying DOE should consider more long-term, "riskier" research like gas hydrates rather than spending money to improve established drilling techniques.
"For example, the fossil energy programs proposed an expansion of research efforts into offshore drilling techniques," the White House budget proposal said. "Yet this area carries a great incentive for industry to invest its own resources, and industry has a long history of doing just that. So there is little reason for taxpayers to help them out."
OMB said the budget proposes reductions to programs that are poorly performing, misdirected, or are "corporate subsidies." Some of the funding is redirected to programs recommended by the administration's energy policy blueprint, such as hydrogen and super conductivity research and other programs that are historically cost-effective, the White House said.
Congress may change the administration's budget proposal for energy research (OGJ Online, Feb. 1, 2002). Last year it restored cuts the White House proposed for oil and gas research but this year there is more pressure to reduce domestic spending in light of the expected budget deficit and a much larger defense budget.
The DOE spending plan is part of the $2.1 trillion budget President George W. Bush sent to Congress Monday. Nearly all agencies, with the exception of the Defense Department, would see their budgets reduced.
Nevertheless, some oil and gas programs would receive minor increases. The Bureau of Land Management would get $10.2 million more to hire staff for permitting and leasing activities and the Minerals Management Service would get $13.7 million more to administer a new program to fill the Strategic Petroleum Reserve with federal royalty oil.
The budget proposes a 3.6% increase to $19.8 billion for DOE, but the bulk of that funding is earmarked for nuclear weapons and cleanup programs. DOE would get $11 million for its portion of the SPR fill program.
The administration is proposing to transfer natural gas infrastructure research to the Transportation Department's Office of Pipeline Safety "to reduce duplication."
The Interior Department budget assumes receipts of $1.2 billion from the coastal plain of the Arctic National Wildlife Refuge in 2004. Interior's budget would rise 5.2% to $10.8 billion.
The Bush administration proposed to extend the suspension of the 100% net income limitation for marginal wells, which expired last Dec. 1, for 2 more years. It explained an extension would "avoid production disruptions and allow the administration and Congress to evaluate the need for additional extensions or other modifications of the provision." That would cost the US Treasury $44 million in fiscal 2003 and $18 million in fiscal 2004.
Contact Maureen Lorenzetti at [email protected].