US Senate committee restores oil, gas research funding

By OGJ editors
WASHINGTON, DC, July 11 -- The Senate Appropriations Committee (SAC) Thursday unanimously voted to expand federally sponsored oil and natural gas research beyond what the White House says it wants for the upcoming fiscal year (FY) that begins Oct. 1.

The Department of Energy plan reduces spending aimed at improving exploration and production techniques sharply below historical levels (OGJ, Feb. 10, 2003, p. 21). President George W. Bush's pending oil research request is $15 million; his natural gas research request is $26.5 million, with $6.5 million to be applied toward the White House's $1.7 billion "Freedom Fuel" hydrogen program. Current DOE E&P funding includes $23.4 million for oil and $47.3 million for gas.

Congress boosts budget
Congress aims to do more, just as it has done in years past. President Bush in his 2002, 2003, and his latest 2004 budget proposed cuts in oil and gas research. Much of the research DOE performs can be duplicated by industry, the Office of Management and Budget has often argued. The administration is also keenly aware that it is often viewed by critics, especially within the environmental community, as being too friendly with industry and the proposed budget cuts reflect that concern, congressional sources say.

The administration is also "fully" aware that many of the programs DOE funds are popular with lawmakers from oil-producing states, they added.

DOE's programs typically are designed to encourage domestic production from marginal fields operated by small independent E&P firms. The cost of the research is often shared with industry, states, or academia interested in encouraging technology that may be available to major oil companies but is not yet cost-effective for smaller producers.

In FY 2002, Congress restored funding to historical levels, and did so again 2003.

This time, SAC's plan trims the gas budget by about 12%, earmarking $41.9 million for FY 2004. But oil research, at $34.5 million, increases a dramatic 30% from current levels.

A pending House budget mark proposes $36.48 million for gas and a $32.2 million oil budget. Final budget numbers will be determined when the two versions are reconciled in a conference committee expected in September. Congressional sources expect the final figures to be closer to the Senate numbers. They also predict there will be little or no opposition from the White House, given the recent push by both Capitol Hill and the administration to focus on US natural gas supplies.

In fact, given that there is concern that higher prices may be the norm rather than the exception over the near to midterm, some congressional observers say DOE's natural gas research budget may be further expanded, either as part of the annual appropriations process or under a pending energy bill due to be finalized in late spring or early fall.

Other spending
DOE's oil and gas research programs are one small part of a much larger annual spending measure called the Interior Appropriations bill. The $19.6 billion bill includes the entire budget of the Department of the Interior, including agencies of interest to industry such as the Bureau of Land Management, Minerals Management Service, and the US Geological Survey. It also includes fossil energy programs at DOE and the operating budgets of the Energy Information Administration and the Strategic Petroleum Reserve.

The pending Senate measure is currently $75 million more than the White House's budget request. It provides $1.7 billion for DOE overall, including $862 million for energy conservation and $594 million for fossil energy research and development (including $130 million for the Clean Coal Power Initiative).

The Senate bill also provides $929 million for USGS, an increase of $33 million over the budget request. It also reinstates $21 million in proposed cuts for minerals resources assessments, water investigations, and mapping activities.

The bill includes $1.7 billion for BLM and $273 million for MMS (about $100 million of that budget is expected to be offset by receipts).