The Fuse

Key Issues to Follow in This Week’s Energy and Interior Budget Debates

by Matt Piotrowski | June 20, 2017

Congress is holding a string of hearings this week for the FY2018 budget, with key energy issues up for debate. On the agenda will be energy innovation, the proper size of the Strategic Petroleum Reserve (SPR), offshore drilling, and oil production on public lands. At the same time, transportation matters with large energy implications, particularly self-driving cars, are seeing more attention on Capitol Hill and at the Department of Transportation (DOT), and will be gaining more traction in coming months.

On the agenda at budget hearings this week will be energy innovation, the proper size of the Strategic Petroleum Reserve (SPR), offshore drilling, and oil production on public lands.

The Trump administration is proposing sharp spending cuts across the agencies, which will spur contentious debate as the Department of Energy’s Rick Perry and Interior Department’s Ryan Zinke make their cases before Congressional committees.

It’s important to note that presidential budgets represent administration preferences and negotiating positions but do not necessarily become realized in legislation.

At Energy Secretary Rick Perry’s testimony before the House and Senate, the subject of funding for Advanced Research Projects Agency–Energy (ARPA-E) will be a significant agenda item. The administration, which is seeking to cut DOE’s budget by some 5.6 percent, wants to fully eliminate APRA-E by 2019, arguing that the risks the program takes should shift to the private sector. Defenders of ARPA-E, which is tasked with promoting and funding high-risk, high-reward projects, argue that the reason the program exists is to fund projects a portfolio of projects that are too early in their development to attract investment from the private sector—but their transformational nature will significantly improve U.S. competitiveness. ARPA-E, which has enjoyed bipartisan support, has initiated projects to reduce energy consumption in the transportation sector, boost autonomous technology, and improve battery efficiency, all vital factors in cutting oil consumption and imports.

Also up for elimination is the Advanced Technology Vehicles Manufacturing (ATVM) direct loan program, which has assisted the production of 4 million ATVs since its inception, while the Department of Energy’s office of Energy Efficiency and Renewable Energy will see downgrades in their research budgets. Perry will likely also field questions regarding downsizing the SPR, which is the government’s only formal line of defense against a severe oil supply disruption.

It’s essential that any DOI restructuring takes into account the proper oversight needed to keep another large accident from happening.

Meanwhile, in front of the committees in the House and Senate, Zinke will address the administration’s changes at the Department of Interior. A couple of weeks ago, Bloomberg reported that Zinke is considering reorganizing the DOI so that the Bureau of Safety and Environmental Enforcement and the leasing-focused Bureau of Ocean Energy Management would be merged into one agency. After the massive BP oil spill in 2010, the Minerals Management Service was split into two, with one focusing on offshore drilling safety and the other on leasing offshore tracts. Combining the two would, Zinke argues, improve cooperation at DOI and speed up permitting. On the flip side, however, it’s essential that any restructuring takes into account the proper oversight needed to keep another large accident from happening. If one were to occur, offshore drilling would face setbacks, such as the drilling moratorium put into place after the BP oil spill, possibly slowing production growth in U.S. waters. Also on Zinke’s agenda is a review of national monuments designations, which could lead to more drilling on federal lands.

Policymakers are coalescing around language that would set up a federal framework for AVs—in order to avoid a patchwork of state regulations—and provide exemptions to auto companies to allow them more flexibility in testing the new technology.

Transportation Secretary Elaine Chao spoke on Capitol Hill last week on her agency’s budget priorities. Most of the focus was on transportation, but there will be decisions made with energy policy implications at the agency in coming months. The National Highway & Traffic Safety Administration (NHTSA) is putting together the mid-term review for fuel economy standards, but it’s unclear if it has the appropriate resources—both funding and personnel—to finalize its review, which needs to be consistent with EPA and California’s rules to avoid hamstringing the automakers. NHTSA will also release fresh recommendations on self-driving cars in the coming months, according to Chao. The move toward new guidelines from NHTSA comes as both the Senate and the House are moving toward legislation on autonomous vehicles (AVs). Policymakers are coalescing around language that would set up a federal framework for AVs—in order to avoid a patchwork of state regulations—and provide exemptions to auto companies to allow them more flexibility in testing the new technology. Industry is supportive of both proposals, believing they will help bring AVs to the public as quickly as possible, a development that will go a long way in improving efficiency and strengthening U.S. energy security.

 

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