Clean energy favored, fossil fuel programs cut under fiscal 2014 budget

Source: Nick Juliano, Hannah Northey and Katherine Ling, E&E reporters • Posted: Thursday, April 11, 2013

President Obama’s fiscal 2014 budget request would boost funding for a variety of clean energy initiatives while reducing spending on fossil fuel programs and repealing oil and gas tax breaks.

The clean energy increases would come in research and development, state-based competition to enhance energy efficiency and the electric grid, a new trust fund designed to find alternatives to oil in transportation, and a permanent extension of the renewable energy production tax credit.

The falling fossil budget and resurrection of a long-standing call to eliminate tax breaks led to complaints from industry groups and Republicans that the president’s claimed “all of the above” energy strategy does not adequately account for coal, gas and oil.

The Department of Energy would see its overall budget grow to $28.4 billion next year, an 8 percent increase from fiscal 2012 levels. That also would reverse the effects of sequestration and a subsequent cut in the recently passed continuing resolution, which dropped DOE’s current appropriations to about $26 billion.

Obama’s budget emerged this morning, two months overdue and after the House and Senate each adopted their own starkly different budgets for fiscal 2014. The document already has been pronounced dead on arrival on Capitol Hill, but it outlines the administration’s priorities as the fiscal 2014 appropriations process ramps up and ahead of tax-and-spending battles likely to dominate Washington through the summer.

Within DOE, the biggest winners are efficiency and renewable energy programs. The budget would provide $615 million for solar, wind, geothermal and hydro energy as part of an overall increase of 40 percent above fiscal 2012 levels for clean technology activities, according to a summary.

The budget resurrects Obama’s long-standing proposal to eliminate a suite of tax deductions and other incentives for the oil and gas industry, including allowing exploration and production companies to deduct intangible drilling costs and a domestic manufacturing deduction. The proposal, which the administration says would save more than $40 billion over the next decade, has been roundly rejected by nearly all Republicans and most oil-state Democrats in Congress.

Obama’s budget also proposes eliminating various tax incentives for the coal industry, which it says would save nearly $3.3 billion over the next decade.

Revenue from closing the fossil fuel and other tax “loopholes” would go to a variety of new or extended tax supports for clean energy, efficiency, domestic manufacturing, and research and development totaling $53.4 billion over the next decade. That includes a permanent extension of the production tax credit, which would cost $17 billion over 10 years, as well as several incentives for advanced technology vehicles and efficient buildings.

Conservatives were quick to dismiss the proposed trade-off.

“He continues his effort to incorporate punitive and discriminatory tax measures for oil and gas producers into the tax code, while renewing his effort to poach mineral royalties owed to U.S. taxpayers to fund his green energy schemes without opening new lands for exploration and development,” said Tom Pyle, president of the American Energy Alliance, a conservative think tank.

The president’s defenders, meanwhile, said his budget provided a welcome contrast to the one adopted by House Republicans last month.

“By eliminating nearly $40 billion in unnecessary special tax breaks for Big Oil over the next 10 years, President Obama’s proposed budget makes the tax code more fair while investing additional revenue to support the middle class,” said Daniel Weiss, director of climate strategy for the liberal Center for American Progress. “Meanwhile, the Republican-controlled House continues to ignore the needs of Americans by passing Rep. Paul Ryan’s (R-WI) budget, which would pour $20 billion in new tax breaks into Big Oil’s already full revenue barrel while draining funding from vital health programs and investments in economic growth.”

Obama’s budget also formalizes several proposals that have been gaining traction among administration members and in energy policy circles, including an interstate clean energy competition program modeled on the popular “Race to the Top” education initiative. The budget proposes a one-time $200 million pool of money from which states would receive competitive grants for a variety of efficiency and grid improvements.

“Key opportunities for States include: modernizing utility regulations to encourage cost-effective investments in efficiency, including combined heat and power and demand response resources, and in clean distributed generation; enhancing customer access to data; investments that improve the reliability, security and resilience of the grid; and enhancing the sharing of information regarding grid conditions,” the budget summary says.

The budget also formalizes Obama’s call for an Energy Security Trust Fund that would grow to $200 million per year to fund research into alternative transportation fuels; the budget envisions the fund receiving $60 million next year. The idea has some bipartisan support, but there is a split between the White House and congressional Republicans over whether additional coastal areas should be open to drilling in order to fund it, dampening its chances of becoming a reality.

Efficiency up, fossil energy down

DOE’s Office of Energy Efficiency and Renewable Energy would receive a substantial boost under the budget, growing to nearly $2.8 billion, a nearly 62 percent increase over its current, sequester-adjusted level of about $1.7 billion.

Some of the largest proposed increases are concentrated in EERE efforts to make buildings more efficient, develop cleaner vehicles and promote domestic manufacturing of clean energy products. Vehicle programs would grow to $575 million from an estimated $340 million in the current fiscal year. The advanced manufacturing program would grow to $365 million from $146 million. And EERE’s weatherization and intergovernmental activities account would grow to $248 million from $145 million under the budget.

Meanwhile, the Fossil Energy Research and Development program would see its budget fall to $420 million from its current level of about $470 million.

The fossil budget would boost funding for carbon capture — from an estimated $69 million in fiscal 2013 to $112 million for next year — while cutting the carbon storage budget from $115 million to $61 million. The only other fossil line item proposed to receive an increase is spending on natural gas technologies, which would grow from $15 million to $17 million.

The Energy Information Administration, which provides a wealth of data on energy commodity prices and supplies as well as projections of future trends, would see its budget set at $117 million, up from about $101 million currently.

 Nuclear, Yucca Mountain

The administration’s request for nuclear power dipped to slightly more than $735 million, down from $771 million under current sequestered spending levels, and didn’t include a request for any new authority for loan guarantees for new nuclear projects.

The White House also asked for $70 million to support the licensing of small modular reactors, which the Obama administration hopes will bolster domestic job creation, cut carbon emissions and provide a solution for replacing aging coal-fired power plants. The funds would go toward the Energy Department’s five-year, $452 million total cost-share program aimed at licensing small modular reactors.

Congress appropriated $67 million for the grant program in fiscal 2012, and DOE asked for an additional $65 million in fiscal 2013.

The president’s budget proposes a number of reforms for how the government pays for storing and disposing of nuclear waste, an issue that’s triggered multimillion-dollar lawsuits against DOE. Although the White House asked for no money to continue working on the Yucca Mountain nuclear repository in Nevada, which Obama abandoned years ago, the budget did call for the establishment of a new program.

The proposed program, which would cost $5.6 billion during the first decade, would allow the government to tap into appropriated funds and the Nuclear Waste Fund, a pot of money utilities pay into for waste disposal. The program would be a “very long-term, flexible, multi-faceted approach to dispose of the nation’s commercial and defense waste” that assumes DOE is making progress on building and operating a pilot interim storage project, as well as a permanent repository.

The White House said the proposal is aimed at curbing a growing number of lawsuits against the federal government for failing to take waste from utilities that generate nuclear power. The government signed contracts in the 1980s to take the waste but failed to do so. “The sooner that legislation enables progress on implementing a nuclear waste management program, the lower the ultimate cost will be to the taxpayers,” the administration wrote.

The administration is seeking about $1 billion for the Nuclear Regulatory Commission, the bulk of which the agency would recover through fees from applicants that are seeking or hold licenses. The NRC did not seek additional funds to review the Yucca Mountain project. The agency is arguing in federal court that a lack of appropriated funds is preventing a review of DOE’s application to build the Nevada facility (Greenwire, March 28).

Funding for the Federal Energy Regulatory Commission would remain at about $305 million.

But the president’s budget proposal called for an investment of more than $153 million in research and development of “smart grid” technology to modernize the country’s aging electric grid, site and plan new power lines, and secure the system against cyberattacks.


Obama’s proposed budget continues his strong support for clean energy research and development, focusing on accelerating breakthrough technology to the marketplace. Most funding requests remain at about the same level as Obama’s fiscal 2013 budget proposal.

“To compete in the 21st century economy and make America a magnet for jobs, the budget invests in American innovation, reviving our manufacturing base and keeping our Nation at the forefront of technological advancement,” a summary of the budget said.

The budget would advance the administration’s strong focus on innovation and R&D for advanced vehicles and biofuels. The budget would provide $575 million for advanced vehicles technologies, a 75 percent boost over the 2012 enacted level, including efforts to reduce the price of electric vehicles. Biofuels and biorefineries would receive a 42 percent increase to $282 million to develop and demonstrate conversion technologies to produce cellulosic ethanol and other advanced biofuels, such as algae-derived biofuels. Overall solar, wind and other renewable energy budget levels would each receive about a 50 percent budget increase from current enacted levels under the proposed budget.

Advanced manufacturing is an important focus of the Obama administration, and the budget would provide $365 million in overall DOE funding to expand innovative manufacturing processes and advanced industrial materials, plus an additional $5 billion in tax credits and a one-time $1 billion investment to launch a network of up to 15 manufacturing innovation institutes.

DOE’s agency charged with developing “game-changing” energy technology, the Advanced Research Projects Agency-Energy (ARPA-E), would receive $379 million under the proposed budget, a 35 percent increase from current levels under sequestration and slightly higher than last year’s administration request.

The Office of Science, the lead agency for fundamental scientific research for energy and the physical sciences, also would see a 5.7 percent increase to its budget from 2012 levels under sequestration to $5 billion. That is level with Obama’s fiscal 2013 request. The budget would boost research on all fronts, particularly for advanced computing and fusion energy with about 10 percent budget increases, but slightly cuts laboratory infrastructure. The budget also includes funding for new Energy Frontier Research Centers, which will undergo a recompetition of current grants in 2014, and Energy Innovation Hubs.

The budget would cancel the ultra-deepwater and unconventional natural gas and petroleum research fund again, although Congress continues to show support for the program.

Overall, Obama’s proposed budget would increase nondefense research and development investment by 9 percent above 2012 levels.

The budget would also make permanent important tax incentives for research and development, along with renewable energy and energy efficiency.