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COLUMN-U.S. Energy Department unfairly criticised over spending, forecasts: Kemp
December 15, 2016 / 1:44 PM / 9 months ago

COLUMN-U.S. Energy Department unfairly criticised over spending, forecasts: Kemp

(John Kemp is a Reuters columnist. The views expressed are his own)

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By John Kemp

LONDON, Dec 15 (Reuters) - The U.S. Department of Energy has become a lightning rod for criticism in parts of the Republican Party and the fossil fuels industry unhappy about the Obama administration’s energy and climate policies.

Presidential candidate Rick Perry promised to abolish the Department of Energy along with the Departments of Commerce and Education during a debate in 2011.

Perry’s views on the department’s usefulness may evolve now he has been selected to lead it in a future Trump administration (“Trump picks climate sceptic Perry for top U.S. energy job”, Reuters, Dec. 14 ).

But Trump’s transition team has been waging its own war against the department sending it a detailed 74-item questionnaire about climate policies, forecasting and the work of career civil servants and officials.

Senator Maria Cantwell, the top Democrat on the Senate Energy and Natural Resources Committee, has described the questionnaire as disconcerting and troubling.

Cantwell warned the transition team “may be preparing to take arbitrary action against civil servants and government contractors” for doing their jobs and implementing the policies of the Obama administration.

“The questions even challenge the independent data analysis functions performed by the Energy Information Administration,” she wrote in a letter to the outgoing secretary of energy.

The transition team has subsequently said in a statement the memo was not authorised as part of its standard protocol and the author has been properly counselled (“Trump transition backs away from controversial questionnaire”, ABC News, Dec. 14).

But while the incoming administration may have backed away from the questionnaire, the scepticism and hostility to the Department of Energy and its mission in some quarters remains very real.

Much of the criticism is based on a misunderstanding about what the department actually does and the policies for which it is responsible.

ORIGINS

The Department of Energy was created in 1977 so it tends to be associated with the Carter administration and the era of big government and price control, which is reason enough for some to be suspicious.

But the Department of Energy Organization Act (Public Law 95-91) received bipartisan support and was passed by lopsided majorities in both the House of Representatives (353-57) and the Senate (76-14).

The Department consolidated a number of existing agencies rather than created a wholly new set of administrative structures (“Institutional origins of the Department of Energy”, DOE, undated).

Programs and agencies transferred to the Department included the nuclear weapons programmes of the Atomic Energy Commission; the power reactor programmes of the U.S. Navy; the power marketing administrations of the Department of the Interior; building energy efficiency from the Department of Housing and Urban Development; and the electricity and gas regulatory programmes of the Federal Power Commission.

The sudden emergence of widespread shortages of coal, gas, oil and electricity in the late 1960s and early 1970s prompted legislators to demand a more joined up approach (“Energy policy in America since 1945”, Vietor, 1984).

Lawmakers and the media demanded to know why the energy crisis had caught the United States by surprise, amid widespread suspicions energy companies were deliberately creating shortages to raise prices.

The lack of reliable and credible statistics on energy reserves, production and consumption prompted Congress to create an Energy Information Administration (EIA) to provide independent statistics and forecasts.

The EIA administrator was granted broad powers to demand data and documents from energy producers and consumers and given statutory independence from the rest of the department and the government.

“The Administrator shall not be required to obtain the approval of any other officer or employee of the Department in connection with the collection or analysis of any information”, according to the law (Section 205(d)).

“Nor shall the Administrator be required, prior to publication, to obtain the approval of any other officer or employee of the United States with respect to the substance of any statistical or forecasting technical reports”.

BUDGET

The Department of Energy is one of the smallest cabinet-level agencies in the federal government in terms of spending (tmsnrt.rs/2gMRW7e).

In fiscal 2015, the department spent $25.4 billion, which amounted to less than 0.7 percent of the $3,688 billion spent by all government agencies.

Department of Energy spending was dwarfed by Health and Human Services ($1,028 billion), Social Security ($944 billion), the Department of Defense ($562 billion) and the Treasury ($486 billion).

It was also smaller than other programmatic agencies including Veterans Affairs ($159 billion), Agriculture ($139 billion), Education ($90 billion), Transportation ($75 billion) Labor ($45 billion), Homeland Security ($43 billion), Housing and Urban Development ($36 billion), Justice ($27 billion) and State ($26 billion).

The only cabinet-level agencies with smaller budgets than DOE were Interior ($12 billion), Commerce ($9 billion) and the Environmental Protection Agency ($7 billion).

Department spending has been broadly flat in real terms since the early 1980s, with the exception of a short-lived increase between fiscal 2010 and fiscal 2012 thanks to the post-crisis stimulus (tmsnrt.rs/2gMVAxJ).

Department expenditure as a proportion of all government spending has declined since the 1970s and 1980s and been basically flat at around 0.7 percent of all outlays for the last decade (tmsnrt.rs/2hzZMNX).

NUCLEAR

Much of the criticism directed at the Department centres on its funding for energy research and development on fossil fuels and renewables.

But most Department spending is related to nuclear weapons, power reactors used in navy submarines and aircraft carriers, and clean up of past nuclear activities.

Congress appropriated $27.4 billion from the Treasury for expenditure by the Department of Energy in fiscal 2015 (“Budget of the United States Government Fiscal 2017”, Office of Management and Budget, 2016).

Appropriations for “atomic energy defense activities” accounted for $17.1 billion, or nearly two-thirds of the total.

Congress appropriated $8.2 billion for weapons activities, $1.6 billion for non-proliferation programmes and $1.2 billion for naval reactors (“Fiscal Year 2017 Budget Justification”, DOE, 2016).

Congress also appropriated almost $5 billion to clean up sites contaminated during the Manhattan Project and Cold War atomic weapons research and manufacturing programmes.

None of this atomic-related spending is controversial. So the political disagreements centre on the $10 billion per year the department spends on other energy programmes.

Of that sub-total, the Department spends $5 billion per year on science including advanced computing ($540 million), basic energy research ($1.7 billion), high energy physics ($766 million) and nuclear physics ($596 million).

The politically contentious Advanced Research Projects Agency-Energy (APRA-E) received an appropriation of just $280 million in fiscal 2015.

Most of the controversy centres on the fossil energy, renewables, and energy conservation programmes and other small items which amounted to around $5 billion in total.

The contentious elements of Department spending amount to less than 0.2 percent of all money spent by the federal government.

Even that overstates the controversy because many programmes, including electric reliability, are not seriously disputed.

The Energy Information Administration received funding of just $117 million in fiscal 2015.

FORECASTS

DOE and EIA forecasts and long-term projections are routinely criticised from all sides within the energy industry, mostly for partisan and lobbying reasons.

Fossil fuel producers claim they overstate the potential growth of renewables and understate the future role of oil and gas.

Clean energy advocates make the opposite criticism, claiming DOE/EIA are too optimistic about oil and gas and do not appreciate the transformational potential of wind, solar and other new technologies.

In reality, these are disputes about policy preferences and assumptions dressed up as technical disputes about data and forecasting.

Long-range energy forecasts have always been controversial and subject to tremendous uncertainty and large errors.

Energy forecasts are both complex (in the sense they have a large number of highly dynamic elements) and controversial (in the sense they can be used to justify particularly policy choices).

“Disagreement over estimates is not the cause but the consequence of disagreement over basic policy perspective” (“The politics of mistrust: estimating American oil and gas resources”, Wildavsky and Tenenbaum, 1981).

The fact that DOE/EIA is equally criticised by fossil fuel and clean energy advocates suggests the agency is trying hard to discharge its statutory mandate to be neutral.

Editing by David Evans

Our Standards:The Thomson Reuters Trust Principles.
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