National Energy Policy: Inventory of Major Federal Energy Programs and Status of Policy Recommendations
Published: 2005-06-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The lives of most Americans are affected by energy. Increased energy demand and higher energy prices has led to concerns about dependable, affordable, and environmentally sound energy. The federal government has adopted energy policies and implemented programs over the years that have focused on the appropriate role of the federal government in energy, attempting to achieve balance between supply and conservation. The May 2001 National Energy Policy (NEP) report contained over 100 recommendations that it stated, taken together, provide a national energy plan that addresses the energy challenges facing the nation. As Congress considers existing federal energy programs and proposed energy legislation in support of the May 2001 report, GAO was asked to (1) identify major federal energy-related efforts, (2) review the status of efforts to implement the recommendations in the May 2001 NEP report, and (3) determine the extent to which resources associated with federal energy-related efforts have changed since the release of the NEP report.
section_title: What GAO Found
paragraphs: Over 150 energy-related program activities and 11 tax preferences address eight major energy activity areas: (1) energy supply, (2) energy's impact on the environment and health, (3) low-income energy consumer assistance, (4) basic energy science research, (5) energy delivery infrastructure, (6) energy conservation, (7) energy assurance and physical security, and (8) energy market competition and education. At least 18 federal agencies, from the Department of Energy (DOE) to the Department of Health and Human Services, have energy-related activities. Based on fiscal year 2003 data (the most complete data available), the federal government provided a minimum of $9.8 billion in estimated budget authority for the energy-related programs we identified. In addition, various federal energy-related income tax preferences provided another estimated $4.4 billion in outlay equivalent value, primarily for energy supply objectives. On the revenue side, the federal government collected about $10.1 billion in fiscal year 2003 through various energy-related programs and about $34.6 billion in energy-related excise taxes. Significant collections involve royalties from the sale of oil and gas resources on federal lands, while taxes on gasoline and other fuels account for most of the excise taxes. While DOE reports that most of the 2001 NEP report recommendations are implemented, it is difficult to independently assess the status of efforts made to implement these recommendations because of limited information and the open-ended nature of some of the recommendations themselves. For example, the NEP report recommended the development of energy educational programs, including possible legislation to create education programs funded by the energy industry. However, DOE's January 2005 status report on NEP implementation provided only an overview of federal energy education efforts and made no mention of possible legislation to create such programs. In addition, some of the recommendations are open-ended and lack a specific, measurable goal, which makes it difficult to assess progress. Without a specific, measurable goal, it can be difficult to understand how and to what extent activities are helping to fulfill a recommendation. While this report does not make recommendations, it provides observations on the lack of information on the status of the NEP recommendations, which may hinder policy makers in assessing progress and determining future energy policies. Resources devoted to energy-related programs have grown since the release of the NEP report. For example, compared with fiscal year 2000, just prior to the 2001 NEP report, fiscal year 2003 estimated budget authority for energy-related programs grew by about 30 percent, from $7.3 billion to $9.6 billion. In addition, over the same period, estimated outlay equivalents for energy-related income tax preferences grew by over 60 percent, from $2.7 billion to $4.4 billion. Federal efforts have continued to address the eight major energy activities. Energy supply continues to be a major emphasis of the federal efforts, accounting for a majority of the growth.

section_title: Letter
paragraphs: The daily lives of most Americans—as well as the health of our economy  and our high standard of living—are directly affected by the availability of  energy. Most sectors of American society, from the agricultural and  industrial to the transportation and residential, rely upon a readily available  supply of energy to function. According to the most recent data from the  Department of Energy’s (DOE) Energy Information Administration (EIA),  the United States is the largest single consumer of energy, accounting for  one-fourth of the world’s consumption. Consumption is expected to grow  here and throughout the world in the near future. Further, energy prices  have risen significantly in recent years—American consumers now spend  about three-quarters of a trillion dollars a year on it—and prices are not  expected to drop significantly in the foreseeable future. The prospect of  increased demand—and perhaps still higher prices—has led to concerns  about the adequacy of our energy supply to sustain these consumption  levels.
Although the federal government has adopted various energy policies and  implemented related programs over the years, energy policies have  frequently been the subject of heated debate. Concerns about these  policies and programs have most often focused on the appropriate role of  the federal government in energy matters and in how to achieve the  appropriate balance between increasing supply and encouraging  conservation. The May 2001 National Energy Policy (NEP) report laid out  the most recent national energy policy proposal: that is, to promote  dependable, affordable, and environmentally sound production and  distribution of energy for the future. The NEP report contained over 100  recommendations that it stated, taken together, provide a national energy  plan that addresses the energy challenges facing the nation. As Congress  considers existing federal energy programs and proposed energy  legislation in support of the NEP report, you asked us for a clearer  understanding of how the federal government is working to meet our  nation’s energy needs. Specifically, you asked us to (1) identify the federal  government’s major energy-related efforts, (2) review the status of efforts  to implement the May 2001 NEP report recommendations, and (3)  determine the extent to which resources associated with federal  energy-related efforts have changed since the release of the NEP report.
To identify the federal government’s major energy-related efforts, we  focused our review on several key federal agencies that have the most  responsibility for implementing the recommendations of the NEP report:  the Departments of Energy, the Interior, Commerce, Transportation, State,  and Agriculture and the Environmental Protection Agency. In addition to  identifying energy-related program activities, we identified energy-related  income tax preferences from the lists of tax expenditures published  annually by the Office of Management Budget that accompany the  President’s budget. We also obtained data on energy-related federal  collections, including revenue from royalties, fees, and excise taxes. We  collected and analyzed agency-reported program and tax policy  descriptions and budget request and funding information at these key  agencies and at other agencies as time allowed; we developed an inventory  of the energy-related program activities we identified. Because it was often  difficult to quantify the resources associated with energy-related aspects of  various programs, where possible, we relied on agency estimates of budget  authority for fiscal year 2003—the most recent year for which data were  available for most of the programs as we conducted the majority of our  review during fiscal year 2004. For example, some programs received  budget authority as part of a larger appropriation, and agencies had to  estimate the portion associated with the energy-related activity. To  facilitate comparing the energy-related resources associated with outlay  and tax programs, we used the Department of the Treasury’s outlay  equivalent estimates for the income tax preferences. The aggregate value  for energy-related tax preferences is useful for gauging general magnitude  but does not take into account interactions between individual provisions.  We were not able to review every agency within the federal government  that might have energy-related activities. Principally, we did not review the  Department of Defense (DOD), which is, among other things, a principal  federal government energy consumer. In addition, although the federal  government has a major impact on the energy industry through regulatory  actions, this review did not include an inventory of federal regulatory  actions that affect energy, but rather focused on federal energy-related  programs and tax policies.
To review the status of federal efforts to implement the recommendations  contained in the May 2001 NEP report, we reviewed publicly reported  status information on the implementation of the NEP recommendations,  focusing on DOE’s most recent January 2005 report on the status of the  106 NEP recommendations. We discussed efforts to monitor and report on  the status of these recommendations with DOE’s Office of National Energy  Policy and other federal agencies involved in energy-related efforts. We  also discussed the energy-related programs with the appropriate agency  personnel and, when possible, determined whether and how the programs  were related to the NEP report recommendations.
To determine the extent to which resources associated with federal  energy-related efforts have changed since the release of the NEP report, we  compared fiscal year 2000 (shortly before the NEP report) federal  programs and budget authority estimates with fiscal year 2003 programs  and budget authority estimates. In addition, we compared outlay equivalent  estimates for energy-related income tax preferences between fiscal years  2000 and 2003. Due to the constraints of developing an inventory of federal  energy-related efforts and associated resources within the review time  frame, we did not assess the changes within the individual program  activities within our inventory. We conducted our review between  December 2003 and May 2005 in accordance with generally accepted  government auditing standards. A detailed description of our objectives,  scope, and methodology is contained in appendix I.
subsections: section_title: Over 150 Different Federal Government Program Activities Address Energy
paragraphs: At least 18 different federal agencies, from DOE to HHS, conduct at least  158 energy-related program activities. These programs address eight major  categories of activities, ranging from energy supply to energy conservation.  In fiscal year 2003, for the energy program activities we identified, the  federal government provided at least $9.8 billion in estimated budget  authority. In addition, 11 federal energy-related income tax preferences  were estimated at $4.4 billion in outlay equivalent value for fiscal year 2003.  On the revenue side, in fiscal year 2003, the federal government collected  about $10.1 billion through various energy-related programs that include  fees and royalties on development of federal energy resources and about  $34.6 billion in excise taxes on gasoline and other fuels.
subsections: section_title: Major Energy Program Activities Fall into Eight Categories
paragraphs: Federal energy-related programs and income tax preferences address eight major energy activity areas: (1) energy supply, (2) energy’s impact on  the environment and health, (3) low-income energy consumer assistance,  (4) basic energy science research, (5) energy delivery infrastructure,  (6) energy conservation, (7) energy assurance and physical security, and  (8) energy market competition and education. On the basis of our analysis  of fiscal year 2003 estimated budget authority for energy-related programs  and outlay equivalent estimates for energy-related income tax preferences,  resources to address energy supply activities accounted for almost one-half  of the $14.2 billion in federal energy-related resources. Table 1 provides a  summary of fiscal year 2003 resources for energy-related programs we  identified and income tax preferences by the eight major energy activity  areas. Appendix II provides additional details on energy-related programs  by major activity area, by agency, and by energy type. In addition to  programs and income tax preferences, other federal policies that are not  quantified also affect these major energy areas. For example, in the supply  area, the federal government provides electricity support through federal  utilities and loan programs. Also, regarding energy’s impact on the  environment and energy conservation, the federal government, as a major  energy user, has energy use policies that influence both the type and  amounts of energy used.
On the basis of our analysis of fiscal year 2003 resources, energy supply  programs and related income tax preferences accounted for about $6.6  billion, or almost one-half of the federal resources provided to  energy-related programs. We identified 6 agencies, conducting 65 different  program activities, addressing supply issues such as access for energy  development on federal lands, research and development for energy  sources ranging from clean coal to nuclear fusion, and nuclear energy  regulation. In addition to these 6 agencies, Treasury reports on 9 different  income tax preferences that address energy supply. Specifically, several  provisions of the Internal Revenue Code grant favorable tax treatment to  activities such as the recovery of the actual capital investment costs of  discovering, purchasing, and developing energy. These income tax  preferences accounted for about $4.18 billion in fiscal year 2003 outlay  equivalent estimates, more than the total estimated budget authority of  $2.39 billion for energy supply programs. Table 2 shows fiscal year 2003  outlay equivalent estimates for supply-related income tax preferences and  fiscal year 2003 estimated budget authority for energy supply programs by  major federal agency. Appendix II provides details on energy supply  programs by agency and energy type.
Supply programs address four primary types of energy: fossil, renewable,  nuclear, and alternative. Fossil energy supply includes coal, oil, and natural  gas production and accounted for $4.7 billion of the almost $6.6 billion in  fiscal year 2003 resources for energy supply programs. Fossil resources  included $1.1 billion in estimated budget authority for programs such as  clean coal technology research and development. Resources addressing  fossil supply also included an estimated $3.6 billion in outlay equivalent  value from 6 different income tax preferences. These income tax  preferences include the support of fossil fuel production from  nonconventional sources such as synthetic fuels produced from coal.  Renewable energy supply includes hydropower, biomass, geothermal,  wind, and solar energy. Estimated budget authority for renewable  programs was at $349 million in fiscal year 2003, and these programs  generally address renewable energy research and development. In addition,  2 income tax preferences, a new technology credit and exclusion of  interest on facility bonds, supported renewable energy at an estimated  outlay equivalent of $510 million in fiscal year 2003. Nuclear energy  supply-related programs, with estimated budget authority of about $507  million in fiscal year 2003, address nuclear fission and mainly consist of  DOE’s nuclear energy research and development programs and the Nuclear  Regulatory Commission’s (NRC) regulation of nuclear energy. Finally,  alternative energy programs, with estimated budget authority of $439  million in fiscal year 2003, include transportation fuels other than gasoline  or diesel; traditional energy sources used in untraditional ways (distributed  energy); and energy sources of the future, such as hydrogen and fusion.  Hydrogen and fusion programs account for most of the programs under  alternative energy. In addition, 1 tax preference, providing tax credits for  alcohol fuels, supports alternative energy supply. Table 3 shows the fiscal  year 2003 level of resources by energy supply type. Appendix II provides  additional details on the types of energy supply addressed by specific  agency programs.
In addition to resources for programs and income tax preferences directed  at the energy sector, the federal government provides other forms of  support, largely to users of electricity. While this support is not captured in  the programs or income tax preferences, it does provide benefits that  represent implicit federal support for certain users of electricity.  Specifically, there are five federal utilities, four Power Marketing  Administrations (PMA) and the Tennessee Valley Authority (TVA), that  provide electricity and transmission services to customers in their regions.  The PMAs market power produced primarily at federal hydroelectric dams  and projects that are owned and operated by either the Department of the  Interior’s (DOI) Bureau of Reclamation, the U.S. Army Corps of Engineers,  or the International Boundary and Water Commission. TVA markets  electricity produced at its own fossil, nuclear, and hydroelectric energy  facilities. In addition, another federal agency, the Rural Utilities Service  (RUS), provides federal loan guarantees and other services to rural utilities.  The federal support provided through these agencies differs from that of  the other programs and incentives described in this report because it does  not provide any federal funding to electricity customers. Revenue from  sales of electricity generated by federally owned facilities and from loan  repayment (in the case of RUS) is intended to largely pay the costs to the  federal government of providing the electricity and loans. Therefore, the  programs undertaken by these agencies are intended to be revenue-neutral  to the federal government. Nonetheless, the electricity support provided by  these agencies constitutes a benefit to users—an implicit federal  subsidy—because the revenues collected by the agencies have generally  been below what would have been collected for the same services by  private entities. Appendix III provides additional details on these support  programs.
subsections: section_title: Energy’s Impact on the Environment and Health
paragraphs: We identified 29 program activities, implemented by 11 different agencies,  that address the impact of energy development and use on the environment  and health. In fiscal year 2003, these programs represented estimated  budget authority of $1.87 billion. In addition, an income tax preference for  clean-fuel burning vehicles amounted to an estimated $90 million outlay  equivalent in fiscal year 2003. Major program focuses include nuclear  waste cleanup and environmental science research. The largest portion of  the funding in this energy policy area goes to DOE, which received an  estimated $1.6 billion for energy-related programs in fiscal year 2003. The  Environmental Protection Agency (EPA), with a primary mission of  protecting the nation’s environment, is also a major agency involved in  addressing energy’s impact on the environment and health. EPA is a major  regulator of energy development and use through its implementation of  environmental laws, such as the Clean Air Act. We were able to quantify an  estimated $24.2 million in fiscal year 2003 that supported EPA programs  addressing energy’s impact on the environment. However, EPA regulatory  activities affect more than the energy sector, and, because EPA does not  track costs by industry sector, the agency was not able to determine with  complete certainty how much of its $8 billion annual budget is  energy-related. Thus, we believe the estimate for EPA programs related to  energy’s impact on the environment is understated. Finally, because energy  development and use can have a significant impact on the environment and  health, other programs that primarily address other areas, such as  renewable supply and energy conservation, also address the environmental  impacts of energy. However, within this inventory, those programs are  accounted for under their primary area of energy supply and conservation  and are not also included here. Table 4 summarizes fiscal year 2003  resources for energy’s impact on the environment and health, by major  agency; appendix II provides more details on the agencies’ individual  programs.
In addition to these programs, the federal government addresses energy’s  impact on the environment through policies that are difficult to quantify.  For example, the federal government has set standards and offered  incentives to the private sector and citizens to reduce the effects of fossil  fuel use and to reduce reliance on fossil fuel for energy. These include  standards for smokestack and motor vehicle emissions, home appliances,  and building materials and practices. In addition, the federal government is  a significant consumer of energy and, through its consumption decisions,  can choose to consume energy that is less harmful to the environment. In  the late 1990s, the federal government embarked on its “greening of the  government” initiative and sought to reduce reliance on the use of fuels in  its buildings and vehicles that contribute the most to pollution. Executive  Order 13123, Greening of the Government Through Efficient Energy  Management, signed June 3, 1999, addresses greenhouse gas emissions  from federal facilities and makes energy-efficiency targets more stringent.  This order requires that each agency reduce its greenhouse gas emissions  by 30 percent by 2010 when compared with 1990 emissions levels.
section_title: Low-income Energy Consumer Assistance
paragraphs: The federal government provides funding to assist low-income consumers  through two block grant programs: (1) the Low-Income Home Energy  Assistance Program (LIHEAP), managed by HHS, provides grants to states  to fund fuel payment assistance and home energy efficiency improvements  for low-income households and (2) DOE’s Weatherization Assistance  Program provides funds to make dwellings more fuel efficient in the long  term for low-income housholds. The total estimated budget authority for  these two programs in fiscal year 2003 was $2.212 billion, with the majority  of the budget authority ($1.988 billion) being for LIHEAP.
LIHEAP seeks to increase the health and prosperity of communities and  tribes by assisting low-income households, particularly those with the  lowest income that pay a high proportion of household income for home  energy, in meeting their immediate home energy needs. LIHEAP operates in  the 50 states, the District of Columbia, Indian tribes or tribal organizations,  and U.S. territories. LIHEAP offers three types of assistance:  heating/cooling bill payment, energy crisis, and weatherization and  energy-related home repairs. Each state operates its own program, which  includes taking applications, establishing eligibility, and making decisions  on the kinds of assistance it will offer. In fiscal year 2003, LIHEAP received  $1.988 billion in budget authority. During that fiscal year, approximately 4.4  million households received heating assistance; 494,000 households  received cooling aid; 1.1 million received winter/year-round crisis aid;  71,000 received summer crisis aid; and 113,000 received weatherization  assistance. Households may receive more than one kind of LIHEAP  assistance. Thus, even though the precise number of households assisted is  not known, 4.8 million households are estimated to have received  assistance in fiscal year 2003.
DOE’s Weatherization Assistance Program is part of the department’s  Weatherization and Intergovernmental Program (WIP). The overall goal of  WIP is to develop, promote, and accelerate the adoption of energy  efficiency, renewable energy, and oil displacement technologies and  practices by a wide range of customers—including state and local  governments, weatherization agencies, communities, companies, fleet  managers, building code officials, technology developers, tribal  governments, and international agencies. In fiscal year 2003, DOE received  about $224 million in budget authority for the Weatherization Assistance  Program to provide weatherization assistance for low-income residences.  The weatherization program also provides technical assistance and  formula grants to state and local weatherization agencies to help  low-income residents with weatherization services. Also, the  weatherization program, as part of WIP, addresses energy conservation  areas as it helps to reduce demand for fuels and peak loads on constrained  electricity systems and modernizes conservation technologies and  practices.
section_title: Basic Energy Science Research
paragraphs: Basic energy sciences consist of general energy-related research within  DOE’s Office of Science. The Office of Science’s Basic Energy Science  (BES) Program (fiscal year 2003 estimated budget authority of $1.0 billion)  and its Advanced Scientific Computing Research (ASCR) Program (fiscal  year 2003 estimated budget authority of $163 million) encompass the basic  energy science research programs we identified. The BES program is a  multipurpose, scientific research effort aimed at expanding the foundation  for new and improved energy technologies and for understanding and  mitigating the environmental impacts of energy use. BES touches virtually  every aspect of energy resources—that is, production, conversion,  efficiency, and waste mitigation. Energy-related research includes (1)  advancing hydrogen production, storage, and use and developing new  concepts and (2) improving existing models for solar energy conversion  and for other energy sources. BES states that it provided the basic  knowledge that resulted in an array of energy-related advances, including  high-energy and high-power lithium batteries, highly efficient photovoltaic  solar cells, and solutions for nuclear fuel purification/reprocessing and for  cleanup of radioactive waste. Also, the BES research for the Hydrogen Fuel  Initiative is based on the BES workshop report entitled Basic Research  Needs for the Hydrogen Economy. The ASCR program supports DOE’s  strategy to ensure the security of the nation and succeed in its science,  energy, and environmental quality missions. ASCR provides the  fundamental mathematical and computer science research that enables the  simulation and prediction of complex physical and biological systems. Its  energy-related objectives include providing the science base to enable the  development of bioenergy sources and laying the groundwork for DOE's  Fusion Simulation Project.
section_title: Energy Delivery Infrastructure
paragraphs: The primary purpose of energy delivery infrastructure programs is to  facilitate the development, maintenance, and improvement of the  comprehensive energy delivery system—for example, electricity  transmission and distribution systems, oil refining and gas processing, and  oil and gas pipelines. We identified 13 program activities at 6 federal  agencies that accounted for estimated budget authority of $882 million in  fiscal year 2003 that addressed energy delivery infrastructure. The largest  investment of program dollars in energy infrastructure that we identified in  fiscal year 2003 involved international infrastructure funded by the U.S.  Agency for International Development (USAID) in its programs in Iraq and  Afghanistan. The total USAID infrastructure effort amounted to about $561  million—or 64 percent of the total energy infrastructure funding—with the  great majority of the effort in Iraq ($558 million). Domestically, several  programs involve the regulation of energy infrastructure on federal lands  by DOI. In addition, Federal Energy Regulatory Commission (FERC)  activities related to energy infrastructure include pipeline certification,  hydropower licenses, and dam safety inspections, while the Department of  Transportation (DOT) conducts regulatory work on pipeline safety. Table 5  provides a listing of infrastructure estimated budget authority for fiscal  year 2003, by agency, while appendix II offers more details on specific  programs.
Energy conservation programs include those efforts to increase energy  efficiency and reduce the amount of energy used in all sectors, such as  buildings and transportation. We identified 27 program activities related to  energy conservation at 5 federal agencies that accounted for about $788  million in estimated budget authority for fiscal year 2003. Energy  conservation programs at DOE represent the bulk of the conservation  efforts, accounting for about $657 million of the $788 million. In general,  the program activities at DOE and the other major agencies, particularly  EPA, DOT, and the National Science Foundation (NSF), involve research  and development efforts aimed at improving energy conservation. In  addition, an income tax preference provides $110 million in exclusions  from income of conservation subsidies provided by public utilities. Table  6 provides a listing of energy conservation resources for fiscal year 2003, by  agency, while appendix II provides program details.
In addition to these programs, the federal government has addressed  energy conservation through policies that seek to minimize the federal  government’s own energy use. The federal government is the largest  institutional user of energy in the world and can influence the amount of  energy used in the marketplace. The National Energy Conservation Policy  Act, as amended, requires federal agencies to achieve reductions in energy  use. The legislation also contains provisions concerning energy  management requirements and incentives, life-cycle cost methods for  energy management decisions, and new technology requirements. In  addition, Executive Order 13123, June 3, 1999, is one of a series of  executive orders over recent years directing federal agencies to  demonstrate leadership in energy and environmental management,  including energy efficient building design, construction and operation, and  the reduction of petroleum use through improvements in fleet fuel  efficiency. Chartered in 1973, the Federal Energy Management Program,  administered by DOE, is charged with coordinating federal government  energy management efforts. DOE’s most recent Annual Report to the  Congress on Federal Government Energy Management and Conservation  Programs for Fiscal Year 2002, dated September 29, 2004, provides  information on federal energy consumption and costs submitted to DOE by  29 federal agencies. Specifically, the report provides information on (1)  consumption and costs of energy by fuel type for buildings, vehicles, and  equipment and (2) agency appropriations for energy conservation retrofits  and capital equipment. In summary, the report noted that fiscal year 2002  federal consumption costs were $9.7 billion, with 92 percent spent on two  categories—62 percent on vehicles and equipment and 30 percent on  standard buildings. DOD, through such energy uses as jet fuel and diesel,  was by far the largest federal energy consumer—DOD spent $7.1 billion of  the $9.7 billion and accounted for 73 percent of the total federal  government energy use. In addition, the report provides information on  progress toward energy conservation goals. For example, Executive Order  13123 requires a 30 percent reduction by 2005 in energy consumption per  square foot for buildings and a 35 percent reduction by 2010 from the base  year of 1985. The report indicates that energy consumption per square foot  for buildings in fiscal year 2002 was about 24 percent less than the fiscal  year 1985 base year.
section_title: Energy Assurance and Physical Security
paragraphs: Energy assurance and physical security activities incorporate federal  programs designed to respond to or prevent energy emergencies and major  reliability and supply disruptions. This includes energy supply reserves,  such as the Strategic Petroleum Reserve, and protection of energy  production and delivery infrastructure from natural events, accidents,  equipment failures, or deliberate sabotage. DOE has two programs to  provide oil reserves to offset supply disruptions: the Strategic Petroleum  Reserve and the Northeast Heating Oil Reserve. In addition, DOE’s Energy  Security and Assurance Program supports the national security of the  United States by working in close collaboration with state and local  governments and the private sector to protect the nation against severe  energy supply disruptions. The Department of Homeland Security (DHS) is  responsible for coordinating the national effort to enhance critical  infrastructure protection, including energy-related infrastructure.  However, DOE is the sector-specific agency for the energy sector. DOE’s  Office of Energy Assurance is responsible for fulfilling the roles of critical  infrastructure identification, prioritization, and protection for the energy  sector, which includes the production, refining, and distribution of oil and  gas and electric power—except for commercial nuclear power facilities.  NRC has programs that address security for commercial nuclear power  facilities. Table 7 lists all of the energy assurance and physical  security-related programs that we identified and provides estimated  program funding for fiscal year 2003.
The issue of energy market competition and education includes efforts to  ensure that competitive domestic and international energy markets are  functioning, as well as efforts in energy education and consumer protection  and awareness. We identified 14 program activities implemented by 11  different agencies that play some role in facilitating competitive and  informed energy markets. For those programs for which we could obtain  estimates, these programs’ estimated budget authority was at least $238  million in fiscal year 2003. Major program focuses include providing federal  oversight of the domestic natural gas, petroleum, and propane markets;  providing energy information and education; and facilitating secure, stable,  and competitive international energy markets that support investment in  developing countries. DOE’s EIA represented the largest program in this  area with estimated budget authority of $80 million. While most of EIA’s  budget goes for domestic data collection and analysis activities, these  activities serve to enhance competitive domestic and, to a lesser extent,  international energy markets. EIA is responsible for providing energy  information that promotes sound policy making, efficient markets, and  public understanding. In addition, FERC, through its competitive market  and market oversight programs, was the next significant program, with  estimated budget authority of about $73 million. FERC has responsibility  for ensuring “just and reasonable rates” for the interstate transportation of  natural gas and the wholesale price of electricity sold in interstate  commerce. Internationally, the U.S. Trade and Development Agency  (USTDA), Commerce, State, and USAID promote economic development  and/or U.S. commercial interests in the energy sector. It was difficult to  quantify the funding specifically associated with energy-related aspects of  various programs in this energy activity area, and some agencies were not  able to provide us with funding information for their energy-related  programs or activities. Significant among these programs were those  agencies—Commodity Futures Trading Commission (CFTC), Department  of Justice (DOJ), Securities and Exchange Commission (SEC), and Federal  Trade Commission (FTC)—that can play a role in market oversight,  including energy markets. Table 8 provides a summary of major federal  agencies that play a role in energy market competition and education and  the available estimates of budget authority for fiscal year 2003. Appendix II  provides additional details on individual programs.
While the federal government has a limited role in setting energy prices or  dictating buyer purchasing strategies, the federal government has an  interest in promoting a competitive and informed energy marketplace that  protects the public from unnecessary price volatility. Recent investigations  of market manipulation, by companies such as Enron, have heightened the  relevancy of the federal government’s role in ensuring that a lack of  competition or reliable market information do not exacerbate energy  prices. Tools available to federal agencies to promote a competitive energy  marketplace and protect the public from price volatility include monitoring  for anticompetitive behavior; taking appropriate enforcement actions when  necessary; and providing decision makers with sound, up-to-date, energy  marketplace information, such as short-term price movements and  long-term demand and supply trends.
In addressing this area of market oversight, we attempted to quantify 4  relevant agencies’ level of effort in energy-related activities—CFTC, FTC,  SEC, and DOJ. However, these 4 agencies, with overall budgets of $85  million for CFTC in fiscal year 2003; $177 million for FTC; $717 million for  SEC; and $22 billion for DOJ, were not able to develop reliable estimates of  the amount of effort devoted to energy-related activities. CFTC officials  roughly estimated that about 20 percent of CFTC’s annual budget of $85  million, or $17 million, could be associated with energy-related activities.  They noted that their work has increased in recent years because of  concerns about energy markets, but they were not able to quantify the  increase. DOJ officials told us that the majority of DOJ’s energy-related  work falls within their Antitrust Division and their Environment and  Natural Resources Division (ENRD). The Antitrust Division was able to  provide us with an estimate for energy-related work, which totaled almost  $4 million in fiscal year 2003, but ENRD was not able to provide us with a  similar estimate of their energy-related work. Although we were not able  to quantify energy-related funding for these 4 agencies, we were able to  gather some basic information on major energy-related activities. For  example:  CFTC resolved its natural gas manipulation case against Enron in fiscal  year 2004. CFTC also undertook a broader energy investigation that  focused on energy trading firms that allegedly engaged in (1) the  reporting of false, misleading, or knowingly inaccurate market  information, including price and volume information; (2) manipulation  or attempted manipulation; and/or (3) “round tripping,” which is a  risk-free trading practice that produces “wash” results and the reporting  of non-bona fide prices, in violation of the Commodity Exchange Act. As  a result of its efforts in this area, as of February 1, 2005, enforcement  actions commenced by the commission have resulted in civil monetary  penalties totaling over $297 million, among other sanctions, imposed  against approximately 27 entities and individuals.
FTC, from 1981 to 2004, alleged that 15 proposed petroleum mergers  would have resulted in significant reductions in competition and  harmed consumers in one or more relevant markets. Four of the  mergers were abandoned or blocked as a result of FTC or court action.  In the other 11 cases, FTC required the merging companies to divest  substantial assets in the markets where competitive harm was likely to  occur. FTC has, since 2000, brought seven energy-related law  enforcement actions to prevent consumer injury from unsubstantiated,  false, or deceptive claims concerning energy or energy-related products.
SEC officials reported that in 2003, there were 23 energy-related cases  or enforcement actions brought by SEC. In addition; SEC issued about  100 orders under the Public Utility Holding Company Act in fiscal year  2003. Also, SEC’s Division of Corporation Finance performed 4,088 full  reviews and full financial reviews of filings from all types of companies;  of these, 619 were for energy-related companies. The division also  performed 190 targeted reviews related to those energy-related  companies.
DOJ’s Antitrust Division has energy-related responsibilities that include  promoting competition and enforcing antitrust laws in the energy  industries. DOJ energy-related activities within ENRD include (1)  defending EPA’s more stringent clean air standards for heavy-duty  trucks and diesel fuel; (2) safety standards for the Yucca Mountain  nuclear waste repository in Nevada; and (3) administrative enforcement  actions, such as a major clean air enforcement action against coal-fired  power plants.
section_title: Federal Government Collects Revenues through Energy-Related Programs and Excise Taxes
paragraphs: The federal government collects about $10.1 billion a year through various  energy-related programs and about $34.6 billion in energy-related excise  taxes. Most of the collections are royalties, rents, and bonuses from oil and  gas on federal lands or offshore areas; while taxes on gasoline and other  fuels account for most of the excise tax revenue.
subsections: section_title: Energy Program Collections
paragraphs: A number of energy-related programs, especially those dealing with the use  of federal energy resources, radioactive waste, and regulation of the energy  industry, involve the collection of federal revenues that are deposited into  the Treasury. In fiscal year 2003, these collections amounted to about $10.1  billion. The majority of these collections come from collections associated  with the production of energy resources on federal lands and in offshore  areas. DOI’s Minerals Management Service (MMS) collected about $8.0  billion in royalties, rents, and bonuses in fiscal year 2003 for the  development of energy resources in federal lands and offshore areas. The  remainders of these collections are generally fees to pay for energy-related  programs. In some cases, federal agencies are authorized to use these  collections to offset program costs. For example, the Office of Civilian  Radioactive Waste Management in DOE collected over $1 billion from  generators of nuclear waste in fiscal year 2003 to manage and dispose of  high-level radioactive waste and spent nuclear fuel. FERC collected fees  from the entities it regulates that funded all of the cost of its regulatory  activities related to energy, while NRC collected fees from the entities it  regulates, including nuclear power plants, that cover about 90 percent of its  costs. Table 9 provides a breakdown of federal energy-related collections  for fiscal year 2003.
The Internal Revenue Code, which is administered by the Department of  the Treasury, provides for federal excise taxes on energy fuels that are used  in many sectors across the United States. Revenue from these  energy-related taxes totaled over $34 billion in fiscal year 2003. The excise  taxes, some applied at the retail and some at the manufacturers’ level, were  typically applied on a unit basis, typically by the gallon, and rates varied  according to the content of the fuel. In general, these excise taxes fund  certain trust funds. The largest of these, the excise tax on gasoline and  gasohol, resulted in $24.2 billion in collections in fiscal year 2003 that  support the Highway Trust Fund. The next largest revenue raiser was the  excise tax on diesel fuel, which amounted to $8.6 billion in the same fiscal  year. Most of the excise taxes on liquid fuels include 0.1 cent per gallon to  finance the Leaking Underground Storage Tank Trust Fund. In addition to  funding various trust funds, excise taxes can be used as a tool to achieve  federal energy-related objectives. For example, alcohol fuels and fuels  containing a portion of alcohol are generally taxed at a lower rate. The  standard rate for gasoline is 18.4 cents per gallon. However, a partial  exemption of 5.4 cents per gallon from the federal excise tax is provided  for ethanol that is derived from renewable sources and used as fuel. The  exemption encourages the substitution of alcohol fuels produced from  renewable sources for gasoline and diesel to reduce reliance on imported  petroleum and to contribute to energy independence. In addition, dyed  diesel fuel and kerosene meant for use in trains, school buses, and local  and mass transit buses are exempt from the 24.3 cents per gallon excise tax  on the normal varieties of these fuels. Another excise tax, the “gas guzzlers”  levy on certain vehicles that do not meet standards for fuel economy per  gallon, raised $127 million in fiscal year 2003. Table 10 provides a listing of  fiscal year 2003 energy-related excise tax collections and the associated  trust funds.
section_title: It Is Difficult to Assess Progress of Federal Efforts to Implement the National Energy Policy Report Recommendations
paragraphs: It is difficult to fully assess the status of progress made in implementation  of the NEP recommendations because the information DOE has reported  has been limited. Moreover, some of the recommendations are open-ended  and lack measurable goals, which contribute to the difficulty in assessing  implementation progress. Finally, because the NEP recommendations do  not reflect all federal energy-related efforts, understanding the overall  status of federal efforts to address energy issues is challenging.
Since the May 2001 NEP report, publicly reported information on the status  of the recommendations has been limited. For example, on the first  anniversary of the NEP report, in May 2002, DOE issued a press release  highlighting progress made in implementing the NEP recommendations.  According to DOE, at that time all but 1 of the 22 recommendations, that it  reported required legislative action, had either been enacted into law or  were contained in House or Senate energy bills. However, DOE provided  no detail on what the 22 recommendations that required legislation were or  what the status was of the other 84 recommendations. On the second  anniversary of the NEP report, in May 2003, DOE again issued a press  release that described progress in implementing the NEP  recommendations. This document provided the first status information on  each of the 106 recommendations in the form of an NEP scorecard that  characterized each recommendation as either under way or complete. The  scorecard reported that 96 of the 106 recommendations were complete,  although it noted that 16 of the “complete” recommendations involved  legislation that was then being considered by Congress. However, DOE did  not provide information on the progress cited specifically related to the 96  recommendations the scorecard reported as complete or on what actions  were planned or then under way to complete the remaining 10  recommendations. DOE’s next report on the NEP recommendations was its  January 2005 report. In contrast to the May 2003 scorecard that  characterized most of the recommendations as complete (but had provided  no specific information pertinent to each), DOE’s January 2005 report (1)  characterized most recommendations as implemented but involving  ongoing activities or requiring legislation and (2) provided the first  information on specific actions taken to implement each recommendation.
Although DOE’s January 2005 report represents an improvement in the  level of information DOE has provided on the status of NEP  recommendation implementation, the information is still incomplete. For  example, the NEP report recommended the development of energy  educational programs, including possible legislation to create education  programs funded by the energy industry. However, the January 2005 status  report provided only an overview of federal energy education efforts, and it  made no mention of creating education programs through legislation.  Similarly, the 2001 NEP report made a recommendation to the Secretary of  Transportation to work with Congress to enact legislation to implement  congestion mitigation strategies. However, while the reported status  outlined various DOT congestion mitigation efforts, it did not address the  legislative aspect of the recommendation nor did it reflect DOT efforts to  propose legislation to address this recommendation. In addition, another  recommendation was made to DOE and DOI to promote new oil and gas  well technology, but the status report addressed only DOE’s efforts to  implement the recommendation. Appendix IV provides a complete list of  the 106 NEP recommendations, DOE’s reported status of the  recommendations, and our observations.
DOE’s ability to provide consistent and complete information on the status  of NEP implementation may have been limited by a lack of sustained,  centralized efforts to monitor and report on the ongoing implementation of  the NEP recommendations. For example, one of the first recommendations  in the NEP report was that the National Energy Policy Development Group  (NEPDG) continue to work and meet on the implementation of the NEP.  However, the NEPDG was terminated on September 30, 2001, and did not  meet or work on the implementation of the NEP recommendations after  that time. Nevertheless, according to DOE, individual agencies have  continued to coordinate implementation efforts and to measure and track  implementation progress. Also, according to DOE, an interagency working  group led by DOE was established to coordinate agencies’ implementation  of the NEP recommendations. According to DOE officials, the agency’s  Office of National Energy Policy is responsible for coordinating, and  providing strategic direction for, the implementation of the NEP report  recommendations. However, additional information we obtained in our  review raises questions about the extent to which centralized monitoring of  recommendation implementation has been sustained. For example,  according to DOE, its NEP Office did not assume leadership of the  interagency working group until the fall of 2003. Also, DOE officials told us  in November 2003 that the NEP Office had not been fully staffed because of  budget constraints. Finally, at that time, DOE officials also told us that  implementing the NEP recommendations was the responsibility of  individual federal agencies, and that there was no centralized, formal  system to monitor implementation and report on the status of the NEP  recommendations.
The nature of some of the NEP recommendations also makes it difficult to  assess the progress made in implementing them. Specifically, some of the  recommendations are open-ended and lack measurable goals. For example,  a NEP report recommendation is that the President make energy security a  priority of our trade and foreign policy. In reporting on the status of this  recommendation, DOE states that the recommendation has been  implemented, with activities ongoing, because energy security has been  made a priority of our trade and foreign policy through various bilateral  and multilateral activities, such as the U.S.-China Oil and Gas Industry  Forum and the International Partnership for the Hydrogen Economy.  However, this recommendation is open-ended and does not contain a  specific, measurable goal, thereby making it difficult to understand how or  to what extent the activities described have helped to implement the  recommendation. In contrast, another NEP report recommendation directs  the Secretary of Energy to authorize the Western Area Power  Administration to explore relieving an electricity transmission bottleneck  in the western United States. The DOE status report noted that a new  transmission line to relieve this bottleneck was completed on December  14, 2004. This recommendation sets a measurable infrastructure-related  goal, and the status report demonstrated progress toward that goal. (See  app. IV.)
Finally, some federal energy-related programs that address the same issues  as some of the NEP recommendations are not mentioned in either the NEP  recommendations or the status report, making it difficult to assess the  overall status of federal efforts to address energy issues. For example, one  NEP recommendation calls for the Secretary of Energy to conduct a review  of current funding and historic performance of energy-efficiency research  and development programs. In response, the status report noted that DOE  completed a detailed review of its programs. However, at least one other  federal agency, NSF, funds energy-efficiency research and development  activities as part of its overall science program. These activities were not  specified in the recommendation or recognized in the status report. Other  federal energy efforts that relate to some of the same issues that the NEP  recommendations addressed, but were not specifically addressed in the  recommendations or the status report, include some NRC programs and  most USTDA and USAID programs. (See app. IV.) These agencies are not  represented on DOE’s NEP interagency task force. When we spoke with  representatives from these agencies, they said that even though their  programs address some of the same issues as the NEP recommendations,  they were not involved in the development of the NEP, nor were they  charged with implementation of the recommendations. Additionally, we  found that the NEP report recommendations omit discussion of some  federal energy-related efforts and the issues they address. Such omissions  preclude a full accounting of the results of federal energy efforts in any  NEP status report. For example, the NEP report recommendations do not  address all energy-related excise taxes and energy-related income tax  preferences. Regarding programs, our review of the NEP report did not  find that it addressed basic energy science research; DOE nondefense  nuclear waste cleanup; federal electricity support; FERC energy market  oversight; and the overall market oversight roles of agencies such as CFTC,  FTC, DOJ, and SEC.
section_title: Federal Resources Devoted to Energy-Related Activities Have Grown since 2000
paragraphs: Federal energy-related program resources have grown since the release of  the NEP report as programs continue to address the major energy activity  areas. For example, compared with fiscal year 2000 estimated budget  authority, fiscal year 2003 estimated budget authority funding grew by  about 30 percent, from $7.3 billion to $9.6 billion for those programs where  we could identify estimated budget authority for both years. In addition,  over the same time period, outlay equivalent estimates for energy-related  income tax preferences grew by over 60 percent, from $2.7 billion to about  $4.4 billion. While we did not review changes within individual programs  and tax policies, federal efforts have continued to address the eight major  energy activities of supply, environment and health, low-income assistance,  basic science, infrastructure, conservation, assurance and security, and  competition and education. Energy supply continues to be a major  emphasis of the federal efforts, accounting for a majority of the growth. For  example, income tax preferences associated with energy supply have  represented almost all of the $1.7 billion growth in income tax preferences.  Within energy supply income tax preferences, growth has occurred  primarily with efforts targeting fossil and renewable energy supplies. Table  11 shows changes in program estimated budget authority, by major energy  issue, in fiscal years 2000 and 2003. Appendix V provides a breakdown of  the change in estimated budget authority for each program addressing the  major energy issues.
Income tax preferences do not compete in the budget process and do not  have to seek budget authority—they are already “fully funded” as long as  they remain in effect. However, as has been demonstrated, they can  represent significant resources. Current fiscal year 2005 projected  estimates indicate energy-related income tax preferences have continued  to grow—to $5.15 billion in outlay equivalent estimates. Table 12 provides a  profile of changes in energy-related income tax preferences in outlay  equivalent estimates between fiscal years 2000 and 2003.
Along with the growth in energy-related federal resources, budget requests  for federal energy-related programs have also grown since 2000. However,  budget request information is not available for all of the programs  identified in our inventory for which we have obtained estimates because  many energy-related programs are part of larger programs and separate,  distinct budget requests are not made for them. For those programs that  had specific, energy-related budget requests, budget requests grew  between fiscal years 2000 and 2003 by about 27 percent—from $5.9 billion  to $7.5 billion. This growth continued into fiscal year 2005, when requests  reached $8.4 billion. Table 13 shows budget requests in fiscal years 2000,  2003, and 2005 by major energy activity area. Appendix VI provides a  breakdown of requests for each program that has a budget request under  the major energy areas.
section_title: Observations
paragraphs: The nation’s energy problems are not new. In the 1970s, we issued a series  of reports to Congress on the need for both a focal point for dealing with  energy problems and a coherent set of energy policies that would stand the  tests of the future. While the United States does have, and has had, a series  of energy-related programs and tax policies, calls for a “national energy  policy” persist. Currently, hundreds of energy-related programs funded by  the federal government, energy-related income tax preferences, and federal  regulatory requirements that impact energy encompass the federal  government’s role in energy policy. At the federal level, development and  implementation of our national energy policy is a shared responsibility of  the executive and legislative branches of government. Any progress toward  understanding the role that the federal government plays in energy policy  and improving upon it must start with a comprehensive inventory of these  federal energy-related programs, tax policies, and regulatory activity. The  NEP report, as other national energy policies have in the past, offers such a  start toward the development of this inventory. Furthermore, although we  are not making recommendations in this report, we have noted a lack of  information on the results of federal energy-related efforts. DOE’s Office of  National Energy Policy has an opportunity to serve as a key focal point in  improving upon the measurement of results made in federal energy-related  efforts. Establishing clear and measurable goals and having the ability to  track, measure, and transparently report on results achieved toward those  goals will give policy makers the information they need to provide  continually improving direction to the federal government’s energy-related  efforts.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided DOE with a draft of this report for review and comment and  asked DOE to coordinate any formal written comments from the other  federal agencies included in this report. In addition, we provided a draft of  this report to the other federal agencies in order to obtain comments on  specific information about particular agencies’ energy-related activities. In  summary, DOE responded in its written comments that it did not believe  our report accurately reflected the goals or intent of the NEP, its  implementation, or the Administration’s ongoing energy security efforts.  Overall, we believe DOE’s comments reflect a basic misunderstanding  about the report’s objectives and the approaches we used to address these  objectives. Specifically, with respect to our first objective (an inventory of  major federal energy programs and their cost) DOE commented that our  presentation of estimated budget authority for programs and outlay  equivalent estimates for tax preferences represented a quantitative  approach to evaluating the NEP report that is not consistent with its  purpose. However, our first objective and the resulting inventory of major  federal energy programs laid out in our report does not in any way reflect  an evaluation of the NEP report. We prepared this inventory independent of  the NEP report and did not intend to suggest that the NEP report was  intended to reflect an inventory and accounting of resources comparable to  the one we prepared.
Our second and third objectives--dealing with the results of NEP report  recommendation implementation and changes in resources since the NEP  report’s issuance—do have obvious connections to the NEP report. Here  too, however, we believe DOE’s comments confuse the issue by suggesting  that our report is somehow an evaluation of the NEP report rather than  simply a presentation of observations on actions taken and reported results  achieved since the report’s issuance. In this connection, DOE defends the  NEP report “as an overall blueprint” and that it “is not sufficient to look at  the President’s energy policies through specific NEP recommendations  alone.” We agree and note that our report suggests nothing to the contrary.  However, our report does focus on the reported results achieved in  implementing these important NEP recommendations that, as the NEP  report states, “taken together, offer the thorough and responsible energy  plan our nation has long needed.” Moreover, DOE implies that when we  point out that many of the NEP recommendations are open-ended in  nature, we were being critical of the recommendations. This is not our  intent. We were simply stating as a matter of fact that the open-ended,  nonspecific nature of many of the NEP recommendations complicated our  reporting on recommendation implementation status. With respect to NEP  report recommendation implementation, DOE further commented that  DOE’s own NEP status report was not intended to be comprehensive and  that supplementary material could be found in unidentified “budget  documents and other means.” We recognize that status information may be  available from a variety of sources, and we explored those sources in  performing our analysis. However, in reviewing the status of efforts to  implement the recommendations, we believe it was appropriate to focus on  DOE’s most recent report on the status of these recommendations. In our  view, it does not seem unreasonable to expect that Congress and the  American people could find relatively complete information on NEP  implementation status in a direct format through one centralized source,  especially if that source is entitled NEP Status Report.
DOE and other federal agencies provided numerous technical  clarifications, observations, and editorial comments, and we have made  changes to this report as appropriate. DOE’s written comments are  reproduced in appendix VII.
As agreed with your offices, unless you publicly announce the contents of  this report, we plan no further distribution of it until 30 days from the date  of this letter. At that time, we will send copies to the Secretary of Energy  and other interested parties. We will make copies available to others upon  request. In addition, the report will be available at no charge at GAO’s Web  site at http:www.gao.gov.
Questions about this report should be directed to me at (202) 512-3841. Key  contributors to this report are James Cooksey, Nancy Crothers, Doreen  Feldman, Mark Gaffigan, Michael Gilbert, Erica Haley, Elisabeth Helmer,  Chir Huang, Arthur James, Alan Kasdan, Frank Rusco, John Scott, Karla  Springer, Anne Stevens, Jena Whitley, and Monica Wolford.
section_title: Objectives, Scope, and Methodology
paragraphs: We were asked to (1) identify the federal government’s major energy- related efforts, (2) review the status of efforts to implement the May 2001  National Energy Policy (NEP) report recommendations, and (3) determine  the extent to which resources associated with federal energy-related  efforts has changed since the release of the NEP report.
To identify the federal government’s major energy-related efforts, we  reviewed the federal agencies that have the most responsibility for  implementing the recommendations of the NEP report—the Departments  of Energy (DOE), the Interior (DOI), Commerce, Transportation (DOT),  State, and Agriculture (USDA) and the Environmental Protection Agency  (EPA). We asked these key agencies, and other agencies as time allowed, to  identify their energy-related work, and we developed an inventory of the  energy-related programs that we identified. Other agencies we included  were the Commodity Futures Trading Commission, Department of Justice  (DOJ), Federal Energy Regulatory Commission, Federal Trade  Commission, Department of Health and Human Services, Nuclear  Regulatory Commission, National Science Foundation (NSF), Securities  and Exchange Commission, U.S. Army Corps of Engineers, U.S. Trade and  Development Agency (USTDA), and U.S. Agency for International  Development (USAID). In addition to identifying energy-related programs,  we relied on the list of energy-related tax expenditures published in the  President’s annual budget that provided income tax preferences. We also  obtained data on energy-related federal collections, including revenue from  royalties and user fees from the agencies. In addition, we also attempted to  identify collections from energy-related excise taxes. Although the  Department of the Treasury does not provide a specific listing of energy- related excise taxes, we used information on the collection of excise taxes  that was published by Treasury’s Internal Revenue Service to identify these  taxes. While this information is updated quarterly, the last full fiscal year  available is 2003. We collected and analyzed agency-reported program and  tax preference descriptions and budget request and funding information at  these key agencies. Based on our review of the NEP report and the  program and tax preference descriptions and our discussions with  applicable program officials, we identified eight categories of energy- related activities and grouped the programs and tax preferences by these  eight areas: (1) energy supply, (2) energy’s impact on the environment and  health, (3) low-income energy consumer assistance, (4) basic energy  science research, (5) energy delivery infrastructure, (6) energy  conservation, (7) energy assurance and physical security, and (8) energy  market competition and education. Because it was often difficult to  quantify the resources associated with energy-related aspects of various  programs, where possible, we relied on agency estimates of budget  authority for fiscal year 2003—the most recent year for which data were  readily available for most of the programs during our review. Since we  began our review in late 2003, fiscal year 2003 was the most complete year  for which data were readily available.
It was often difficult to quantify the resources associated with energy- related aspects of various programs because agencies could not provide  specific estimates. We used the following method to arrive at an estimate of  the magnitude of federal energy resources for fiscal year 2003—the most  recently completed fiscal year readily available—and for fiscal year 2000.  For many programs, we obtained budget request, budget authority, outlay,  and obligation information for programs from agency officials and  documents to the extent that these numbers were available. To ensure the  accuracy of the financial information provided by the agencies, we  attempted to obtain documentation and agency verification, but we could  not independently verify the estimates for energy-related programs or  activities. In obtaining information on resources associated with most  programs, we were able to obtain actual budget authority or estimated  budget authority from agency officials.  However, some programs do not  have readily available estimates of budget authority available for their  energy-related activities because they are part of a larger appropriation that  addresses both energy-related and nonenergy-related activities. For such  programs, agencies had to estimate the portion of budget authority  associated with the energy-related program activity. In these cases, we  asked knowledgeable agency officials to estimate the amount of resources  dedicated to the energy-related activities. In some cases, agencies provided  estimates of energy-related outlays or obligations. For the following  agencies, in consultation with agency officials, we used these agency outlay  or obligation estimates as estimates for budget authority: State, U.S. Army  Corps of Engineers, NSF, USAID, USTDA, and some USDA, DOT, and EPA  programs. On the basis of our examination of the supporting information,  we believe that the estimates of budget authority for federal energy-related  programs gathered are sufficiently reliable for the purposes of this report,  which is to provide the best available estimate of federal resources for  energy-related programs.
In addition to obtaining budget authority estimates for energy-related  programs, we also obtained outlay equivalent estimates for energy-related  income tax preferences—federal income tax provisions that provide  preferential tax treatment related to energy supply and use. Revenue losses  resulting from these tax preferences—also called tax expenditures—may,  in effect, be viewed as spending channeled through the tax system. The  Congressional Budget and Impoundment Act of 1974 requires that the  budget include a list of tax expenditures. Each year, revenue loss  estimates for tax expenditures are prepared by Treasury and the Joint  Committee on Taxation. Treasury also produces outlay equivalent  estimates—the amount of budget outlays that would be required to provide  the taxpayer with the same after-tax income as would be received through  the tax expenditure. We used the outlay equivalent measure in quantifying  the energy-related tax preferences because it allows the tax preference  programs to be compared with federal outlay programs on a more even  footing. While the aggregate value for energy-related tax preferences is  useful for gauging their general magnitude, summing does not take into  account interactions between individual provisions. In addition, tax  preferences below $5 million annually are not reported on Treasury’s list  and, therefore, are not included in this report.
We focused on federal resources associated with key federal agencies that  have direct responsibility for issues addressed in and for implementing the  recommendations of the NEP report. We attempted to address other  agencies as time allowed, but the inventory did not evaluate the efforts of  every federal agency. Principally, in this review, we did not attempt to  inventory DOD spending and activities. However, DOD is a large user of  energy and engages in a wide range of activities that may impact the energy  sector.  For example, DOD installations have about 2,600 electric, water,  wastewater, and natural gas utility systems valued at about $50 billion.  These systems include the equipment, fixtures, and structures used in the  distribution of electric power and natural gas; the treatment and  distribution of water; and the collection and treatment of wastewater.  Because we did not evaluate DOD spending, or every federal agency that  may have energy-related activities, this report reflects a significant, but  minimum amount of resources associated with federal programs that may  play a role in energy.
In addition, although the federal government has a major impact on the  energy industry through regulatory actions, this review did not attempt to  inventory the federal regulatory actions that affect energy, but rather  focused on federal energy-related programs and tax policies.  Federal  regulatory actions that impact energy have a cost to the industry but are  offset by benefits accruing to the population at large or targeted groups.  For example, in its report entitled Progress in Regulatory Reform: 2004  Report to Congress on the Costs and Benefits of Federal Regulations and  Unfunded Mandates on State, Local, and Tribal Entities 2004, the Office  of Management and Budget (OMB) estimated the annual costs of all major  federal rules implemented between fiscal years 1994 and 2003 at about $35 billion to $40 billion and annual benefits of these rules at between $63  billion to $169 billion. A large fraction of these costs and benefits may be  related to energy in that (1) they have come about as the result of  regulations to reduce public exposure to fine particulate matter, such as  some emissions from burning fuels, or (2) they pertain to regulations  promulgated by DOE, in part to address energy efficiency and renewable  energy. In this report, we have primarily focused on direct federal programs  and tax policies, rather than trying to assess the total economic impact of  the federal government on the energy sector. However, the magnitude of  the OMB estimates of the costs and benefits of regulation indicates that the  federal impact on energy issues may be greater than the sum of resources  associated with direct programs and tax preferences.
To review the status of federal efforts to implement the recommendations  contained in the May 2001 NEP report, we reviewed publicly reported  status information on the implementation of the NEP recommendations,  focusing on DOE’s most recent January 2005 report on the status of the 106 NEP recommendations. We discussed efforts to monitor and report on  the status of these recommendations with DOE’s Office of National Energy  Policy and other federal agencies involved in energy-related efforts. We  also discussed the energy-related programs with the appropriate agency  personnel and, when possible, determined whether and how the programs  were related to the NEP report recommendations.
To determine the extent to which resources associated with federal energy- related efforts have changed since the release of the NEP report, we  compared fiscal year 2000 (shortly before the NEP report) federal  programs and budget authority estimates with fiscal year 2003 programs  and budget authority estimates. However, we were not able to identify  estimates of budget authority for every program for both fiscal years 2000  and 2003. Thus, we compared only those programs for which we could  identify an estimate for both years. As a result, three FERC programs that  were included in the inventory of fiscal year 2003 programs and resources  were not included in the fiscal years 2000 to 2003 comparison. In addition,  we compared outlay equivalents for energy-related tax preferences  between fiscal years 2000 and 2003. We were able to obtain outlay  equivalent estimates for all 11 energy-related tax preferences for both years  as well as projections for fiscal year 2005. Finally, we compared fiscal years  2000, 2003, and 2005 Presidential budget requests for those major energy- related programs that have specific budget requests. However, many of the  smaller programs we identified in our inventory do not have specific  budget requests. Thus, those programs are not included in the comparison  of energy-related budget requests and cannot be compared with the  estimates of budget authority provided for all energy-related programs we  identified in our inventory.
Finally, due to the constraints of developing an inventory of federal energy- related efforts and associated resources within the review time frame, we  did not assess the changes within the objectives of the individual program  activities within our inventory. Instead, we compared the resources and  budget requests associated with federal energy-related efforts in the eight  major activity areas. We conducted our review between December 2003  and May 2005 in accordance with generally accepted government auditing  standards.
section_title: Federal Electricity Support
subsections: section_title: PMAs and TVA Market and Deliver Power Generated at Federal Facilities
paragraphs: The four federal Power Marketing Administrations (PMAs)—Bonneville  Power Administration, Southeast Power Administration, Southwest Power  Administration, and Western Power Administration—market power  produced primarily at federal hydroelectric dams and projects. These  facilities are owned and operated by either DOI’s Bureau of Reclamation,  the U.S. Army Corps of Engineers, or the International Boundary and Water  Commission. In contrast, the Tennessee Valley Authority (TVA) markets  electricity produced at its own fossil, nuclear, and hydroelectric energy  facilities. Most electricity marketed by the PMAs is generated from  facilities built with federal funding through appropriations or Treasury  financing. Sales of this electricity are intended to pay back these  appropriated funds or financing as well as offset any ongoing expenses  associated with operating or upgrading the facilities, including the  construction, operation, and maintenance of hydroelectric facilities by the  Bureau of Reclamation, the Corps, or the International Boundary and Water  Commission.
The Corps has developed hydroelectric power as part of many of its  multipurpose water resources projects. The Corps reports that it has an $18  billion investment in hydropower facilities, which include 75 plants and 350  generating units. Hydropower represents 13 percent of the electrical power  generated in the United States, and the Corps reports that its facilities  generate 24 percent of it. The Corps is the largest owner/operator of  hydroelectric power plants in the United States. The Corps reports that its  objective is to keep the plants operating at peak efficiency and reliability by  replacing aging turbines, generators, and control systems with state-of-the- art equipment. In fiscal year 2003, the Corps received budget authority of  $414 million to fund a portion of these activities. The revenues from the  power collected were either deposited in the Treasury by the PMAs or, as in  the case of the Bonneville Power Administration, used directly to fund the  Corps activities. In fiscal year 2003, Bonneville provided $336 million  directly for the Corps’ hydroelectric power program in Bonneville’s region.  The Bureau of Reclamation’s central mission is to manage water resources  for multiple benefits, including the generation of electricity, at its  multipurpose water projects in the western United States. Electricity  produced at Reclamation facilities either is used internally at projects or  sold as surplus power. Surplus power marketed by the PMAs produces  revenues used to repay project costs. In fiscal year 2003, Reclamation  received $58.6 million in budget authority for operations of hydroelectric  facilities in three of its five regions. In the other two regions, PMAs directly  fund the hydroelectric facilities. Finally, the International Boundary and  Water Commission operates the Falcon-Amistad Project. The project  consists of two dams on the Rio Grande River between Texas and Mexico,  which share and operate separate power plants on each side of the river.
By law, the federal utilities are nonprofit and provide selected classes of  customers with preference in purchasing their power. These “preference  customers” include municipal utilities; cooperatives; state utilities;  irrigation districts; and, in some instances, state governments and federal  agencies. According to the Energy Information Administration (EIA), in  2003, federal utilities sold about 300 million megawatt-hours of wholesale  and retail electricity, a volume equivalent to about 8 percent of total U.S.  electricity consumption. In 2000, EIA published a report on federal  financial interventions and subsidies in energy markets that included an  assessment of subsidies to PMA and TVA customers. In its 2000 report,  EIA presented three different methodologies for estimating the value of the implicit support to these customers measured by the extent to which  (1) electric power was sold by federal utilities at below-market prices, (2) federal utilities paid below-market rates on debt they had incurred, or  (3) federal utilities’ rates of return were below those of their private utility  counterparts. The estimated value of the implicit support varied  significantly, depending on which methodology was used. Further, EIA’s  report noted that there are potential problems with each of the  methodologies that EIA discussed that make it impossible to choose the  best methodology or to conclude that any one of the three methodologies is  likely to give a “most accurate” estimate of the actual value. In table 17, we  present EIA’s measures of implicit support for 1998 for the PMAs and TVA.
section_title: Rural Utilities Service Provides Federal Loans and Loan Guarantees
paragraphs: The Rural Utilities Service (RUS) is an agency of USDA that provides  support to rural communities, including loans and loan guarantees for the  development and improvement of electricity services. Under the authority  of the Rural Electrification Act of 1936 and amendments, RUS loans and  loan guarantees are (1) to finance the construction of electric transmission  and generation facilities, as well as electric system improvements and  replacements in rural areas, and (2) to be used for energy conservation  programs and renewable energy systems.
As of September 30, 2003, RUS had approximately $28 billion in  outstanding loans and about $520 million in outstanding loan guarantees.  Some RUS loans and loan guarantees provide access to financing at below- market rates, which amounts to a subsidy for some rural users of  electricity. The size of this subsidy depends on the interest rates at which  RUS loans are made as well as the prevailing market interest rates;  therefore, the amount of support varies from year to year and according to  which measure of market interest is used.
In its May 2000 report on federal financial interventions in energy markets,  EIA estimated that the value of the subsidy provided by RUS loans and loan  guarantees was between $144 million and $1.557 billion in 1998. We asked  RUS to estimate the value of the subsidy associated with these loans and  loan guarantees for fiscal year 2003, but RUS does not estimate such  values. However, RUS did provide us with a figure derived by OMB of about  $5 million that reflects the net cost to the government of the program,  which is the amount of direct appropriations to the program that is not  recaptured by loan repayments. This figure does not reflect the implied  interest rate support as measured by the EIA report.
section_title: NEP Recommendations, DOE Reported Status, and GAO Observations
paragraphs: This appendix provides a complete list of the 106 recommendations  contained in the May 2001 National Energy Policy report, DOE’s January  2005 reported status of these recommendations, and our observations on  the reported status. For each of the 106 NEP recommendations, table 18  contains the following information:   The first column contains the number and text of the NEP  recommendation as printed in the May 2001 NEP report. This number is  used to track the recommendations and refers to the chapter and the  order within which the recommendations appear in the NEP. Thus, “4-3”  refers to the fourth chapter of the NEP and the third recommendation  within that chapter.
The second column contains DOE’s overall assessment of the  recommendation, such as “Implemented, Activities Ongoing, or  Legislation Proposed,” and DOE’s description of the actions taken to  implement the recommendation. This status information was reported  by DOE in its January 2005 National Energy Policy Status Report on  Implementation of NEP Recommendations.
The third column contains our observations on the status of the  recommendation provided by DOE as reported in the second column.  Our observations may discuss reported status of the recommendations  and observations about it, such as the lack of specific goals and  measures that make it difficult to assess the progress of federal energy- related efforts to implement the recommendations. In some cases, we  include additional information in this column from (1) DOE’s responses  to questions we raised about its status report or (2) agency comments  on a draft of this report. Our observations on the status report should  not be viewed as either an endorsement or a critique of the NEP  recommendations.
section_title: Fiscal Years 2000 and 2003 Estimated Budget Authority for Agency Programs, by Energy Activity Area
paragraphs: Cooperative State Research, Education, and  Extension Service: Bioenergy and Energy  Related Programs I Cooperative State Research, Education, and  Extension Service: Bioenergy and Energy  Related Programs II Cooperative State Research, Education, and  Extension Service: Bioenergy and Energy  Related Programs III Cooperative State Research, Education, and  Extension Service: Bioenergy and Energy  Related Programs IV Farm Service Agency-Commodity Credit  Corporation’s Bioenergy Program Forest Service Research and Development:  Bioenergy, Energy Efficiency, and Conservation  Research Office of Chief Economist, Office of Energy Policy  and New Uses-3 Office of Chief Economist, Office of Energy Policy  and New Uses-2 Rural Development Business Programs:  Renewable Energy and Energy Efficiency (146,000,000) (47,000,000)
Energy Supply-Biomass And Biorefinery Systems  Research and Development (R&D)
section_title: Comparison of Budget Requests for Fiscal Years 2000, 2003, and 2005 for Agency Programs, by Energy Activity
paragraphs: Cooperative State Research, Education,  and Extension Service-Bioenergy and  Energy Related Programs I Cooperative State Research, Education,  and Extension Service-Bioenergy and  Energy Related Programs II Cooperative State Research, Education,  and Extension Service-Bioenergy and  Energy Related Programs III Cooperative State Research, Education,  and Extension Service-Bioenergy and  Energy Related Programs IV Farm Service Agency-Commodity Credit  Corporation’s Bioenergy Program Forest Service Research and  Development-Bioenergy, Energy Efficiency,  and Conservation Research Office of Chief Economist-Office of Energy  Policy and New Uses-3 Office of Chief Economist-Office of Energy  Policy and New Uses-2 Rural Development Business Programs- Renewable Energy and Energy Efficiency (246,000,000) (140,000,000)
Energy Supply-Biomass and Biorefinery  Systems Research and Development  (R&D)
section_title: Appendix VII