Maureen Lorenzetti
Washington Editor
WASHINGTON, DC, Feb. 4 -- The Bush Administration's latest budget proposal unveiled Monday for the fiscal year that starts Oct. 1 once again calls on the Department of Energy to overhaul federal oil and gas research programs.
"There's a major effort to reform the program," said a senior DOE official at a background budget briefing.
For the fiscal year (FY) 2004 budget, the natural gas research request is $26.5 million, with $6.5 million applied toward the White House's $1.7 billion "Freedom Fuel" hydrogen program. DOE's oil technology research request is $15 million.
Acknowledging its oil and gas research requests are well below past funding levels, DOE officials said President George W. Bush's budget still meets key domestic policy objectives: reducing foreign oil imports and lowering air pollution.
"Budgets are tight, and we may be a nation at war, but budget constraints will not stop us from meeting our objectives," the senior DOE official said.
Historical budget restrictions
Bush in his 2002, 2003, and his latest 2004 budgets proposed cuts in oil and gas research. In FY 2002, Congress restored funding to historical levels, and it now appears that the still pending FY 2003 budget may go well over last year's White House request. The administration in the 2003 budget sought to reduce natural gas research to $22.6 million from $45.2 million, with oil technology research dropping to $35.4 million from $56 million.
Final resolution of the FY 2003 budget, which began Oct. 1, 2002, may happen before month's end.
Under the pending House version, natural gas research is slated to be $41.8 million; the Senate version is $46.3 million. For oil technology, the House proposal stands at $38.9 million; the Senate version at $44.3 million. Congressional appropriators say they expect the House and Senate to split the difference between the two, resulting in funding still measurably higher than what the White House originally proposed.
Yet the president's latest budget was far from a surprise, given tough budget forecasts and the unwavering desire by the White House's Office of Management and Budget to turn most federally funded oil and gas research to the private sector.
"One has to look at these things dispassionately," said Bob Hirsch, chairman of the board of energy and environmental systems at the National Academy of Sciences and a past critic of the department's research programs. "It should be about what industry is doing and what is needed, not funding levels from one year to the next."
Nevertheless, many of the programs DOE funds are popular with lawmakers from oil-producing states. DOE's programs are typically designed to encourage domestic production from marginal fields operated by small independents. The cost of the research is often shared with industry, states, or academia interested in encouraging technology that may be available to majors but is not yet cost-effective for smaller producers.
Fossil energy office review
Responding to growing criticism from OMB and outside government, DOE last year met with industry and other stakeholders on how it could improve the directions of the fossil energy program, particularly its oil and gas research office. From March through July 2002 the fossil energy office conducted what it called a "top-to-bottom review" to identify weaknesses in the program. Officials said that they are now in the process of crafting a "strategic plan" designed to reorganize various offices that will ultimately make the oil and gas research programs more efficient.
Among the recommendations in the review was a call for a more transparent research and development procurement process. The internal report also said the fossil energy office should create a task force to evaluate performance measures used to grade various research projects.
The next step in the budget process rests with Congress. Industry supporters of DOE's oil and gas research efforts fear that tough fiscal constraints on domestic programs may mean that the department's modest request may actually be granted.
Other budget requests
DOE's request for oil and gas research is just one small part of a $2.2 trillion government budget. DOE's fossil energy office also administers the 600 million bbl Strategic Petroleum Reserve. The administration's request is for $175 million, a $7 million increase from last year's plan. Congress in the FY 2003 budget cycle is expected to provide $173 million for the reserve and $6 million for the Home Heating Oil Reserve. DOE's request for the home heating stockpile for the new fiscal year is $5 million.
DOE's budget does not include funds to buy additional supplies for either the crude or heating oil stockpile. However, DOE plans to continue filling the SPR to its 700 million bbl capacity over the next few years with federal royalty oil through a joint program with the US Minerals Management Service. The timeline to fill the SPR may be delayed because of a recent action by the department to suspend royalty-in-kind shipments in light of supply shortages from strike-torn Venezuela. Now that the Venezuelan supplies are returning to the market, SPR shipments may resume, although possible hostilities in Iraq could delay SPR shipments or even precipitate a draw down of stocks, depending on crude market conditions.
At the Department of Interior, the Bureau of Land Management is requesting a budget of $1.7 billion, an increase of $42.8 million from last year. About $3.6 million in funds would promote energy development on public lands, including a portion of the Arctic National Wildlife Refuge (see related story, p. 22). BLM is seeking $48 million from Congress to complete 18 land management plans and to amend 47 existing plans to accommodate increased industry interest in leasing mineral rich public land.
The Minerals Management Service budget request for 2004 is $271.5 million. This figure includes $171.3 million in current appropriations, an increase of $1 million; and $100.2 million in offsetting collections from federal offshore rents. The agency said that total production in the Outer Continental Shelf in 2003 is projected to be more than 600 million bbl of oil and more than 5 tcf of natural gas.
Direct appropriations in the proposed budget include $164.2 million for royalty and offshore minerals management activities and $7.1 million for oil spill research activities.
The US Environmental Protection Agency's funding proposal calls for a $7.6 billion budget, a $10 million increase from last year. The budget for enforcement and compliance is set at $372 million, an increase of $21 million. The agency told Congress it wants to spend $617 million for clean air programs, a $19.4 million increase from last year. EPA did not seek reinstatement of the Superfund tax that expired in 1995. Instead, it wants $150 million more from Congress for cleanups. EPA expects the trust fund that finances Superfund to dwindle to between $30-40 million by the end of the fiscal year, Sept. 30.
Contact Maureen Lorenzetti at [email protected]
