How Biden’s budget would change the energy sector

Source: By Heather Richards, Miranda Willson, Carlos Anchondo, Christian Vasquez, Kristi E. Swartz, E&E News • Posted: Tuesday, March 29, 2022

Pumpjack, DOE Seal, Wind Turbine

President Biden’s fiscal 2023 budget plan yesterday would increase funding for energy programs in multiple federal agencies. Joe Raedle/Getty Images (pumpjack); Francis CHung/E&E News (DOE seal); Sean Gallup/Getty Images (turbine)

The White House released a budget proposal yesterday for fiscal 2023 that would deploy billions of dollars toward carrying out President Biden’s climate and clean energy priorities at the Department of Energy and related agencies.

While a final budget will be refashioned and bartered by lawmakers on Capitol Hill, the blueprint underscores how Biden officials like Interior Secretary Deb Haaland and Energy Secretary Jennifer Granholm are trying to shift agency muscle toward administration priorities like grid modernization, renewables, energy security, research into new technologies, cleanup programs and growing the capacity for clean energy on public lands.

“After a year of unprecedented economic growth that resulted in over $500 billion in deficit reduction, the President’s Budget reflects his commitment to protecting our national security, cleaning up legacy pollution from historic nuclear activities, and transitioning the U.S. to clean energy,” Granholm said in a statement.

She said: “As we facilitate the transition to clean energy, the investments reflected in this latest budget will cut costs for Americans and secure our energy independence on our path towards a net-zero future.”

The president’s $5.8 trillion proposal would spend $3.3 billion on clean energy growth alone, including $90 million for a grid deployment office to modernize the nation’s electrical grid and $502 million to weatherize and retrofit low-income homes, the White House said yesterday.

“My budget lowers family energy costs with tax credits to help people make their homes more efficient, research and development to broaden the reach of solar and build a clean energy future,” Biden told reporters yesterday.

Other bundles of federal dollars would go toward boosting offshore wind energy projects and directing funding toward thwarting Russian cyberthreats.

But the spending proposal would also maintain the status quo in many areas, such as keeping oil and natural gas flowing on public lands.

Lesley Jantarasami, managing director of the energy project at the Bipartisan Policy Center, said the budget reveals the ideal funding direction for agencies to carry out Biden’s agenda, from climate resiliency to climate research.

The proposal touches on all the hallmarks that Biden made clear via executive actions and legislation like the “Build Back Better Act,” a spending approach that fell apart over partisan lines last year, and the Bipartisan Infrastructure Law, she said.

Josh Bowman, managing director for government affairs at the Natural Resources Defense Council, characterized the Biden budget as a “call for assertive action on climate now,” applauding its attention toward expanding renewables to help shift reliance away from fossil fuels and economic justice for front-line communities.

The budget’s clean energy focus didn’t please Biden’s critics, however, including the conventional energy sector, where groups slammed the proposal for proposing to cut tax breaks on drilling costs and for marginal wells that are widely used by the oil and gas industry.

“The energy tax increases proposed by Pres Biden would disincentivize additional production, decrease supply, & subsequently increase energy costs for families at a time of historic inflation & record-high gasoline prices,” said Anne Bradbury, CEO of the American Exploration & Production Council, on Twitter yesterday.

Taken together with the infrastructure bill passed by Congress last year, the proposal released yesterday would compound the dollar amount going to programs on the White House’s radar. But without the kind of funding laid out in the proposal, some of the programs built up in the infrastructure package would wane, ultimately undermining the White House’s priorities, some experts noted.

“We do worry about the fiscal cliff coming when the infrastructure funding runs on in four years’ time,” said David Hart, director of the Center for Clean Energy Innovation at the Information Technology and Innovation Foundation, in an email. “We’d like to see appropriations ramp up to carry the momentum forward.” Hart said overall the proposal “tells us that the administration maintains its strong commitment to investing in clean energy innovation.”

Here’s how the $5.8 trillion plan would affect spending on energy issues at key federal agencies, from solar panel manufacturing to offshore wind farms.

Renewables, public lands, oil

When it comes to energy on public lands, the president’s budget proposal reflects the status quo for oil and gas, but with reforms on the horizon and large bursts of funding for growing the renewable sector.

Interior’s sprawling $17.5 billion budget — a leap from the $14.1 billion Congress just appropriated for the agency in an omnibus funding package — would direct $254 million toward renewable energy on public lands, including $50 million toward the Bureau of Land Management’s renewable energy program.

It would increase funding for the Bureau of Ocean Energy Management’s renewables office to help support its goal to approve 16 offshore wind farms by the end of Biden’s first term, while adding staff to that agency. Plus, it would expand the renewable office at the Bureau of Safety and Environmental Enforcement’s with a $7.7 million earmark.

“These resources, coupled with the historic Bipartisan Infrastructure Law, will help the Department make critical investments in climate resiliency while creating good-paying union jobs in the clean energy economy,” Haaland said in a statement.

The Interior subagencies, however, would also continue to uphold robust oil and gas programs on public lands under the White House’s proposed budget, albeit with reforms in the works, underscoring its commitment to continue managing the vast mineral resources held by the U.S. government.

The budget proposal would expend $478 .9 million for oil and gas programs across BLM, BOEM and BSEE. Those agencies oversee leasing and permitting of oil and gas wells, as well as safety and environmental enforcement in the federal oil patch, which could see an uptick.

Traditional energy funding at the Bureau of Ocean Energy Management, for example, supports tasks that include writing the offshore oil and gas leasing plan, according to Interior’s budget explainer. The current plan sunsets this summer and the oil and gas industry has become increasingly agitated by the administration’s slow walk on offshore leasing.

But, Interior also noted that its funds to conventional energy programs would support continued reform efforts focused on climate accountability and fiscal responsibility, including a push to reassess the financial assurances oil companies must lay down before drilling on federal lands and offshore.

“Effectively combating and mitigating climate change for the long term depends on moving our Nation away from its heavy reliance on fossil fuels,” the Interior budget states.

The administration’s proposal would also affect the oil and gas industry at other agencies, including by increasing oversight of pipelines at the Pipeline and Hazardous Materials Safety Administration.

It requested $339 million for PHMSA, on top of $200 million provided in the infrastructure package for the agency, according to an agency spokesperson. That would be an increase of approximately 10 percent for the agency that oversees safety for pipelines, liquefied natural gas export terminals and underground gas storage, according to the agency.

The agency wants to use the money to hire more safety inspectors, collect safety data on rural pipelines and reduce methane emissions, according to agency budget documents.

The proposal would include hiring an additional 29 inspection, enforcement and safety staff and eight more regulatory staffers. The agency wants six more staff to deal with what department documents call “difficult pipeline facility issues related to climate change mitigation.”

It also proposes spending on retention programs to recruit and retain pipeline inspection engineers. Agency leaders say engineers are difficult to retain because of high salaries in the private sector.

Cyber

In the face of increasing cyberthreats, from U.S.-Russia tensions to criminal ransomware gangs, Biden’s $10.9 billion proposal is an increase in spending to protect information held by civilian agencies across the federal government.

“The budget funds a strategic shift in the defense of Federal infrastructure and service delivery, better positioning agencies to guard against sophisticated adversaries,” said the administration in one budget document.

While federal cybersecurity spending saw an increase, certain agencies like the Cybersecurity and Infrastructure Security Agency (CISA) would see a small funding decrease. Biden’s proposal would fund CISA at $2.5 billion, a slight decrease from $2.6 billion passed in the fiscal 2022 spending package.

Around half of CISA’s budget proposal would be focused on protecting federal civilian networks and partnering with state and local governments to increase their digital defenses, according to DHS’s budget justification document. In addition, $175.2 million would be aimed at helping CISA secure critical infrastructure through risk management and collaboration with private companies.

The FBI would see $52 million more for cybersecurity to hire additional field agents and strengthen intelligence gathering.

The Department of Energy’s cyber office also saw a slight increase. The Office of Cybersecurity, Energy Security and Emergency Response would see $202 million. Most of that is allocated to securing the grid against physical and cyber threats.

The State Department would also send $682 million in funds to Ukraine aimed at countering “Russian malign influence and [to] meet emerging needs related to security, energy, cybersecurity.” The money would also help counter disinformation efforts.

Department of Energy

Charged with deploying several clean energy initiatives established through the infrastructure bill, the Energy Department would receive a $3.3 billion bump in funding under the proposed fiscal 2023 budget to $48.2 billion.

The budget would allocate $4 billion to the department’s Office of Energy Efficiency & Renewable Energy, a significant jump from the $3.2 billion Congress provided in fiscal 2022 (Greenwire, March 28). It would also create a new Grid Deployment Office to help build out a carbon-free power system, as well as a new initiative focused on boosting domestic manufacturing of solar panels.

Designed to spur the development of new and updated high-voltage transmission lines, the Grid Deployment Office would receive $90 million under the budget proposal.

With an intended focus on helping to revitalize energy-producing communities, DOE’s Office of Fossil Energy and Carbon Management (FECM) would get $893 million — up $68 million compared to fiscal 2022 enacted numbers. Of the $893 million, the carbon dioxide removal program is slated to receive $65 million.

“For carbon removal, we’re thrilled to see the larger changes that this administration is making to build climate into the work that FECM does and to expand funding for carbon removal specifically,” said Erin Burns, executive director at climate-focused Carbon180, in an email.

“Though this request is in line with the authorization from the Energy Act of 2020, we think there’s room to increase funding for carbon removal,” Burns continued.

The budget proposal comes on the heels of a decision by the Department of Commerce to initiate an investigation into potential new tariffs on solar imports, which some clean energy advocates say could devastate the solar industry. To help spur manufacturing of solar panels in the U.S., the White House budget proposes allocating $200 million to a new Solar Manufacturing Accelerator that it says could reduce the use of imported products tied to unfair or abusive labor practices. 

Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, called the effort “helpful” for the solar industry but lamented the Commerce decision to take up the petition.

“We are fully committed to advancing American manufacturing, but we cannot weaken the industry to the extent this circumvention case will and hope that annual appropriations will do an adequate job of maintaining the deployment goals our country needs to hit critical climate targets,” she said in a statement.

Meanwhile, the Advanced Research Projects Agency-Energy (ARPA-E), which supports emerging energy technologies, would receive $700 million under the request, an increase of $250 million from the previous fiscal year. The funding boost for the division, which did not receive money through the infrastructure bill, could help accelerate clean energy innovation, said Hart of ITIF.

A proposal floated in 2020 to create a new Advanced Research Projects Agency focused on climate was not included in the budget (Greenwire, March 28). However, DOE said that ARPA-E was “expanding its scope” to support initiatives that will accelerate a transition to net-zero greenhouse gas emissions by 2050 and help the U.S. adapt to the effects of climate change.

“My impression is that DOE does have a broad scope, and probably ARPA-E could do what was envisioned for [the climate office],” Hart said.

Hands off the TVA

Whereas previous presidents have proposed selling the Tennessee Valley Authority, a federally owned electric utility in the South, and all or some of DOE’s power marketing administrations, Biden has left those federal authorities untouched.

The DOE power administrations sell power from federally owned power plants, including hydroelectric dams operated by the Army Corps of Engineers. Electricity is sold to public power entities, including municipal utilities and electric cooperatives, DOE’s national labs and military bases.

The Bonneville Power Administration operates in the Pacific Northwest, the Southeastern Power Administration is in 11 Southeastern states, the Southwestern Power Administration covers parts of the Midwest and South, and the Western Area Power Administration includes 15 central and Western states.

For the federal power market administrations, the president’s budget would continue to allocate money for annual expenses, buying electricity that is needed to produce and deliver power, and to pay for what’s known as “wheeling” charges — fees associated with transmitting electricity from one system to another via transmission lines.

The budget plan also leaves TVA intact.

“The public power model is being recognized for the value and strength it brings to the Tennessee Valley both in Congress and in the Administration,” said TVA spokesperson Jim Hopson.

The question of whether to sell TVA came to a head during the Obama administration, when the federal agency was bumping up toward its $30 billion debt cap. A long-term financial plan, including rigorous cost cutting has taken TVA’s debt to $20.5 billion at the beginning of fiscal 2022.

TVA does not receive appropriations from Congress. It finances its operations by selling electricity to public power entities across seven states in the Southeast.

The agency’s capital spending for fiscal 2023 will be roughly $2.6 billion. TVA is on a path to cut carbon emissions 70 percent by 2030 and 80 percent by 2035 from 2005 levels and on a path to net-zero in 2050.

Executives have said its ongoing transition to cleaner sources of fuel may lead it to increase its debt. The budget notes that TVA remains committed to keeping debt stable at or below $24 billion.

“If [debt] rises, it’s because we’re adding assets to the system,” CEO Jeff Lyash said in February (Energywire, Feb. 2).

Leaders of the House Energy and Commerce Committee in January accused TVA of blocking renewable energy development and pressed the agency to justify previous rate increases and reductions in energy efficiency programs. TVA said it was behind the federal agency’s net-zero carbon path despite assertions that the plan is not in line with the Biden administration.

Reporters Jeremy Dillon, Mike Soraghan and Nick Sobczyk contributed.