WATCHING GOVERNMENT CUTS AT DOE

The U.S. Department of Energy has escaped the guillotine for now-but not the knife.

The Clinton administration has proposed a $10.6 billion cut in the DOE budget for the next 5 years as part of a $19.5 billion program to reduce federal spending and help pay for a proposed middle class tax cut.

DOE's budget has been running about $17.5 billion/year, mostly for nuclear programs. And almost all of the funding cuts would occur in nuclear programs.

NO DEATH SENTENCE

The real news was that the White House decided not to abolish DOE and shift its functions elsewhere. That decision implies the White House will resist any efforts by the Republican controlled Congress to kill DOE.

Alice Rivlin, Office of Management and Budget director, explained: "Some activities must remain in Washington while being performed more effectively. That's why we have decided not to abolish any major agencies."

In 1982, the Congressional Budget Office studied proposals to eliminate DOE and decided it would save the federal government little or nothing.

The Clinton administration's package calls for DOE to raise $1.6 billion during 5 years through disposal of the Elk Hills, Calif., and Teapot Dome, Wyo., naval petroleum reserves, as well as oil shale reserves in Colorado and Utah.

The Clinton administration proposed selling Elk Hills in its last budget plan. The preceding Bush and Reagan administrations also asked Congress to do that.

Congress not only ignored those suggestions, but also forbade DOE to spend time or money to study such divestitures.

Deputy Energy Sec. Bill White said DOE's first step will be to ask Congress to lift that ban so it can determine if it's better to sell, lease, or farm out the reserves.

Congress is more likely to agree this time around because the Republican staff of the House budget committee also has proposed selling Elk Hills.

DOE owns 78% of Elk Hills field, which is producing about 100,000 b/d, and all of the 30,000 b/d Teapot Dome field. It has awarded leases on Buena Vista Hills field in California, as well as gas reserves in the Colorado oil shale reserve.

The four locations produced a combined 25 million bbl of crude oil, 123 bcf of gas, and 158 million gal of gas liquids in fiscal 1993.

STREAMLINING

In other measures, White noted a DOE streamlining plan already calls for a 5% cut in department employment, and "we have made huge cuts in the number of contractors."

The government has spent $2 billion to help fund 45 projects in its Clean Coal Technology program, which helps utilities use coal with less pollution, White said that program has outlived its usefulness and will be ended.

DOE has not decided whether to continue a research and development program aimed at increasing production from certain types of U.S. reservoirs. White said those reservoirs could be better produced by industry because DOE lacks the funds for optimum development.

Issue date: 12/26/94