Chu faces bipartisan heat on proposed oil and gas cuts

Senate Democrats and Republicans criticized President Obama's spending proposals for energy today for not living up to his State of the Union rhetoric expressing support for both new and old sources of energy.

"These policies are clearly not designed to spur more domestic production," said Alaska's Lisa Murkowski, the top Republican on the Senate Energy and Natural Resources Committee.

Murkowski directed her complaints at Energy Secretary Steven Chu at a hearing on the Obama administration's fiscal 2011 budget proposal for the Energy Department. She criticized plans to end tax incentives for oil and gas production and scale back the nation's Strategic Petroleum Reserve. Chairman Jeff Bingaman (D-N.M.) also criticized DOE's suggestion to cut all funding for oil and gas research, "especially in light of the recent natural gas discoveries here in the U.S."

Murkowski also questioned why solar and wind seemed to be the "favored children" in the renewable budget, winning increases at the expense of hydropower. And while saying she was "pleased" to see a tripling of loan guarantee authority for nuclear power, she said she and other Republicans found it "troubling" that no guarantee for nuclear has been awarded yet and that the administration has decided to zero out funding and remove the license for the nuclear waste repository at Yucca Mountain, Nev.

Overall, Murkowski said, DOE should not get a fiscal 2011 budget increase when the department has spent $2.1 billion of the roughly $37 billion it received in last year's stimulus bill.


"In a time of record debt, we should be asking if we should be giving increases when the department is having trouble spending the money it has," Murkowski said.

Given the stimulus backlog and the proposed budget increase, Murkowski said DOE should not get more money in a proposed jobs bill. She told Chu she hopes he would "communicate to our Democratic colleagues building this jobs bill that 'we are maxed out over here.'"

Chu went before the committee to explain and defend the administration's $28.4 billion budget request for DOE. That would be an increase of 6.8 percent for the fiscal year that begins Oct. 1.

But much of that increase goes to the National Nuclear Security Administration, which is not subject to Obama's proposed nonsecurity budget freeze; the plan provides NNSA with a 14 percent increase. Aside from NNSA, Obama is proposing a 2.8 percent increase. That is still more than most departments, some of which are recommended for cuts under Obama's announced domestic spending freeze.

Bingaman questioned the administration's recommendation to cancel the $20 million renovation of the Los Alamos Neutron Science Center, a linear accelerator built 30 years ago to support the nation's nuclear weapon stockpile. Administration officials say it no longer plays a critical role in weapons research, and Obama has singled it out as an example of his push to end wasteful spending.

"We're saving $20 million by stopping the refurbishment of a Department of Energy science center that the Department of Energy does not want to refurbish," Obama said when he announced his budget Monday.

Many programs favored by the environmental community won out in the proposal, while priorities of the George W. Bush administration were recommended for cuts. Wind was the big winner, driven by the Obama administration's desire to push offshore wind in the coming fiscal year. The budget request for wind power jumped 53 percent, from $80 million this year to $123 million next year. The administration's campaign will seek to win public acceptance, overcome regulatory hurdles and find solutions to technical problems facing offshore wind.

The White House also wants a big boost in solar programs, seeking a hike from $247 million this year to $302 million next year, which would be a 22 percent increase. And it requests $500 million to cover initial fees, or "credit subsidies," to support the $3 billion to $5 billion in loan guarantee authority for energy efficiency and renewable energy projects.

Obama wants big new investments in "clean energy" research. His $300 million request for the Advanced Research Projects Agency-Energy, or ARPA-E, is a show of support for the high-risk, high-reward research. Congress had declined to give the program more money for fiscal 2010 after it got $400 million in the stimulus. The Obama plan recommends the program be pulled out of the Office of Science and funded separately.

The Office of Science would get a big boost in funding under the president's request. The administration would provide the office, which operates the bulk of DOE's research and development programs as well as 10 of the nation's 17 national laboratories, with $5.12 billion, an increase of about 4.5 percent over fiscal 2010 levels.

Fossil fuels take a hit

The Obama administration is proposing to cut all funding for research into natural gas technologies, a program that had received $18 million for the current fiscal year.

The spending plan would eliminate 12 tax breaks for the oil and gas industry, the largest of which is industry's ability to claim the Section 199 domestic manufacturing tax deduction. The Office of Management and Budget estimates ending it would bring in an extra $17.3 billion over the next 10 years.

Oil and gas industry officials said the proposal would increase their costs by $80 billion. But the administration says the tax provisions do little to encourage production or cut prices.

Obama also would cut $71 million from another Bush administration favorite, the Strategic Petroleum Reserve. The administration wants to cancel plans for new site expansion proposed in previous budgets.

Sen. Richard Burr (R-N.C.) said it was inconsistent for the administration to say it is promoting national security in the DOE budget if "in SPR we are decreasing funding by 43 percent."

Another Bush-era program taking a hit is hydrogen. The administration's request recommends a 21 percent cut for the hydrogen technology program, taking it from $174 million to $137 million.

Nuclear ramifications

Republican committee members pressed Chu on what a new "blue ribbon" commission to find alternatives to Yucca Mountain would do and when its suggestions would be ready.

"We've got to pick a path and go for it and not kick the can down the road," Burr said. "You think we will have a maximum build out of nuclear until we have a solution to nuclear waste? ... If we build out two dozen and then stop, where are we? Better off than if we hadn't built for decades?"

Burr and Murkowski also asked Chu what is going to be done about the fees that consumers pay on electricity that comes from nuclear to fund a nuclear waste repository.

"We are required to constantly review whether the fees are needed," Chu said. "That's not really changed at all."

Sen. Bernie Sanders (I-Vt.) said DOE is risking taxpayer money providing $36 billion to the loan guarantee authority for nuclear power. "It's risky business, risky business," he said.

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