DOE:

With fresh clout, White House likely will continue clean energy spending push

All indications suggest President Obama will continue forging ahead into the political minefield of hefty clean energy investments when he rolls out his fiscal 2013 spending wish list for the Energy Department and other federal agencies later this morning.

Despite an ongoing scandal surrounding a DOE loan guarantee to the now-bankrupt solar firm Solyndra and a lackluster response from Congress over his previous efforts to boost clean energy spending, Obama has hinted he is not slacking off in his push to ramp up federal investment in the sector.

Indeed, Obama dedicated a significant portion of his State of the Union address last month to energy spending. "I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here," he said during the speech.

"Some technologies don't pan out; some companies fail," he added in reference to Solyndra. "But I will not walk away from the promise of clean energy."

Over the past few months, the White House has carefully been making its case for strong clean energy investments.

Last year, the administration began touting its early investments in hydraulic fracturing -- or fracking -- technology, which has helped drive a natural gas boom in the United States, as justification for current investments in new clean energy technologies (E&E Daily, Feb. 14, 2011). And that approach went primetime this year when Obama made a direct link between the two in his State of the Union address.

"By the way, it was public research dollars, over the course of 30 years, that helped develop the technologies to extract all this natural gas out of shale rock -- reminding us that government support is critical in helping businesses get new energy ideas off the ground," Obama said.

Salo Zelermyer, a former DOE lawyer during the George W. Bush administration who now works for Bracewell and Giuliani, said Obama's State of the Union remarks indicate he is still strongly pushing clean energy investments.

"I think it seems clear based on the president's remarks in the State of the Union that he remains committed to -- one could argue -- doubling down on his bets on clean energy investments to the point that in the State of the Union he used the example of technological achievements that have led to fracking and shale gas recovery as a means of arguing that investments such as the ones made in Solyndra and other loan guarantee projects are entirely worth it for the public," Zelermyer said.

On Friday, the White House circulated an independent review it requested on the loan guarantee program. That report said that while there was room for improvement in the program, DOE wasn't being too risky with taxpayers' money, a statement many Democrats immediately hailed as vindication (E&ENews PM, Feb. 10).

Still, the White House is not likely to use its newfound political clout on clean energy investments to pour more money into the loan guarantee program, which got its most significant influx of cash from the 2009 stimulus law. Instead, observers say, Obama will likely request near-fiscal 2012 funding levels for DOE clean energy research and development programs.

"While I don't expect any grand new proposal for funding -- certainly for the clean technology loan guarantees, there may be some sort of minimal level to continue that program," Zelermyer said. "I would anticipate a request for funding for [the Advanced Research Projects Agency-Energy], [the Office of Energy Efficiency and Renewable Energy] and other research offices ... will be in line with what came out in the last budget request."

But the 2012 request didn't fare so well among fiscally minded Republicans in Congress. In fact, lawmakers roughly halved the appropriation for DOE research and development programs compared with the White House request. For example, the White House requested $3.2 billion for the Office of Energy Efficiency and Renewable Energy, but Congress appropriated $1.8 billion. And the White House called for $550 million for the Advanced Research Projects Agency-Energy, but Congress appropriated $275 million.

Other budget priorities

Republicans in Congress will get their first chance Thursday to blast the proposed spending plan during a Senate Energy and Natural Resources Committee hearing with Energy Secretary Steven Chu.

There, they are likely to voice objections to the White House's expected call to slash tax breaks for the oil and gas industry.

The president last year called on Congress to repeal a suite of tax incentives that the oil industry enjoys. He repeated that call in this year's State of the Union and is sure to use the slashed incentives as a way to boost spending in other areas.

"It's time to end the taxpayer giveaways to an industry that's rarely been more profitable, and double-down on a clean energy industry that's never been more promising," Obama said in the annual address.

The oil industry is already ramping up its defense against the likely incentive cuts. The industry's main trade group has already scheduled a conference call with reporters to discuss the industry's position on the cuts.

The nuclear industry also will be closely watching to see whether the president includes funding for the federal cost-share program to develop small modular reactors.

Last month, DOE announced it would offer up to $452 million over five years to develop a pair of designs for the miniature reactors. The money was available under the omnibus spending bill Congress passed at the end of last year (Greenwire, Jan. 20).

Some sources say the program could see as much as $90 million, compared to $67 million last year.

Sen. Dianne Feinstein (D-Calif.), chairwoman of the Senate Energy and Water Development Appropriations Subcommittee, has been critical of advancing the development the tiny plants without a national solution for disposing of nuclear waste. Feinstein is working with Sen. Lamar Alexander of Tennessee, the ranking Republican on the subcommittee, and Senate leaders on the Energy and Natural Resources Committee to find a solution within a year.

Environmental groups have also questioned the technology. Last week, groups including the Wilderness Society said in their annual "Green Budget 2013" that DOE should eliminate funding for developing small modular reactors because the plants will be expensive and present new safety and permitting issues.

Industry sources are doubtful the president will ask for additional loan guarantees for nuclear power projects, or include any money for the now abandoned nuclear waste repository under Yucca Mountain in Nevada.

But it remains unclear whether the administration will fund a hotly contested uranium enrichment facility in Ohio. DOE had requested a total of $300 million over two years for U.S. Enrichment Corp.'s uranium enrichment plant in Piketon, Ohio, and the administration recently pledged to assume $44 million of liability to advance the project. The plant would be the first to use domestic gas centrifuge technology to produce low-enriched uranium for nuclear reactors.

It is also unclear whether the president will include funding to address a host of new recommendations the Blue Ribbon Commission on America's Nuclear Future issued last month. The expert panel urged the administration to revamp unworkable federal nuclear waste policies in fiscal 2013 and begin looking for new deep geologic and temporary waste storage sites.

One source said the administration could include about $50 million to continue DOE's research on various geologies and methods for storing nuclear waste.

Schedule: The hearing is Thursday, Feb. 16, at 9:30 a.m. in 366 Dirksen.

Witness: Energy Secretary Steven Chu.