SEQUESTRATION:

Ready or not, here comes the sequester

Whether it brings the apocalypse or just another tedious, predictable outbreak of partisan finger-pointing, sequestration -- a round of automatic cuts to the federal budget -- will kick in Friday, unless President Obama and Congress act this week to avert it.

Sequestration will affect government's ability to do its job in myriad ways. It could drastically cut back the federal workforce and could also affect the nation's overall economic outlook.

What follows is a snapshot look at how sequestration is playing in the environment and energy space, and what might lie ahead if the cuts go into effect:

Interior

While it is unclear how the sequester would affect the nation's primary land management agency, Interior Department officials have highlighted likely hits to national parks, energy development and payments to Western counties -- areas that resonate the most with the American public, not to mention the Republican lawmakers whose help the White House will need to stave off the cuts.

Most of the sequester planning has happened internally, but Interior will break its silence today with a public relations blitz on how the cuts would harm the nation's 398 national parks, historic sites and recreation areas. Interior Secretary Ken Salazar and National Park Service Director Jonathan Jarvis are scheduled to hold a tele-news conference this afternoon to talk about the importance the Park Service plays in local economies.

Few Interior programs have such a direct impact on the general public. Parks offer low-cost family vacations and are a boon to surrounding communities, but staffing cuts are expected to close many visitor centers, delay snow removal from key access roads, and close an untold number of campgrounds and picnic areas.

But given that high season for parks does not begin until summer, the National Park Service may be spared the worst of the sequester.

"Clearly the longer this goes on, the more impact we'll have on our national parks and our communities, plus the tourism and outdoor recreation that relies on those places," said Scott Slesinger, legislative director for the Natural Resources Defense Council. "Watch as this drags into the spring. You might have school groups being told they can't visit the parks, they can't have enough workers there."

The Fish and Wildlife Service is facing similar challenges at more than 100 of its wildlife refuges, said Desiree Sorenson-Groves, vice president of government affairs for the National Wildlife Refuge Association. Since most were established primarily to support endangered species and migratory birds, public uses like education, recreation and hunting are second, she said. "Unless your refuge was made for environmental education ... you're not going to do it. You have to put staff on things that are mandated by Congress."

Sorenson-Groves said FWS has indicated it will not have staff to oversee the refuges' 42,000 volunteers, a significant portion of the agency's labor force that helps conduct wildlife surveys, band birds, raise fish and guide tours, among other tasks.

While some conservationists have conceded the sequester will not mean the end of the world -- at least initially -- groups in recent weeks have mobilized their members, warning of cuts to parks and clean water sources. A graphic in an NRDC blog post last week asked readers whether they'd rather cut $138 million from NPS or $8 billion from oil industry tax breaks. A backdrop features a red rock arch next to the Deepwater Horizon rig.

The sequester's impact on oil and gas and renewable energy development on public lands is unclear, though it's unlikely it would result in an immediate drop in production. Interior this month warned cuts would result in 300 fewer drilling leases in Western states, the delayed receipt of tens of millions of dollars in coal leases, and trouble processing more than 500 exploration and development plans in the Gulf of Mexico.

The Western Energy Alliance, which represents hundreds of oil and gas firms that operate in Rocky Mountain states, said fewer permits could reduce the billions of dollars drillers return to the U.S. Treasury.

"Interior has spent the last four years shifting resources away from revenue-generating oil and natural gas development to renewable energy projects," said Kathleen Sgamma, the group's vice president of government and public affairs. "They have the flexibility to adjust to any budget cuts by moving personnel back to oil and gas, which generates $66 for every dollar DOI spends administering the onshore program."

It's less clear how the sequester would affect drilling in the Gulf of Mexico, which is overseen by the bureaus of Ocean Energy Management and Safety and Environmental Enforcement. For example, BSEE in 2011 said it expected to keep more than half its staff working even if the government shuts down, because more than half its budget comes from rental receipts and inspection fees that are not appropriated by Congress.

Many experts are wondering whether Congress will grant agencies the latitude to shift funding between programs rather than require they be lopped evenly by 5 percent. If it does, Interior will have leeway, say, to move money out of its land acquisition or construction budget to stave off staffing cuts in other programs.

One thing is for sure: The impending sequester, the March 27 expiration of government funding and the need to prepare for the president's fiscal 2014 budget have likely siphoned precious time away from agency budget personnel, who have likely prepared numerous contingency plans. "There's probably a lot of lost efficiency and a lot of lost staff time doing this modeling when it's all in a vacuum," one conservationist said. -- Phil Taylor

DOE

The Energy Department is bracing for potential furloughs and possible delays in cleaning up some of the country's most polluted sites if Congress fails to stop across-the-board cuts from taking effect in March.

On the heels of U.S. EPA and the Department of Defense's announcement that furloughs are on tap if sequestration cuts go through, industry sources say they expect similar actions will take place at DOE.

The fear has only been escalated by a memo that Deputy Energy Secretary Dan Poneman is reportedly circulating among DOE employees, warning of potential temporary furloughs as well as cuts to travel, training, facilities and supplies.

"Given that less than one month remains until these cuts would take effect and given that the delay enacted by Congress would give us less time in which to make the required cuts, our senior leadership team is engaged in extensive planning efforts to determine how we would deal with sequestration," Poneman wrote.

DOE is taking all steps possible to protect employees, he said, but the agency's ability is "limited by the rigid nature of the cuts imposed by Congress."

Although the effects of such financial cuts remain unclear, outgoing Energy Secretary Steven Chu warned in a letter earlier this month that winnowing down agency budgets could strain efforts to clean up waste sites in Washington state; in Oak Ridge, Tenn.; in the Savannah River Site in South Carolina; and at a cleanup project in Idaho.

Chu followed that warning with a reminder that DOE is locked into legal agreements with state and federal regulators to make sure that work gets done (Greenwire, Feb. 15).

Those cuts would especially be felt in Hanford, Wash., where DOE has already spent millions to clean up about 56 million gallons of radioactive waste in underground tanks and is struggling to build a first-of-its-kind plant that would trap the waste in glass for burial.

Earlier this month, a tank at the site was found to be leaking, prompting Washington Gov. Jay Inslee (D) to visit Chu in Washington, D.C., last week to discuss the matter (Greenwire, Feb. 18).

Workers at the site are very concerned about the effects of sequestration in light of the leak and the fact that it costs about $2 billion each year to run offices there that oversee the tank farm, river protection and waste treatment, said Dieter Bohrmann, a spokesman for Washington state's nuclear waste program at the state Department of Ecology.

"In general, we're concerned it could slow down the cleanup," Bohrmann said. "Hanford cleanup needs more money, not less funding."

DOE made a legal agreement with the state of Washington to retrieve the waste from tanks at the site, and the most pertinent deadline would be the agency's goal to move waste from 10 single-shell tanks into stronger, double-shelled tanks by September 2014, Bohrmann said.

Although DOE has been mum on the issue of how cuts could affect the agency, one industry source voiced concern about the nuclear loan guarantee program, which needs $50 million annually to support staff and hire consultants to review the applications. Without that funding, the program could also stall, they said.

Clean energy grant programs, similarly, could be in for significant cuts (Greenwire, Feb. 19). -- Hannah Northey

U.S. EPA

EPA has already warned that its cuts would touch everything from air quality monitoring to clean water infrastructure. In a letter to the Senate Appropriations Committee, the agency detailed cuts that would "directly undercut our congressionally-mandated mission of ensuring Americans have clean air, clean water and clean land," including reducing enforcement staff and research grants.

The agency's cleanup of toxic pollution sites under the Superfund program could be among the hardest and most visibly hit, with an estimated three to five new construction sites on the chopping block and work potentially stopping at one or more ongoing construction projects. Given the multiyear process to approve and study sites to begin with, environmentalists expressed concern that additional cuts could mean toxic sites sit untouched.

The agency also has warned that it would have to cut back on funding given to states to monitor air quality, meaning reductions in both staff and air monitoring equipment.

That, said Bill Becker, executive director of the National Association of Clean Air Agencies, would mean not only less reliable information about air pollution, but also inconsistent testing for industries already trying to meet EPA regulations.

Cuts to air and water programs would be especially tough because much of that money is distributed to states, many of which have already seen their budgets significantly reduced in recent years. Grant programs to the states to finance aging water infrastructure and implement Clean Water Act and Safe Drinking Water Act programs are among the largest pots of money in EPA's budget.

"It means permits take longer to issue, it means a reduction in inspections, it means less monitoring, it means less enforcement, it means fewer standards being set," said Steve Brown, executive director of the Environmental Council of the States. "Every state will tailor the cuts in areas where they have the least impact ... but something has to give."

It's unclear how much discretion agencies will be given to prioritize individual programs. If EPA is given some authority to move funds around, it is likely that regulatory programs and infrastructure assistance will receive more at the expense of nonmandated programs like Energy Star and WaterSense, which promote efficiency.

"The question will be how deep to cut the voluntary programs, the ones that may be producing great results but aren't mandated by law," said Ben Grumbles, president of the U.S. Water Alliance and former EPA administrator for the Office of Water under the George W. Bush administration. "The WaterSense program is the wave of the future, and if it's zeroed out, that would be a tragedy."

EPA noted that the cuts would also hurt a number of regulatory programs that could ripple out to the economy at large. The agency's testing of vehicles for emissions and fuel economy standards, for example, could be slowed and translate into delays in cars getting to market. And the agency's comments on transportation and energy projects as required under the National Environmental Policy Act could see delays, adding time to a process already criticized as too lengthy.

Sequestration would also mean delays in EPA's chemical and toxic substance assessment under the Integrated Risk Information System (IRIS) program, another project already facing backlogs and under scrutiny. A program that cleans up potentially toxic leaks from underground storage tanks would have to eliminate up to 290 cleanups, while reductions in state grants could mean an additional 2,600 fewer inspections of toxic sites.

But, Becker said, the sequester's real effects may not be felt for months or even years. States cutting back on air equipment and monitoring staff now could lead to inconsistencies in monitoring for industries and could hinder long-term plans to regulate air quality.

"We're not going to turn into a nation of nonattainment areas, and overall it's less than 10 percent in terms of cuts, but there are real, tangible impacts here," Becker said, referring to areas that no longer meet air quality standards. "People are telling us to clean up the air and then three years later when the job's not done, those same members of Congress who are responsible for taking away funding will complain about states' inaction." -- Jason Plautz

Federal workforce

Sequestration equates to one main concern for the federal workforce: furloughs. But when it comes to most agencies, mum's the word on the particulars.

The most recent direct communication from the White House Office of Management and Budget came nearly a month ago, stating that agencies must give workers at least 30 days' notice if they will be required to take furloughs (Greenwire, Feb. 6). And per a guidance released by the Office of Personnel Management this month, if the furloughs are longer than 22 work days, agencies must notify employees at least 60 days in advance. Under those rules, mandatory unpaid leave for employees at some agencies could start as soon as April.

Government watchdog Center for Effective Government, which released a report last year stating that furloughs could be avoided in the event of a short-term sequestration by shifting spending around, now believes furloughs are more likely to happen. The key is that they won't be happening in isolation, said Patrick Lester, the center's director of federal fiscal policy. Instead, agencies have taken steps to cut down their costs in other areas first.

"I think it's one of the last things they'll want to do," he said.

Unions said they are expecting more agencies to start disclosing their sequestration plans, including furloughs, this week as the deadline approaches. Last week, EPA officials met with union leaders to discuss more specifics about sequestration's impacts on workers, sources said.

Meanwhile, on Capitol Hill, Republicans have floated legislation that would delay sequestration for a year -- but would in turn cut the federal workforce by 10 percent. The legislation, S. 263 and H.R. 593, has been disparaged by Democrats and unions for targeting federal employees (E&E Daily, Feb. 7). However, both bills have been sent to committee, and neither is likely to come up this week. -- Jessica Estepa

Agriculture

Agriculture Secretary Tom Vilsack has been vocal about criticizing Congress for sequestration, which he calls a "bad, bad policy" that creates uncertainty for farmers and ranchers. The sequester, according to Vilsack, will require the Agriculture Department to reduce discretionary funding for programs by nearly $2 billion this fiscal year.

Among the reductions, USDA would cut the technical and financial assistance it provides to farmers for putting in place conservation measures. The department also plans to put in place a hiring freeze in the Natural Resources Conservation Service, which administers conservation programs.

Conservationists are warning that such cuts could lower the effectiveness of programs in the future.

"This is not happening in a vacuum. These programs have already taken a hit. They are already on a downward trend," said Steve Kline, agriculture program director at the Theodore Roosevelt Conservation Partnership. "These programs have already given a lot. ... I'm not sure how much more they can give and continue to exist and function on the ground."

USDA has also warned that it would furlough meat and poultry inspectors and scale back programs that have provided credit to farmers who suffered from last year's drought in the Corn Belt. The department would cut $60 million from agricultural research -- a move that is expected to reduce the number of grants the agency awards for projects in water, nutrient management and biofuel production. Sequestration would also force USDA to reduce the financial help it provides to states to prevent pests and disease.

It's still unclear how much the mandatory funding of farm bill programs would get cut under sequestration. USDA has not given a figure, but some groups expect it to add billions more on top of the $2 billion cut in discretionary spending. The reduction to NRCS could be as high as $400 million, including both mandatory and discretionary funding. --Amanda Peterka

Mining

Sequestration would affect mining-related oversight efforts within numerous agencies and around the country, Obama administration officials and advocates have said.

When it comes to miner safety, the Mine Safety and Health Administration warned that although coal mine inspections would likely continue unaffected, it may have to roll back noncoal site visits.

MSHA, facing a $31 million cut, would also consider rolling back enhanced safety enforcements that have been in place since the 2010 Upper Big Branch explosion. The Department of Labor said in a recent letter that cuts could potentially lead "to an increase in the fatality and injury rate among miners."

The mining industry is already warning that the agency has only so much leeway when it comes to cuts. "MSHA has a statutory obligation to inspect all underground mines four times annually and all surface mines twice annually," said National Mining Association spokeswoman Carol Raulston. "We expect MSHA will find the resources to fulfill its statutory obligations."

Perhaps the greatest impact of sequestration on mining is already being felt. The Office of Surface Mining last week doled out more than $300 million in grants for abandoned mine land cleanups.

However, because of the impending spending cuts, the agency delayed the grants and gave states and tribes more than $30 million less than it would have under normal circumstances.

Jay Apperson, spokesman for the Maryland Department of the Environment, said about sequestration's impacts: "We have delayed one project that would eliminate a potential landslide that threatens a county road. If the delays continue, then other projects could be delayed."

OSM, which has been working with states to help them deal with possible cuts, said that nationwide 50 mine sites may not be reclaimed, more than 1,800 acres of land may not be cleaned up and more than $4 million may not be set aside for polluted water cleanups under sequestration.

OSM would see its own spending and coal mine oversight ability slashed by $10 million, according to the Office of Management and Budget. Payments to United Mine Workers of America health plans would go down by $13 million.

When it comes to other agencies, Interior said sequestration could slow down the pace of federal coal leases, something many anti-coal environmentalists would welcome. The Forest Service has said its oversight of mining and minerals could suffer.

EPA said in a letter that cuts would hamper its ability to comment and offer advice on National Environmental Policy Act reviews, including for mines. EPA backing off some enforcement efforts is, however, something many state regulators and companies would welcome.

At the Department of Energy, which would see a $44 million cut in fossil energy research and development, efforts at developing carbon capture and other technologies to make coal power plants cleaner could also be affected. --Manuel Quinones

NOAA

The sequestration cuts could be a major blow for the government's weather satellite programs, potentially jeopardizing future forecasts, according to federal officials and groups that monitor the programs.

National Oceanic and Atmospheric Administration chief Jane Lubchenco told reporters this month that sequestration could "wreak havoc" at the agency, especially with satellites. A large chunk of NOAA's budget is dedicated to the launch of new environmental satellites that will help weather forecasters track hurricanes and winter storms, and fill in the gap when other satellites go offline in the next few years.

Two new satellites are currently planned to launch in 2015 and 2017. A delay would increase the risk of a gap in satellite coverage and compromise weather forecasts and warnings, according to NOAA.

Satellites have a lot to lose, funding-wise. They are a huge budget item, with a $2 billion request for 2013, so if the spending cuts are made across the board, without discretion, the program could stand to lose more than $160 million.

"Satellites are going to be the biggest problem for [NOAA] to manage," said Kevin Wheeler, who follows the NOAA budget as director of public affairs for the Consortium for Ocean Leadership. "How does NOAA, which is already facing challenges in terms of potential data gaps and delayed launches, manage a $100 million cut there?"

Eric Webster, vice president of ITT Exelis, a contractor that builds the major sensors for many of NOAA's satellites, said the cuts could push back contracts that have not been finalized.

"If there are massive cuts to our major programs, we would have to consider staffing issues," Webster said. "But we don't know where NOAA plans to make actual cuts."

Other programs could also face painful cuts. In a letter to the Senate Appropriations Committee earlier this month, Rebecca Blank, the acting Commerce secretary, warned the cuts could force reductions in funding for fishery stock assessments, support for regional fishery management councils and at-sea observers who monitor catch on fishing boats.

NOAA would have to furlough up to 2,600 employees and cut 1,400 contractor jobs, according to Blank. The agency would not fill an additional 2,700 positions.

That could be a major blow to fishermen who are struggling in the face of strict catch limits intended to rebuild stocks. Even without further cuts, fishermen have been calling for updated stock assessments in some fisheries where they think fish have rebounded enough to increase their catch.

"If we don't have research, we are going to lose jobs," said Zeke Grader, executive director at the Pacific Coast Federation of Fishermen's Associations. "For us it is very much a jobs issue, but the alternative of trying to fish without good science would be putting the future at risk."

Fisheries managers are bound by law to avoid overfishing and rely on data on fish stocks to make decisions about catch limits and fisheries closures. Blank said they may have to be more conservative in those opinions if fisheries funding faces cuts.

"They are required to manage for science, but if you don't have the science, you're screwed," Grader said. "It's bad news, there's no doubt about it."

How soon stakeholders would feel the pain from cuts is uncertain. If the sequester cuts are only temporary, most stakeholders think NOAA could find ways to chug along -- but it could still throw a wrench in big, time-sensitive projects like the satellites if future funding is uncertain. NOAA may also be able to smooth over some of the cuts with the extra funding it received in the disaster supplemental for Superstorm Sandy. -- Allison Winter

Transportation

If sequestration takes effect Friday, the Obama administration argues that travelers might expect longer delays at airports and railways. Also, motorists could see a slight spike in traffic along busy corridors, and fewer people will be around to fix potholes.

The Transportation Department -- with its influence on commerce and business travel -- would temporarily lay off a "vast majority" of the Federal Aviation Administration's workforce.

"The furlough of a large number of air traffic controllers and technicians," DOT Secretary Ray LaHood said, would "be felt across the country, as the volume of travel must be decreased."

In a communication with Senate appropriators, LaHood was more specific: The sequester would result in nearly $1 billion in funding reductions at DOT spread over time. And while DOT leadership asserts that safety personnel would remain in full force, sequestration "could mean making cuts to vital programs or curtailing spending on contracts," DOT Deputy Secretary John Porcari added in a letter to employees this month.

Specifically, a sequester would mean NASA would have to cut research into advanced air traffic management, Amtrak could face cuts in its operations and capital budgets, and so forth.

Not subject to the cuts, DOT leaders say, are federal highway and transit grant funds that are allocated to the states by taxes collected for the Highway Trust Fund.

Several leading transportation advocacy groups agree the cuts would devastate travel performances while conceding it's anybody's guess at this point what course of action lawmakers take.

"It's premature to speculate," Victoria Day, spokeswoman for Airlines for America, told reporters.

A spokesman for the American Association of State Highway and Transportation Officials, a leading transportation lobby, said organization officials are concerned about the cuts but will wait to see how congressional debate shapes up this week before expanding on their concerns. -- Eugene Mulero

Army Corps of Engineers

For a picture of the ripple effect that sequestration promises to send across the American economy, look no further than the Mississippi River.

The Army Corps of Engineers typically spends $50 million a year dredging the world's largest navigable inland waterway. If that budget faces the 8.2 percent cut the corps currently anticipates across its civil works programs, navigation experts say it wouldn't be long until barges have to be light-loaded, driving up the cost of everything from a box of Cheerios at Wal-Mart to the price of electricity made from coal shipped down the river.

"There'd be multiple impacts throughout the economy," said Don Riley, former deputy commander of the Army Corps and now senior vice president at the water resources lobbying firm Dawson & Associates. Industry, in fact, got a taste of what this could look like last year, when the massive drought sent water levels on the river to near-historic lows.

Lawmakers are already angling to shield key projects in their regions. At a recent hearing of the Environment and Public Works Committee, Sen. Roger Wicker (R-Miss.) pressed the corps' top civil works official about how she might prioritize projects like the Mississippi River and Tributaries Project in his state, which provides flood protection along the waterway but is only 86 percent complete.

For now, though, the corps says its hands are tied.

"If we are faced with sequestration, we are going to have to do across-the-board cutbacks in all of our program areas -- we'll have to reduce funding in dredging, we'll have to reduce funding in flood protection, we'll have to reduce funding in ecosystem restoration," Jo-Ellen Darcy, assistant secretary of the Army for civil works, told Wicker. "Every project is going to have to take that percentage off the top."

By law, cuts must be applied at the account level -- meaning the balance the corps currently has struck among its priorities won't change -- but the administration could choose to allow agencies to prioritize projects within an account. That might make financial sense, allowing projects to be funded most efficiently, but it would also set off a lobbying bonanza.

"They absolutely want to avoid picking projects and having members get down their throats," a Senate Republican staffer said. -- Annie Snider

Defense

After four years of working to rein in the military's roughly $20 billion fuel and electricity bill, Pentagon energy officials say their gains could come to a halt if sequestration takes place.

With defense spending slated to take half of the sequester's cut -- $46 billion out of the military's roughly $600 billion budget in 2013 -- Pentagon officials are looking to do what they can to push money to support the current war and basic operations.

That would leave other areas, including many energy programs, to absorb even more of the cuts, with some projects taking a 20 or 30 percent hit this year.

"It's a very frustrating situation to be in," said Katherine Hammack, assistant secretary of the Army for installations, environment and energy.

Her office has mounted a full-scale effort to woo third-party financing for energy efficiency measures or renewable power projects at bases. Last year the Army awarded about $200 million in Energy Savings Performance Contracts alone. But writing and vetting those contracts is labor-intensive, and much of that staff is made up of civilian employees, who outgoing Defense Secretary Leon Panetta last week said would be furloughed under sequestration.

And you might as well forget about incorporating energy security concerns into those contracts through measures like microgrids, Hammack said. The work that her office is able to get done will have to be highly focused on reducing costs, she added.

Research and development efforts, including testing and certifying the military's fleets on biofuels, would also take a steep hit under sequestration. The biofuels program is funded through the end of this year, but after a cutting battle over it last year, supporters fear that even if the sequester is averted or reversed, future funding for the program could be cut in a deal. --Annie Snider

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