Energy Policy: Information on Federal and Other Factors Influencing U.S. Energy Production and Consumption from 2000 through 2013
Released: 2014-10-30T00:00:00

Letter

Background

U.S. Sources and Uses of Energy

The United States consumes energy from three major categories of sources: fossil, nuclear, and renewable. Fossil energy comes from coal, natural gas, crude oil, and petroleum products. Nuclear energy comes from uranium, which is mined and processed into nuclear fuel. This fuel undergoes nuclear fission in a nuclear reactor to produce heat, which is converted into electricity using steam turbine technology. Renewable energy comes from a variety of sources, including biomass, which is organic material from plants and animals and includes liquid biofuels (such as ethanol and biodiesel), wood, and waste (such as municipal solid waste and agricultural byproducts); hydroelectric power; geothermal; wind; and solar. Many sources of renewable energy are converted into electricity before being consumed. The United States domestically produces most of the energy it consumes. However, it also imports a portion, mostly in the form of crude oil and petroleum products.

In 2013, the United States consumed over 97 quadrillion British thermal units (Btu) of energy, including over 12 quadrillion Btus of imported energy, according to EIA data. As shown in figure 1, most of this energy (or about 82 percent) came from fossil energy sources. The rest came from renewable and nuclear energy sources.

There are four major sectors of the U.S. economy that consume energy at the point of end use: the industrial sector, which includes facilities and equipment used for manufacturing, agriculture, mining, and construction; the transportation sector, which generally comprises vehicles (such as cars, trucks, buses, trains, aircraft, and boats, among others) that transport people or goods; the residential sector, which consists of homes and apartments; and the commercial sector, which includes buildings such as offices, malls, stores, schools, hospitals, hotels, warehouses, restaurants, and places of worship, among others, as well as federal, state, and local facilities and equipment.

End-use sectors obtain energy from different combinations of sources. The industrial sector mainly consumes natural gas and electricity but also uses some petroleum products as feedstock. The transportation sector mainly consumes gasoline, diesel, and jet fuel; it also consumes biofuels and natural gas, as well as small amounts of electricity. The residential and commercial sectors mainly consume energy from electricity and natural gas but also use some petroleum products. As described above, every sector consumes electricity produced by the electric power sector, which takes electricity generated from fossil, nuclear, or renewable energy and delivers it to the end-use sectors through transmission and distribution lines. As shown in figure 2, the industrial sector consumed the largest share of energy (32 percent or 31.3 quadrillion Btus) in 2013, followed by the transportation, residential, and commercial sectors.

Not all of the energy produced is available for consumption at the point of end use, mainly because energy losses occur whenever energy is converted from one form to another. For example, coal-fueled power plants produce electricity by burning coal in a boiler to heat water and produce steam. The steam, at tremendous pressure and temperature, flows into a turbine, which spins a generator to produce electricity. During this process, the burning of coal produces heat energy, some of which converts water into steam. In turn, some of the energy in the steam is converted into electrical energy. At each point in this process, some of the original energy contained in the coal is lost. According to EIA, about two- thirds of the energy consumed to generate electricity is lost in conversion, and most of these losses occur in fossil-fueled and nuclear power plants that generate steam to turn turbines.

According to general economic principles, a number of factors may affect the production and consumption of energy. These factors include the following:

Changes in the supply of energy relative to changes in demand may affect the price that consumers pay. For example, if the supply of gasoline increases faster than the demand for it, the price of gasoline will most likely decrease. In contrast, if the demand for gasoline increases faster than the ability to supply it, the price of gasoline will most likely increase.

Prices of energy provide signals to producers and consumers and may affect their behavior. For example, lower gasoline prices provide an incentive for consumers to consume more gasoline, while higher gasoline prices provide an incentive for consumers to consume less gasoline. (However, incentives or disincentives may not actually change behavior if they are insufficient to outweigh other factors or considerations.)

Costs associated with producing energy provide signals to producers and may affect their behavior. For example, lower production costs provide an incentive for oil companies to produce more gasoline, while higher production costs provide an incentive for oil companies to produce less gasoline.

Factors Influencing Overall U.S. Energy Production and Consumption

Three important factors—energy efficiency, energy conservation, and the global economic recession of 2007 to 2009—had a major influence on U.S. energy production and consumption over the past decade but generally affected all energy producers and consumers rather than affecting only a specific source of energy. The first two factors are related but have distinct meanings. Energy efficiency is the use of technology that requires less energy to perform the same function, such as using a compact fluorescent light bulb in place of an incandescent bulb. Energy conservation is any behavior that results in the use of less energy, such as turning the lights off when you leave the room. Both energy efficiency and conservation reduce our consumption of energy and thereby influence the total amount of energy produced and consumed in the United States.

Some data suggest that the United States increased the efficiency with which it used energy from 2000 to 2013. For example, according to Federal Highway Administration data, the fuel economy of U.S. motor vehicles increased from an average of 16.9 miles per gallon in 2000 to 17.6 miles per gallon in 2012 (the latest year for which data are available). Another measure of the efficiency with which the United States uses its energy is to compare U.S. energy consumption with the U.S. gross domestic product, which is a measure of the value of all final goods and services produced within the United States in a given period. By making this comparison, we can measure whether it takes less energy over time to produce the same value of goods and services. According to EIA data, the consumption of energy per dollar value of gross domestic product decreased from about 7,900 Btus per dollar in 2000 to about 6,200 Btus per dollar in 2013, indicating that the United States became more energy efficient.

The third factor, the global economic recession of 2007 to 2009, resulted in reduced economic activity in general, which reduced energy demand and had long-term effects on global energy markets. For example, according to a 2009 International Energy Agency report, the recession’s effects on both energy producers and consumers included the following:

Energy companies drilled fewer oil and gas wells and reduced spending on refineries, pipelines, and power stations.

Businesses and households spent less on energy-using appliances, equipment, and vehicles.

Tighter credit and lower prices made investment in energy savings less attractive financially, while the economic crisis encouraged energy consumers to reduce overall spending. As a result, the deployment of more energy-efficient equipment was delayed.

Equipment manufacturers were expected to reduce investment in research, development, and commercialization of more energy- efficient models.

Key Methods of Federal Support and Interventions

The federal government supports or intervenes in U.S. energy production and consumption through a number of key methods, including (1) setting standards and requirements, (2) directly providing goods and services, (3) assuming risk, (4) providing funds, and (5) collecting or forgoing revenue from taxes or fees. The federal government also conducts and provides funding for energy-related R&D.

Setting Standards and Requirements

Through laws and regulations, the federal government sets standards and requirements for (or prohibitions against) certain activities. Some laws and regulations focus on affecting economic activity by controlling prices, output, or the entry and exit of firms in a market. For example, under the Atomic Energy Act, as amended, the Nuclear Regulatory Commission is responsible for issuing licenses to commercial nuclear reactors and conducting oversight of activities under such licenses to protect the health and safety of the public, among other things. Without such licenses, firms cannot operate nuclear reactors and generate electricity from nuclear energy. Other laws and regulations focus on the effects of economic activity on the health and welfare of citizens. For example, under the Clean Air Act, EPA is responsible for regulating emissions of a variety of air pollutants from coal-fueled power plants and other energy producers. While laws and regulations vary widely in how they are designed, they tend to function by influencing the decisions of producers and consumers in the market. In addition, laws and regulations may impose a variety of costs, such as costs on regulated entities to comply with the laws and regulations (“compliance costs”), and costs on government agencies to administer and enforce them. To the extent that the compliance costs affect the costs of engaging in particular energy-related activities, laws and regulations may change the behavior of energy producers and consumers.

Directly Providing Goods and Services

The federal government provides some goods or services directly—that is, through a government agency—rather than providing funds to another entity to provide these goods or services. For example, the federal government may produce and sell electricity generated at federally- owned facilities and produce reports and information on energy markets, among other things. Government provision of goods or services may be deemed necessary to address certain circumstances, such as economic inequalities among segments of the public or a need for a good or service considered unlikely to be met by the private sector. Such activities may affect energy producers and consumers in different ways. For example, production and sales of electricity generated at federally-owned facilities may involve energy sources and prices that differ from those of electricity produced and sold by private market participants.

Assuming Risk

The federal government assumes risk (and potential costs associated with risk) in a number of ways, such as making direct loans—disbursing funds to nonfederal borrowers under contracts requiring the repayment of such funds either with or without interest; guaranteeing loans—providing a guarantee, insurance, or other providing or subsidizing insurance. pledge regarding the payment of all or a part of the principal or interest on any debt obligation of a nonfederal borrower to a nonfederal lender; limiting liability; and By assuming some or all of the costs associated with risks for certain energy activities, the government may make those activities relatively less expensive, thus providing an incentive to pursue those activities. For example, if the federal government assumes the risk of default on a loan to a manufacturer of turbines (that generate electricity from wind energy), nonfederal lenders may offer a lower interest rate to the manufacturer than they would in the absence of the federal guarantee. Lowering the costs of capital for developers could result in certain projects being financed that would otherwise not be built.

Providing Funds

The federal government directly provides (or outlays) funds for different purposes. In some cases, an agency may provide funds in the form of a grant. For example, USDA may provide grants to help farmers, ranchers, and rural small businesses purchase and install renewable energy systems. In other cases, an agency may need to purchase goods or services. For example, federal agencies purchase energy for their buildings, as well as vehicles and fuel for these vehicles. To the extent that federal outlays lower the cost associated with a particular activity, federal outlays may lead to changes in the behavior of energy producers and consumers.

Collecting or Forgoing Revenues

The federal government collects revenues using different methods. One prominent method is through the tax system, which includes personal income taxes, corporate income taxes, and excise taxes based on the value of goods and services sold, among other types of taxes. The primary purpose of the federal tax system is to collect the revenue needed to fund the operations of the federal government. Taxes may alter taxpayers’ behavior by inducing them to shift resources from higher-taxed uses to lower-taxed uses in an effort to reduce tax liability.

The federal government also collects revenues associated with its management of federal lands. The federal government owns and manages roughly 30 percent of the nation’s total surface area (or about 700 million acres onshore). It also has jurisdiction and control over the outer continental shelf, which includes about 1.8 billion acres of submerged lands in federal waters off the coast of Alaska, in the Gulf of Mexico, and off the Atlantic and Pacific coasts. The federal government leases federal lands for the production of oil, gas, minerals such as coal, or other resources. In exchange, the government generally collects revenues, including payments in the form of rents and bonuses, which are required to secure and maintain a lease, and royalties, which are based on the value of the minerals that are extracted.

However, the federal government may choose to forgo certain revenues. Tax expenditures are tax provisions that are exceptions to the “normal structure” of individual and corporate income tax necessary to collect federal revenue. These preferences can have the same effects as government spending programs; hence the name tax expenditures. The Congressional Budget and Impoundment Control Act of 1974 identified six types of tax provisions that are considered tax expenditures when they are exceptions to the normal tax, as described in table 1. Tax expenditures may affect the behavior of energy producers and consumers by providing an incentive to engage in certain types of activities. For some tax expenditures, forgone revenues can be of the same magnitude or larger than related federal spending for some mission areas.

In addition to forgoing tax revenues, the federal government may choose to forgo revenues associated with its leases of federal lands and waters. “Royalty relief” is a waiver or reduction of royalties that companies would otherwise be obligated to pay for their leases of federal lands or waters. For example, the Outer Continental Shelf Deep Water Royalty Relief Act of 1995 mandated royalty relief for oil and gas leases issued in the deep waters of the Gulf of Mexico from 1996 to 2000.

Research and Development

Energy-related R&D takes place across a spectrum of activities, including basic research, applied research, and demonstration. Basic research includes efforts to explore and define scientific or engineering concepts or to investigate the nature of a subject without targeting any specific technology. Applied research includes efforts to develop new scientific or engineering knowledge to create new and improved technologies. Demonstration includes efforts to operate new or improved technologies to collect information on their performance and assess readiness for commercialization and deployment for widespread use.

The federal government plays a critical role in supporting energy-related R&D, which may involve conducting R&D at government-owned laboratories or funding another entity to conduct R&D. For example, as one of the largest research agencies in the federal government, DOE spends billions of dollars every year on R&D to support its diverse missions, including advancing scientific research and technology development and ensuring efficient and secure energy, among other things. However, because long time lags may occur between basic research activities and activities related to commercialization and deployment, it is often difficult to link government-funded R&D to specific effects on energy production, consumption, and prices in the future.

DOE’s R&D covers a broad range of activities, and DOE program offices manage 17 national laboratories. The following DOE program offices and laboratories primarily support energy-related R&D:

The Office of Science oversees six national laboratories with research areas focusing on energy: Ames Laboratory in Iowa, Argonne National Laboratory in Illinois, Brookhaven National Laboratory in New York, Oak Ridge National Laboratory in Tennessee, Pacific Northwest National Laboratory in Washington, and Princeton Plasma Physics Laboratory in New Jersey. The Office of Science is the nation’s single largest funding source for supporting research in energy sciences.

The Office of Nuclear Energy oversees the Idaho National Laboratory in Idaho. The office’s primary mission is to advance nuclear power as a resource capable of meeting the nation’s energy, environmental, and national security needs by resolving technical, cost, safety, proliferation resistance, and security barriers.

The Office of Fossil Energy oversees the National Energy Technology Laboratory in Pennsylvania. The office’s primary mission is to ensure reliable fossil energy resources for clean, secure, and affordable energy while enhancing environmental protection.

The Office of Energy Efficiency and Renewable Energy oversees the National Renewable Energy Laboratory in Colorado. The office’s mission is to develop solutions for energy-saving homes, buildings, and manufacturing; sustainable transportation; and renewable electricity generation.

Federal agencies other than DOE also provide funding for energy-related R&D. For example, as we found in February 2012, the Department of Defense and USDA implemented numerous initiatives to help develop renewable energy technologies. In addition, as we found in August 2012, the National Aeronautics and Space Administration, National Science Foundation, EPA, and National Institute of Standards and Technology implemented a number of energy initiatives related to batteries and energy storage.

Major Factors Influencing U.S. Production and Consumption of Energy from 2000 through 2013

The following three sections provide information on U.S. production and consumption of fossil, nuclear, and renewable energy from 2000 through 2013 and major factors, including federal activities, that influenced energy production and consumption levels. The fourth section provides information on other federal activities that may have influenced aspects of U.S. energy production and consumption from 2000 through 2013 but were not targeted at a specific energy source, as well as information on federal support for R&D.

Major Factors Influencing U.S. Production and Consumption of Fossil Energy

According to the studies and reports we reviewed, several major factors influenced U.S. production and consumption of fossil energy from 2000 through 2013:

Advances in drilling technologies enabled economic production of natural gas from shale and other tight formations. These advances led to increases in domestic production of natural gas starting around 2008 and contributed to declines in domestic prices of natural gas starting around 2009. As domestic production rose and prices declined, domestic consumption increased, imports of natural gas decreased, and companies began taking steps to gain approval to export liquefied natural gas.

The same advances in drilling technologies also enabled the economic production of crude oil from shale formations. These advances led to increases in the domestic production of crude oil beginning around 2009, reversing a decades-long trend of decreasing production. Global crude oil prices generally increased between 2000 and 2013, the largest, sustained price increase since comparable data were available. Increased domestic production contributed to lower prices for some regions of the country; however, the impact of increased domestic crude oil production on global crude oil prices was likely small. Imports of crude oil decreased beginning around 2008 as domestic production displaced imported crude oil to U.S. petroleum refiners. Around 2010, U.S. refiners began consuming greater quantities of crude oil to produce more petroleum products. As domestic consumption of petroleum products generally decreased beginning around 2008, exports of petroleum products (mostly diesel fuel) increased.

Due in part to lower prices of natural gas, the use of coal for electricity generation decreased in recent years as utilities switched to natural gas. Domestic coal production decreased in recent years; however, coal exports increased as domestic consumption declined faster than domestic production.

The studies and reports we reviewed also indicated that federal activities may have influenced fossil energy markets, generally by providing incentives or disincentives for the production and consumption of fossil energy. These activities included setting standards and requirements related to fossil energy emissions, assuming risks associated with oil spills and the Strategic Petroleum Reserve, collecting revenues associated with excise taxes on transportation fuels and royalty payments for oil and gas leases, and forgoing revenues associated with tax expenditures for fossil energy producers and royalty relief for oil and gas production. (See app. III for more information on the major factors that influenced U.S. production and consumption of fossil energy from 2000 through 2013.)

Major Factors Influencing U.S. Production and Consumption of Nuclear Energy

According to the studies and reports we reviewed, several major factors may have influenced U.S. production and consumption of nuclear energy from 2000 through 2013. Specifically, declining natural gas prices, along with the 2011 accident at Japan’s Fukushima Daiichi commercial nuclear power plant, may have led to decreases in the production and consumption of nuclear energy in recent years. Federal activities also may have influenced this trend, generally by providing incentives or disincentives for the production and consumption of nuclear energy. These activities included setting standards and requirements related to the operation of nuclear power plants, providing services related to the storage of nuclear waste, assuming risks associated with nuclear power plant operations, and forgoing revenues associated with tax expenditures for nuclear energy producers. (See app. IV for more information on the major factors that influenced U.S. production and consumption of nuclear energy from 2000 through 2013.)

Major Factors Influencing U.S. Production and Consumption of Renewable Energy

According to the studies and reports we reviewed, several major factors influenced U.S. production and consumption of renewable energy— particularly from ethanol, wind energy, and solar energy—from 2000 through 2013:

Federal tax credits for ethanol and federal policies requiring the use of ethanol in transportation fuels were major factors influencing an 8-fold increase in the production and consumption of ethanol from 2000 through 2013. As domestic production of ethanol outpaced consumption in recent years, U.S. exports of ethanol increased.

State policies requiring the use of renewable energy in electricity production, as well as federal activities such as outlays and tax credits for renewable energy producers, were major factors influencing production and consumption of electricity from wind and solar energy. Technological advances also played an important role. These factors supported a 30-fold increase in production and consumption of wind energy from 2000 through 2013 and a 19-fold increase in the production and consumption of solar energy.

See appendix V and appendix VI for more information on the major factors that influenced U.S. production and consumption of renewable energy from 2000 through 2013.

Other Federal Activities Influencing Aspects of U.S. Energy Production and Consumption

According to the studies and reports we reviewed, other federal activities were not targeted specifically at fossil, nuclear, or renewable energy production and consumption but may have influenced aspects of U.S. energy production and consumption from 2000 through 2013. Relevant federal activities included setting standards and requirements for energy efficiency, selling electricity, providing loans and loan guarantees related to energy efficiency, making outlays for energy consumption and energy efficiency, and forgoing revenues through tax expenditures for electricity transmission and energy efficiency, among other things. Many of these federal efforts, particularly activities related to energy efficiency, provided disincentives for energy production and use; in contrast, other federal efforts, such as selling electricity, provided incentives for energy production and consumption. In addition, the federal government, and DOE in particular, supported energy-related R&D, which typically is directed at the early stages of technological advances and therefore not generally linked to actual production or consumption of energy. Some of this R&D related to specific energy sources, while other R&D was more general. (See app. VII for more information on federal activities that may have influenced other aspects of U.S. energy production and consumption from 2000 through 2013.)

Agency Comments

We provided a draft of this report to DOE, Interior, Treasury, and USDA for review and comment. DOE, Treasury, and USDA provided technical or clarifying comments, which we incorporated as appropriate. Interior indicated they had no comments on the report.

As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees; the Secretaries of Agriculture, Energy, the Interior, and the Treasury; the Administrator of EIA; the Director of OMB; and other interested parties. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made major contributions to this report are listed in appendix VIII.

Appendix I: Scope and Methodology

This report provides information on U.S. production and consumption of fossil, nuclear, and renewable energy from 2000 through 2013 and major factors, including federal activities, that influenced energy production and consumption levels. It also provides information on other federal activities that may have influenced aspects of U.S. energy production and consumption from 2000 through 2013 but were not targeted at a specific energy source, as well as information on federal support for research and development (R&D).

To provide information on U.S. production and consumption of fossil, nuclear, and renewable energy from 2000 through 2013, we reviewed and analyzed Department of Energy (DOE) Energy Information Administration (EIA) historical data, as well as EIA articles and monthly and annual reports. To assess the reliability of EIA data, we took several steps including reviewing available documentation on the collection of the data. We determined the EIA data to be sufficiently reliable for our purposes.

To provide information on the major factors, including federal activities, that influenced energy production and consumption levels from 2000 through 2013; to provide information on other federal activities that may have influenced U.S. energy production and consumption from 2000 through 2013 but were not targeted at a specific energy source; and to provide information on federal R&D, we performed the following steps:

We reviewed information from our prior work related to the production and consumption of crude oil, petroleum products, natural gas, coal, nuclear energy, ethanol, wind energy, solar energy, energy efficiency, electricity transmission, and federal R&D. We relied on our prior work to identify the major factors that influenced U.S. energy production and consumption levels. However, this work may not have identified all of the relevant factors that influenced energy production and consumption from 2000 through 2013. In addition, we did not examine permitting issues on federal lands, including issues related to infrastructure and oil and gas development.

We reviewed information related to U.S. energy production and consumption from federal agencies and government organizations, including reports and studies by the Congressional Budget Office (CBO), Congressional Research Service (CRS), EIA, congressional Joint Committee on Taxation (JCT), and U.S. Department of Agriculture (USDA). To identify reports and studies, we conducted searches of various databases, such as ProQuest and PolicyFile, for studies published since 2008. We also asked agency officials and other stakeholders we contacted to recommend reports and studies. We relied on these reports and studies to identify the major factors that influenced U.S. energy production and consumption levels. However, these reports and studies may not have identified all of the relevant factors that influenced energy production and consumption from 2000 through 2013.

We reviewed and analyzed data on outlays, royalties collected, and excise taxes collected from DOE, Department of the Interior (Interior), Department of the Treasury (Treasury), and Office of Management and Budget (OMB). To assess the reliability of these data sets, we interviewed individuals with knowledge of them and reviewed available documentation on the collection of the data and on any methods that were used in calculating the data. From this review, we determined that the data sets were sufficiently reliable for our purposes.

We reviewed and analyzed data on estimates of tax expenditures, forgone royalties, and federal credit programs collected from DOE, JCT, and Treasury. We also relied on lists of tax expenditures and estimates of their cost compiled annually by Treasury and JCT under the energy budget function. In general, we used Treasury revenue loss estimates for each tax expenditure except in cases where only JCT reported a tax expenditure. Regarding data on tax expenditures, changes in economic conditions and estimation techniques can affect revenue loss estimates for tax expenditures, making them differ from year to year. Also, legislation affecting tax rates or the tax structure affects tax expenditure estimates. When statutory rates increase, a taxpayer’s ability to reduce tax on a portion of income is worth more; consequently, tax expenditures are worth more. Likewise, when rates decrease, tax expenditures are worth relatively less. To assess the reliability of these data sets, we interviewed individuals with knowledge of them and reviewed available documentation on the collection of the data and on any methods that were used in calculating the data. From this review, we determined that the data sets were sufficiently reliable for our purposes.

We conducted this performance audit from August 2013 to September 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix II: Federal Sources of Data on Energy-Related Outlays and Tax Expenditures

The federal budget provides data on energy-related outlays. The federal budget is divided into different functional areas, which is a way of grouping budgetary resources so that all budget authority and outlays of on-budget and off-budget federal entities and tax expenditures can be presented according to the national needs being addressed. National needs are grouped in 17 broad areas, one of which is “energy.” The energy area includes (1) promoting an adequate supply and appropriate use of energy to serve the needs of the economy and (2) energy programs of the Department of Energy (DOE) and its predecessor agencies. It also excludes atomic energy defense activities and general science research not closely related to energy. The Office of Management and Budget’s (OMB) public budget database contains historical data on outlays associated with each functional area, including the energy area.

However, the federal budget does not provide a comprehensive source for all federal outlays that might be related to energy production and consumption. Instead, the 17 functional areas in the federal budget relate to the primary area of a given account, even though the programs within the account may serve a variety of purposes. As a result, the public budget database may not identify all energy-related activities in the energy functional area. For example, the federal budget identifies seven agencies, including DOE and the U.S. Department of Agriculture (USDA), with outlays in the energy supply subfunction in fiscal year 2010. However, as we found in February 2012, 17 federal agencies beside DOE and USDA—such as the Departments of Defense and the Interior— implemented renewable energy initiatives for fiscal year 2010.

The Department of the Treasury (Treasury) and the congressional Joint Committee on Taxation (JCT) report revenue loss estimates for energy- related tax expenditures. Both Treasury and JCT estimate the revenue loss associated with each tax provision they have identified as a tax expenditure. Treasury’s list is included in the President’s annual budget submission; and JCT issues annual tax expenditure estimates as a stand- alone product. Both organizations calculate a tax expenditure as the difference between tax liability under current law and what the tax liability would be if the provision were eliminated and the item were treated as it would be under a “normal” income tax. In general, the tax expenditure lists that Treasury and JCT publish are similar, although these lists differ somewhat in the number of tax expenditures reported and the estimated revenue losses for particular expenditures. In addition, as with the federal budget, both lists of tax expenditures are divided into different functional areas, including one related to energy.

However, Treasury’s list and JCT’s list of tax expenditures may not include all tax expenditures that provide a benefit to energy producers. For example, both Treasury and JCT list the deduction for income attributable to domestic production activities as a tax expenditure. This tax expenditure allows a deduction of 6 percent from taxable income for oil extraction, among other things. According to Treasury estimates, repealing this provision would result in more than $17 billion in revenue related to oil and natural gas production for fiscal years 2014 through 2023. However, because this tax expenditure is available to other industries beside oil production, Treasury and JCT do not list this tax expenditure under the energy functional area.

Appendix III: Information on Major Factors Influencing Fossil Energy Production and Consumption

This appendix provides more detailed information on U.S. production and consumption of fossil energy from 2000 through 2013 and major factors, including federal activities, that influenced fossil energy production and consumption levels.

Natural Gas Production and Consumption

The year-to-year pattern of domestic production of natural gas fluctuated from 2000 through 2006 and then began to increase around 2007, according to Energy Information Administration (EIA) data, and as shown in figure 3. Specifically, the United States produced about 19.2 trillion cubic feet of natural gas in 2000; by 2005 and 2006, production had fallen below 19 trillion cubic feet but then began to increase, reaching over 24 trillion cubic feet in 2012 and 2013. Domestic consumption of natural gas exceeded domestic production throughout the period, with the difference coming from imports, primarily from Canada. However, as shown in figure 3, the difference between the domestic consumption and production of natural gas generally decreased between 2007 and 2013, leading to a reduction in natural gas imports.

Natural gas is used by a number of sectors in the economy, most notably for electricity generation; for industrial use as a source of heat or as a feedstock for petrochemical production, among other things; for residential heating and other home uses; and for commercial heating and other uses. Figure 4 shows the share of natural gas consumption by sector in 2000 and 2013. Specifically, according to EIA data, natural gas consumption for electricity generation (as well as other energy needs of the electric power sector) increased from about 5.2 trillion cubic feet in 2000 to about 8.2 trillion cubic feet in 2013. Natural gas consumption for commercial use also increased, from about 3.2 trillion cubic feet in 2000 to about 3.3 trillion cubic feet in 2013. Industrial and residential uses declined over the same period.

Major Factors Influencing Natural Gas Production and Consumption

The studies and reports we reviewed indicated that increases in the domestic production of natural gas were due primarily to increases in the extraction of natural gas from shale formations. As shown in figure 5, the production of natural gas from shale formations caused an increase in total domestic natural gas production starting around 2008 and continuing through 2012 (the latest year for which annual data were available). According to EIA data, natural gas withdrawals from shale formations increased from about 2 trillion cubic feet in 2007 to over 10 trillion cubic feet in 2012. These increases were largely due to technological advances in horizontal drilling and hydraulic fracturing—a process that injects a combination of water, sand, and chemical additives under high pressure to create and maintain fractures in underground rock formations that allow oil and natural gas to flow. For example, as we reported in January 2012, improvements in horizontal drilling and hydraulic fracturing led to a boom in the production of natural gas from shale formations. In addition, according to the Congressional Research Service (CRS), in recent years the oil and gas industry improved its extraction rate of natural gas from shale formations from about 5 percent to about 15 percent of total estimated gas resources in the ground (thereby tripling the amount of recoverable natural gas).

Increases in domestic natural gas production contributed to decreases in domestic natural gas prices, according to CRS. The price of natural gas, as with other commodities, is driven by supply and demand. The Henry Hub spot market in Louisiana is the best known spot market for natural gas. As shown in figure 6, annual prices for natural gas in the Henry Hub spot market generally increased between 2000 and 2008 (although some fluctuations occurred) before decreasing between 2008 and 2013. Specifically, in 2000, the annual spot price was $4.31 per million British thermal units (Btu) of natural gas. This price generally increased to $8.69 per million Btus in 2005 and $8.86 per million Btus 2008. Since 2008, the annual price generally decreased to $3.73 per million Btus in 2013.

In recent years, natural gas prices in the United States were much lower than in other parts of the world, according to CRS. This price difference encouraged some American companies to apply for authorization to export domestically produced liquefied natural gas from the contiguous 48 states. Specifically, since 2010, the Department of Energy (DOE) has received more than 30 applications for permission to export liquefied natural gas to countries that do not have a free trade agreement with the United States. DOE has fully approved 3 applications and approved 6 others on the condition that the Federal Energy Regulatory Commission issues a satisfactory environmental review of the associated liquefied natural gas export facility. Moreover, EIA has projected that the United States could be a net exporter of liquefied natural gas by 2016.

Production and Consumption of Crude Oil and Petroleum Products

The United States produces crude oil, which is refined along with imported crude oil into petroleum products such as gasoline, diesel, and jet fuel. U.S. refineries use both domestically produced crude oil and imported crude oil to produce petroleum products. According to EIA data, there were 143 petroleum refineries in the United States as of January 2013, with a capacity to process 17.8 million barrels of crude oil per day. The United States also both exports and imports petroleum products.

Domestic production of crude oil declined from 2000 through 2008, continuing a downward trend beginning in the 1970s, but increased beginning in 2009, according to EIA data. Specifically, as shown in figure 7, between 2000 and 2008, domestic crude oil production decreased from an average of about 5.8 million barrels of oil per day to 5.0 million barrels per day. However, by 2013, domestic crude oil production had increased to an average of almost 7.5 million barrels per day, the highest level of oil production since 1989. In 2013, an average of about 15.3 million barrels per day of crude oil was refined into petroleum products at U.S. refineries. As domestic crude oil production increased, imports of foreign crude oil decreased. Specifically, crude oil imports decreased from an average of about 9.8 million barrels per day in 2008 to 7.7 million barrels per day in 2013.

Overall domestic consumption of petroleum products—including gasoline, diesel, and jet fuel—peaked in 2005 and then generally declined through 2013, according to EIA data. Specifically, as shown in figure 8, consumption of petroleum products increased from an average of 19.7 million barrels per day in 2000 to 20.8 million barrels per day in 2005 before declining to between 18-19 million barrels per day in recent years. Amid declining domestic consumption and somewhat increasing U.S. refining capacity, refiners have increasingly exported petroleum products. Specifically, U.S. exports of petroleum products grew from an average of about 1.1 million barrels per day in 2005 to about 3.5 million barrels per day in 2013. The United States had been a net importer of petroleum products since 1949, but in 2011 it became a net exporter, primarily of diesel.

The primary users of petroleum products in the United States are the transportation and industrial sectors, according to EIA data. As shown in figure 9, the transportation sector consumed the largest share of petroleum products in 2000 and 2013 (at about 4.8 billion barrels). The industrial sector consumed the next largest share of petroleum products (at about 1.8 billion barrels in 2000 and about 1.7 billion barrels in 2013), while the remaining sectors (commercial, residential, and electric power) consumed the smallest share (at about 0.7 billion barrels in 2000 and about 0.3 billion barrels in 2013). Overall, total consumption of petroleum products increased from about 7.2 billion barrels in 2000 to about 7.6 billion barrels in 2007 before decreasing to about 6.9 billion barrels in 2013.

Major Factors Influencing Production and Consumption of Crude Oil and Petroleum Products

The studies and reports we reviewed indicated that increases in domestic crude oil production came primarily from increased production from shale formations. As we found in March 2014, the technological advances in horizontal drilling and hydraulic fracturing that contributed to increasing U.S. production of natural gas have also allowed companies that develop petroleum resources to extract crude oil from shale and other formations that were previously considered to be inaccessible because traditional techniques did not yield sufficient amounts for economically viable production. According to EIA data, much of the increase in crude oil production has been from shale and other tight formations, such as the Bakken formation in North Dakota and the Eagle Ford formation in Texas. Production from these two states accounted for 87 percent of the increase in U.S. crude oil production from 2008 through 2013.

Prices of crude oil increased considerably between 2000 and 2013 but show a distinctive pattern, according to EIA data. First, crude oil prices generally increased from 2000 to 2008. Crude oil is a widely traded global commodity, and prices of crude oil are generally determined by global supply and demand rather than exclusively by events in a single oil- producing country such as the United States. Since the mid‐1980s, benchmark crude oil prices such as West Texas Intermediate in the United States and Brent in Europe have served as reference points that the global oil market uses for pricing other crude oils. As shown in figure 10, crude oil prices in these two markets increased from about $30 per barrel in 2000 to almost $100 per barrel in 2008—one of the largest and most sustained crude oil price increases since comparable data were available. In 2009, crude oil prices in both markets decreased to about $62 per barrel, reflecting the effects of the global economic recession of 2007 to 2009 and the consequent falling demand for petroleum products. In 2010, crude oil prices in both markets increased.

Starting in 2010, increases in U.S. production of crude oil contributed to lower prices for some domestic crude oils and may have had a small effect on some global oil prices, according to EIA. Specifically, as shown in figure 10, West Texas Intermediate crude oil began to sell at a large discount relative to Brent crude oil starting around 2011. This price divergence was due to increases in domestic crude oil production— existing crude oil pipelines were constrained in their ability to ship additional quantities of oil from the midcontinental United States and Canada to refineries, which limited the ability of this oil to reach global oil markets. In terms of global effects, in 2013 U.S. crude oil production grew more than the combined increase in the rest of the world, which contributed to relatively stable global crude oil prices in 2013, according to EIA.

Coal Production and Consumption

The United States has the largest recoverable coal reserves in the world, according to EIA, and most domestically produced coal comes from five states: Wyoming, West Virginia, Kentucky, Pennsylvania, and Illinois. Domestic production of coal fluctuated somewhat during the past decade but declined by about 16 percent from 2008 through 2013, according to EIA data. Specifically, as shown in figure 11, the United States produced 1.07 billion short tons of coal in 2000; by 2008, production had risen to 1.17 billion short tons. However, coal production fell below 1 billion short tons by 2013—the lowest level in almost 2 decades, according to EIA data. Domestic consumption of coal generally increased from 2000 (at 1.08 billion short tons) to 2007 (at 1.13 billion short tons). However, starting in 2008, coal consumption generally decreased and reached 0.93 billion short tons in 2013. As domestic consumption of coal fell, the United States generally exported more coal to Europe and Asia. The vast majority of coal consumed in the United States is used for generating electricity.

Major Factors Influencing Coal Production and Consumption

The studies and reports we reviewed indicated that the recent decrease in domestic coal production and consumption came partly from declines in the use of coal to generate electricity. In the past, the fuel cost of generating one kilowatt-hour of electricity from natural gas had typically been higher than that of coal, according to EIA. However, coal began losing its price advantage over natural gas for electricity generation in some parts of the country in 2009, particularly in the eastern United States, according to EIA. In addition, new natural gas-fueled generating units generally are able to convert fuel into electricity more efficiently than existing coal-fueled generating units, meaning they can convert a unit of fuel energy into more electricity than coal-fueled units. Newer designs of coal-fueled units exist that can operate at higher efficiencies, but few have been built in the United States. In addition, recently proposed or finalized EPA regulations affecting coal-fueled electricity generating units may also have played a role in recent decreases in domestic coal production and consumption.

The price of coal depends on its type, in part because different types of coal produce differing amounts of energy when burned. According to EIA, two of the most common types in the United States are bituminous and subbituminous coal. Bituminous coal is the oldest and most abundant coal type found in the United States. West Virginia, Kentucky, and Pennsylvania are the primary producers of bituminous coal. Subbituminous coal contains less energy than bituminous coal; however, large quantities are found in thick beds near the surface, resulting in low mining cost and, correspondingly, lower prices. Wyoming produces the vast majority of subbituminous coal. As shown in figure 12, annual U.S. prices for bituminous and subbituminous coal generally increased from 2000 to 2012 (the latest year for which data are available). For example, for bituminous coal, prices increased from $24.15 per short ton in 2000 to $66.04 per short ton in 2012, or an increase of over 170 percent. Some of these cost increases may be due to increases in coal transportation costs and declines in mine productivity during this period, according to EIA. As the price of coal increased, it reduced coal’s price advantage relative to other energy sources, such as natural gas, which decreased in price over this period.

Federal Activities That May Have Influenced Fossil Energy Production and Consumption

In addition to the major factors we identified above from the studies and reports we reviewed, we identified a number of federal activities that may have also played a role in influencing U.S. production and consumption of fossil energy from 2000 through 2013. These activities included setting standards and requirements for emissions from electricity generating units, assuming risks associated with oil production, collecting excise taxes and royalty payments, and providing tax expenditures and royalty relief. Some of these activities provided an incentive to produce and consume fossil energy, while others provided a disincentive for its production and consumption.

Setting Standards and Requirements

The federal government established or strengthened a number of standards and requirements related to fossil energy production from 2000 through 2013. For example, under the Clean Air Act, the Environmental Protection Agency (EPA) establishes national ambient air quality standards for six pollutants which states are, primarily, responsible for attaining. States attain these standards, in part, by regulating emissions of these pollutants from certain stationary sources, such as electricity generating units. In particular, according to EPA, fossil fuel-fired electricity generating units are among the largest emitters of sulfur dioxide and nitrogen oxides, which have been linked to respiratory illnesses and acid rain, as well as of carbon dioxide, the primary greenhouse gas contributing to climate change. Numerous Clean Air Act requirements apply to electricity generating units, including New Source Review, a permitting process established in 1977. Under New Source Review, owners of generating units must obtain a preconstruction permit that establishes emission limits and requires the use of certain emissions control technologies. New Source Review applies to (1) generating units built after August 7, 1977, and (2) existing generating units—regardless of the date built—that seek to undertake a “major modification,” a physical or operational change that would result in a significant net increase in emissions of a regulated pollutant.

In general, the cost of complying with New Source Review requirements provided a disincentive for producing electricity from fossil energy sources. As we found in June 2012, EPA has investigated most coal-fired generating units at least once for compliance with New Source Review requirements since 1999, and has alleged noncompliance at more than half of the units it investigated. Specifically, of the 831 units EPA investigated, 467 units were ultimately issued notices of violation, had complaints filed in court, or were included in settlement agreements. In total, EPA reached 22 settlements covering 263 units, which will require affected unit owners to, among other things, install around $12.8 billion in emissions controls. According to our analysis of EPA data, these settlements will reduce emissions of sulfur dioxide by an estimated 1.8 million tons annually, and nitrogen oxides by an estimated 596,000 tons annually.

Assuming Risk

The federal government assumed some risks related to fossil energy production and consumption from 2000 through 2013. For example, the federal government assumed financial risks associated with potential cleanup costs for some oil spills, and the federal government acquired billions of dollars worth of crude oil to hold in reserve in case of supply disruptions, as discussed below:

Cleanup costs for oil spills. Under the Oil Pollution Act of 1990, as amended, which was enacted after the Exxon Valdez oil spill in 1989, the federal government established a “polluter pays” system that places the primary burden of liability for costs of spills on the responsible parties, up to a specified limit of liability. In general, the level of potential financial liability under the act depends on the kind of vessel or facility from which a spill originates and is limited in amount. However, if the oil discharge is the result of gross negligence or willful misconduct, or a violation of federal operation, safety, and construction regulations, then liability under the act is unlimited. In addition, the act provides the Oil Spill Liability Trust Fund to pay for oil spill costs when the responsible party cannot or does not pay. The fund’s primary revenue source is an 8-cent-per-barrel tax on petroleum products—a small fraction of the price of a barrel in 2013— either produced in the United States or imported from other countries. The fund is subject to a $1 billion cap on the amount of expenditures from the fund per incident.

Stockpiling crude oil. Congress created the Strategic Petroleum Reserve in 1975, following the Arab oil embargo of 1973 to 1974, to help protect the U.S. economy from damage caused by oil supply disruptions. The reserve is owned by the federal government and operated by DOE. It can store up to 727 million barrels of crude oil in salt caverns. The President has discretion to authorize release of oil in the Strategic Petroleum Reserve to minimize significant supply disruptions. In the event of such a disruption, the reserve can supply oil to the market by either selling stored crude oil or trading this oil in exchange for a larger amount of oil to be returned later. From fiscal year 2000 through 2013, the federal government received almost $3.9 billion from the sale of crude oil from the reserve, spent about $0.5 billion to purchase crude oil, and spent $2.5 billion for operations and maintenance of the reserve.

The assumption of liability by the federal government for some oil spills may have provided an incentive for oil production and consumption by potentially decreasing the overall cost associated with certain production- related activities. For example, the liability limitations established under the Oil Pollution Act may have lowered costs for liability insurance or other insurance paid for by oil producers. However, the extent to which this federal intervention influenced changes in petroleum or natural gas production or consumption is difficult to precisely measure. Moreover, the fund—which is paid by oil producers—raises the cost of producing oil by a small fraction, which may have a negative impact on oil production.

DOE’s operation of the Strategic Petroleum Reserve may have had little to no impact on fossil energy production and consumption between 2000 and 2013. For example, we found in August 2006 that filling the Strategic Petroleum Reserve from late 2001 through 2005 during a time of tight supply and demand conditions had minimal impact on oil prices because the volume was so small compared with world oil demand, according to most of the experts with whom we spoke. However, some experts believed the existence of the Strategic Petroleum Reserve may have a stabilizing effect on oil prices, particularly during extreme supply or demand events, whether or not it is actually used. If true, the reserve could have had positive effects on oil producers or consumers by reducing the risks associated with unstable prices.

Collecting or Forgoing Revenue

From 2000 through 2013, the federal government collected revenues through excise taxes and royalty payments related to fossil energy production and consumption while forgoing other related revenues through tax expenditures and royalty relief. Regarding excise taxes, the federal government collected about $637 billion through excise taxes targeting or related to fossil energy—primarily motor fuels (gasoline, diesel, and others)—from fiscal year 2000 through 2012. The federal excise tax rate on gasoline is 18.4 cents per gallon (the same amount as in 1993). Most revenues from these taxes are dedicated to the Highway Trust Fund, which was established by Congress in 1956 and is a major source of funding for various surface transportation programs. As shown in figure 13, revenues from excise taxes targeting or related to fossil energy were about $45 billion a year from fiscal year 2000 through 2004 and increased to about $50 billion a year for the rest of the period.

Regarding royalty payments, the federal government collected more than $124 billion in revenues from royalty and other payments for federal oil, gas, and coal leases from fiscal year 2003 through 2013. As shown in figure 14, revenues from royalty and other payments increased from almost $8 billion in fiscal year 2003 to $23.4 billion in fiscal year 2008, then decreased to about $9 billion in fiscal years 2009 and 2010 before increasing to about $13.2 billion in fiscal year 2013.

Regarding tax expenditures, the federal government incurred revenue losses of almost $50 billion from fiscal year 2000 through 2013 due to 16 tax expenditures we identified as targeting or related to fossil energy according to the Department of the Treasury (Treasury) and the Joint Committee on Taxation (JCT) estimates. As shown in figure 15, revenue losses associated with these 16 tax expenditures increased from less than $2 billion in fiscal year 2000 to over $4.6 billion in both fiscal year 2006 and 2007. They decreased from fiscal year 2007 through 2010 before increasing to about $4.6 billion in fiscal year 2012 and declining to $4.1 billion in fiscal year 2013.

Table 2 provides descriptions of these 16 federal tax expenditures. The table also provides information from Treasury on tax expenditures that will or have expired, in full or in part, due to an expiration of legislative authority or some other expiration under the law as of the fall of 2014, as well as on tax expenditures that currently have no expiration. In addition, the table provides information on revenue loss estimates from Treasury (unless otherwise specified).

The federal government may have incurred additional revenue losses associated with other tax provisions related to fossil energy; however, we were unable to identify data on the level of federal revenue losses. For example, JCT and Treasury identified three tax provisions as being related to the oil and gas industry but also broadly available to taxpayers engaged in energy-related and non-energy-related activities, such as manufacturing or trade. These three tax provisions are described in table 3. For these provisions, JCT and Treasury did not estimate annual revenue losses attributable to fossil energy production or consumption for fiscal year 2000 through 2013, and therefore this information was not readily available.

Regarding royalty relief, the federal government provided nearly $12 billion in royalty relief for oil and gas production from 2000 through 2012, according to Interior estimates. As shown in figure 16, revenue losses associated with royalty relief increased from $40 million in 2000 to more than $2 billion in 2011, before declining to about $1.9 billion in 2012 (the most recent estimate available).

These federal activities—collecting revenues from excise taxes and royalties and forgoing revenues from tax expenditures and royalty relief— may have influenced U.S. fossil energy production and consumption in different ways, as described below:

Excise taxes. Because excise taxes raised prices on motor fuels, they provided a disincentive for consuming such fuels. However, because much of the revenue from these excise taxes was used to improve roads and other transportation infrastructure, these taxes could also have provided an incentive for motor vehicle use and thereby increased consumption of motor fuels.

Royalties. Because royalty payments raised costs associated with the development and sales of fossil energy, they provided a disincentive to produce and consume fossil energy. However, we cannot say to what extent the federal royalties provided a disincentive for oil and gas development on federal lands relative to other places because oil and gas companies that lease federal lands look for the best economic terms across a wide range of land owners (such as state, private, federal, and international owners). We found in 2008 that studies of many resource owners indicated that the federal government collected less in total revenues than most other resource owners, but we do not have more recent comparisons of revenues collected.

Tax expenditures and royalty relief. In general, tax expenditures and royalty relief provided incentives for fossil energy production by lowering the costs associated with the exploration and development of oil and gas resources.

Appendix IV: Information on Major Factors Influencing Nuclear Energy Production and Consumption

This appendix provides more detailed information on U.S. production and consumption of nuclear energy from 2000 through 2013 and on major factors, including federal activities, that may have influenced nuclear energy production and consumption levels.

Nuclear Energy Production and Consumption

The United States has 100 operating commercial nuclear reactors, all of which are used to generate electricity. The year-to-year pattern of domestic production and consumption of nuclear energy fluctuated from 2000 through 2013, as shown in figure 17. In general, nuclear energy production and consumption increased from 754 million megawatt-hours in 2000 to 806 million megawatt-hours in 2007, according to Energy Information Administration (EIA) data. From 2007 through 2010, nuclear energy production and consumption remained steady between about 800 million megawatt-hours and 807 million megawatt-hours. From 2011 through 2013, nuclear energy production and consumption decreased below 800 million megawatt-hours. The proportion of electricity generated by nuclear power in the United States changed little during the period we reviewed, with nuclear reactors accounting for about 20 percent of total U.S. electricity generation in 2000 and about 19 percent in 2013.

Major Factors Influencing Nuclear Energy Production and Consumption

The studies and reports we reviewed indicated that recent decreases in U.S. nuclear energy production and consumption may be due to a number of major factors, including reductions in natural gas prices and the Fukushima Daiichi nuclear accident. Regarding natural gas prices, some nuclear plant operators cited price reductions as an important factor in their decisions regarding nuclear power reactor operations. For example, the Vermont Yankee Nuclear Power Station in Vernon, Vermont, began operations in 1972, and the owners obtained a renewed license in 2011 to operate the plant for an additional 20 years. However, in August 2013, the owners announced plans to permanently close the plant in 2014. According to the owners, their decision to close the plant was driven in part by lower natural gas prices, which had reduced the comparative profitability of the plant.

In March 2011, a 9.0-magnitude earthquake and subsequent tsunami devastated northeastern Japan and severely damaged the Fukushima Daiichi nuclear power plant. The resulting radiological emergency involved the most extensive release of radioactive material at a nuclear power plant since the 1986 Chernobyl disaster. Following this release, the Japanese government evacuated people within 12 miles of the plant, and later extended the evacuation zone to 19 miles. In total, almost 150,000 people were evacuated. In response to the incident, Japan shut down all of its nuclear power reactors, and concerns heightened about the safety of commercial nuclear power plants worldwide. For example, Germany closed 8 of the country’s 17 reactors and decided to shut down the remainder by 2022. In the United States, the Fukushima incident affected some plans to build new nuclear power plants. For example, in 2011, a company planning to construct two nuclear reactors in Texas cited uncertainties related to the Fukushima incident as a reason for abandoning the project.

U.S. nuclear energy production and consumption trends may also have been affected, to a more limited extent, by increases in the price of uranium oxide, which is processed into fuel used by nuclear power reactors. As shown in figure 18, uranium oxide prices have increased considerably from 2000 to 2013, according to EIA data. Specifically, the average domestic price of uranium oxide increased from $11.45 per pound in 2000 to $52.51 per pound in 2013, an increase of more than 300 percent.

Federal Activities That May Have Influenced Nuclear Energy Production and Consumption

In addition to the major factors we identified above from the studies and reports we reviewed, we identified a number of federal activities that may have also played a role in influencing U.S. production and consumption of nuclear energy from 2000 through 2013. These activities included setting standards and requirements related to the operation of nuclear power reactors, directly providing goods and services related to the storage of spent nuclear fuel, assuming risk associated with the operation of nuclear power reactors, and forgoing revenues associated with tax expenditures for nuclear energy producers. Some of these activities provided an incentive to produce and consume nuclear energy, while others provided a disincentive for its production and consumption.

Setting Standards and Requirements

The federal government established or strengthened a number of standards and requirements related to nuclear energy from 2000 through 2013. For example, after the Fukushima incident, the Nuclear Regulatory Commission (NRC) accepted 12 recommendations from a task force that NRC had convened in 2011 to review its processes and regulations and determine whether lessons learned from the accident could inform its oversight processes. The task force recommended that NRC require licensees to reevaluate and upgrade seismic and flooding protection of reactors and related equipment, strengthen capabilities at all reactors to withstand loss of electrical power, and take other actions to better protect their plants for a low-probability, high-impact event. NRC’s activities to strengthen the safety and security of nuclear power plants after the Fukushima incident may have increased the costs associated with operating commercial nuclear power reactors, thereby providing a disincentive for nuclear power production.

Directly Providing Goods and Services

The federal government engaged in activities related to providing for the management of spent nuclear fuel—i.e., fuel that has been used and removed from the reactor core of a nuclear plant—from 2000 through 2013. The nation currently has about 70,000 metric tons of commercial spent nuclear fuel stored at 75 sites in 33 states. This fuel is extremely hazardous: without protective shielding and proper handling, its intense radioactivity can kill a person directly exposed to it or cause long-term health hazards, such as cancer, as well as contaminate the environment. The Nuclear Waste Policy Act of 1982 directed the Department of Energy (DOE) to investigate sites for a federal deep geological repository for spent nuclear fuel and high-level radioactive waste. In 1987, Congress amended the Nuclear Waste Policy Act to direct DOE to focus its efforts only on Yucca Mountain in Nevada for a repository. The act, as amended, authorized DOE to contract with commercial nuclear reactor operators to take custody of spent fuel for disposal at the repository beginning in 1998. DOE spent billions of dollars related to this effort and in 2008 submitted a license application for the construction of a permanent repository at Yucca Mountain to NRC, which has regulatory authority over the construction and operation of a repository.

However, as we reported in August 2012: In 2009, DOE announced that it planned to terminate its work related to the Yucca Mountain repository and in 2010 filed a motion to withdraw the license application. NRC’s licensing board denied the motion, but DOE continued to take steps to dismantle the repository project.

In September 2011, the NRC commissioners considered whether to overturn or uphold the licensing board’s decision, but they were evenly divided and unable to take final action on the matter. Instead, the NRC commissioners directed the licensing board to suspend work by September 30, 2011.

NRC’s failure to consider the application, among other things, was contested in federal court. Several parties filed a petition against NRC asking the federal court to compel NRC to provide a proposed schedule with milestones and a date for approving or disapproving the license application, among other things.

Federal activities related to the Yucca Mountain repository may have provided a disincentive for nuclear energy production and consumption. For example, DOE’s actions regarding its license application for the construction of the repository may have caused uncertainty about the federal government’s long-term strategy for storing nuclear waste because Congress has not agreed upon a path forward. This uncertainty may have provided a disincentive for some nuclear plant operators to stay in the market or expand capacity because storing nuclear waste is expensive.

Assuming Risk

The federal government assumed certain risks related to nuclear energy production and consumption from 2000 through 2013. For example, under the Price-Anderson Act, the federal government limited the liability of nuclear plant operators in the case of a nuclear accident. The act requires each licensee of a nuclear plant to have primary insurance coverage equal to the maximum amount of liability insurance available from private sources—currently $375 million—to settle any such claims against it. In the event of an accident at any plant where liability claims exceed the $375 million primary insurance coverage, the act also requires licensees to pay retrospective premiums (also referred to as secondary insurance). The act places a limit on the total liability per incident, which is currently about $13 billion.

In addition, the federal government assumed risks related to nuclear energy production and consumption by establishing a loan guarantee program. Specifically, Section 1703 of the Energy Policy Act of 2005 authorized DOE to issue loan guarantees for projects that avoid, reduce, or sequester greenhouse gases using new or significantly improved technologies. In 2010, DOE made conditional commitments under Section 1703 to provide $8.3 billion in loan guarantees for the construction of two advanced nuclear reactors at the Vogtle Electric Generating Plant in Georgia.

These federal activities provided an incentive for nuclear energy production and consumption by decreasing the overall cost associated with certain production-related activities. For example, according to the Congressional Budget Office (CBO), the Price-Anderson Act provides a benefit to nuclear plant operators by reducing their cost of carrying liability insurance. CBO estimated that the potential level of support was about $600,000 annually per reactor, which would be about $62 million annually for all reactors in the United States. Without the liability limitations provided by the Price-Anderson Act, the cost of obtaining insurance for nuclear power plant operators might have been higher. Consequently, the act may have supported higher levels of nuclear power production in the United States between 2000 and 2013 than would have otherwise occurred because the lower cost provided an incentive for increased production and consumption.

Forgoing Revenue

The federal government incurred revenue losses related to nuclear energy production and consumption from 2000 through 2013. Specifically, we identified one tax expenditure targeting nuclear energy that resulted in $7.9 billion in revenue losses from fiscal year 2000 through 2013. This tax expenditure—the special tax rate for nuclear decommissioning reserve funds—increased from $100 million in fiscal year 2000 to $1.1 billion in fiscal year 2013, as shown in figure 19. Under the special tax rate for nuclear decommissioning reserve funds, taxpayers (e.g., utilities) who are responsible for the costs of decommissioning nuclear power plants can elect to create reserve funds to be used to pay for decommissioning. The funds receive special tax treatment: amounts contributed are deductible in the year the contributions are made and are not included in the taxpayer’s gross income until the year they are distributed, thus effectively postponing tax on the contributions. Amounts actually spent on decommissioning are deductible in the year they are made. Gains from the funds’ investments are subject to a 20 percent tax rate—a lower rate than that which applies to most other corporate income. In general, this tax expenditure supported nuclear energy production and consumption by lowering the costs of nuclear energy production and providing an incentive to engage in nuclear power production.

Appendix V: Information on Major Factors Influencing Renewable Energy Production and Consumption

This appendix provides more detailed information on U.S. production and consumption of renewable energy from 2000 through 2013 and on major factors, including federal activities, that influenced renewable energy production and consumption levels.

Renewable Energy Production and Consumption

U.S. production and consumption of renewable energy generally increased from 2000 through 2013, as shown in figure 20, according to Energy Information Administration (EIA) data. Specifically, in terms of energy content (i.e., British thermal units ), production and consumption of all sources of renewable energy—including liquid biofuels (such as ethanol and biodiesel), other forms of biomass (i.e., wood and waste), hydroelectric power, geothermal, wind, and solar—increased from 6.1 quadrillion Btus in 2000 to 9.2 quadrillion Btus in 2013. As a proportion of total energy consumption, consumption of renewable energy increased from about 6 percent in 2000 to 9 percent in 2013. Hydroelectric power and wood were the two largest sources of renewable energy during this time period and accounted for about 50 percent of all renewable energy consumed in 2013. However, the overall increase in domestic production and consumption of renewable energy from 2000 through 2013 can be attributed primarily to increases in the production and consumption of ethanol, wind energy, and solar energy.

Ethanol Production and Consumption

Domestically produced ethanol primarily comes from corn grown in the Midwest; the cornstarch is converted into sugar and then fermented and distilled into ethanol. Ethanol is used as a transportation fuel; almost all ethanol is blended into gasoline as an additive to make fuel containing up to 10 percent ethanol by volume. As shown in figure 21, ethanol production increased from 1.6 billion gallons in 2000 to almost 14 billion gallons in 2011 and about 13 billion gallons in both 2012 and 2013. Consumption of ethanol followed a similar pattern until 2010, when domestic consumption of ethanol remained relatively flat at around 13 billion gallons per year. The United States increased its exports of ethanol beginning in 2010, mostly to Brazil and Canada.

Major Factors Influencing Ethanol Production and Consumption

The studies and reports we reviewed indicated that several federal activities had a major impact on the increase in ethanol production and consumption—most notably federal tax expenditures and requirements for the use of ethanol in transportation fuel. Regarding federal tax expenditures, alcohol fuel credits provided a 45-cent-per-gallon tax credit to gasoline suppliers who blend ethanol with gasoline. According to the Department of the Treasury (Treasury) data, the alcohol fuel credits resulted in more than $39 billion in revenue losses from fiscal year 2000 through 2013. As shown in figure 22, revenue losses associated with alcohol fuel credits increased from about $0.9 billion in fiscal year 2000 to $7 billion in fiscal year 2011, before decreasing to $3.7 billion in fiscal year 2012 and about $50 million in fiscal year 2013.

Regarding federal requirements, the Energy Policy Act of 2005 (EPAct) created a federal renewable fuel standard that generally required gasoline and diesel sold in the United States to contain 4 billion gallons of renewable fuels, such as ethanol and biodiesel, in 2006 and 7.5 billion gallons in 2012. The Energy Independence and Security Act of 2007 (EISA) expanded the renewable fuel standard by requiring that U.S. transportation fuel contain 9 billion gallons of renewable fuels in 2008, with the amount required increasing annually to 36 billion gallons in 2022. The 36-billion-gallon total must include at least 21 billion gallons of advanced biofuels (defined as renewable fuels other than ethanol derived from corn starch that meet certain criteria) and can include up to 15 billion gallons of conventional biofuels (defined as ethanol derived from cornstarch).

In our previous work, we found that the alcohol fuel credits were important in establishing and expanding the domestic ethanol industry. However, we also found that the alcohol fuel credits became less important over time for sustaining the ethanol industry because (1) most of the capital investment had already been made and (2) the credits were duplicative with the renewable fuel standard. We recommended in 2009 that Congress consider modifying or phasing out the alcohol fuel credits. Congress allowed the alcohol fuel credits to expire at the end of 2011.

In addition to the alcohol fuel credits and renewable fuel standard, the federal government may have influenced ethanol production and consumption from 2000 through 2013 in a number of other ways, according to the studies and reports we reviewed, including the activities described below. While the precise effects of these activities on changes in ethanol production and consumption are difficult to measure, some of these activities provided incentives for the production and consumption of ethanol.

Requirements for federal fleets to use ethanol and other alternative fuels. The Energy Policy Act of 1992 requires that 75 percent of all vehicles acquired by the federal fleet in fiscal year 1999 and afterward be “alternative fuel vehicles,” which can use ethanol and blends of 85 percent or more of ethanol with gasoline, among other fuels. EPAct generally requires that all such vehicles be fueled with alternative fuel. In addition, EISA requires that no later than October 2015 and each year thereafter, agencies must achieve a 10 percent increase in vehicle alternative fuel consumption relative to a baseline established by the Energy Secretary for fiscal year 2005.

Excise taxes. The federal excise tax rate on ethanol in motor fuels is 18.4 cents per gallon. We did not separately analyze the portion of revenues from excise taxes on ethanol from the portion on gasoline. However, we believe the effects of these excise taxes may be similar to the effects of excise taxes on gasoline.

Another factor likely affecting ethanol production and consumption from 2000 through 2013 was the price of ethanol relative to the prices of corn and gasoline, according to U.S. Department of Agriculture (USDA) research. Ethanol prices generally increased from 2000 through 2013, according to USDA data, as shown in figure 23. Specifically, ethanol prices increased from an annual average of $1.35 per gallon in 2000 to $2.47 per gallon in 2013. Because ethanol is used as a gasoline substitute, and because nearly all ethanol produced in the United States comes from corn, the relationship between prices of ethanol, gasoline, and corn is complex. As gasoline prices rise, ethanol’s appeal as a substitute increases, as does the profitability of ethanol production and the demand for corn. As a result, according to USDA’s Economic Research Service, prices of corn, ethanol, and gasoline have become more interrelated in recent years. Specifically, from March 2008 to March 2011, ethanol supply and demand accounted for about 23 percent of the variation in the price of corn, while corn market conditions accounted for about 27 percent of ethanol’s price variation. At the same time, about 16 and 17 percent of gasoline price variation could be attributed to ethanol and corn markets conditions, respectively.

Production and Consumption of Wind and Solar Energy

Wind is transformed into electricity using wind turbines. In terms of the electricity generated from wind turbines, domestic production and consumption of wind energy increased from 5.6 million megawatt-hours in 2000 to 167.7 million megawatt-hours in 2013 (an increase of almost 3,000 percent), as shown in figure 24. According to the Department of Energy (DOE), wind energy comprised 43 percent of all additions to U.S. generating capacity in 2012, overtaking natural gas-fired electricity generation as the leading source of new capacity for that year.

Solar energy is used to heat, cool, and power homes and businesses using a variety of technologies that convert sunlight into usable energy. The most widely used solar technology is the photovoltaic cell, which uses semiconducting materials to convert sunlight into electricity. Sunlight can also be used to heat water (for later use) or to boil water, which produces steam that can be used in a turbine to generate electricity. In terms of the electricity generated from solar energy, domestic production and consumption of solar energy increased from about 0.5 million megawatt-hours in 2000 to 9.3 million megawatt-hours in 2013 (an increase of almost 1,900 percent), as shown in figure 25. According to the Solar Energy Industries Association, photovoltaic solar installations grew 76 percent from 2011 to 2012, and 8 of the 10 largest photovoltaic installations in the United States were built in 2012.

Major Factors Influencing Production and Consumption of Wind and Solar Energy

The studies and reports we reviewed indicated that the increase in wind and solar energy production and consumption resulted from a number of major factors—most notably state policies and federal activities, as well as technological advances. Regarding state activities, many states have created policies known as renewable portfolio standards that encouraged the production and use of renewable energy. These state policies generally require a percentage of electricity sold or generated in the state to come from eligible renewable resources, including wind and solar energy. According to EIA, 29 states and the District of Columbia had enforceable renewable portfolio standards or similar laws as of October 2013. According to the Congressional Research Service (CRS), state policies have been the primary creator of demand for wind projects.

Regarding federal activities, the studies and reports we reviewed indicated that the federal government influenced increases in the production and consumption of wind and solar energy primarily through tax incentives. Specifically, the production tax credit and the investment tax credit, along with a related program that provided grants in lieu of these tax credits, resulted in almost $14 billion in revenue losses and almost $20 billion in outlays from fiscal year 2000 through 2013. These tax credits and grants, which are described below, supported wind and solar energy production by lowering the costs associated with production and providing an incentive to those firms engaged in the construction and operation of wind and solar energy projects.

Production tax credit. This credit provided a 10-year, inflation- adjusted income tax credit based on the amount of renewable energy produced at wind and other qualified facilities. The amount of the credit varied depending upon the source. The value of the credit was 2.2 cents per kilowatthour in 2012 for certain resources (e.g., wind, geothermal, and certain biomass electricity production) and was raised to 2.3 cents per kilowatthour in 2013. This credit resulted in about $9.6 billion in revenue losses from fiscal year 2000 through 2013. Specifically, as shown in figure 26, revenue losses associated with this tax credit increased from $40 million in fiscal year 2000 to $1.5 billion or more annually from fiscal year 2010 through 2013. This credit, which has periodically expired and then been extended, is available to facilities for which construction began before January 1, 2014. As we reported in March 2013, new additions of wind energy capacity fell dramatically in years following the credit’s expiration.

Investment tax credit. This credit, which has not expired, provides an income tax credit for business investments in solar systems and small wind turbines, among other things. Investments in solar and small wind turbine systems qualify for a 30 percent tax credit. In addition, temporary provisions enacted under the American Recovery and Reinvestment Act of 2009 (Recovery Act) allow taxpayers to claim this credit for property that otherwise would have qualified for the production tax credit. This credit resulted in over $4 billion in revenue losses from fiscal year 2000 through 2013. As shown in figure 26, no revenue loss estimates were reported for this tax credit from fiscal year 2000 through 2005; revenue losses then generally increased from $80 million in fiscal year 2006 to almost $2 billion in fiscal year 2013.

Section 1603 program. Section 1603 of the Recovery Act, as amended, allows taxpayers eligible for the production or investment tax credit to receive a payment from the Treasury in lieu of a tax credit. This Treasury program provided almost $20 billion in outlays from fiscal year 2009 through 2013, as shown in figure 26, of which about $13 billion were related to wind energy projects, and about $4 billion were associated with solar energy projects. This program, which is still available in some cases, applies to projects placed in service during 2009, 2010, or 2011, or afterward if construction began on the property during the specific years and the property is placed in service by a credit termination date (e.g., January 1, 2017 for certain energy property).

In addition to these tax credits, the studies and reports we reviewed indicated that the federal government provided incentives for the production and consumption of wind and solar energy in other important ways, including through the following activities:

Requirements for purchasing electricity. Under EPAct, federal agencies’ consumption of electricity from renewable sources has generally been required— to the extent economically feasible and technologically practicable—to meet or exceed 5 percent of total consumption in fiscal years 2010 through 2012, and 7.5 percent in fiscal year 2013 and thereafter. According to DOE’s most recent data, federal agencies spent about $57 million in electricity purchases from renewable sources in fiscal year 2012.

Loan guarantees. DOE’s Title 17 Innovative Technology Loan Guarantee Program included a temporary program for the rapid deployment of renewable energy projects, among other things. As shown in table 4, DOE guaranteed 23 loans totaling more than $14 billion for wind and solar energy projects. Most of these loans (15 of 23) and most of the amount guaranteed went to projects to produce and sell electricity generated from solar energy. There have been two defaults on guaranteed loans, both for projects involving the manufacture of solar energy equipment. However, most of the long- term total estimated cost to the government is associated with solar generation projects. The authority to enter into loan guarantees under DOE’s temporary program expired on September 30, 2011.

As a result of required federal purchases of electricity from renewable sources, the federal government provided incentives to produce wind and solar energy. In addition, through the loan guarantee program described above, the federal government assumed risks of defaults on loans to firms engaged in developing wind and solar energy projects. These federal actions had the potential to lower the costs for some of these projects. Such lower costs could have led to certain projects being financed that otherwise may not have been developed.

Along with federal activities, the studies and reports we reviewed indicated that technological advances played a role in influencing increases in production and consumption of wind and solar energy. For example, according to DOE’s National Renewable Energy Laboratory (NREL), wind turbine manufacturers increased turbine performance by steadily increasing the turbine height and rotor diameter of their turbines from 2000 through 2010. In addition, the average capacity of wind turbines installed in the United States has more than doubled since 2000—increasing from 0.88 megawatts in 2000 to 1.95 megawatts in 2012, according to NREL. Regarding solar technology, technological innovation—along with improved manufacturing processes and growing markets—resulted in declining costs associated with the manufacture of photovoltaic technologies, according to a 2012 DOE study.

Appendix VI: Federal Tax Expenditures, Outlays, and Loan Guarantees Related to Renewable Energy

Table 5 provides descriptions of the three federal tax expenditures we identified in appendix V as targeting or related to ethanol, wind energy, and solar energy, as well as four additional federal tax expenditures we identified as more broadly targeting or related to renewable energy. The table also provides information from the Department of the Treasury (Treasury) on tax expenditures that will or have expired, in full or in part, due to an expiration of legislative authority or some other expiration under the law as of the fall of 2014, as well as on tax expenditures that currently have no expiration. In addition, the table provides information on revenue loss estimates from Treasury (unless otherwise specified).

Table 6 provides a description of the federal program we identified in appendix V as targeting or related to wind and solar energy, as well as two additional federal programs we identified as more broadly targeting or related to renewable energy. The table also provides information reported by the Office of Management and Budget (OMB) on outlays.

Table 7 provides a description of the federal loan guarantee program we identified in appendix V as targeting or related to wind and solar energy, as well as an additional federal loan guarantee program we identified as more broadly targeting or related to renewable energy. The table also provides information on disbursements and estimated costs reported by OMB and provided by DOE.

Appendix VII: Information on Other Federal Activities Related to Aspects of U.S. Energy Production and Consumption

This appendix provides more detailed information on other federal activities that were not targeted specifically at fossil, nuclear, or renewable energy production and consumption but may have influenced aspects of U.S. energy production and consumption from 2000 through 2013. It also provides information on federal energy-related research and development (R&D).

Federal Activities Not Targeted at a Specific Energy Source

The studies and reports we reviewed indicated that a number of federal activities may have influenced U.S. energy production and consumption from 2000 through 2013 but were not targeted at a specific energy source. These activities included setting standards and requirements for energy efficiency, selling electricity, providing loans and loan guarantees related to energy efficiency, making outlays for energy consumption and energy efficiency, and forgoing revenues through tax expenditures for electricity transmission and energy efficiency, among other things.

Setting Standards and Requirements

The federal government established or strengthened a number of standards and requirements generally related to energy production and consumption from 2000 through 2013. For example, since the 1970s, the federal government has regulated vehicle fuel economy through corporate average fuel economy (CAFE) standards, which originally required manufacturers to meet a single fleetwide standard for all cars and either a single standard or class standards for light trucks. The Energy Independence and Security Act of 2007 (EISA) instituted several changes to CAFE standards in 2007, such as moving from a single fleet standard to an attribute-based standard. In 2009, the U.S. administration announced a new policy to increase vehicle fuel economy by strengthening CAFE standards and aligning them with the first greenhouse gas emissions standards for vehicles, which would be administered by the Environmental Protection Agency (EPA). The Department of Transportation and EPA established a national program for these two sets of standards by issuing coordinated regulations covering vehicle model years 2012 to 2025 in May 2010 and October 2012. Vehicle manufacturers will have to meet more stringent fuel economy standards, which are projected to be equivalent to over 50 miles per gallon by 2025.

In addition, since the 1970s, the federal government has established minimum efficiency standards requiring that certain products, such as residential appliances, commercial equipment, and lighting products, meet specified energy efficiency standards before they can be sold in the United States. The Energy Policy and Conservation Act of 1975 required the Department of Energy (DOE) to set minimum energy-efficiency standards for manufacturers of specified categories of consumer products such as refrigerators, dishwashers, furnaces, and hot water heaters. The statute was later amended (e.g., by the Energy Policy Act of 2005 and EISA) to include additional categories of consumer products. Manufacturers’ compliance with the standards is mandatory. The statute further requires DOE to set and periodically review and revise standards for these product categories to achieve the maximum level of energy efficiency that is technically feasible and economically justified.

The federal standards for vehicle fuel economy and for energy efficiency standards in products provided disincentives for overall energy production and consumption. Specifically, as we concluded in August 2007, the CAFE program reduced oil consumption by cars and light trucks from what it would have otherwise been, and the evidence suggested that increasing CAFE standards would save additional oil in the future. In addition, as we found in March 2013, DOE estimated that, from the inception of the federal minimum efficiency standards program in 1975 through 2005, consumer benefits from these standards amounted to about $64 billion. DOE projected that the standards will save consumers $241 billion by 2030 and $269 billion by 2045.

Directly Providing Goods and Services

The federal government directly provided goods and services generally related to energy production and consumption from 2000 through 2013. For example, the federal government is the largest owner of electricity- generating capacity in the country and owns significant electricity transmission assets. Development of these resources was initially pursued as part of efforts to provide electricity to rural areas, control flooding, and provide irrigation. Five federal utilities—four power marketing administrations and the Tennessee Valley Authority (TVA)— provide electricity and transmission services to customers in their regions. The power marketing administrations sell power produced primarily at federal hydroelectric dams and projects that are owned and operated by the Department of the Interior’s 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 October 2011, we reported on several features of TVA’s operations as a federally owned electric utility that provided incentives for energy production and consumption in its power service area—covering about 80,000 square miles in the southeastern United States, including almost all of Tennessee and parts of Mississippi, Kentucky, Alabama, Georgia, North Carolina, and Virginia, with a population of more than nine million people. In fiscal year 2010, TVA sold more than 173 million megawatt- hours of electricity to customers. To meet this customer demand, TVA generates electricity at 11 coal-fired plants, 11 natural gas-fired plants, 3 nuclear plants, and 29 hydroelectric dams, among other things. Under the TVA Act of 1933, as amended, TVA has not been subject to many of the regulatory oversight requirements that commercial utilities must satisfy. TVA is also exempt from paying federal and state taxes and can borrow funds for investment in its power system at very competitive interest rates as a result of its triple-A credit rating—which, as we have found, is based partly on its status as a federal entity. Additionally, unlike many utilities, TVA charges rates for its electric power that are not subject to review and approval by state public utility commissions. However, in setting TVA’s rates, TVA’s Board must comply with the primary objectives of the TVA Act, including the objective that power shall be sold at rates as low as are feasible.

Assuming Risk

Through loan and loan guarantee programs, the federal government assumed risks generally related to energy production and consumption from 2000 through 2013. Specifically, we identified three federal programs that provided loans and loan guarantees targeting energy efficiency and other activities from fiscal year 2000 through 2013. These programs are described below:

Direct and Guaranteed Electric Loan Program. This U.S.

Department of Agriculture (USDA) program, authorized under the Rural Electrification Act of 1936, provides loans and loan guarantees to establish and improve electric service in rural areas, and to assist electric borrowers in implementing demand side management, energy efficiency and conservation programs, and on-grid and off-grid renewable energy systems. These loans and loan guarantees provide financing under favorable terms to eligible nonprofit utility organizations, such as electric co-ops and public utility districts, as well as to for-profit entities. According to USDA, the program supports approximately 700 electric system borrowers in 46 states. This program disbursed about $45 billion in loans from fiscal year 2000 through 2013 with a total cost of about $0.7 billion. To the extent that some of these loans supported energy efficiency and conservation programs, this program provided a disincentive for energy production and consumption. However, because some loans may have supported renewable energy systems, this program also provided incentives for energy production and consumption.

Advanced Technology Vehicles Manufacturing loan program.

This DOE program, authorized under EISA, provides loans to support development of advanced technology vehicles and associated components in the United States that would increase the fuel economy of U.S. passenger vehicles. EISA authorized DOE to make $25 billion in loans under this program. As we reported in March 2013, DOE has used the program to make five loans worth $8.4 billion. Two of the loans in this program defaulted, and one has been paid back in full. The current estimated cost of the loans is about $0.3 billion. Because these loans supported improvements in the fuel economy of passenger vehicles, this program provided disincentives for energy production and consumption.

Green Retrofit Program for Multifamily Housing. This Department of Housing and Urban Development program, established by the American Recovery and Reinvestment Act of 2009 (Recovery Act), funds energy and green retrofits to selected affordable multifamily properties through grants and loans. Eligible projects include the installation of efficient heating and cooling systems and appliances, and the upgrade of units to reduce water usage, increase indoor air quality, and provide other various environmental benefits. This program disbursed about $83 million in loans from fiscal year 2000 through 2013 with a total cost of about $66 million.

In addition, we identified other federal loan programs generally related to energy production and consumption, but for which we were unable to identify data on the level of federal support. For example, the Farm Security and Rural Investment Act of 2002, as amended, established the Rural Energy for America Program within USDA to provide loan guarantees to agricultural producers and small businesses in rural areas to assist with purchasing and installing energy efficiency improvements and renewable energy systems. Costs associated with loans from this program totaled about $17 million from fiscal year 2000 through 2013; however, USDA did not report costs specifically related to energy efficiency separately from costs related to renewable energy.

Providing Funds

The federal government provided funds generally related to energy production and consumption from 2000 through 2013. Specifically, we identified five federal programs and activities with almost $51 billion in outlays from fiscal year 2000 through 2013. Of these total outlays, about $40 billion were associated with the Department of Health and Human Services’ Low Income Home Energy Assistance Program, which provides funds to low-income households to help cover home heating and cooling costs. As shown in figure 27, outlays associated with this program generally increased from fiscal year 2000 through 2010, then decreased through fiscal year 2013. Specifically, program outlays rose from $1.5 billion in fiscal year 2000 to $4.6 billion in fiscal year 2010 before decreasing to $3.5 billion in fiscal year 2013. Because this program made outlays to low-income households to purchase energy, it provided an incentive for energy production and consumption. However, this spending cannot easily be attributed to specific energy sources or fuel types because funds supporting energy purchases in different regions would encourage consumption of different mixes of these fuels, reflecting regional differences in how energy is produced.

Table 8 provides a description of these five federal programs and activities, as well as providing information reported by the Office of Management and Budget (OMB) and provided by DOE on outlays.

We also identified other outlays that generally related to energy production and consumption, but for which we were unable to identify data on the level of federal support. For example, USDA’s High Energy Cost Grants program, authorized under the Rural Electrification Act of 1936, provides grants for energy generation, transmission, and distribution facilities serving rural communities with annual average home energy costs that exceed 275 percent of the national average. Applicants may receive grants for on-grid and off-grid renewable energy systems, as well as energy conservation and efficiency projects. This program provided $202 million in outlays from fiscal year 2000 through fiscal year 2013; however, USDA did not report on program outlays specifically related to electricity and energy efficiency separately from outlays related to renewable energy. In general, this program provided incentives for energy production and consumption through its support for energy generation and transmission to rural communities, while providing disincentives for energy consumption through energy conservation and efficiency projects.

Forgoing Revenue

The federal government may have influenced general aspects of energy production and consumption from 2000 through 2013 through the tax code. Specifically, we identified 13 tax expenditures that resulted in more than $65 billion in federal revenue losses from fiscal year 2000 through fiscal year 2013. As shown in figure 28, most of these revenue losses ($42 billion or 64 percent) were associated with a tax expenditure excluding employer-paid transportation benefits from taxation, including a number of benefits related to parking, transit passes, and vanpool transportation, among other things. This tax expenditure provided an incentive for the production and consumption of transportation fuels by reducing costs associated with parking. However, it also provided a disincentive for production and consumption of transportation fuels by reducing costs associated with the use of public transportation, which may rely on electricity or other forms of energy.

Table 9 provides descriptions of these 13 federal tax expenditures. It also provides information from the Department of the Treasury (Treasury) on tax expenditures that will or have expired, in full or in part, due to an expiration of legislative authority or some other expiration under the law as of the summer of 2014, as well as on tax expenditures that currently have no expiration. In addition, the table provides information from Treasury on revenue loss estimates (unless otherwise specified).

In addition, we identified other provisions of the tax code that are generally related to energy production and consumption, but for which data on the level of federal support were not readily available. For example, tax-exempt municipal bonds allow publicly-owned utilities to obtain lower interest rates than those available from either private borrowers or the U.S. Treasury. Lower interest rates reduce borrowing costs for such utilities and provide incentives for producing electricity. While tax-exempt municipal bonds are used by energy industries such as electric utilities, the group of eligible borrowers also includes water utilities, telecommunication facilities, waste treatment plants, and other publicly-owned entities. OMB and the Joint Committee on Taxation did not provide estimates of annual revenue losses related to electric utilities for fiscal year 2000 through 2013 for this provision. Consequently, we cannot report the amount of forgone revenue related to this provision.

Federal R&D Related to Specific Energy Sources

We identified four federal programs that made more than $20 billion in outlays for R&D related to fossil, nuclear, and renewable energy from fiscal year 2000 through fiscal year 2013. The vast majority of these outlays were made by three DOE program offices—the Office of Fossil Energy, Office of Nuclear Energy, and Office of Energy Efficiency and Renewable Energy. As shown in figure 29, federal outlays related to R&D for fossil, nuclear, and renewable energy generally increased from fiscal year 2000 to 2013, although some variation occurred. Specifically, federal outlays for R&D related to fossil energy increased from about $412 million in fiscal year 2000 to about $1 billion in fiscal year 2012 and $0.9 billion in 2013. Outlays for R&D related to nuclear energy increased over the time period to almost $1 billion in fiscal year 2009, and then decreased through fiscal year 2013. In addition, outlays for R&D related to renewable energy increased to about $1.3 billion in fiscal year 2012 and just over $1 billion in 2013. According to the Energy Information Administration (EIA), new or expanded programs associated with the Recovery Act had a significant impact on energy-related R&D spending.

Table 10 provides a description of these four federal R&D programs and activities; it also provides information reported by OMB and provided by DOE on outlays.

These outlays provided funding for a variety of energy-specific R&D at federally owned laboratories, as illustrated in the following examples:

Researchers at DOE’s National Energy Technology Laboratory conducted R&D to resolve the environmental, supply, and reliability constraints of producing and using fossil resources. One area of R&D involved combustion science, which provides the basis for a new generation of advanced fossil fuel conversion technologies to meet future demands for efficient, clean, and cost-effective energy production. Combustion science researchers at the laboratory conducted exploratory and applied research in the areas of combustion science technology, and dynamics of engines and other energy conversion devices. This research included modeling, simulation, and laboratory-scale studies of advanced combustion turbines, among other things.

Researchers at DOE’s Idaho National Laboratory conducted R&D on advanced nuclear reactor designs, including the Next Generation Nuclear Power Plant project, which are intended to offer safety and other improvements over the current generation of nuclear power plants. EPAct formally established the Next Generation Nuclear Plant as a DOE project and designated the Idaho National Laboratory as the lead laboratory and construction site for the plant and directs the laboratory to carry out cost-shared R&D, design, and construction activities with industrial partners.

Researchers at DOE’s National Renewable Energy Laboratory (NREL) conducted R&D that led to technological advances for wind and solar energy technologies. For example, laboratory researchers collaborated with wind turbine manufacturers to develop variable- speed turbines to take advantage of lower wind conditions. This innovation allowed a turbine manufacturer to develop and refine its 1.5-megawatt turbines. In addition, laboratory researchers collaborated with solar cell manufacturers to refine their manufacturing techniques before going into full production. This collaboration helped a company to become the world’s largest manufacturer of thin-film solar modules.

Federal R&D Generally Related to Energy Production and Consumption

We identified four DOE programs that provided funding for R&D that were not linked to a specific energy source but related to more general aspects of energy production and consumption. These programs made about $47 billion in outlays from fiscal year 2000 through 2013 for R&D related to basic energy sciences, energy efficiency and energy conservation, and electricity grid reliability, among other things. As shown in figure 30, federal outlays for these programs generally increased from fiscal year 2000 to fiscal year 2013, although some variation occurred. Specifically, federal outlays for R&D related to energy efficiency and conservation increased from about $670 million in fiscal year 2000 to over $6 billion in fiscal year 2011 and declining to about $2.0 billion in fiscal year 2013. Outlays for R&D related to basic energy science—funded by DOE’s Office of Science—increased from more than $700 million in fiscal year 2000 to about $1.5 billion in fiscal year 2013. In addition, outlays for R&D related to other activities, such as electricity delivery and energy reliability, increased from about $10 million in fiscal year 2003 to about $1.6 billion in fiscal years 2011, before declining to about $1.1 billion in fiscal year 2013. As mentioned above, according to EIA, new or expanded programs associated with the Recovery Act had a significant impact on energy-related R&D spending.

Table 11 provides a description of these four federal R&D programs and activities; it also provides information reported by OMB on outlays.

These outlays provided funding for a variety of R&D programs at federally owned laboratories and by nongovernmental entities. For example, researchers at NREL developed a new smart occupancy sensor in 2013 to control lighting and reduce energy costs that could lead to significant energy savings in commercial buildings. In addition, as we found in January 2012, since first receiving an appropriation in the Recovery Act, the Advanced Research Projects Agency-Energy program awarded more than $500 million to universities, public and private companies, and national laboratories to fund 181 projects that attempt to make transformational advances to a variety of energy technologies related to energy efficiency and renewable fuels, among other things.

Appendix VIII: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, Chris Murray (Assistant Director), Quindi Franco, Jason Holliday, and David Messman made key contributions to this report. Also contributing to this report were Nicole Dery, Cindy Gilbert, Carol Henn, Jon Ludwigson, Cynthia Norris, MaryLynn Sergent, Anne Stevens, and Barbara Timmerman.

Related GAO Products

Oil and Gas Transportation: Department of Transportation Is Taking Actions to Address Rail Safety, but Additional Actions Are Needed to Improve Pipeline Safety. GAO-14-667. Washington, D.C.: August 21, 2014.

Petroleum Refining: Industry’s Outlook Depends on Market Changes and Key Environmental Regulations. GAO-14-249. Washington, D.C.: March 14, 2014.

Coal Leasing: BLM Could Enhance Appraisal Process, More Explicitly Consider Coal Exports, and Provide More Public Information. GAO-14-140. Washington, D.C.: December 18, 2013.

Oil and Gas Resources: Actions Needed for Interior to Better Ensure a Fair Return. GAO-14-50. Washington, D.C.: December 6, 2013.

Oil and Gas Development: BLM Needs Better Data to Track Permit Processing Times and Prioritize Inspections. GAO-13-572. Washington, D.C.: August 23, 2013.

Pipeline Permitting: Interstate and Intrastate Natural Gas Permitting Processes Include Multiple Steps, and Time Frames Vary. GAO-13-221. Washington, D.C.: February 15, 2013.

Mineral Resources: Mineral Volume, Value, and Revenue. GAO-13-45R. Washington, D.C.: November 15, 2012.

Electricity: Significant Changes Are Expected in Coal-Fueled Generation, but Coal is Likely to Remain a Key Fuel Source. GAO-13-72. Washington, D.C.: October 29, 2012.

Oil and Gas: Information on Shale Resources, Development, and Environmental and Public Health Risks. GAO-12-732. Washington, D.C.: September 5, 2012.

Oil and Gas Management: Interior’s Reorganization Complete, but Challenges Remain in Implementing New Requirements. GAO-12-423. Washington, D.C.: July 30, 2012.

EPA Regulations and Electricity: Better Monitoring by Agencies Could Strengthen Efforts to Address Potential Challenges. GAO-12-635. Washington, D.C.: July 7, 2012.

Oil and Gas: Interior Has Strengthened Its Oversight of Subsea Well Containment, but Should Improve Its Documentation. GAO-12-244. Washington, D.C.: February 29, 2012.

Energy-Water Nexus: Information on the Quantity, Quality, and Management of Water Produced during Oil and Gas Production. GAO-12-156. Washington, D.C.: January 9, 2012.

Deepwater Horizon Oil Spill: Actions Needed to Reduce Evolving but Uncertain Federal Financial Risks. GAO-12-86. Washington, D.C.: October 24, 2011.

Oil and Gas Bonds: BLM Needs a Comprehensive Strategy to Better Manage Potential Oil and Gas Well Liability. GAO-11-292. Washington, D.C.: February 25, 2011.

Energy-Water Nexus: A Better and Coordinated Understanding of Water Resources Could Help Mitigate the Impacts of Potential Oil Shale Development. GAO-11-35. Washington, D.C.: October 29, 2010.

Federal Oil and Gas Leases: Opportunities Exist to Capture Vented and Flared Natural Gas, Which Would Increase Royalty Payments and Reduce Greenhouse Gases. GAO-11-34. Washington, D.C.: October 29, 2010.

Coal Power Plants: Opportunities Exist for DOE to Provide Better Information on the Maturity of Key Technologies to Reduce Carbon Dioxide Emissions. GAO-10-675. Washington, D.C.: June 16, 2010.

Oil and Gas Management: Interior’s Oil and Gas Production Verification Efforts Do Not Provide Reasonable Assurance of Accurate Measurement of Production Volumes. GAO-10-313. Washington, D.C.: March 15, 2010.

Nuclear Energy

Nuclear Power: Analysis of Regional Differences and Improved Access to Information Could Strengthen NRC Oversight. GAO-13-743. Washington, D.C.: September 27, 2013.

Commercial Spent Nuclear Fuel: Observations on the Key Attributes and Challenges of Storage and Disposal Options. GAO-13-532T. Washington, D.C.: April 11, 2013.

Emergency Preparedness: NRC Needs to Better Understand Likely Public Response to Radiological Incidents at Nuclear Power Plants. GAO-13-243. Washington, D.C.: March 11, 2013.

Spent Nuclear Fuel: Accumulating Quantities at Commercial Reactors Present Storage and Other Challenges. GAO-12-797. Washington, D.C.: August 15, 2012.

Nuclear Regulation: NRC’s Oversight of Nuclear Power Reactors’ Decommissioning Funds Could Be Further Strengthened. GAO-12-258. Washington, D.C.: April 5, 2012.

Nuclear Fuel Cycle Options: DOE Needs to Enhance Planning for Technology Assessment and Collaboration with Industry and Other Countries. GAO-12-70. Washington, D.C.: October 17, 2011.

Commercial Nuclear Waste: Effects of a Termination of the Yucca Mountain Repository Program and Lessons Learned. GAO-11-229. Washington, D.C.: April 8, 2011.

Renewable Energy

Wind Energy: Additional Actions Could Help Ensure Effective Use of Federal Financial Support. GAO-13-136. Washington, D.C.: March 11, 2013.

Renewable Energy: Agencies Have Taken Steps Aimed at Improving the Permitting Process for Development on Federal Lands. GAO-13-189. Washington, D.C.: January 18, 2013.

Solar Energy: Federal Initiatives Overlap but Take Measures to Avoid Duplication. GAO-12-843. Washington, D.C.: August 30, 2012.

Renewable Energy Project Financing: Improved Guidance and Information Sharing Needed for DOD Project-Level Officials. GAO-12-401. Washington, D.C.: April 4, 2012.

Renewable Energy: Federal Agencies Implement Hundreds of Initiatives. GAO-12-260. Washington, D.C.: February 27, 2012.

Biofuels: Challenges to the Transportation, Sale, and Use of Intermediate Ethanol Blends. GAO-11-513. Washington, D.C.: June 3, 2011.

Defense Infrastructure: Department of Defense Renewable Energy Initiatives. GAO-10-681R. Washington, D.C.: April 26, 2010.

Defense Infrastructure: DOD Needs to Take Actions to Address Challenges in Meeting Federal Renewable Energy Goals. GAO-10-104. Washington, D.C.: December 18, 2009.

Other Aspects of Energy Production and Consumption

DOE Loan Programs: DOE Should Fully Develop Its Loan Monitoring Function and Evaluate Its Effectiveness. GAO-14-367. Washington, D.C.: May 1, 2014.

National Laboratories: DOE Needs to Improve Oversight of Work Performed for Non-DOE Entities. GAO-14-78. Washington, D.C.: October 25, 2013.

Energy Efficiency: Better Coordination among Federal Programs Needed to Allocate Testing Resources. GAO-13-135. Washington, D.C.: March 28, 2013.

Department of Energy: Status of Loan Programs. GAO-13-331R. Washington, D.C.: March 15, 2013.

Tax Expenditures: Background and Evaluation Criteria and Questions. GAO-13-167SP. Washington, D.C.: November 29, 2012.

Batteries and Energy Storage: Federal Initiatives Supported Similar Technologies and Goals but Had Key Differences. GAO-12-842. Washington, D.C.: August 30, 2012.

Home Energy Assistance for Low-Income Occupants of Manufactured Homes. GAO-12-848R. Washington, D.C.: August 24, 2012.

Energy Conservation and Climate Change: Factors to Consider in the Design of the Nonbusiness Energy Property Credit. GAO-12-318. Washington, D.C.: April 2, 2012.

DOE Loan Guarantees: Further Actions Are Needed to Improve Tracking and Review of Applications. GAO-12-157. Washington, D.C.: March 12, 2012.

Energy: The Department of Energy’s Office of Science Uses a Multilayered Process for Prioritizing Research. GAO-12-410R. Washington, D.C.: February 24, 2012.

Department of Energy: Advanced Research Projects Agency-Energy Could Benefit from Information on Applicants’ Prior Funding. GAO-12-112. Washington, D.C.: January 13, 2012.

Green Building: Federal Initiatives for the Nonfederal Sector Could Benefit from More Interagency Collaboration. GAO-12-79. Washington, D.C.: November 2, 2011.

Tennessee Valley Authority: Full Consideration of Energy Efficiency and Better Capital Expenditures Planning Are Needed. GAO-12-107. Washington, D.C.: October 31, 2011.

Recovery Act: Energy Efficiency and Conservation Block Grant Recipients Face Challenges Meeting Legislative and Program Goals and Requirements. GAO-11-379. Washington, D.C.: April 7, 2011.

Department of Energy: Advanced Technology Vehicle Loan Program Implementation Is Under Way, but Enhanced Technical Oversight and Performance Measures Are Needed. GAO-11-145. Washington, D.C.: February 28, 2011.

Electricity Grid Modernization: Progress Being Made on Cybersecurity Guidelines, but Key Challenges Remain to be Addressed. GAO-11-117. Washington, D.C.: January 12, 2011.

Department of Energy: Further Actions Are Needed to Improve DOE’s Ability to Evaluate and Implement the Loan Guarantee Program. GAO-10-627. Washington, D.C.: July 12, 2010.

Low-Income Home Energy Assistance Program: Greater Fraud Prevention Controls Are Needed. GAO-10-621. Washington, D.C.: June 18, 2010.

Federal Energy Management: GSA’s Recovery Act Program Is on Track, but Opportunities Exist to Improve Transparency, Performance Criteria, and Risk Management. GAO-10-630. Washington, D.C.: June 16, 2010.

Vehicle Fuel Economy: NHTSA and EPA’s Partnership for Setting Fuel Economy and Greenhouse Gas Emissions Standards Improved Analysis and Should Be Maintained. GAO-10-336. Washington, D.C.: February 25, 2010.