DOE - Fossil Energy Techline - Issued on:  February 7, 1997

DOE's 1998 Budget Proposal Includes $672 Million for Fossil Energy Programs

Washington, DC - The Department of Energy (DOE) has proposed a $16.6 billion core budget for fiscal year1998 which allocates $672.4 million for fossil energy-related research and petroleum reserves programs.

Stressing that its funding proposals represent an "investment in a better future," DOE's proposed budget would target just over $346 million for research and development of advanced coal, natural gas and petroleum technologies. Another $209 million would be spent to maintain and continue refurbishing the Strategic Petroleum Reserve, the nation's emergency oil stockpile. Another $117 million would be spent to oversee and produce the Naval Petroleum and Oil Shale Reserves leading up to the sale of the largest of the reserves, the Elk Hills field in California, in February 1998.

The Department also proposes to offset some of the Fossil Energy funding request by returning to the Treasury $153 million of unspent funds from the Clean Coal Technology Program and deferring spending authority for $133 million more until FY 1999.

Cleaner electricity generation and increased oil and natural gas production are the two major priorities in DOE's budget request for research and development of advanced coal, natural gas and petroleum technologies.

A New Generation of High-Efficiency, Ultra-Clean 21st Century Power Technologies

DOE said it will continue the development of clean power systems that ultimately could achieve 50-60% efficiency levels and reduce the cost of electricity by up to 20%. Included in the coal research program are 21st century technologies that, when fully developed, will be capable of reducing regulated emissions to one-tenth of current requirements and cutting carbon dioxide emissions by more than 40%.

The FY 1998 budget begins the final phase of development for three key post-2000 electric power generating concepts: a low emission coal boiler system, an ultra-clean high-efficiency gas turbine, and advanced fuel cell technologies.

In both the low emission boiler program and the advanced gas turbine program, the department intends to narrow the number of lead developers, selecting one industrial contractor in each to design, build and test a first-of-a-kind prototype system that would be ready in the 2000-2001 timeframe. The low-emission boiler concept will integrate innovative pollution controls and combustion improvements into a conventional design for a pulverized coal boiler, producing a new, higher efficiency coal system with significantly improved environmental performance. The advanced gas turbine will be a radically-new "leapfrog" system that will be more efficient than any turbine on the market today while producing much less nitrogen oxide pollutants than the average gas turbine.

In the fuel cell program, the department proposes to continue with three private sector developers, although likely stretching the final development schedule from 2000 to 2002. Funding will be provided to continue two jointly-sponsored R&D efforts to develop a lower-cost molten carbonate fuel cell. DOE also intends to provide matching funds for the design and fabrication of the world's first complete solid oxide fuel cell power plant.

Boosting the Nation's Gas and Oil Supplies

The FY 1998 R&D budget also maintains a major effort to ensure that adequate and affordable natural gas supplies can continue to be produced to meet the projected rising demand for this clean-burning fuel over at least the next 20 years. Within the natural gas program, DOE intends to spend $25.3 million to develop innovative exploration, production, processing and storage technologies, including new imaging and improved fracturing technologies that will be especially applicable to the vast but more difficult, low-permeability gas formations. DOE would maintain research efforts to upgrade low-quality natural gas and to convert gas in remote locations to more economically transportable liquid fuels. It also would increase funding for new environmental efforts, working with industry to help ensure that environmental compliance approaches make technical and economic sense while continuing to protect land and water resources.

The results of the natural gas supply research program could lead to increased gas production by 2010 totalling 3.7 trillion cubic feet per year.

With U.S. dependence on foreign oil continuing to rise, the FY 1998 budget would increase support for new technologies that can boost domestic oil production and reduce the growth of imports. Included in the FY 1998 proposal is funding to complete the current field demonstrations of advanced oil technologies in reservoirs that otherwise are likely be abandoned. With over half of the 34 projects in the field program now producing results or having been completed, DOE is proposing to apply some of the innovative approaches to a series of smaller, targeted field tests in FY 1998 as a way to transfer the technology to a wider range of small producers. R&D will also continue in other areas of exploration, production, processing and environmental compliance.

The FY 1998 request for petroleum supply activities is $52.2 million, a 14% increase from the FY 1997 level. If the technologies in this program are successfully developed and deployed to domestic producers, U.S. oil production could be increased by more than 500,000 barrels per day during the 2001-2010 time period.

Maintaining the Nation's Oil Stockpile

The FY 1998 budget request of $209 million will maintain the 563-million Strategic Petroleum Reserve in a full state of readiness while efforts continue to modernize major portions of the emergency oil complex. The life-extension program is intended to ensure the full capability of the Reserve through at least 2025. Decommissioning of the geologically unsound Weeks Island (Louisiana) site will continue in FY 1998 as will degassing of the last remaining crude oil affected by the slow intrusion of natural gas over the last 20 years.

The Administration proposes no sale of crude oil from the Strategic Petroleum Reserve in FY 1998. Last year Congress offset the Reserve's operating budget by mandating the sale of oil.

Readying the Elk Hills Naval Petroleum Reserve for Divestiture

The $117 million funding request for the Naval Petroleum and Oil Shale Reserves is reduced from last year because the Department still expects to sell its portion of the giant Elk Hills oil field in California in February 1998. The budget request provides for 7 months of operations leading to the sale, followed by a 3-month transition to a new owner. DOE will also propose in the near future its disposition plans for the Naval Oil Shale Reserves and other properties.

Clean Coal Program to Return Funds to Treasury

The 1998 fossil energy budget will be partially offset by DOE's proposal to return $153 million in unspent funding for the Clean Coal Technology Program to the Treasury. Spending authority for another $133 million in prior appropriations would be deferred until FY 1999. The funding changes will not impair DOE's capability to complete its funding commitments to previously agreed-to Clean Coal Technology projects. DOE will also ask Congress to consider using $50 million of the FY 1999 funding as an incentive for an integrated gasification combined cycle power generation project to be built in China using U.S. technology as a model for future plants in this large, emerging market.

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