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Copyright 1999 Federal News Service, Inc.  
Federal News Service



LENGTH: 4863 words


Thank you, Mr. Chairman, and Members of the Committee, for the opportunity to appear before you today to present the fiscal year 2000 budget request for the Department of Energy. In fiscal year 2000, the Department requests $17.8 billion in investments needed to furnish America with the scientific and technical foundation that will help our nation cross the threshold of the 21st Century.
Before I address the details of this year's budget request, I would like to do two things. First, I would like to briefly outline what a 21st Century Department of Energy will offer to America, and how it will answer to America's challenges. And second, I would like to describe a pair of Departmental actions that I know are of interest to you: our ongoing oil and gas activities, and our decisions on Nevada's Mountain. I will then turn to our budget request for fiscal year 2000 and we can get to your questions.
From my time in Congress, through my term as Ambassador to the United Nations, and into my tenure as Secretary of Energy -- which is now approaching six months -- I have been keenly aware of just what energy means to our country. When I announced our budget request on February 1st, I also noted the Departmental theme that, I believe, addressed the essence of what this agency can provide to our nation: Science, Security and Energy: Powering the 21st Century.
Since its inception, the Department of Energy has performed a central role in stewarding not just America's growing energy demands, but also the world's. And this role has changed to meet the evolving demands of a modem world.
Today, we utilize our technical and scientific knowledge to meet our missions of ensuring the United States' energy security, maintaining the safety and reliability of our nuclear weapons stockpile, safely cleaning up the environment from the legacy of the Cold War, and developing breakthroughs in science and technology.
Much of the substance of our national energy profile is included in our Comprehensive National Energy Strategy. This plan is focused on hitting a number of critical, national goals, including: - Improving the efficiency of our energy system, using energy resources more adeptly to boost overall economic performance while also protecting the environment; - Guarding against energy disruptions, by shielding our economy from supply interruptions; - Promoting energy production and use in ways that respect our health and environmental values; - Growing tomorrow's energy options. With continued progress in science and technology, we can furnish tomorrow's America with a full slate of clean, abundant, and affordable energy sources; and finally by - Joining hands with our global neighbors to illuminate, address, and resolve international energy dilemmas.
One such dilemma has, over the last year, played out on the international stage. As you know, the international oil markets have weathered a stormy year. And even though short-term demand is down, over time, demand will increase substantially. Examining the larger picture, our projections show that the world will likely double its energy use by 2030 and quadruple its use by the end of the 21st century. Oil demand is projected to grow by about two percent annually over the next 20 years.
Our Comprehensive National Energy Strategy was designed to address expanding our energy sources. I have made a very concerted effort in my first six months at the Department - and will continue to do so - to ensure that America has the most diverse, economically-responsible energy portfolio of any nation in the world.
We must also keep in mind that energy production and use are principal contributors to local, regional and global environmental problems. Developing and deploying new, energy efficient technologies represents one of the best ways to address these problems. Energy efficiency makes good economic sense, and it makes good environmental sense. Even those who disagree with the specifics of the Kyoto Protocol do agree on the need to conduct the scientific research necessary to develop and deploy new, energy efficient technologies.
Yucca Mountain Policy Update
In December, the Department completed the Yucca Mountain Viability Assessment. This assessment assembled, for the first time, information about all major elements of the site and proposed repository design. The assessment concluded that there were no disqualifying conditions, and it identified additional research work that needs to be accomplished in order to complete a final recommendation for site approval and for preparation of a license application for submission to the Nuclear Regulatory Commission (NRC). The assessment also included a preliminary baseline design, cost and schedule for completion of the proposed repository. For fiscal year 2000, the Department is requesting $409 million, an increase of $52 million over the current fiscal year to fund the additional cost of these efforts. These funds will support continuation of technical evaluation of the site and refinement of engineering and design for the repository.
Under the current schedule, the Department would also complete the Final Environmental Impact Statement for the repository in the year 2000. If the site is suitable, the formal recommendation of the site to the President would be made in 2001 and submission of the license application to the NRC would occur in 2002.At the time I was confirmed last year, I committed to you to take a look at our nuclear waste policy and to come up and talk to you about issues related to our program at Yucca Mountain. Since I submitted the viability assessment to the President and the Congress in December, I have been examining our nuclear waste policy and consulting with my staff and others in the Administration on whether changes or additions to that policy are appropriate to address the Department's obligation under its contracts to take spent fuel from utilities. As you are aware, the Department is in litigation with a number of utilities related to these contractual issues. I am sensitive to the concerns of the utilities. Many of them have serious concerns regarding the costs and physical limitations of continued storage of spent fuel at their reactors.
I find constructive some of the ideas put forth to date as alternatives to centralized interim storage such as to have the Department take title to spent fuel onsite and assume management responsibility until such time as it can be placed in a permanent repository. I want to continue to examine this idea further and take a serious look at how such a proposal would be structured and paid for without imposing undue burdens on either utility ratepayers or the taxpayers. I also want to analyze further proposals that would ensure that the revenues raised by the nuclear waste fee remain available to complete the job of safe management and disposal of nuclear waste.
Finally, as I continue to evaluate these nuclear waste issues, I am anxious to learn more about the potential for accelerator transmutation of waste. The Department is spending $4 million in fiscal year 1999 to develop a roadmap for continued research and development in this area. This would certainly not replace the need for a repository, but it is intriguing research that may become important sometime in the future.

Let me emphasize that the Administration is not now endorsing any of these proposals, and the Administration continues to oppose interim storage at Yucca Mountain in advance of completion of the scientific and technical work necessary to make a decision on whether it is a suitable site for a repository. I am optimistic, however, that we can make progress on addressing the legitimate concerns of the nuclear utility industry and hope that we can avoid an unnecessary legislative showdown this year. I look forward to working with members of this Committee and others in the Congress in this effort.
Oil and Gas Policy Update
As I mentioned in opening, oil and gas markets have seen some tough times -- and continue to. Therefore, last December, I appointed an internal Oil Emergency Task Force to assess the effects of low oil prices on domestic production. I instructed the Task Force to go out into the Oil Patch to "feel-out" the industry and gauge the perspective of its decision-makers. I asked them to identify which measures were reasonable ... what steps could be taken quickly ... and what were the most effective ways to stop the premature abandonment of oil and gas wells.
The Task Force gave me a list of recommendations designed to: - enhance America's energy security; - preserve our domestic production capacity; - lower the costs of production, and;improve government decision- making.
We have already announced several initiatives in these strategic areas, and will continue to work on others in the days ahead.
To enhance the nation's energy security, we will shortly be putting 28 million barrels of federal royalty oil into the Strategic Petroleum Reserve. In a related move, we are offering un-utilized space in the Reserve for commercial storage, with storage fees to be paid in oil.
No money has been appropriated to fill the Reserve since 1990 -- the last oil that went in was paid for with receipts from a Desert Storm oil sale. Now, for the first time in recent memory, we have mechanisms to re- fill the Reserve during peacetime. These "first-of-a-kind" efforts are designed to make the most of today's low prices. By putting oil in the Reserve today, we will receive a higher rate of return tomorrow -- increased energy security, more strategic assets, and a great buy for the American taxpayer.
The Administration has altered its requirements for federal lease holders to diminish the threat that near-term low prices hold for long-term production. This change would allow stripper well operators to temporarily suspend production, without losing their leases or having to plug their wells.
To help see small operators through tough times, the Administration is also offering various types of federal royalty relief, and is actively considering additional categories of relief. We are working with the Small Business Administration to assist small, independent, domestic oil producers to take advantage of SBA's small business assistance programs. We are signing a Memorandum of Agreement with SBA Administrator Aida Alvarez that will formalize this collaboration.
To help lower the costs of production, we just committed $18 million for a technology-driven, industry cost-shared program to improve oil recovery from endangered domestic reservoirs. We also kicked off a program to assist small independents--those with less than 50 employees which have specific production problems, ranging from reservoir characterization to environmental compliance.
We launched a large-scale pilot program in six states -- California, Texas, Ohio, Utah, Wyoming and Colorado -- to decrease production costs through the use of new, energy efficient technologies and motor replacements. A similar small-scale pilot in Kansas has shown promising results -- lowering the cost of production by 77 cents per barrel. In today's price environment, 77 cents to a marginal producer could mean the difference between oil production and well abandonment.
Just last Friday, we announced another innovative pilot program in Texas that could be the first step towards paperless regulation. This new on-line permitting system could save the industry millions of dollars in administrative costs and countless hours of labor.But as we strive to preserve the industry's viability, we carry with us the responsibility to continue progress in exploration and production. We must continue to move forward to maintain both our energy security and our leadership in technology.
Therefore, the Department of Energy is today releasing a report that documents the remarkable legacy of technology innovation in oil and gas exploration and production, and that highlights the environmental benefits - more efficient recovery of oil and gas, smaller industrial "footprints," cleaner and safer operations - associated with advanced technology.
Finally, we are pushing hard for better dialogue between government decision-makers, and improved coordination with other federal agencies. Energy concerns must be represented at the table when key economic and regulatory decisions are being made.
I am pleased with these initiatives and hope to announce more in the coming days. I will need this Committee's support to continue the Department's efforts to help the oil sector.
The Fiscal Year 2000 Budget Request
The Department of Energy's fiscal year 2000 operating budget represents an increase of 4.1 percent -- or $717 million - over FY1999 levels, when you exclude three one-time adjustments.
With these one-time adjustments, traditional budget accounting would show our budget to be level, at $17.8 billion. Our budget reflects my concerted commitment to do more to help America meet the challenges of the 21st Century.
This is my first full budget request, and it plainly reflects the priorities I have set for the Department of Energy, as does our theme: Science, Security and Energy: Powering the 21st Century.
The Department's Missions
This budget increase will help the Department fulfill its four missions. These are: - Advancing the frontiers of science and technology; - Helping to increase the security, diversity and affordability of America's energy resources through market mechanisms; - Promoting national security, and keeping our nuclear weapons stockpile safe, secure, and reliable; and - Cleaning up the environmental legacy of the Cold War, and establishing a national integrated waste strategy to clean up our sites.
1. Science and Technology
The Department of Energy is, at its heart, a science and technology agency. Science and technology are not merely parts of this Department, they are the foundation on which all the Department's work is based.
The $2.8 billion budget request for fundamental research in fiscal year 2000, an increase of $138 million, further supports our commitment to science.
I'm pleased to announce our $70 million investment as part of the President's Information Technology for the 21st Century initiative. This investment will enable us to develop and deploy new, far faster computers for advanced simulation. We call it the "Scientific Simulation Initiative," or "SSI." These new simulation capabilities will be powerful tools to do things like design a new generation of cars, develop new pharmaceuticals, and also help improve our weather and climate research, reaffirming America's leading role in these fields.
We will continue investing in the Spallation Neutron Source. This state of the art neutron scattering facility will lead to the development of stronger and lighter materials, more efficient motors, and increase our understanding of the structure of matter.

Our increased budget will support a number of scientific user facilities that are new or just coming into operation, including: - the Fermi Lab Main Injector near Chicago; - the B-Factory at the Department's Stanford Linear Accelerator in California; - the Relativistic Heavy Ion Collider at our Brookhaven Lab on Long Island; - the Combustion Research Facility at our Sandia/California Lab; and - the National Spherical Torus Experiment in Princeton, New Jersey.
All of these are part of what President Clinton has called "using science to serve society." Let me give you three more examples: - Boron Neutron Capture Therapy, for experimental cancer treatment; - New research into the therapeutic activity of radiopharmaceuticals; and - The Science Education Initiative, which will bring the Department's extensive resources into our nation's schools, benefitting children from Kindergarten through 12th grade.
2. Energy Resources
In our Energy Resources budget we're requesting $2.3 billion. This is an increase of $213 million over the FY1999 level, and includes a 20 percent increase, or $208 million, to fund energy efficiency and renewable energy programs.
A key priority is the Partnership for a New Generation of Vehicles, to develop an 80 mile-per gallon automobile. One example of PNGV progress was seen this past year, when the Energy Department and private industry shared costs in developing a smarter, smaller, less-expensive electric power system for the "car of the future." Working together, we've already shrunk this system from the size of a large suitcase to smaller than a shoe box. Now, we're working to cut the $10,000 cost to less than $500.And we will continue to pursue our ambitious goals of: - striving to cut energy use in new homes by 50 percent by 2010; - reducing the energy bills of America's more energy intensive industries; and - cutting federal energy use by 30 percent from 1985 levels by 2005.
We will also pursue other initiatives including: - weatherizing nearly 80,000 low-income homes, to save money on utility bills and keep people warm in the winter and cool in the summer; and - our 'EnergySmart Schools' project, which gives schools the information they need to cut energy costs and save money.
And we're working to bring competition to America's electricity industry. Our proposal will save American consumers and businesses $20 billion each year - and let consumers choose renewable energy sources while at the same time promoting the use of renewable energy sources.
The Department of Energy will soon be forwarding an updated version of the Administration's Comprehensive Electricity Competition Plan to Congress. This revised legislation will retain the basic framework of encouraging retail electric competition, and will offer states and unregulated municipal and cooperative utilities the flexibility they need to "opt out" if they find that competition wouldn't benefit their consumers.
We've been looking to fine-tune the legislation the Administration sent to Capitol Hill last year. We're going to: - make the bill more consumer friendly; and - address issues which were not contained in the original proposal (for example, the role of federal utilities in a competitive environment).
To-date, about 20 states have enacted legislation or promoted regulations that either have led or will lead to the implementation of retail competition programs. Almost every other state has the matter under active consideration. But Federal action is necessary. We believe that it is important to act sooner rather than later to complement what is going on at the state level -- and we're ready to work with you to get the job done.
We are increasing - to $25 million - nuclear energy research and development. This investment will help ensure the viability of this energy option and will secure our leadership role in promoting the safe use of nuclear technologies.
We have also proposed over $160 million to operate America's energy security insurance policy - - the Strategic Petroleum Reserve - without selling oil.
We are funding research and development on fossil energy - including technology to boost oil and natural gas production and lower discovery costs. And we will continue to pursue R&D that will help us find and develop new natural gas resources.Because global climate change is a major environmental challenge, we will continue our activities in developing technologies that will reduce greenhouse gas emissions. We are going to continue the dialogue on the Kyoto Protocol to help improve the framework it provides, while undertaking more ambitious tactics to address global warming.
3. National Security,
We are requesting $6.2 billion, an increase of $244 million, for the Department' s national security missions.
$4.5 billion of that will go to our stockpile stewardship program. This effort uses lab experimentation, high speed computer simulation, and decades of Department specialists' expertise to ensure the safety, security, and reliability of America's nuclear deterrent -- without nuclear testing. And stockpile stewardship is working: in December, Secretary of Defense Cohen and I signed the third annual certification to the President that the nation's stockpile is safe, secure, and reliable, and that nuclear testing is not required at this time.
This budget will also support: - construction of Our National Ignition Facility, keeping us on track and on budget; - the Accelerated Strategic Computing Initiative -- which will furnish the world's fastest supercomputers, backed by our experimental facilities, to simulate nuclear detonations; and - work on tritium production.
And should the need arise for a return to nuclear testing of our stockpile, the Department continues to maintain the Nevada Test Site in a state of readiness, performing an active set of science-based stewardship activities, ensuring it remains a vibrant facility.
We will also push for ratification of the Comprehensive Test Ban Treaty this year, to help constrain the development of more advanced nuclear weapons, and limit the spread of nuclear weapons to new states.
One of the nightmares of the post-Cold War world is the possibility that weapons-usable nuclear material from the former-Soviet Union will fall into the hands of terrorists, criminals, or rogue nations. President Clinton has recognized that the possible proliferation of nuclear, biological, and chemical weapons is one of the major threats we face as we enter the next millennium, and that we must confront this threat head-on.
The Energy Department has an important role in the President's Expanded Threat Reduction Initiative, and our budget reflects this priority, with an increase of $100 million over earlier plans. We will continue our work in: - Materials Protection, Control and Accounting; - The Second Line of Defense; - Plutonium Disposition; and - The Nuclear Cities Initiative.We are doing important work on materials protection, control and accounting upgrades in 55 nuclear sites in Russia and the newly independent states, to ensure that weapons-grade nuclear materials are protected from theft. We are also helping to improve working conditions at these sites, by providing winter gear and heaters for guards' use - guards that are critical links in global safety but who are, in some cases, not being paid their salaries.
As many of you know, the proliferation challenge in Russia and the Newly Independent States will not end once all nuclear materials have been secured.

This budget advances our cooperation with Russia in disposing of Russian military plutonium and supports design of the facilities needed to dispose of excess plutonium in the U.S.
Threats to our nation's security -- chemical, biological, nuclear, and cyber terrorism -- have become more technologically advanced.
The Department of Energy has a leading role in creating the tools to defuse these threats. We've boosted our funding in all these areas -- particularly in chemical and biological weapons detection, where we are creating the most effective, hand-held devices that America's law enforcement community has seen, for use in detecting radiation or chemical materials.
Our laboratories - the world's preeminent national defense technology centers -- have long been of great interest to foreign intelligence sources. Therefore, we have created an entirely new office of counterintelligence, doubled its budget, and have already put a number of counterintelligence fixes in place to ensure the security of our labs and our most sensitive information.
4. Environmental Quality / Environmental Management
Our request proposes an increase of $114 million for environmental quality programs, of which nearly $100 million is for our Environmental Management Program, bringing it to $5.7 billion. The Department is taking an aggressive approach to address the immediate and long-term environmental and health risks of the Department's former weapons production complex, and resolve the issues surrounding spent nuclear fuel storage.
The FY 2000 request will enable the Department to address the highest human health, safety, and environmental risks within the Department of Energy complex. It will also enable the Department to continue its real progress toward answering some of the most critical questions in the area of long-term nuclear waste disposal.
For our Environmental Management program we are requesting a total of $5.7 billion. This amount would enable each cleanup site under the aegis of the Department of Energy to meet its safety and legal requirements, support our goals for accelerated cleanup and site closure, and maintain other critical environmental projects and priorities. It is nearly $100 million higher than in FY 1999.In FY 2000, $228 million is requested to continue the Department's Privatization Initiative, begun in FY 1997 in pursuit of alternative financing mechanisms for several of the Department's large scale environmental cleanup design and construction activities. Under the privatization approach, many of the technical and performance risks are shifted to the private contractor, creating greater incentives to complete projects on time and within budget. This contracting approach also will bring private sector efficiencies, and new technology to the Department's cleanup program.
As was mentioned earlier, the Department achieved significant progress this past year in its Civilian Radioactive Waste Management program, completing the Yucca Mountain Viability Assessment. In December, I submitted the viability assessment to President Clinton and the Congress. The assessment recommended further study - and we are proposing the funding required to do exactly that.
For FY 2000, DOE is requesting $409 million ($370.0 million in new budget authority). These funds will support: continued data synthesis and analysis; model validation; and refinement of engineering and designs necessary for major upcoming decision documents: the Final Environmental Impact Statement and Record of Decision in 2000; the Site Recommendation to the President in 2001, should the Suitability Assessment determination prove suitable; and the License Application to the Nuclear Regulatory Commission in 2002.
We need to do more, and this budget reflects our commitment. In the next few months, I plan to meet with the governors of a number of states to discuss their long-term priorities for the cleanup program.
And for programs within the Office of Environment, Safety, and Health, DOE is requesting $163 million, including $13.5 million for its commitment to the Radiation Effects Research Foundation. We also propose $20 million for other Health Studies programs, including epidemiological studies and occupational medicine. From our headquarters to the Department of Energy labs, clean-up sims, and field offices spread across the U.S., we are going to boost safety performance and protect our workers from harm.
Management Changes
Today, the Energy Department is functioning smarter and leaner. Working with Congress, we've reduced our Federal employee workforce by 25 percent in less than four years -- beating our ambitious goal by almost two years. We've also reduced our contractor employment by 29 percent since its peak in 1992. But this streamlining has left gaps in Departmental skill areas.
To resolve this, in December I announced a targeted effort to bring specialized skills into the Department as part of a "Workforce 21" initiative. We are also putting employment initiatives in place to ensure the Department has the essential expertise to carry out its missions in the future. These efforts will bolster the strength of our skills and our comprehensive expertise, Department wide. And we're going to improve diversity, making sure women and minorities are better represented within the Department. I ask for your support in this undertaking, Mr. Chairman.And we are taking a comprehensive look at the structure of the Department, looking for ways to improve efficiency, strengthen management, ensure accountability, and improve reporting requirements. We are seeing results from our Research and Development Council, which has been working to ensure that we fully synchronize and integrate our work across the Department, focus on what our key objective is, and ensure that our laboratories are aligned directly with that work. This "roadmapping" technique helps us guarantee the elimination of duplication in our work - and will help save America money.
And we are looking at the relationship between our field offices and headquarters, to enhance communications and capability.
The Department of Energy's proposed budget for FY 2000 will provide our scientists and engineers with the tools, facilities and talented personnel necessary to help lead this nation into the new millennium. The technological breakthroughs which lie ahead will provide improvements to the quality of life of all Americans. With this Committee's continued support, the Department of Energy will produce the science, security and energy to power this nation in the 21 st Century.

LOAD-DATE: February 27, 1999

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