DOE'S FISCAL YEAR 1994 BUDGET WEDNESDAY, APRIL 21, 1993 HOUSE OF REPRESENTATIVES, COMMITTEE ON ENERGY AND COMMERCE, The subcommittee met, pursuant to notice, at 9:19 a.m., in room 2123, Rayburn House Office Building, Hon. Philip R. Sharp (chairman) presiding. Mr. SHARP. The subcommittee will come to order. I am very pleased this morning to welcome Secretary of Energy Hazel O'Leary to our hearing, and although it is her first appearance here as the Secretary, she is a repeat visitor and an old friend to many of us on the subcommittee who had the opportunity_to hear from her in some of her previous incarnations, both at the Department of Energy and in the private sector. Madam Secretary, I would like to say in public what I have said many times in private to many of my colleagues, that I believe, by virtue of your varied experience in Government and in the private sector, and your exposure to a whole range of energy issues facing the Department that you come to this job as the most qualified Secretary of Energy that has ever been appointed to date. The challenges before you we know are immense, but I certainly want to offer my assistance, and that of our subcommittee. We wish you success and, indeed, we have had a habit on this subcommittee of trying to find bipartisan ways to work when we can with the Department. I hope that will continue because we know that policy just zigzags back and forth in this country when we end up taking off in one direction or another without some kind of a bipartisan consultation and work. National energy policy, of course, has been characterized by periods of change followed by periods of consolidation as industry, government, and consumers have adapted to changing events in the world. Last year, of course, we in Congress recognized the need for change by passing the far reaching legislation in the form of the Energy Policy Act, and I am pleased that the Clinton administration has responded to this opportunity by proposing a budget that tailors priorities to the new challenges that we face in the Nation. I now hope that we in Congress can maintain our focus on these priorities as we work to comply with budgetary spending limits. That means, of course, that we must be willing to cutback in other areas. It should be noted that the fiscal year 1994 proposed budget from the Department actually results in a decline of about 3 percent in (1) the activities of the Department when compared with the fiscal year 1993 enacted level. This decline takes place even when one takes into account the new spending proposed in the fiscal year 1993 supplemental. However, within this reduced budget, we certainly can see very dramatic changes in the Department of Energy priorities that do receive support. First, the administration budget reflects a shift in the world from the Cold War to relative peace. It is an extremely notable fact that this proposal marks the first budget ever where proposed funding for environmental cleanup at the DOE defense-related facilities would exceed the proposed amount for defense production. Second, the administration budget signals a commitment to sustainable energy technologies for the future, something many of us strongly support. For the last 12 years, as we know, funding for the major four energy categories, renewables, efficiency, fossil and nuclear has been substantially, in the opinion of many of us, out of balance. According to figures from the Congressional Research Service, renewables and efficiency each receive less than 10 percent of the funding during this period, while fossil fuels received about 25 percent, and nuclear power over 55 percent of the total. The proposed budget for the next year, for fiscal year 1994, begins to address this past imbalance by providing significant increases in support for renewables and efficiency, and many of us applaud that very strongly. In addition, within the funding for fossil fuels, the greater priority is given to natural gas in keeping with President Clinton's express priorities. Finally, the DOE budget shows fiscal restraint. Because the proposed DOE budget is essentially frozen in real terms, increases in funding for priority programs are generally paid for through offsetting reductions in other areas. For example, total defense activities, including environmental cleanup, would be nearly $300 million less than last year. In addition, while support for natural gas would be increased, certain fossil energy programs, such as oil shale and MHD would be phased out. Furthermore, the fill-rate for the Strategic Petroleum Reserve [SPR] would be reduced. I would note that from my point of view this is not a perfect budget. Although I have been a long-time supporter of the SPR, I accept the proposed reduction in appropriations for filling the SPR as a concession to fiscal reality. As many know, we had an intense battle last year to try to find an alternative funding source, as did Senator Johnston in the Senate. In both bodies these were staunchly defeated efforts which many of felt was a big mistake but, nonetheless, we frankly anticipated that no administration in the deficit situation we are in was going to be able to continue high rates of fill that many of us believe is still important. I do hope that the new administration will pursue alternative funding mechanisms for the SPR. I believe we need to recognize that our oil imports are almost certain to increase, that the world's reliance on a few countries in the Middle East is also likely to grow, and that the percentage of imports we obtain from OPEC is not a reliable indicator of our security in a world market. I also support the President's original proposal for ending nuclear programs with no commercial application, and regret to see a partial reversal of this position. But I believe that when the budget is seen as a whole, it brings both balance and responsibility to Federal energy spending. Therefore, I look forward to hearing Secretary O'Leary speak on behalf of this budget today, and look forward to working with the administration in fulfilling its vision of change. With that, I would like to recognize our distinguished Republican colleague, ranking minority member from the State of Florida. Mr. BILIRAKIS. Thank you, Mr. Chairman. I, too, welcome you, Madam Secretary, as we are here to review your Department's budget request. In these tough economic times, and I know it is not necessary really to keep repeating this, it is important that we spend the taxpayer's money wisely. We should closely scrutinize Government spending to make sure that the taxpayers are getting value for their money, and I look forward to hearing the Secretary's testimony on how the Department of Energy is spending that money. I also welcome this opportunity, Madam Secretary, and I know that you are probably expecting this, to express my concern with the administration's proposal to raise new revenues through one of the most regressive forms of tax, an energy tax. Various forms of energy taxes have been studied here in Washington, as you know, for many years. One thing we have discovered each time we have studied an energy tax is that it has an unequal impact. It hurts the poor more than the rich. Even if we expand Earned Income Tax Credits, increased the Low-Income Home Energy Assistance Program, and the Food Stamp Program, as the President has proposed, this tax still will fall disproportionately on lower income Americans. More importantly, it will fall on the working poor who did not receive benefits from these programs. In spite of all these proposed offsets, this will still be, I think, a regressive tax. Moreover, Madam Secretary, if this administration feels strongly that this tax should be imposed, then I am a little curious as to why it seems to be taking great pains to make sure that the ultimate consumer does not see how much of its total energy bill will go to paying this tax. The most natural point to place this tax is on the ultimate consumer. Yet the administration has placed the tax in such various places as the tailgate of a refinery, the citygate for natural gas, and at the point of generation for hydro and nuclear. The primary focus of the administration in developing this course seems to be not to let the ultimate consumers know why their energy bills are going up. Finally, I think we should look at cutting spending before we look at increasing taxes. When the administration first started looking at raising new taxes, the goal was to cut spending $2 for every $1 of revenue collected. Now that we have the budget numbers, it looks like we are actually increasing taxes, and this is our history up here over the years, increasing taxes $2 for every $1 spending cut. So I think this budget hearing is a good opportunity for us to discuss these issues. Madam Secretary, I beg your pardon. I know you are here to talk about the budget, but that, of course, is really all a part of it, and I hope you don't mind our going into these areas, and I do look forward to your remarks on the budget and, of course, I am extremely interested to hear your responses to my questions on the Btu tax. Thank you very much, Mr. Chairman. Mr. SHARP. Thank you, Mr. Bilirakis. The Chair will now recognize the distinguished gentleman from Oklahoma, Mr. Synar. Mr. SYNAR. Thank you, Mr. Chairman. I would, first of all, welcome you, Madam Secretary, and let me commend you for this budget that will reduce the emphasis on nuclear energy at the Department and increase oil and gas energy conservation emphasis. I don't envy you as you try to fix the civilian radioactive waste program, which you and I both know is in serious trouble. I also know you are aware of fixing the Department's internal management as a critical part of your agenda. Even though I share some concerns about your reorganization proposals, I think the fact that you recognize there are serious organizational problems is something that we all want to work with you on. I am very glad that you are here, and very tickled to death, as Phil said, that we finally have somebody at the Department of Energy who knows what to do. So welcome. Secretary O'LEARY. Thank you. Mr. SHARP. Thank you very much. The Chair now recognizes the distinguished gentleman from Idaho, Mr. Crapo. Mr. CRAPO. Thank you, Mr. Chairman, and good morning, Secretary O'Leary. Mr. Chairman, thank you for holding this hearing on the fiscal year 1994 Department of Energy Budget Request. There are many important issues which we will discuss today that are important for me and for my home State of Idaho. I, too, am concerned about the energy tax, but I wanted to talk this morning in my opening comments about a particularly important issue that is focused not only in Idaho, but I think on the future of important issues in terms of nuclear waste reprocessing. It has been mentioned already here today that there is a significant need to address concerns and some positive elements of this budget about nuclear waste cleanup, and I am particularly concerned with one aspect of the current budget proposal because of the impact it has on the amount and direction of nuclear research in the United States. The budget virtually eliminates nuclear research which will provide energy security for the future, and has the potential to reduce the nuclear waste problem. I am speaking of the Department's intended elimination of funding for the Integral Fast Reactor, which is a part of the Advanced Nuclear Reactor Program. The IFR Program is central to the Department of Energy's Advanced Reactor Development Program. This new technology is revolutionary and its benefits are numerous. It maintains strong support from the National Academy of Sciences, which has identified the IFR as the Nation's most promising long-term reactor option, and recommend that it be given the highest priority. The IFR is much safer than current reactor designs. Prototype tests simulating Three Mile Island and Chernobyl type accidents were resolved by immediate and harmless shut down. The IFR technology is designed to recycle and burn its own radioactive byproducts. This provides exciting potential for solving the long-term high-level nuclear spent fuel disposal problems. Furthermore, the IFR fuel cycle doesn't produce a pure plutonium byproduct. This provides a strong deterrent against nuclear proliferation. The IFR is environmentally clean, and allows the United States to take advantage of a large energy supply capability. With this technology, our ability to use nuclear energy will be measured in centuries rather than decades, as it is now with current technology. American utilities and foreign utilities are also very supportive of this technology. It would be a mistake for the United States to withdraw its investment in this key element of our nuclear future, or our energy future. Continued research and development of the IFR is critical to that end. I urge the committee and the Appropriation Committee to support full funding of the appropriation needed for the IFR research. Full funding for this program is critical to our environmental future, our energy security future, and to maintain our lead in advanced nuclear research, and I hope you will support this request. Thank you, Mr. Chairman. Mr. SHARP. Thank you very much, Mr. Crapo. The Chair now recognizes the distinguished gentleman from the State of Washington, Mr. Kreidler. Mr. KREIDLER. Thank you, Mr. Chairman. I would like to thank you for holding this hearing, and giving us an opportunity to comment on the Department of Energy's Request Budget, and also to thank the Secretary for coming here to brief the committee on this topic. The Department of Energy's Budget reflects the new administration's priorities-a change of priorities in which I generally agree. I support the President's request for resources for Energy conservation and development of environmentally friendly energy sources. In addition, I am encouraged by the request for increased funding for cleanups at DOE nuclear sites around the country. As you know, one of the sites most in need of cleanup is in my State; specifically the Hanford Reservation in Washington State. I was pleased to see the priority given for reducing the risk of accidental releases at Hanford, and I hope the Department will focus on both reducing this risk and facilitating overall cleanup efforts at this site. Although I generally support the budget request, I must express some concerns about the energy related aspects of the President's Btu tax. I understand, Secretary O'Leary, that your Department was not primarily responsible for drafting this tax proposal, however, I would assume that you were involved in the negotiations. I am asking for your response to questions I will forward to you regarding the methodology that was involved in determining the |