The New US Budget: The Energy Sector Becomes More “All of the Above”

By
December 31, 2014

The US statesmen’s vision for the energy sector has been under a series of transformations over the last several years. It has been through a few cycles, alternating its focus between fossil fuels and renewables, with everything else in between. Nowadays, fossil fuels are on the uptake.

On December 13, 2014, US Congress passed H.R. 83, the fiscal year 2015 budget. Some of the winners of next year’s national budget are the Pentagon, with a large portion of the funding allocated to defense, the National Institute of Health, and education. Overall, the Department of Energy’s $10.2 billion budget was largely unchanged; however, the budget featured mixed outcomes of cuts and additions that solidify the trend of renewable and environmental concerns giving way to fossil fuels – some of the Obama administration’s requests for funds have been reversed and others ignored.

The Office of Energy Efficiency and Renewable Energy received a modest increase of $25 million (to $1.937 billion), which nonetheless was about $380 million less than the administration requested. Another denied request for increase was funding for renewable energy research (16% less than President Obama was asking for). Obama was also denied $3 billion he had promised to the Green Climate Fund operating within the framework of the UNFCCC  as amechanism to redistribute money from developed to developing countries to counter climate change. The Environmental Protection Agency (EPA) is losing ground and funding as well: its $8.1 billion budget was cut by $60 million, bringing its staffing to the lowest level since the 1980s and curbing the agency’s efforts in enforcing some air and water laws. This budget reduction also prohibits the EPA from regulating lead ammunition and mountaintop-removal mining.

On the flip side, Congress was generous to fossil fuels and nuclear power by allocating more than requested by the administration. The bill provides $913 million to support nuclear energy. Fossil fuels research is an especially interesting case. President Obama requested a decrease in funding, from $562 million provided in fiscal year 2014 to $475 million. Instead, Congress increased support by boosting funding $100 million above what was asked. Fossil fuels R&D in 2015 will amount to $571 million. Slowly but surely, federal funding of fossil fuels research has been creeping up, growing by about 50% in the past five years.

All in all, a greater number of Republican representatives in Congress is becoming increasingly successful and inventive. Thus, Obama’s announcement a couple years ago of an “all of the above” energy strategy is playing right into their hands: it is being quoted mostly by these lawmakers when pledging their support for fossil fuels. Needless to say, the President has not referenced this energy strategy for a while.

Meanwhile, the markets do not demonstrate any hesitation about fossil fuels: public exchanges and brokers have been adding more products where oil, natural gas, and LNG are underlying commodities. In fact, I don’t remember any noticeable additions to environmental products in many months. And it is a safe bet that this state of affairs will not change in the near future.

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