$760 Million Devoted to Fossil Energy Programs in FY 2006

The U.S. Department of Energy's FY 2006 budget request of $23.4 billion, allocates $759.9 million for fossil energy activities. Included is $351 million for the President's Coal Research Initiative, $50 million for clean coal demonstration projects and $18 million for FutureGen, the world's first zero-emissions hydrogen and electricity producing power plant.

Fossil Energy's programs focus on supporting the President's top initiatives for energy security, clean air, climate change, and coal research. FY 2006 Fossil Energy programs:

  • Support the development of lower cost, more effective pollution control technologies embodied in the President's Coal Research Initiative to meet the goals of the President's Clear Skies Initiative;

  • Expand the nation's technological options for reducing greenhouse gases either by increasing power plant efficiencies or by capturing and isolating these gases from the atmosphere as called for by the President's Global Climate Change Initiative, and;

  • Measurably add to the nation's energy security through such programs as the Strategic Petroleum Reserve and the production of hydrogen from coal to support and hasten development of the "hydrogen energy economy."

  • The President's Coal Research Initiative

    Meeting rising demand for clean, reliable and affordable electricity will require the use of coal for the foreseeable future, which in turn will require the development and demonstration of new, environmentally-sound technologies for coal-based electricity generation.

    The FY '06 budget supports the Office of Fossil Energy's continuing effort to fulfill President Bush's 10-year, $2 billion comittment to clean coal research, beginning with funding for the President's Coal Research Initiative of $351 million, the same level of funding found in the enacted budget for FY '05.

    While the overall budget amount remains the same, the distribution of funds to various research and development components of the program has been changed somewhat to achieve the maximum program benefit in a disciplined budget environment.

    Clean Coal Power Initiative and FutureGen. Within the President's Coal Research Initiative, the Clean Coal Power Initiative (CCPI) is a key component of the National Energy Policy to address the reliability and affordability of the nation's electricity supply, particularly from its coal-based generation.

    The FY '06 budget includes $50 million for the CCPI program and $18 million for FutureGen, the world's first zero-emissions hydrogen and electricity producing power plant.

    Under CCPI, the nation's power generators, equipment manufacturers, and coal producers help identify the most critical barriers to coal's use in the power sector. Technologies are selected with the goal of accelerating development and commercialization of coal technologies that will economically meet environmental standards, while increasing the efficiency and reliability of coal power plants.

    There are currently 10 active CCPI projects, six from the first competition, announced in January 2003, and four from the second, announced in October 2004. The projects include an array of new cleaner and cheaper concepts for reducing sulfur dioxide, nitrogen oxides, and mercury - the three air pollutants targeted by the Clear Skies Initiative. In FY '06, Fossil Energy will begin developing a solicitation for a third round of projects.

    The fully funded FutureGen program for FY '06, backed up by a request for $257 million in deferred funds for future activities from available prior year funds from the Clean Coal Technology Demonstration program, will establish the capability and feasibility of co-producing electricity and hydrogen from coal with essentially zero emissions, including carbon sequestration and gasification combined cycle technologies, both integral components of the zero emissions plant of the future.

    In order to assure that FutureGen is successful, the President's Coal Research Initiative also includes supporting research programs in FY '06 at a proposed level of $283 million. The programs will be focused on all the key technologies needed - such as carbon sequestration, membrane technologies for oxygen and hydrogen separation, advanced turbines, fuel cells, coal to hydrogen conversion, gasifier related technologies, and other technologies.

    Carbon Management. Carbon management has become an increasingly important element of the coal research program. Carbon sequestration - the capture and permanent storage of carbon dioxide - has emerged as one of the highest priorities in the Fossil Energy R&D program, a priority reflected in the proposed budget of $67.2 million in FY '06, a nearly 50 percent increase over FY '05 allocation of $45 million.

    One of the cornerstones of the carbon sequestration program, a national network of regional partnerships, will continue its important work in FY '06. This Secretarial initiative has brought together the federal government, state agencies, universities, and private industry to determine which options for capturing and storing greenhouse gases are most practicable for specific areas of the country.

    In addition, the international, ministerial-level Carbon Sequestration Leadership Forum will continue to execute its mission of gathering data, exchanging information and participating in joint projects to advance carbon sequestration technology.

    Hydrogen. Another aspect of the President's Coal Research Initiative is the production of clean fuels from coal. Hydrogen has emerged as a major priority within the Administration and the Department of Energy as a clean fuel for tomorrow's advanced power technologies such as fuel cells, and for future transportation systems. Within the Fossil Energy program, we have increased FY '06 funding for hydrogen from coal research to almost $22 million from the FY '05 allocation of $17 million, a 27 percent increase.

    Innovations for Existing Plants. While the Office of Fossil Energy continues its aggressive research, development and demonstration projects for technologies of the future, an invaluable program designed to produce dramatic short-term reductions in emissions of mercury, nitrogen oxide, particulate matter and byproducts of combustion from existing coal plants receives a 25 percent boost in FY '06 to $24 million from the FY '05 allocation of $19 million.

    Gasification Technology. Advances to the proven integrated gasification combined-cycle technology, which delivers significant increases in operating efficiency and reductions in emissions when compared to conventional coal-based plants, will intensify in FY '06 with projects aimed at reducing capital costs and technical risk, increasing plant efficiency and availability, and achieving essentially zero emissions. Gasification technology's FY '06 budget increases by nearly 25 percent over FY '05 funding to $56.4 million to improve and test gasification designs, materials, instrumentation and processes.

    Fuel Cells. Fuel cell technology presents enormous potential to significantly improve environmental performance and energy security as a source of electrical power in stationary plants at or near the end user. They can reduce criteria pollutants well below New Source Performance Standard levels and offer important carbon management advantages because of their inherently low emissions and ultra-high operating efficiency.

    Faced with these potential benefits, the Office of Fossil Energy has refined its ongoing Fuel Cell R&D program to focus on the successful and highly promising work of the Solid State Energy Conversion Alliance (SECA). As a result, all fuel cell funding for FY '06 has been re-directed to the SECA program from previous, less promising or completed R&D projects that ran in parallel with the SECA program.

    This decision provides a two-fold budgeting benefit: the overall cost of the fuel cell program has been reduced by $10 million, to $65 million in FY '06; however, funding for the most promising research avenue, SECA, increases by nearly $12 million, or 20 percent more than the FY '05 allocation of $54 million.

    Oil and Natural Gas Technology

    Budget discipline necessitated close scrutiny of all Fossil Energy programs, using strict guidelines to determine their effectiveness and compare them to other programs offering more clearly demonstrated and substantial benefits. As a result, the FY '06 budget proposes to conduct orderly termination of the oil and natural gas programs.

    A Program Assessment Rating Tool (PART) assessment of these programs was conducted for the FY '04 budget, and a reassessment was conducted for the FY '05 budget. These programs were rated "Ineffective" in the PART analysis, based primarily on not demonstrating clear results of the research efforts.

    The $20 million requested in FY '06 is for legal obligations incurred by the termination process. DOE will complete a detailed termination plan this Spring, which will include the close-out process and timetable. All prior-year funds will be used for the purposes appropriated.

    Petroleum Reserves

    Strategic Petroleum Reserve. The President has directed that the Strategic Petroleum Reserve be filled to 700 million barrels. The mechanism for doing this is a cooperative effort with the Minerals Management Service to exchange royalty oil from federal leases in the Gulf of Mexico. Current projections are that the SPR will reach its 700-million barrel target in mid-2005.

    The SPR's FY '06 budget is $166 million for facilities development and management. This is approximately equal to the FY '05 budget allocation. The SPR does not require additional funds in the oil acquisition account for transporting "royalty in kind" oil to the SPR, since these charges are the responsibility of the oil supplier. Also, the SPR has the authority to "borrow" funds from other Departmental accounts to support an emergency SPR drawdown.

    Northeast Home Heating Oil Reserve. FY '06 activities for the Heating Oil Reserve will be funded with carryover funds from previous years. The 2-million barrel reserve remains ready to respond to a Presidential order should there be a severe fuel oil supply disruption in the Northeast.

    Naval Petroleum and Oil Shale Reserves. The FY '06 budget request of $18.5 million funds environmental remediation, cultural resource and equity determination activities required by the Naval Petroleum Reserve-1 (NPR) sales agreement. Also included is continued operation of the NPR-3 in Wyoming.

    Other Fossil Energy Activities The budget also includes $121 million for other activities in our Fossil Energy program, including $100 million for headquarters and field office program direction and management support; $8 million for environmental restoration; $3 million for Federal matching funds for cooperative research and development projects; $1.8 million for natural gas import/export responsibilities; and, $8 million for advanced metallurgical research at the Albany Research Center.

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