Energy and Water Funding Bill Analysis – Fiscal Year 2019

analysisEnergy and Water Funding Bill Analysis – Fiscal Year 2019A detailed analysis of the final Energy and Water conference bill alongside the earlier House and Senate versions

This summer, House and the Senate appropriators negotiated to reconcile their two different versions of the Energy and Water Appropriations bill for fiscal year (FY) 2019. Both chambers originally passed their separate measures in June as part of a three-bill appropriations package, or “minibus.” A final version of the minibus, or conference bill, was passed by the House and Senate in late September and became law (P.L. 115-244). Trying to compare the Senate and House bills, the President’s Budget Request (PBR), and funding levels in previous years against what was finally enacted is tricky business, but here are a few things that stood out to us:

Topline Spending Numbers – a Flood of Funding

  • Overall, the House and Senate Minibuses allocated the same amount – $147 billion. Within that, the House version spent $1 billion more on the Energy & Water section of the Minibus – $44.8 billion vs. $43.9 billion – while the Senate put $1 billion more toward Legislative Branch appropriations, the second part of the package. Both bills agreed to fund the third part of the Minibus providing for Military Construction and the VA at $98 billion.
  • FINAL BILL: $44.7 billion for Energy & Water, $4.8 billion for Legislative Branch, $98 billion for Military Construction, the VA, and the Overseas Contingency Operations Account
  • The topline spending level for FY19 Energy & Water appropriations is historically high, reflecting huge increases in spending caps for FY18 and FY19 Congress enacted in the Bipartisan Budget Act of 2018 (BBA).
  • Funding levels in the House and Senate Energy & Water bills were 19 percent and 11 percent more than what each chamber suggested just last year, before the BBA was passed. The final FY19 Energy & Water appropriation is 16 percent more than the amount enacted for FY17 – the last fiscal year before the BBA set topline spending.

Energy & Water Appropriations – Breakdown
$, millions

FY16 Enacted FY17 Enacted FY18 Enacted FY19 Request House Bill Senate Bill Conference Bill

NNSA

12,527 12,938 14,669 15,091 15,313 14,780 15,229

Energy Programs

11,027 11,284 12,918 8,513 13,422 13,326 13,472

Environmental and Other Defense Activities

6,066 6,752 6,828 6,514 6,660 6,828 6,884

USACE

5,989 6,038 6,827 4,785 7,278 6,914 6,999

Bureau of Reclamation

1,275 1,317 1,480 1,057 1,555 1,568 1,565

Independent Agencies and Other

440 121 496 382 524 456 511

Total Bill

37,323 38,450 43,219 36,340 44,751 43,872 44,660

Nuclear Energy

  • While the Senate bill kept funding for the Department of Energy’s (DOE’s) Office of Nuclear Energy flat from last year at $1.21 billion, the House provided an additional $140 million. A large part of the increase, $100 million, was devoted to reinvigorating an old pipe dream – small modular reactors (SMRs). The “mini-nukes” are typically designed to generate 300 MWe or less, a fraction of the electricity produced by traditional nuclear reactors (around 1,000 MWe). The idea is that by manufacturing and transporting more of the small reactors’ parts pre-made, and using passive safety features, SMRs can take advantage of economies of scale to provide cheaper power. Unfortunately, no one has been able to make that dream a reality, despite significant taxpayer funding.
  • We were glad to see DOE’s SMR Licensing Technology Program end last year, only to see the President’s FY19 budget request propose $54 million for SMR research and development (R&D) under the Reactor Concepts RD&D program. The request was a reversal from DOE’s decision to eliminate a separate line item for SMR R&D in its FY15 budget. The House was quite willing to go along, and put almost double what DOE requested toward the “new” program in their FY19 Energy & Water bill. The Senate bill did not mention SMRs specifically, but did add $65 million to the Reactor Concepts pot from the program’s FY18 enacted level.
  • The final bill increases the budget for DOE’s Office of Nuclear Energy from last year’s funding level of $1.21 billion to $1.33 billion, providing an additional $120 million for the office. Much to our disappointment, as part of the increased funding, the bill provides $100 million for “Advanced Small Modular Reactor Research.”

MOX – mixed messages on Mixed Oxide

  • In the FY18 Omnibus passed in March, Congress seemed to acknowledge it might finally be time to shutter construction of the Mixed Oxide Fuel Fabrication Facility (MOX project) in South Carolina. See our earlier post for some background. A provision in the Energy & Water section of the Omnibus mirrored the FY18 National Defense Authorization Act (NDAA) in allowing the Secretary of Energy to move away from the MOX project after certifying certain plans for disposing of weapons-grade plutonium through another route.
  • Secretary Perry made the necessary certification on May 10, and the project seemed to be on its last legs. At the beginning of June, a U.S. District Court Judge issued a preliminary injunction preventing the shutdown of the MOX project on the grounds that DOE hadn’t conducted sufficient environmental studies. In early October, a federal appeals court lifted the injunction, allowing DOE to move ahead with any closeout activities.
  • The House version of the FY19 Energy & Water bill provided $335 million for MOX construction but included the same language from the FY18 Omnibus allowing the Secretary of Energy to ditch the project. For the second year in a row, the Senate bill only provided funding for closeout activities at MOX. In contrast, the Senate passed its version of the FY19 NDAA which not only omitted the language allowing DOE to shut down MOX, but also included a provision specifically prohibiting such a move (see Sec. 3118).
  • The final version of the FY19 funding bill allows for DOE to pursue other means of disposing of weapons grade-plutonium at Secretary Perry’s discretion. The E&W bill defers to language in the final version of the NDAA passed in August (Sec. 3119), which allows the secretary to request a waiver from Congress to halt construction of the project. This is good news, and we hope that the secretary will pursue a fiscally responsible alternative means of plutonium disposal. The bill provides $220,000, which can be used for shutdown activities at the MOX site, if the DOE moves in that direction.
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Fossil Energy

  • Both the House and Senate bills continued the trend of increasing appropriations for DOE’s Fossil Energy R&D program, which is mainly devoted to advancing carbon capture and sequestration (CCS) technology. The Senate suggested $463 million for CCS-specific work, while the House provided $508 million, $61 million more than what was enacted in FY18 – $446 million.
  • On top of that, the House devoted another $25 million to a solicitation for two large-scale CCS pilot projects, a line item that first appeared in the FY17 Omnibus at the same time $240 million was being clawed back from…unsuccessful CCS demonstration projects. In fact, DOE has wasted hundreds of millions of dollars through the Clean Coal Power Initiative in support of CCS projects that end up failing. Unfortunately for taxpayers, it’s not clear Congress is giving any more forethought to splurging on CCS projects than last time. DOE didn’t request any additional funding for CCS projects after it asked for $50 million in FY17, yet it got $35 million more in the FY18 Omnibus. For FY19, the House proposed an additional $25 million. Giving federal agencies more money without any real plan is likely to lead to more waste.
  • The Senate bill did not provide further funding for the demonstration projects, but its’ accompanying report did include some interesting language in support of CCS R&D:

The Committee believes the potential for carbon dioxide utilization technologies to become economically viable has improved in recent years, and these technologies should continue to receive attention from the Office of Fossil Energy.

 The report didn’t mention that any improvement to CCS’ prospects is due, in part, to the billions of dollars in subsidies Congress provided to CCS projects through the 45Q tax credit expansion in February. Specifically, the provision tacked onto the tax extenders package more than tripled the credit for ‘Utilization’ of captured CO2 from $10 to $35 per metric ton. In effect, the Senate bill was using subsidies for CCS to justify further subsidizing CCS.

  • Of note, the House bill also pushed back against the proposal in the President’s FY19 Budget Request to defund R&D for solid oxide fuel cells. Not only did the bill restore $30 million for the program, like it received in both FY17 and FY18, but through an amendment offered by Rep. Elizabeth Esty (D-CT) on the House floor, it provided an additional $20 million, for a total of $50 million.
  • The final E&W bill conference bill provides $486 million for Carbon Capture and Storage activities within DOE’s Office of Fossil Energy. A fairly even compromise between the $463 million suggested by the Senate and the $508 million suggested by the House in their versions of the E&W bill. For taxpayers, this means another half billion dollars in treasury funds that will be spent on a program with an extensive history of poor results, on top of the lost tax revenues from the 45Q tax credit. The finalized bill also incorporates the House provision allowing for $25 million to be spent on soliciting two large scale CCS pilot projects.

Energy Efficiency and Renewable Energy, and Energy Reliability

  • In both bills, funding for DOE’s Energy Efficiency and Renewable Energy (EERE) program was consistent with recent trends – the House cut funding compared to the prior year’s enacted level ($2.3 billion), while the Senate provided a small increase. Nonetheless, the House amount, $2.1 billion, represented a much less severe cut than last year when the chamber followed the direction of the President’s Budget Request in slashing EERE’s budget. The budget stayed the course this year, requesting just $700 million, or 30 percent of FY18 funding, while the House proposed triple that amount.
  • The two bills diverge on how to fund DOE’s office of “Electricity Delivery and Energy Reliability.” In its first budget request (for FY18), the administration proposed renaming some of the office’s program areas – for example, from “Smart Grid Research and Development” to “Resilient Distribution Systems.” After Congress agreed in the FY18 omnibus, the administration suggested a broader reorganization this year, cleaving the office into two program areas: “Cybersecurity, Energy Security, and Emergency Response,” and “Electricity Delivery.” The President’s Budget Request also cut the programs’ combined funding by more than a third. Neither chamber does exactly what the President’s Budget Request proposed.

 The House bill agrees with the reorganization but proposed increasing the budget by $75 million over the FY18 amount to $323 million. The Senate changed the name of the DOE office, but didn’t split it in two, and kept funding relatively flat.

  • The final bill funds EERE at $2.38 billion, a number higher than the funding levels found in both the House and Senate versions of the bill. The final funding level represents an almost $60 million increase spending compared with the FY18 Omnibus and a nearly $1.7 billion increase when compared to the President’s FY19 Budget Request. The bill follows the President’s Budget Request in splitting the Electricity Delivery and Energy Reliability office. The conference bill provided $120 million for Cybersecurity, Energy Security, and Emergency Response and $156 million for Electricity Delivery.

Science

  • The House and Senate bills funded DOE’s Office of Science at roughly the same level, around $6.6 billion, an increase of roughly $350 million over the FY18 enacted level.
  • The final version of the E&W bill provides $6.59 billion for DOE’s Office of Science, a small decrease when compared with the House and Senate versions of the bill, but a $325 million plus up from FY18 enacted levels. ARPA-E received $366 million in funding, that’s an additional $12 million when compared to FY18 funding and a $366 million increase over the President’s Budget Request (which included $0 for ARPA-E).
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