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Thursday, May 26, 2011

Energy and Water Development:FY2011 Appropriations

Carl E. Behrens, Coordinator
Specialist in Energy Policy

The Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers (Corps), the Department of the Interior’s Bureau of Reclamation, the Department of Energy (DOE), and a number of independent agencies.

As with other funding bills, the FY2011 Energy and Water Development bill was not taken to the floor in either the House or the Senate in the 111
th Congress. Funding for its programs was included in a series of continuing resolutions, and at the beginning of the 112th Congress was part of a major debate over overall spending levels. Energy and Water Development programs were included in the Department of Defense and Full-Year Continuing Appropriations Act (P.L. 112- 10) that became law April 15, 2011.

Besides the overall spending debate, a number of issues specific to Energy and Water Development were important during the FY2011 budget cycle: 

  • the distribution of Corps appropriations across the agency’s authorized planning, construction, and maintenance activities (Title I); 
  • support of major ecosystem restoration initiatives, such as Florida Everglades (Title I) and California “Bay-Delta” (CALFED) and San Joaquin River (Title II); 
  • alternatives to the proposed national nuclear waste repository at Yucca Mountain, Nevada, which the Administration has abandoned (Title III: Nuclear Waste Disposal); and 
  • several new initiatives proposed for Energy Efficiency and Renewable Energy (EERE) programs (Title III). 
Funding for FY2010 Energy and Water Development programs was contained in P.L. 111-85, which passed in October 2009. The legislation retained significance during the FY2011 budget process because the continuing resolutions passed by the Congress retained FY2010 funding levels except where specifying new levels for individual programs.

President Obama’s proposed FY2011 budget for Energy and Water Development programs was released in February 2010. On July 15, 2010, the House Appropriations Subcommittee on Energy and Water Development approved a bill to fund these programs, but the full committee did not report out the bill. In the Senate, the Appropriations Committee reported out S. 3635 (S.Rept. 111-228) on July 22. The bill did not reach the floor of either the House or the Senate. On September 30, the Congress passed H.R. 3081 (P.L. 111-242), funding government programs at the FY2010 level through December 3. Several more continuing resolutions extended funding through March 4, 2011. H.J.Res. 44 (P.L. 112-4) extended funding through March 18, 2011, and reduced funding levels for a number of Energy and Water Development programs.

On February 14, 2011, H.R. 1 was introduced, continuing funding through the rest of FY2011 at the FY2010 level, but with many specified exceptions in which funding was reduced. On February 19 the House passed H.R. 1 by a vote of 235-189. In the Senate, S.Amdt. 149 was offered as a substitute for H.R. 1, continuing funding through the rest of FY2011 but with fewer funding reductions. On March 9 the Senate rejected both the House-passed version of H.R. 1 and the S.Amdt. 149. After two more short-term extensions, H.R. 1473 was introduced April 11, passed by the House and Senate April 14, and signed by the President April 15 (P.L. 112-10).

Date of Report: May 11, 2011
Number of Pages: 56
Order Number: R41150
Price: $29.95

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Tuesday, May 24, 2011

Nuclear Energy Policy

Mark Holt
Specialist in Energy Policy

Nuclear energy issues facing Congress include federal incentives for new commercial reactors, power plant safety and regulation, radioactive waste management policy, research and development priorities, nuclear weapons proliferation, and security against terrorist attacks.

Significant incentives for new commercial reactors were included in the Energy Policy Act of 2005 (EPACT05, P.L. 109-58). These include production tax credits, loan guarantees, insurance against regulatory delays, and extension of the Price-Anderson Act nuclear liability system. Together with volatile fossil fuel prices and the possibility of greenhouse gas controls, the federal incentives for nuclear power have helped spur renewed interest by utilities and other potential reactor developers. Plans for as many as 31 reactor license applications have been announced, although only a handful of those projects currently appear to be moving toward construction.

The earthquake and resulting tsunami that severely damaged Japan’s Fukushima Daiichi nuclear power plant on March 11, 2011, raised questions in Congress about the accident’s possible implications for nuclear safety regulation, U.S. nuclear energy expansion, and radioactive waste policy. The tsunami blacked out all electric power at the six-reactor plant, resulting in the overheating of several reactor cores and spent fuel storage pools, major hydrogen explosions, and releases of radioactive material to the environment. Several House and Senate hearings have been held on the accident, and several bills on nuclear safety have been introduced.

In his January 2011 State of the Union Address, President Obama called for nuclear power to be included in a national goal of generating 80% of U.S. electricity “from clean energy sources” by 2035. Financing for new reactors is widely considered to depend on the loan guarantees authorized by EPACT05 Title XVII, administered by the Department of Energy (DOE). The total amount of loan guarantees to be provided to nuclear power projects has been a continuing congressional issue. Nuclear power plants are currently allocated $18.5 billion in loan guarantees, enough for three or four reactors. President Obama’s FY2012 budget request would nearly triple the loan guarantee ceiling for nuclear power plants, to $54.5 billion. However, opponents of nuclear power contend that the Administration’s proposed increases in nuclear loan guarantees would provide an unjustifiable subsidy to a mature industry and shift investment away from environmentally preferable and more cost-effective energy technologies.

DOE’s nuclear energy research and development program includes advanced reactors, fuel cycle technology and facilities, and infrastructure support. The Obama Administration requested $824.1 million in FY2011 and received $732.1 million. The Administration requested $754 million for FY2012.

Disposal of highly radioactive waste has been one of the most controversial aspects of nuclear power. The Nuclear Waste Policy Act of 1982 (P.L. 97-425), as amended in 1987, required DOE to conduct a detailed physical characterization of Yucca Mountain in Nevada as a permanent underground repository for high-level waste. The Obama Administration decided to “terminate the Yucca Mountain program while developing nuclear waste disposal alternatives,” according to the DOE FY2010 budget justification. Alternatives to Yucca Mountain are being evaluated by a “blue ribbon” panel of experts convened by the Administration. No funding was provided for the Yucca Mountain project in FY2011, and DOE filed a motion with NRC to withdraw the Yucca Mountain license application on March 3, 2010. However, the motion to withdraw has prompted substantial opposition, including lawsuits in federal court.

Date of Report: May 10, 2011
Number of Pages: 37
Order Number: RL33558
Price: $29.95

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Wednesday, May 18, 2011

Offshore Oil and Gas Development: Legal Framework

Adam Vann
Legislative Attorney

The development of offshore oil, gas, and other mineral resources in the United States is impacted by a number of interrelated legal regimes, including international, federal, and state laws. International law provides a framework for establishing national ownership or control of offshore areas, and domestic federal law mirrors and supplements these standards.

Governance of offshore minerals and regulation of development activities are bifurcated between state and federal law. Generally, states have primary authority in the three-geographical-mile area extending from their coasts. The federal government and its comprehensive regulatory regime govern those minerals located under federal waters, which extend from the states’ offshore boundaries out to at least 200 nautical miles from the shore. The basis for most federal regulation is the Outer Continental Shelf Lands Act (OCSLA), which provides a system for offshore oil and gas exploration, leasing, and ultimate development. Regulations run the gamut from health, safety, resource conservation, and environmental standards to requirements for production based royalties and, in some cases, royalty relief and other development incentives.

In 2008, both the President and the 110
th Congress removed previously existing moratoria on offshore leasing on many areas of the outer continental shelf. As of the date of this report, Congress has not reinstated the appropriations-based moratoria that were not renewed by the 110th Congress. Other recent legislative and regulatory activity suggests an increased willingness to allow offshore drilling in the U.S. Outer Continental Shelf. In 2006, Congress passed a measure that would allow new offshore drilling in the Gulf of Mexico. Areas of the North Aleutian Basin off the coast of Alaska have also been recently made available for leasing by executive order. The five-year plan for offshore leasing for 2007-2012 adopted by the Minerals Management Service (MMS, now the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE)) in December of 2007 proposed further expansion of offshore leasing. In the 112th Congress, legislation has been introduced that could accelerate the leasing and permitting process for offshore oil and gas exploration and production. H.R. 1229 would create new deadlines for review of certain permits for exploration and production; while H.R. 1230 would require BOEMRE to lease certain offshore areas for oil and natural gas exploration and production on an accelerated timeline.

In addition to these legislative and regulatory efforts, there has also been significant litigation related to offshore oil and gas development. Cases handed down over a number of years have clarified the extent of the Secretary of the Interior’s discretion in deciding how leasing and development are to be conducted.

Date of Report: May 2, 2011
Number of Pages: 25
Order Number: RL33404
Price: $29.95

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Tuesday, May 17, 2011

Energy Tax Policy: Historical Perspectives on and Current Status of Energy Tax Expenditures

Molly F. Sherlock
Analyst in Economics

Since the 1970s, energy tax policy in the United States has attempted to achieve two broad objectives. First, policymakers have sought to reduce oil import dependence and enhance national security through a variety of domestic energy investment and production tax subsidies. Second, environmental concerns have led to subsidization of a variety of renewable and energy efficiency technologies via the tax code. While these two broad goals continue to guide policy, enacted policies that solely focus on achieving only one of the goals are often inconsistent with policies solely designed to achieve the other goal. For example, subsidies to oil and gas producers, while enhancing domestic oil and gas production, encourage an activity with negative environmental consequences.

By providing a longitudinal perspective on energy tax policy and expenditures, this report examines how current revenue losses resulting from energy tax provisions compare to historical losses and provides a foundation for understanding how current energy tax policy evolved. Further, this report compares the relative value of tax incentives given to fossil fuels, renewables, and energy efficiency. Recent legislation has introduced, reintroduced, expanded, and extended a number of energy tax provisions. While a number of the current energy provisions have a long historical standing in the tax code, a wider variety of tax incentives, to promote a range of energy sources, are presently available than have been available in the past.

Examining trends in revenue losses associated with energy tax provisions provides insight into the actual direction of energy tax policy. In inflation-adjusted terms, revenue losses associated with energy tax provisions in the late 1970s and early 1980s are similar to revenue losses in the late 2000s. The composition of these revenue losses, however, has changed significantly. In the late 1970s nearly all revenue losses associated with energy tax provisions were the result of two tax preferences given to the oil and gas industry. In the early 1980s, revenue losses associated with special treatment for the oil and gas industry accounted for more than three quarters of all federal revenue losses associated with energy tax expenditures. Changes in policy, coupled with declining oil prices in the late 1980s, dramatically reduced revenue losses associated with oil and gas tax policy. Throughout the 1990s, the bulk of revenue losses associated with energy tax provisions were attributable to the tax credit for unconventional fuels. In the 2000s, revenue losses associated with renewable energy production incentives began to make up a larger portion of energy tax expenditure revenue losses. Revenue losses associated with tax provisions benefitting fossil fuels also remained important into the 2000s, with a large proportion of revenue losses in the mid-to-late 2000s associated with the unconventional fuel production credit, benefitting synthetic coal producers. In the late 2000s, the majority of revenue losses have been associated with incentives designed to promote alternative fuels and biofuels. By 2010, revenue losses associated with tax incentives for renewables exceeded revenue losses associated with fossil fuels. The Section 1603 grants in lieu of tax credits, made available starting in 2009, have resulted in increased federal financial support for renewables.

The federal government also loses revenue from excise tax credits given to alcohol fuel blenders (specifically, the volumetric ethanol excise tax credit (VEETC)). While excise tax credits are not technically a tax expenditure (technically, tax expenditures are only revenue losses associated with income tax provisions), these excise tax credits have played an important role in shaping energy tax policy and were estimated to result in revenue losses of $5.7 billion in 2010 alone.

Date of Report: May 2, 2011
Number of Pages: 40
Order Number: R41227
Price: $29.95

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Monday, May 16, 2011

The Low Income Home Energy Assistance Program (LIHEAP): Program and Funding

Libby Perl
Specialist in Housing Policy

The Low Income Home Energy Assistance program (LIHEAP), established in 1981 as part of the Omnibus Budget Reconciliation Act (P.L. 97-35), is a block grant program under which the federal government makes annual grants to states, tribes, and territories to operate home energy assistance programs for low-income households. The LIHEAP statute authorizes two types of funds: regular funds (sometimes referred to as formula funds), which are allocated to all states using a statutory formula, and emergency contingency funds, which are allocated to one or more states at the discretion of the Administration in cases of emergency as defined by the LIHEAP statute.

States may use LIHEAP funds to help households pay for heating and cooling costs, for crisis assistance, weatherization assistance, and services (such as counseling) to reduce the need for energy assistance. According to the most recent data available from the Department of Health and Human Services (HHS), in FY2007, 52.8% of funds went to pay for heating assistance, 3.4% was used for cooling aid, 17.9% of funds went to crisis assistance, and 10.1% was used for weatherization. The LIHEAP statute establishes federal eligibility for households with incomes at or below 150% of poverty or 60% of state median income, whichever is higher, although states may set lower limits. However, in both the FY2009 and FY2010 appropriations acts, Congress gave states the authority to raise their LIHEAP eligibility standards to 75% of state median income. In FY2008, the most recent year for which HHS data are available, an estimated 33.5 million households were eligible for LIHEAP under the federal statutory guidelines. According to HHS, 5.4 million households received heating or winter crisis assistance and approximately 600,000 households received cooling assistance that same year.

For FY2011, after being funded under a series of continuing resolutions, Congress appropriated a total of $4.71 billion for LIHEAP regular and emergency contingency funds as part of the Department of Defense and Full-Year Continuing Appropriations Act (P.L. 112-10). Of this amount, $4.51 billion was appropriated for regular funds and $200 million for emergency contingency funds. This compares to a total appropriation of $5.1 billion in FY2010, with the same level of regular funds, but $590 million in emergency contingency funds. The FY2011 appropriation is also subject to an across-the-board rescission of 0.2%, bringing the LIHEAP total to approximately $4.7 billion. As of the date of this report, HHS had not indicated how it would apply the rescission. To date, formula funds for the first three quarters of FY2011 have been released to the states. And on January 24, 2011, HHS announced the distribution of $200 million in emergency contingency funds to all states, tribes, and territories. As a result, no more contingency funds remain for distribution in FY2011.

The President’s proposal for LIHEAP in FY2012 would reduce funding for regular funds to $1.98 billion, the amount that was appropriated for the program in FY2007 and FY2008. The budget proposes to fund emergency contingency funds at the FY2010 level of $590 million. 

This report describes LIHEAP funding, program rules, and eligibility.

Date of Report: May 5, 2011
Number of Pages: 35
Order Number: RL31865
Price: $29.95

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