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Friday, November 15, 2013

Energy and Water Development: FY2014 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), for the Department of the Interior’s Bureau of Reclamation (Reclamation), the Department of Energy (DOE), and several independent agencies.

FY2013 Energy and Water Development appropriations were considered in the context of the Budget Control Act of 2011 (BCA, P.L. 112-25), which established discretionary spending limits for FY2012-FY2021. On March 26, 2013, the President signed H.R. 933, the FY2013 Defense and Military Construction/VA, Full Year Continuing Resolution (P.L. 113-6). The act funds Energy and Water Development accounts at the FY2012 enacted level for the rest of FY2013, with some exceptions. However, under BCA, an automatic spending reduction process, consisting of a combination of sequestration and lower discretionary spending caps, went into effect March 1, 2013. The effect of these reductions on the budgetary resources that will ultimately be available to an agency at the account level remains unclear until further guidance is provided by the Office of Management and Budget as to how these reductions should be applied.

President Obama’s FY2014 budget request for Energy and Water Development was released in April 2013. The request totaled $34.4 billion. On June 26 the House Appropriations Committee reported a bill, H.R. 2609, with a total of $30.4 billion; the bill passed the House, with amendments, on July 10. The Senate Appropriations Committee reported out a bill, S. 1245, on June 27, with a total of $34.4 billion. On October 16, 2013, Congress passed the Continuing Appropriations Act, 2014, H.R. 2775, P.L. 113-46, extending funding for all federal programs, including Energy and Water Development, through January 15, 2014, at the FY2013 post sequestration spending level.

For FY2014, as in previous years, the level of overall spending will be a major issue. On March 21, 2013, the House passed H.Con.Res. 25, setting FY2014 spending at $2.77 trillion. On March 23, the Senate passed S.Con.Res. 8, with a spending level for FY2014 of $2.96 trillion. On June 4 the House Appropriations Committee issued budget allocations for the individual subcommittees (H.Rept. 113-96). The suballocation for Energy and Water Development programs was set at $30.4 billion. On June 20 the Senate Appropriations Committee announced subcommittee allocations for FY2014; the Energy and Water Development suballocation was $34.8 billion.

In addition to funding levels, issues specific to Energy and Water Development programs include

• the distribution of appropriations for Corps (Title I) and Reclamation (Title II) projects that have historically received congressional appropriations above Administration requests;

• alternatives to the proposed national nuclear waste repository at Yucca Mountain, Nevada, which the Administration has abandoned (Title III: Nuclear Waste Disposal);

• proposed FY2014 spending levels for Energy Efficiency and Renewable Energy (EERE) programs (Title III) that are more than 50% higher in the Administration’s request than the amount appropriated for FY2012; and,

• funding for the nuclear weapons program and other defense activities, which make up half of the total Department of Energy budget.


Date of Report: November 1, 2013
Number of Pages: 70
Order Number: R43121
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Oil and Natural Gas Industry Tax Issues in the FY2013 Budget Proposal


Robert Pirog
Specialist in Energy Economics

The Obama Administration, in the FY2014 budget proposal, seeks to eliminate a set of tax expenditures that benefit the oil and natural gas industries. Supporters of these tax provisions see them as comparable to those affecting other industries and supporting the production of domestic oil and natural gas resources. Opponents of the provisions see these tax expenditures as subsidies to a profitable industry the government can ill afford, and impediments to the development of clean energy alternatives.

The FY2014 budget proposal outlines a set of proposals, framed as the termination of tax preferences, that would potentially increase the taxes paid by the oil and natural gas industries, especially those of the independent producers. These proposals include repeal of the enhanced oil recovery and marginal well tax credits, repeal of the current expensing of intangible drilling costs provision, repeal of the deduction for tertiary injectants, repeal of the passive loss exception for working interests in oil and natural gas properties, elimination of the manufacturing tax deduction for oil and natural gas companies, increasing the amortization period for certain exploration expenses, and repeal of the percentage depletion allowance for independent oil and natural gas producers. In addition, a variety of increased inspection fees and other charges that would generate more revenue for the Department of the Interior (DOI) are included in the budget proposal.

The Administration estimates that the tax changes outlined in the budget proposal would provide $24.2 billion in additional revenues over the period FY2014 through FY2018, and $40.7 billion from FY2014 to FY2023. These changes, if enacted by Congress, would reduce the tax advantage of independent oil and natural gas companies over the major oil companies. They would also likely raise the cost of exploration and production, with the possible result of higher consumer prices and more slowly increasing domestic production; however, the measurement of these effects is beyond the scope of this report.

Date of Report: October 30, 2013
Number of Pages: 13
Order Number: R42374
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Thursday, November 14, 2013

Petroleum Coke: Industry and Environmental Issues


Anthony Andrews
Specialist in Energy Policy

Richard K. Lattanzio
Analyst in Environmental Policy

In early 2013, media outlets around Detroit, Michigan began publishing stories about large piles of petroleum coke stored along the Detroit Riverfront. Petroleum coke (petcoke) is a blackcolored solid composed primarily of carbon, and may contain limited amounts of elemental forms of sulfur, metals and non-volatile inorganic compounds. Petcoke is essentially chemically inert. Petcoke exposure is considered to pose few human health or environmental risks, but may present significant nuisance concerns. The material in Detroit was the byproduct of the nearby Marathon Refinery’s processing of heavy crude oils derived, in part, from Canadian oil sands deposits. The situation gained national attention with the publication of an article in the New York Times (“A Black Mound of Canadian Oil Waste Is Rising over Detroit,” New York Times, May 17, 2013). The piles of petcoke sparked local concerns over the potential impacts of the material on human health and the environment, and whether these concerns were adequately addressed by local, state, and federal regulations. As petroleum refining is a nationwide commercial industry, these concerns may arise in other regions.

Petcoke is a co-product of several distillation processes used in refining heavy crude oil. Nearly half of U.S. petroleum refineries (56 or more) use a coking process to convert heavy crude oils into refined petroleum products, and more refineries may follow suit to take advantage of the supply of heavy crude oils from Canada’s oil sands projects. Although it is a refining co-product, petcoke has economic value as both a heating fuel and raw material in manufacturing. In 2012, the U.S. Energy Information Administration reported that U.S. refineries produced in excess of 56 million metric tons of petcoke, of which 80% was exported.

The U.S. Environmental Protection Agency has surveyed the potential human health and environmental impacts of petcoke through its High Production Volume (HPV) Challenge Program and found the material to be highly stable and non-reactive at ambient environmental conditions. Most toxicity analyses of petcoke find it has a low potential to cause adverse effects on aquatic or terrestrial environments as well as a low health hazard potential in humans, with no observed carcinogenic, reproductive, or developmental effects. Cases of repeated-dose and chronic inhalation of fugitive dust (as generated during petcoke handling and storage) in animal studies do appear associated with respiratory inflammation. Emissions from the combustion of petcoke, however, can have impacts on human health and the environment, including the release of common pollutants, hazardous substances, and high levels of the greenhouse gas, carbon dioxide.

While some federal statutes address certain environmental impacts of petcoke’s life-cycle, most regulatory action and oversight has been undertaken at the state and local levels, generally through facility-specific permitting requirements. Federally, petcoke is exempted from classification as either a solid or hazardous waste under the Resource Conservation and Recovery Act (RCRA) and is not considered a hazardous substance under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Petcoke facilities may be regulated under certain provisions of the National Pollutant Discharge Elimination System (NPDES) permit program, as authorized by the Clean Water Act (CWA), if it is determined that runoff from sites where it is stored has the potential to transport the substance to nearby surface waters. The handling of petcoke may also create instances of reduced air quality due to releases of fugitive dust into the atmosphere. Most of the impacts of fugitive dust are localized; and thus, much of the regulatory oversight is implemented at the local and state level. Whether such oversight is providing adequate protection is among the issues that have been raised.

Date of Report: October 29, 2013
Number of Pages: 29
Order Number: R43263
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