Statement of
The Honorable Federico Peña
Secretary of Energy
before the
Committee on Energy and Natural Resources
United States Senate
March 4, 1998

Thank you, Mr. Chairman, and Members of the Committee, for the opportunity to appear before you today to present the FY 1999 budget for the U.S. Department of Energy. In FY 1999, the Department requests $18.0 billion to provide America with the technical and scientific infrastructure required to meet the challenges for the next century. Our FY 1999 request supports work to ensure: a safer world, one free from the threat of nuclear danger; enhanced U.S. energy security; a cleaner environment; and that America retains its scientific leadership in a number of important fields.

In his State of the Union address, President Clinton reaffirmed his belief in the power of science and technology to revolutionize the world and help our nation rise to meet the challenges of today and the future. Investments made in science and technology today will yield benefits for the 21st Century that we can only begin to imagine. The budget that the President proposes for FY 1999 is historic -- historic because it is the first balanced budget to be submitted to Congress in 30 years. But also historic because of the commitment this Administration has made to science and technology.

The Department of Energy budget request for FY 1999 reflects that commitment. It is about providing the nation with the tools we will need in science, technology, and energy for our future.

Our FY 1999 budget request reflects an increase of nearly $1.5 billion from the FY 1998 appropriated level of $16.6 billion -- a 9 percent increase. This budget emphasizes the Department's strength in science and technology and demonstrates this Administration's commitment to invest for the country's future.

Of the $1.5 billion increase for FY 1999 -- $1 billion is for the following programs:

• $338 million more for enhanced energy programs throughout the Department,
• $246 million more to invest in basic science programs and facilities,
• $421 million more to fully support stockpile stewardship activities to implement the objectives of the Comprehensive Test Ban Treaty and address the threat of nuclear proliferation throughout the world.

Beyond this $1 billion increase in our core programs, there is also a $317 million increase to continue our environmental cleanup privatization initiative, and $160 million to support continued operation of the Strategic Petroleum Reserve--which last item, in FY 1998, was directed by the Congress to be offset through the sale of Reserve oil. We do not propose to sell oil from the Reserve for budgetary purposes, in FY 1999 or beyond.

At the same time, this budget recognizes the Administration's challenge to reinvent federal programs to become more responsive and more efficient. Beyond our ongoing reengineering efforts, this budget was formulated with the assumption that we will discontinue activities where we have accomplished our objectives. For example, this budget reflects the recent sale of the Elk Hills Naval Petroleum Reserve which brought $3.6 billion to the U.S. Treasury -- the largest sale of a government asset ever negotiated on behalf of American taxpayers and an amount far exceeding CBO or OMB projections.

We are also continuing to reengineer our operations and streamline our workforce. Since 1995, we have reduced our federal workforce by nearly 3000 positions, or 22 percent. And contractor employment has declined 29 percent from an all-time high of 148,000 in 1992 to just over 100,000 this past year.

ENERGY AND THE NATIONAL INTEREST

Affordable and abundant supplies of energy are critical to economic, environmental and national security. Energy is key to economic performance, it offers new market opportunities for business, it is a global commodity of strategic importance, and it impacts the environment.

Energy and the Economy

United States expenditures for energy now exceed $500 billion annually, accounting for over 7.5 percent of our gross domestic product (GDP). Since the oil price shocks and energy instability of the 1970's, world oil prices have decreased sharply--in today's dollars, we are paying about the same price for a barrel of oil as we were decades ago. The annual electricity bill for American consumers, however, is more than $200 billion and the cost of energy for U.S. manufacturing industries alone stands at $100 billion per year.

Largely in response to oil price increases, the United States decreased its energy use per dollar of GDP by 26 percent between 1975 and 1986 , in essence representing an annual energy savings today of $269 billion (in 1996 dollars). Despite this track record, the energy intensity of the U.S. economy is higher than that of other industrialized nations and the potential for increased energy efficiencies in the U.S. economy remains considerable.

Energy and Global Business Opportunities

The global market for energy supply equipment is about $300 billion annually. This will grow proportionately as world energy capacity doubles over the next few decades. If we include the value of products whose marketability depends upon energy performance -- such as cars or appliances -- the global market reaches into the trillions of dollars.

The United States -- with its strong scientific and technological leadership, capacity for sustained innovation and position as the preeminent economic power in the world -- needs energy policies that position us to take advantage of this large and growing global export market.

Energy is a Strategic Global Commodity

We learned through harsh experience during the two oil shocks of the 1970's and the disruption of oil markets resulting from the Gulf War that the price and availability of energy resources in one region can have global implications. The Persian Gulf -- one of the most politically volatile regions in the world -- currently supplies about one half of the world's exports of oil, and this figure is expected to go even higher over the next 15 years. We have diversified our energy supply, however, to the point that Venezuela and Mexico are now our top two suppliers of foreign oil. We maintain the Strategic Petroleum Reserve to protect us from oil supply disruptions and wide fluctuations in price.

The world will likely double its energy use by 2030 and quadruple its use by the end of the next century. Oil demand is projected to grow by about two percent annually over the next 20 years. Total world energy consumption is projected to reach 562 quadrillion Btu in 2015, an increase of 197 quadrillion Btu over 1995 totals. Competition with, and within, the developing world for scarce fossil fuel resources will become intense over the next several decades. It is essential that we continue to diversify our energy supply, both in the energy options we choose and the regions of the world from which we import oil.

Energy and Environmental Security

Energy production and use are principal contributors to local, regional and global environmental problems. Smog, acid rain and particulates affect quality of life at local and regional levels. Over the past two decades, U.S. emissions of SO_x, NO_x and CO₂ were lower than they otherwise would have been, due in no small part to technological innovations such as: more energy-efficient automobiles, scrubbers on power plants, more energy efficient buildings and home appliances, and a slow but steady infiltration of the market by alternative fuels. Much more remains to be done, and can be done, with concomitant health and quality of life improvements for tens of millions of Americans.

On a global scale, there is little doubt that human activities associated with energy production and use, primarily of fossil fuels, have over the last few decades significantly altered the composition of atmospheric gases. World carbon emissions are expected to increase by 3.5 billion metric tons over current levels by 2015 if world energy consumption reaches levels projected by DOE's Energy Information Administration. Although a detailed understanding of regional impacts awaits further research, scientific analysis overwhelmingly suggests the possibility of major climatic disruptions. Prudence demands a measured but strong response in ensuring that sustained technological innovation positions us for continued prosperity and quality of life.

A Comprehensive National Energy Strategy

The Administration recently released for comment a draft framework for a Comprehensive National Energy Strategy, and we look forward to discussion with the Committee, the Congress, and the public in the weeks ahead. It is organized around several common sense, high level goals:

• Improve the efficiency of the energy system -- make more productive use of energy resources in order to enhance overall economic performance while protecting the environment and advancing national security;
• Ensure against energy disruptions -- protect our economy from external, as well as internal, threats of interrupted supplies or infrastructure failure;
• Promote energy production and use in ways that reflect human health and environmental values -- increase production while at the same time improving our health and local, regional and global environmental quality;
• Expand future energy choices -- pursue continued progress in our science and technology to provide future generations with a robust portfolio of clean and affordable energy sources; and
• Cooperate internationally on energy issues -- develop the means to identify, manage, and resolve global economic, security and environmental concerns.

Technology is the common thread in our efforts to realize all of these goals that support our economic, national and environmental security. Our success in reaching these goals tomorrow depends on our energy R&D investments today.

SCIENCE AND TECHNOLOGY ARE KEY

There is no one "silver bullet" that will solve our future energy needs. A broad and balanced R&D portfolio is essential. Fossil fuels will continue to be the world's dominant energy source for a considerable time under any plausible scenario. Thus, improved efficiency, increased use of natural gas, reduced environmental impact in fossil resource recovery, pollution abatement, and sequestration of carbon following combustion are all important goals to be advanced by new technology.

Renewable energy technologies, with electricity delivered at costs roughly comparable to fossil sources, may hold the key for appreciably slowing global warming in the longer term, while offering myriad additional benefits. Technology options for advanced nuclear energy technologies such as safe, proliferation-resistant reactors and waste-minimizing, advanced nuclear fuel need to be preserved.

Basic research continues to provide the foundation both for new technologies and for the policy framework that will evolve as the human health, environmental and climate impacts of energy use become increasingly well understood.

Indeed, The President's Committee of Advisors on Science and Technology (PCAST), inits November 1997 report Federal Energy Research and Development for the Challenge of the Twenty-First Century, advocated a substantial and sustained increase across the entire energy R&D portfolio.

Increasing our Domestic Energy Supply

We have or are developing technology pathways to increase our access to domestic fossil energy resources while minimizing impacts on the environment. For example, the Department's current oil and gas program is projected to stimulate about one million barrels per day of additional liquids production by 2010, approximately enough to stabilize domestic production after 2005. Thus, we must continue to look for opportunities to partner with our domestic oil and gas producers to: (a) improve the accuracy of reservoir imaging and diagnostics; (b) expand the use of enhanced oil recovery processes, such as CO₂ flooding, to basins beyond those that have been the traditional targets; and (c) reduce the cost of effective environmental protection in such areas as the minimization of produced water and the development of more effective air emission control technologies.

The power and potential of technology has been demonstrated on the Alaskan North Slope, where a significant percentage of our domestic oil and gas is produced. While the previous Prudhoe Bay development impacted two percent of the surface area, the new Alpine field will impact only two tenths of one percent of the surface because of new drilling technologies. The North Slope also has huge reserves of natural gas, very remote from an adequate market. Last year, DOE initiated a cost-shared, joint government-industry collaboration to produce a revolutionary ceramic membrane that might significantly lower the cost of chemically converting natural gas into a middle distillate liquid. Such a breakthrough in the current limitations that transportation places on natural gas could add a billion barrels or more of vital liquid fuels to our energy supply. In addition, several oil companies have gas-to-liquids programs underway, representing private investments totaling about $1.5 billion. The increased availability of natural gas could help reduce greenhouse gas emissions by substituting for more carbon-intensive fossil fuels.

It is worth noting in this connection that one of the 1997 R&D 100 Awards the Department received was for the development of an energy supply technology through a laboratory-industrial partnership--advanced seismic oil exploration software using supercomputers. For the first time, operators are performing relatively fine scale modeling of very large oil fields in their entirety, thereby increasing domestic energy resources, such as North Slope oil. The underlying computational and simulation tools were actually developed for nuclear stockpile stewardship. This is just one example of how the core competencies in the DOE labs and programs often bear fruit across multiple missions. And, as our nuclear stockpile mission drives American computational capability to 100 trillion operations per second in the next decade, dramatically enhanced simulation capability will enhance numerous energy and environmental R&D programs as well, including much more precise studies of global systems with concomitant improvement in regional climate predictive power.

Efficient Use of Conventional Energy Options

In a very real sense, energy efficiency is grounded in making better use of conventional energy sources. The plain fact is that about 93 percent of the energy we consume today comes from fossil and nuclear fuel. Energy efficiency is not some "green" alternative to the "real business" of traditional energy investments; rather, it is grounded in better use of our dominant energy resources. Advances in energy efficiency technologies deliver important national benefits: extending the life of our domestic reserves; reducing our dependence on imported oil; and minimizing the adverse environmental effects of energy, including substantial near-term carbon reducing impacts over the next decade.

We are working to develop"intelligent building" control systems, more efficient appliances and fuel cells to power commercial buildings to use electricity more efficiently.

Advanced turbines developed by DOE with industry -- fueled by natural gas or biomass and producing steam together with low cost electricity -- are capable of extremely high efficiencies and should be available in about three years. High-efficiency electric power systems, where fuel cells are joined with combined cycle plants, could improve efficiency as much as 70 percent. Industrial resource recovery could be dramatically improved with the development of technologies such as an integrated gasification combined cycle power technology, which would convert coal, biomass and municipal wastes into power and products. Our Partnership for a New Generation of Vehicles (PNGV) initiative, with a goal of an 80 mile per gallon vehicle, encompasses a wide variety of efficiency technologies such as hybrid vehicle design, advanced engines, regenerative braking and lightweight materials -- all pieces of a technology pathway to increase transportation efficiency.

Clean Energy for a Cleaner Environment

Research and development on clean energy technologies will result in the efficiency of energy production, diversity of domestic energy supplies, opportunities for technology exports, and little or no environmental damage. Development of clean energy will also help reduce carbon intensity, the amount of carbon used to provide a unit of energy. A wide range of improved clean energy options, including renewables, could be introduced and widely deployed within the next two decades and begin to match the carbon reduction impact of increased end-use efficiencies within this period.

Power generation with advanced turbines and combined cycle plants, industrial applications, and potential to tap oceanic gas hydrates will result in the increased use of natural gas. Cleaner coal technologies will help achieve higher efficiencies and double the energy per unit of fuel use or CO₂ emission. To maintain nuclear energy as an option in our energy portfolio, we need research to develop next-generation nuclear reactors that are simpler, safer and more efficient; we also need technologies to extend the life cycle of existing nuclear reactors. Already, wind energy, once at $.40 per kilowatt-hour, is now at $.05 per kilowatt-hour and is producing electricity for one million Americans. To increase the availability and affordability of this and other renewable energy sources, we should invest in such technologies as advanced wind turbines, co-firing of coal plants with forest and agricultural biomass and on-site solar and photovoltaics to enable buildings to become net energy producers. The Million Solar Roofs initiative provides a goal within our reach.

Carbon Sequestration: Maximize Resources, Minimize Environmental Impacts

Carbon sequestration is the removal of atmospheric carbon through natural or induced methods. Research and development on this pathway is at its early stages and large scale impacts are not anticipated for decades. The vast wealth of U.S. coal resources surpasses the entire energy content of all of the world's known, producible oil; technology breakthroughs in sequestration could prove to be a major benefit for the domestic coal markets industry, for the creation of international markets, and for minimizing coal impacts on the environment. Capture of combustion gases, production of hydrogen from natural gas, use of microalgae to convert power plant CO₂ to biomass, injection of CO₂ in terrestrial aquifers (this is already being done to enhance oil and gas production), and oceanic injection are all examples of sequestration opportunities.

Basic Research Advances All DOE Missions

Essential to our work in each of these areas is the Department's continued investment in basic research. While the results of a specific avenue of basic research are difficult to predict with any accuracy, some promising areas in basic science with an energy impact include: biosciences, with the potential to grow fuel crops and tailored industrial feedstocks; photoconversion technologies for the production of very cheap electric power or fuels directly from sunlight; and understanding of the global carbon cycle in order to select optimal strategies and technologies to arrest global warming. As already noted, technology "tools" such as those being developed as part of our stockpile stewardship's advanced supercomputing initiative, will have important applications for modeling and understanding a wide variety of basic R&D areas, including subsurface phenomena relevant to oil recovery technologies, combustion science, and global systems. Vigorous, accelerated R&D programs for all of these technology pathways will help guide the evolution of the nation's energy system. Given the breadth of technology options, this transformation will take place in an orderly fashion as energy-producing and energy-using equipment is replaced. Public-private strategic alliances could help offset costs and risks associated with the development of many of these technologies. Industry and consumers would be able to recover their investments in the nation's energy infrastructure, while new energy technologies are gradually absorbed as they become profitable.

THE DEPARTMENT'S BUSINESS LINES

The Department of Energy is organized into four primary lines of business: energy resources, science and technology, environmental quality, and national security. The Department has four major goals, which correspond to these business lines and drive the strategic planning process, and which affected the development of this FY 1999 budget request:

• Developing and promoting clean, efficient energy technologies and enhancing energy security;

• Unleashing America's scientific and technological resources with an expanded and reinvigorated research and development program to enable the Nation's private sector to maintain America's global leadership into the next millennium;

• Completing cleanup of the Cold War's environmental legacy, by expediting closure of former nuclear weapons sites through technological development, enhanced managerial and contractual practices, and expanded flexibility for private enterprise; and

• Advancing America's strategic defense by ensuring a safe and reliable nuclear weapons stockpile and by reducing global danger from weapons of mass destruction.

I now would like to discuss briefly the budget for each of our four business lines and tell you how our investments will prepare us for the 21st century.

I. ENERGY RESOURCES

The Energy Resources request for FY 1999 is $2.3 billion. It includes a $338 million increase for enhanced energy programs--investments that will help our nation to better meet the challenges of the 21st Century. This budget responds to the recommendations of the PCAST panel which called for investments in energy R&D to, "maximize our country's economic prosperity, environmental quality, national security, and world leadership in science and technology." This also is in keeping with the challenge issued by President Clinton in his State of the Union address, to improve the quality of the environment while growing our economy and improving our standard of living. This budget furthers PCAST objectives by including the following increases:

• $161 million more for energy efficiency R&D;
• $100 million more for renewable energy R&D;
• $21 million more for Fossil Energy R&D; and
• $56 million more for nuclear energy programs, of which $34 million is for R&D.

This budget supports energy R&D that will help our nation be more competitive in rapidly changing world markets while at the same time helping achieve a cleaner environment for future generations. For example, this budget supports technologies like fuel cells, advanced turbine systems, and research in carbon sequestration to capture the carbon dioxide produced from burning fossil fuels before it enters our atmosphere. We are proposing $91 million to fund development of Power Systems for the 21st Century, directly supporting the recommendations of PCAST. This initiative will use coal in power plants far more cleanly and efficiently than we can today, will help us make better use of our natural resources, lower the cost of power for consumers and reduce the emissions of the greenhouse gases responsible for climate change. Other fossil energy research and development is focused upon technology to improve production -- such as advanced seismic technologies, which use computers to model the dimensions of an oil field over time, helping producers locate potential oil and gas reserves.

We also propose $152.7 million to support collaborative R&D on the Partnership for a New Generation of Vehicles with a goal of an 80 mile per gallon production prototype automobile by 2004 that has all of the safety and convenience we've come to expect in a mid-sized car, and one that American consumers can afford.

This budget supports deployment of operating biomass power systems that generate power from agricultural wastes. Our objective is to double U.S. renewable energy capacity from non-hydropower sources by 2010. Much critical work in this area is conducted at the National Renewable Energy Laboratory in Golden, Colorado.

The Energy Resources budget also will help to protect our country from disruptions in energy supplies and oil price shocks by maintaining the strength of our Strategic Petroleum Reserve with a direct request for funds to operate the Reserve rather than relying on the sale of its oil as we have done for the past three fiscal years, FY 1996 - 1998. Additionally, we request $159.7 million in Natural Gas and Oil R&D to partner with industry to develop technologies to encourage greater production from, and utilization of, our domestic oil and gas sources.

We propose two new nuclear power initiatives to address the future nuclear technology needs of the Nation. Nuclear energy provides approximately one-fifth of our Nation's electric generating capacity, and can be expected to be an important component of our energy picture well into the 21st century. One new initiative proposes a new program of nuclear R&D to support innovative research to address the long-term issues associated with nuclear power, such as nuclear waste and proliferation. Another will focus on a cooperative program with industry to improve the long-term operation and safety of the nation's nuclear power plants.

II. SCIENCE

The science and technology arena is perhaps where the Department has its greatest opportunity to contribute to the future of our nation. Science and technology underlie all of our work and we have a proud history of developing many of the innovations that have kept U.S. industry on the cutting edge of international competitiveness. Science and technology are integral parts of each the Department's business lines. In the Science business line budget, we include $2.7 billion to support basic scientific investigation and exploration.

A key component of the FY 1999 Science request is $157 million to initiate construction of the Spallation Neutron Source (SNS). This follows a $23 million investment last year. The total project cost is projected to be $1.33 billion over 7 years. When completed, the SNS will be the most powerful pulsed neutron source in the world -- but what does that mean for the American people? As just a few examples, neutron science helped scientists invent floppy disks, modern bullet-proof vests, and the magnetic strips on the backs of credit cards. Chemical companies use neutrons to make better fibers, plastics, and highly efficient and selective catalysts; automobile manufactures use the penetrating power of neutrons to understand how to cast and forge gears and brake discs to make cars run more efficiently and safely; airplane manufacturers use neutron radiography for nondestructive testing of defects in airplane wings, engines, and turbine blades; and drug companies use neutrons to design drugs with higher potency and fewer side effects. This request also includes an increase to support scientific investigation of greenhouse gases. We request $27 million for basic science associated with carbon reduction, including carbon sequestration science. This is augmented by our fossil energy program's work in sequestration research and development. Together, these programs seek innovative techniques to capture carbon dioxide emissions to keep them from reaching the atmosphere.

The Department will continue to improve our world class research facilities and work to improve access to our facilities which now accommodate more than 15,000 scientists a year. We will also continue to invest in cutting-edge facilities to maximize U.S. scientific capabilities. In FY 1999, $65 million is included for U.S. participation in the Large Hadron Collider. The Collider will accelerate protons up to speeds just a fraction under the speed of light and smash them together at higher energies than any machine has ever before achieved. The results of the collisions will allow physicists to study in unprecedented detail and precision the structure of matter, and to shed new light on some of the mysteries of the origin of the universe, as well as to increase our understanding of the fundamental building blocks of matter.

We will complete construction and begin operation of the Relativistic Heavy Ion Collider at Brookhaven, New York; initiate operation of the Fermi Main Injector in Illinois; and initiate operation of the Stanford Linear Accelerator Center B-factory in California. We will also continue our inquiry into fundamental biology. The Department also supports fundamental research in the biological and environmental sciences allowing fundamental understanding of energy production and use. The FY 1999 budget request for biological and environmental research is $392.6 million.

In FY 1999 we include $85.3 million to continue DNA sequencing of the human genome. We propose to integrate genome work at three of our national laboratories so that DOE will provide about one-third of the U.S. effort to sequence all 3 billion base sequences of the human genome by 2005. An exciting example of the work these programs support is the recent accomplishment of the complete genomic sequencing of several microbes of potentially great importance for the production of energy, improving the understanding of the effect of radiation on living cells, and the cleanup of wastes.

In FY 1999, we are working to get the most leverage from the nation's investment in our world-class national laboratories. The scientific and technical capabilities of our national laboratories are the Department's greatest assets. In FY 1999, we include $15 million to provide our nation's classrooms better access to the resources housed at our national laboratories.

We also include $160.6 million for Computational and Technological Research. This includes $22 million for our Next Generation Internet initiative to improve the networking capabilities at our national laboratories and provide better linkages to universities and federal research institutions to encourage scientific collaboration. Our goal is to have an Internet capable of allowing far-flung scientists to work collaboratively from their desktop computers.

We must carry out our science and technology responsibilities with sound strategic management of a broad portfolio of energy investments. We are now advancing our strategic management of R&D by:

• Increasing the profile, expanding the responsibilities and improving the accountability of the DOE R&D Council. The Council, which I now chair, has a new charter, to more fully integrate and manage the Department's R&D both within and across program areas. The Energy Resources working group of the R&D Council simultaneously serves as a working group of the Energy Resources Board; this will provide a way to fully integrate energy R&D into the development of overall energy policy.
• Updating the way we select R&D performers. We will be intensifying our evaluation of how we award grants and contracts, including technology transfer and partnership agreements, to ensure they are made on the basis of sound scientific review and economic judgment. We need to constantly evaluate the appropriateness of these agreements on a case-by-case basis and make policy and process adjustments when necessary.

III. ENVIRONMENTAL QUALITY

Our request for fiscal year 1999 proposes a five percent increase, bringing the environmental quality budget request to $6.7 billion. We ended the Cold War with a legacy of environmental contamination and degradation with which we will be grappling for decades. Hundreds of millions of gallons of highly radioactive and toxic waste were generated during the production of the nuclear materials necessary for our national defense. Much of this waste contains long-lived radioactive elements that could pose risks for tens of thousands of years. About 100 million gallons of high-level nuclear waste are currently stored in underground tanks, many of which have leaked. Cleaning up this waste poses one of our greatest challenges. The request includes $6.1 billion for Environmental Management activities. We have restructured the EM budget for FY 1999. It now includes three new accounts -- the Site Closure Fund, the Site/Project Completion Account, and the Post-2006 Account -- which will help us to focus on cleanup targets. Our plan is to complete cleanup at as many sites and projects as possible by 2006, then to focus on long-term custodianship. We are accelerating cleanup and reducing risk as we clean up our sites to prepare to make them available for economic development or conservation purposes.

In FY 1999, we will continue to work closely with our communities as we develop our plans for cleanup, risk reduction, environmental and health monitoring and site closures. We have set very ambitious goals for closing the Rocky Flats site in Colorado, and the Mound and Fernald sites in Ohio, by the year 2006. This is why we are continuing to work with Congress to support the Site Closure Fund. The budget provides $1.26 billion in the defense and non-defense Site Closure Fund to accelerate closure of Rocky Flats, in Colorado, and of Mound and Fernald, in Ohio. It is also why we are continuing to invest resources in developing and deploying technologies to help us get the job done. For example, we have developed a camera-equipped robotic arm that allows scientists to see inside high-level radioactive waste tanks, thus providing a dramatic improvement in the quality of the information we can obtain, with an equally dramatic decrease in the safety risks of obtaining that information.

The environmental quality budget also reflects our plan to open the Waste Isolation Pilot Plant (WIPP) in May 1998 to begin accepting transuranic waste, pending the expected certification from the Environmental Protection Agency this Spring. This will be a crucial step forward in providing for the disposal of highly radioactive wastes currently stored at a number of DOE sites across the country.

In FY 1999, we include $517 million in budget authority for cleanup privatization. This program was begun in FY 1997 to develop innovative and improved financing mechanisms for environmental projects. Under the privatization approach, many of the technical and performance risks are shifted to the contractor, providing greater incentives to complete projects on time and within budget. This contracting approach also will bring private sector efficiencies, and new and improved technology to the Department's cleanup program.

The Department will continue to invest resources in technology research, development, and deployment programs to cut costs, reduce safety, health, and environmental risks, and accelerate cleanup. In FY 1999, $219.5 million will support the Environmental Management Technology Development program, which includes basic science research.

These programs are maturing and will soon generate significant cost savings and performance gains as they are applied to the hazardous, toxic and nuclear cleanup challenges of the Cold War legacy. The newly released draft strategy entitled Accelerating Cleanup: Paths to Closure identifies specific areas where the application of innovative technologies can accelerate cleanup and generate large cost savings.

The budget includes $380 million for the Civilian Radioactive Waste Management program to continue to address one of the most significant environmental and energy challenges, the permanent disposal of spent nuclear fuel and high-level nuclear waste. In FY 1999, $298 million is included for Yucca Mountain Site Characterization activities. We will complete the viability assessment of the site in calendar year 1998, and issue a draft EIS for the Yucca Mountain Site in FY 1999.

Safety is a principal priority for the entire Department. The FY 1999 budget request for the Environment, Safety and Health program is $150 million. This is a slight drop -- $10 million -- from 1998 because of reductions in support service contracts, and completion of two activities funded in FY 1998. However -- and the importance of this point cannot be overemphasized -- safety, health, and environmental protection are integrated into every operating budget and the responsibilities of every line manager in the Department.

We are vitally concerned about the health of our employees, as well as the health of citizens in nearby communities. We are funding 70 health studies this year across the DOE complex and in FY 1999 have budgeted $60.5 million to continue this effort. We have also directed all of our sites to put in place stringent programs to keep to an absolute minimum any worker exposure to beryllium, a metal that is used in nuclear weapons.

IV. NATIONAL SECURITY

The National Security program request is $6.1 billion, a $421 million increase from last year's appropriation.

National Security challenges have changed dramatically since the end of the Cold War. The Department's programs are providing new solutions for the new national security challenges of a changing world. Our national security responsibilities are: maintaining the safety and reliability of our nuclear weapons stockpile, advancing our arms control and nonproliferation initiatives, disposing of our surplus weapons-usable materials, and providing nuclear reactors for the U.S. Navy.

In FY 1999, we propose $4.5 billion for Defense Programs activities, including a $330 million increase in Stockpile Stewardship activities to develop the science-based capabilities necessary to meet our national security objectives under a Comprehensive Test Ban Treaty.

Our budget includes $291 million to continue construction of the National Ignition Facility (NIF). The lasers of the NIF willl generate temperatures and pressures near those found in nuclear explosions. Understanding the behavior of matter under these conditions is key to understanding the basic physics of nuclear weapons and predicting their performance in the absence of nuclear testing.

The Accelerated Strategic Computing Initiative budget request is $329 million. We need to develop the fastest supercomputers ever to simulate nuclear explosions, and though we currently have the world's fastest supercomputer -- one that performs one trillion operations per second -- by the year 2000 we will have a computer 10 times faster than that. And by 2004, we expect to have one that is 100 times faster. These supercomputers will run simulations for making critical decisions about the safety and reliability of the stockpile. The also will revolutionize the way we design and make everything from cars to medicines.

One of the greatest challenges we face in this post-Cold War era is ensuring that unsecured nuclear materials do not fall into the wrong hands. This budget addresses the threat of nuclear proliferation, and works to halt the spread of weapons of mass destruction. A total of $676 million is included for Nonproliferation and National Security programs, a $19 million increase. Our request includes $256.9 million for Arms Control activities to continue to address nuclear materials security issues. We will accelerate our ongoing initiatives to secure at-risk facilities in the former Soviet Union.

Our request for nonproliferation initiatives also shows our determination to use the Department's unique scientific and technical expertise to address this challenge. For example, we are currently developing remote sensing devices that will help us detect, prevent, and reverse the proliferation of weapons of mass destruction.

The Department's FY 1999 request continues our International Nuclear Safety Program, which will expand on its successes to date by spreading Western nuclear safety training, know-how and procedures to additional Soviet-designed nuclear plants in the former Soviet Union and Central and Eastern Europe.

With the proposed budget increase, we will continue to develop the technologies we need -- such as advanced DNA analysis techniques -- to counter terrorist threats to the United States, including nuclear, chemical, and biological threats. This budget includes funding to counter the threat of domestic terrorism. We request $19 million for the chemical and biological weapons detection initiative which supports next generation chem-bio detectors.

There is also $7 million proposed for the enhanced nuclear smuggling/terrorism initiative. We have begun to implement a hybrid plutonium disposition strategy that calls for pursuing both immobilization and burning mixed oxide (MOX) fuel in existing, domestic commercial reactors. The fiscal year 1999 budget request for fissile materials disposition is $169 million, a $65 million increase. This increase will allow the Department to begin the design of key U.S. facilities for the disassembly and conversion of nuclear weapons pits and for the fabrication of MOX fuel, as well as to begin the design of a pilot-scale plutonium conversion system in Russia. We will also continue immobilization process development and technology demonstrations required for plutonium disposition. Shortly, we expect to announce the Department's preferred alternatives for siting the plutonium disposition facilities. In moving forward, we recognize that the United States cannot proceed independently to dispose of surplus plutonium without significant progress from Russia. Negotiations to achieve this aim have begun on a framework of agreements on plutonium disposition so that facility construction can commence as expected in the FY 2001-2002 time frame.

MANAGEMENT IMPROVEMENTS

Before closing, I want to provide you some examples of the progress we have made during the past year to strengthen the management of the Department. In addition, I want to highlight areas of increased emphasis in the coming year.

Performance-Based Budgeting: The Department of Energy has been using strategic planning and performance-based budgeting since the beginning of the Clinton Administration, enabling this budget to begin implementation of the provisions of the Government Performance and Results Act (GPRA) to manage federal taxpayer dollars more effectively. This budget was developed by linking the Department's strategic planning process to performance-based planning and budget proposals. The Department will continue to work with the Office of Management and Budget and the Congress to develop improved performance measures for the FY 2000 budget submission.

Increased Competition of Site Management Contracts: Since 1994, the DOE has competed eight Management and Operating contracts with an estimated contract value of more than $24 billion. At least four additional contracts will be competed in the next two years. In comparison, only six competitions were conducted in the 10 years prior to 1994 -- three of which had to be competed because the incumbent contractor had made a business decision to end its work with the Department.

Since I became Secretary one year ago, we have competed the Brookhaven contract and changed the contractor for the first time in 50 years, and we completed the competitions for the Brookhaven contract and the Oak Ridge Environmental Management contract in record time. Currently, we are in the process of competing the management contract for the National Renewable Energy Laboratory (NREL).

Privatization/Alternative Contracting Strategies: We have made substantial improvements in our environmental privatization program during the past year. We have strengthened our review of Requests for Proposals and draft contracts, including rigorous procurement and legal oversight and consideration of "lessons learned" in previous contracts. In addition, we anticipate the hiring of an individual in the very near future to fill the position of the Director of Contract Reform and Privatization and to bring private sector expertise to assist the Department in its alternative contracting strategies. In addition, we supported the enactment of a legislative provision to further clear communication with the Congress on our privatization projects, and late last year, Congress approved this provision, which requires reports to Congress 30 days in advance of the award of any privatization contract. We also are increasing staff training and are improving our procedures for cost estimating and independent reviews of privatization projects. Finally, the Department has a much more focused budget request for Fiscal Year 1998.

Project Management: Last year's Energy and Water Appropriations legislation provided the Department $35 million to provide for independent reviews of the Department's individual construction and privatization projects as well as an external review of the Department's entire project management process. We have commissioned and received the first phase of a review by the National Academy of Engineering recommending actions to revamp our project management processes and procedures, including all privatization projects. A second phase is planned to begin in the near future.

In the interim, we plan to build on the recommendations of the Academy, our own experience, and that of the private sector to implement improvements in the Department's project management process, including increased use of independent reviews of the technical, management, and economic foundations of DOE projects. We will be working closely with the Congress as we develop and implement this initiative.

Support Service Contractors: In FY 1994, the Department spent $700 million on support service contracts. Since that time, DOE has reduced money spent on support service contractors by $247 million.

Reductions in Headquarters Personnel: Since 1995, there has been a 28 percent reduction in Headquarters personnel. Personnel in Headquarters units of the Office of Environmental Management have been reduced by 41 percent since 1995, and this office has not only met its FY 1998 end of year downsizing target but is also extremely close to meeting its FY 1999 target.

Next Steps: We are continuing to move forward on these and other management improvements. We plan additional steps to strengthen the integrated management of the Department's missions. In addition, further actions need to be taken, within the framework of the current downsizing targets, to better match the workforce to the evolving mission. Workforce reductions have hit hardest over the past few years among those employees expected to become the next generation of technical experts and senior managers. Moreover, DOE now has 25 percent of its workforce currently eligible for full or early retirement, a demographic fact which threatens to seriously erode the Department's future technical capabilities and management leadership. I would like to work with the Congress to arrive at a path forward to introduce some certainty and stability into the Department's staffing levels.

THE DOE BUDGET IN PERSPECTIVE

In closing, I would like to discuss the Department's FY 1999 request in the context of the previous years. The Department's budget request in FY 1999 is an increase over the FY 1998 appropriated level; however, as compared to previous years, when adjusted for inflation, we are nearly 30 percent below the FY 1981 appropriation, and nearly 20 percent below our FY 1993 appropriation.

Our FY 1999 budget may be much smaller than our peak years, but it proposes investments that are vital to our country's future. The Department's budget is, of course, part of an overall balanced budget plan. The balanced budget plan does reflect the high priority that President Clinton places on investments in science, technology, and energy for our future. As I have summarized, this budget will take us into the future with the tools we need to ensure a stronger economy, a more secure energy future, better protection from the threat of nuclear danger, a strong nuclear deterrent without nuclear testing, and a healthier society and world.

With your support, the Department of Energy can make a significant contribution to the scientific and technological leadership our nation needs to maintain its preeminence in the global marketplace, and to keep our commitments to a cleaner, safer world. The Department's missions are linked by the common threads of science and technology -- our public investment in energy research and development provides a key catalyst for private sector innovation and the creation of new markets at home and abroad.

Thank you. I would be happy to answer your questions.