Trump Budget Proposes Deep Cuts in Energy Innovation Programs

Source: By BRAD PLUMER and CORAL DAVENPORT, New York Times • Posted: Wednesday, May 24, 2017

President Trump’s budget proposes a major restructuring of the way electricity is bought and sold in Western states, which rely on hydroelectric power generated by government structures like the Hoover Dam in Nevada. Chase Stevens/Las Vegas Review-Journal, via Associated Press

WASHINGTON — President Trump’s budget proposal for 2018 envisions a flurry of changes to domestic energy policy, reaping billions of dollars in one-time revenue from oil and gas resources while cutting research into future energy technologies that could pay long-term dividends.

Mr. Trump’s budget, released Tuesday, says it will raise about $36 billion over the next 10 years by selling off major American energy resources and infrastructure, opening up vast new areas of public land for oil and gas drilling, and redirecting state revenues from oil and gas royalties back to Washington.

At the same time, the budget would cut $3.1 billion from energy research programs at the Energy Department, an 18 percent reduction from last year’s spending. These programs are aimed at developing innovative technologies like better batteries for electric vehicles or carbon capture for coal and gas plants — all of which could one day help reduce greenhouse gas emissions and combat global warming.

Critics say these cuts could imperil American leadership in cutting-edge clean energy industries.

“It is incredibly shortsighted to slash funding for energy R&D and let other countries take the lead in developing new technologies and markets that are going to grow quickly in the years to come,” said Jason Bordoff, the director of the Center on Global Energy Policy at Columbia University.

The cuts and program changes represent a modest portion of Mr. Trump’s $4.1 trillion budget. Nearly all of them would require approval from Congress, which appears highly unlikely. Still, the document lays down a detailed marker of the administration’s energy philosophy.

The budget would significantly scale back public financing for federal energy research. The Energy Department focuses on the next generation of energy technologies — from advanced nuclear reactors to algae biofuels — conducting basic research in its network of 17 national laboratories, and aiding private companies struggling to bring risky new technologies to market. Yet Mr. Trump’s proposal envisions sweeping cuts that would neuter most of the agency’s critical energy programs.

The agency’s Office of Energy Efficiency and Renewable Energy, which has helped nudge down the cost of solar power, faces a 69 percent cut. The Office of Fossil Energy, which invests in methods for capturing carbon dioxide from coal plants and burying it underground, faces a 54 percent cut. The Office of Nuclear Energy, which is pursuing technology to help extend the life of the United States’ existing nuclear reactors, faces a 31 percent cut.

The Trump administration’s plan was heavily influenced by the Heritage Foundation, a conservative think tank that argues that the federal government should fund only very basic scientific research and get out of the business of helping companies commercialize new energy technologies.

Accordingly, Mr. Trump’s plan would provide no funds for initiatives like the Advanced Technology Vehicle Manufacturing program, which in 2010 provided Tesla with a crucial $465 million loan six months before the electric car manufacturer went public.

In the natural resources sections of the budget, the administration proposes opening up the Arctic National Wildlife Refuge to oil and gas drilling, estimating that royalties and fees from exploring for fossil fuels in the protected area could generate $1.8 billion in new federal revenue by 2027. But drilling in the Arctic refuge is an intensely contentious proposal that has failed repeatedly in Congress.

Mr. Trump also proposes repealing part of a 2006 law that diverted about 37 percent of the revenues from oil and gas drilling in the Gulf of Mexico to Louisiana, Texas, Mississippi and Alabama from the federal government.

The White House estimates that repealing the law and redirecting the state oil revenue back to Washington could yield $3.5 billion over 10 years. Those states, and the oil lobby, are expected to push back fiercely.

The budget also proposes selling off half of the oil in the federal government’s 700 million-barrel Strategic Petroleum Reserve, which was established after the oil crises of the 1970s to provide a cushion against unexpected shortages. Mr. Trump’s budget director, Mick Mulvaney, told reporters on Tuesday that it was “no longer necessary” to hold so much crude in reserve, thanks to the boom in domestic oil and gas drilling over the last decade.

The administration estimates that selling the oil will generate a profit of $16.5 billion over 10 years. While the Energy Department has the authority to sell some oil in the reserve, such a major reduction would almost certainly need action from Congress, and the prospects of success for such a move are unclear.

“There are credible arguments that the optimal size of the S.P.R. should be smaller than it is,” Mr. Bordoff said. “But if we’re selling off a big chunk of a national security asset that we’ve held for 40 years, that should be rooted in a detailed analysis of the country’s energy needs, not short-term budget considerations.”

In the meantime, Congress will probably resist major changes to federal research spending. Last week, a group of six Republican senators, led by Lamar Alexander of Tennessee, wrote a letter to the White House warning against major reductions at the agency. “Federally funded research is imperative to ensuring we meet our energy, science and national security needs for generations to come,” they wrote.

Mr. Trump’s budget also proposes a drastic restructuring of the way electricity is bought and sold in Western states, which rely heavily on cheap hydroelectric power generated by government structures like the Hoover Dam in Nevada. Mr. Trump proposes selling off thousands of miles of government-owned transmission lines that move this electricity to homes across nearly 20 Western states, from Arizona to Wyoming, creating estimated revenue of about $10 billion over a decade.

Senator Maria Cantwell of Washington, the top Democrat on the Senate Energy Committee, said the plan had no chance.

“Selling government-owned transmission lines to the highest bidder will just have the effect of jacking up power rates, and no one in that region is going to be in favor of this,” she said.

The proposal would also restart the Nuclear Waste Fund fee program, which charges electricity users money to be funneled toward construction of the Yucca Mountain nuclear waste dump in Nevada, with estimated revenues of about $3 billion over 10 years. But that money would be specifically earmarked for construction of the nuclear waste repository, which has been mired in delays and disputes for decades.