oversight

Department of Energy: Budget Trends and Oversight

Published by the Government Accountability Office on 2012-04-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             United States Government Accountability Office

GAO                          Testimony
                             Before the Subcommittee on Oversight
                             and Investigations, Committee on Energy
                             and Commerce, House of Representatives

                             DEPARTMENT OF
For Release on Delivery
Expected at 10:30 a.m. EDT
Wednesday, April 18, 2012

                             ENERGY
                             Budget Trends and
                             Oversight
                             Statement of Frank Rusco, Director
                             Natural Resources and Environment




GAO-12-659T
                                           April 18, 2012

                                           DEPARTMENT OF ENERGY
                                           Budget Trends and Oversight

Highlights of GAO-12-659T, a testimony
before the Subcommittee on Oversight and
Investigations, Committee on Energy and
Commerce, House of Representatives



Why GAO Did This Study                     What GAO Found
Understanding the impact of budget-        Recent GAO work found that funding increases have expanded or created
related considerations has become          Department of Energy (DOE) programs with varying results. For example:
particularly important as Congress and
the administration seek to decrease        •   Advanced Research Projects Agency-Energy (ARPA-E) awards grants to
the cost of government while improving         projects that help develop high-risk energy technologies. Since fiscal year
its performance. In recent years,              2009 the program has received $855 million to fund energy projects that
Congress has authorized large                  industry by itself was not likely to undertake. GAO found that ARPA-E uses
increases in funding for DOE. For              several selection criteria in awarding funds, but its requirements for
example, the Recovery Act, which               information on private funding could be improved.
Congress enacted to, among other
things, preserve and create jobs and       •   The Loan Guarantee Program provides loan guarantees for innovative
promote economic recovery, provided            energy technologies. DOE has made about $15 billion in loan guarantees
DOE with more than $41.7 billion in            and is authorized to make up to $34 billion in additional loan guarantees.
areas such as energy efficiency,               GAO found that the program does not have sufficient data to facilitate
renewable energy, and environmental            oversight, and its actual process for reviewing applications has differed from
cleanup.                                       the established process.
This testimony focuses on several key      •   The Weatherization Assistance Program helps low-income families reduce
programs and related budget issues at          their energy bills by making long-term energy efficiency improvements to
DOE, including (1) the management of           their homes. The American Recovery and Reinvestment Act of 2009
selected programs expanded or                  (Recovery Act) provided $5 billion to enhance the program’s ability to make
created by recent funding increases            energy efficiency improvements to low-income family homes. GAO made
and (2) potential opportunities to             recommendations to DOE to clarify the program’s production targets
achieve savings or enhance revenue.            (e.g., the number of homes weatherized) and guidance.
This testimony is based on prior GAO
reports from February 2011 to March        •   The Advanced Technology Vehicles Manufacturing Loan Program provides
2012, and updated with readily                 loans for projects to produce more fuel-efficient passenger vehicles and their
available data from DOE.                       components. DOE can make up to $25 billion in loans for fuel-efficient
                                               vehicles; at the time of GAO’s review, DOE could not be assured that
                                               projects would be delivered as agreed.
What GAO Recommends                        GAO also reported that improvements at DOE may provide opportunities for
GAO is making no new                       increasing savings and enhancing revenue. For example:
recommendations in this testimony but
continues to believe that implementing     •   Contractor support costs. DOE’s management of contractors, who operate
the recent recommendations made in             DOE sites and represent 90 percent of DOE’s budget, has historically been
the reports discussed should improve           decentralized, or fragmented. This adds to inefficiencies in support functions.
DOE program management, achieve                Since 2007, DOE and contractors at some DOE sites have had efforts to
savings, and enhance revenue. DOE              streamline these functions. GAO recommended that DOE assess whether
has generally agreed with most of our          further opportunities could be taken to streamline such functions.
recommendations, but disagreed on
certain points related to the timing of    •   Diesel emissions. DOE, the Department of Transportation, and the
implementing our recommendations.              Environmental Protection Agency receive federal funding to reduce diesel
                                               emissions from mobile sources—14 programs in all, which also overlap on
                                               certain activities. DOE received $572 million for its 3 programs. GAO
                                               recommended that the three agencies establish a strategy for collaboration
                                               to reduce diesel emissions from mobile sources.
View GAO-12-659T. For more information,    •   Excess uranium inventories. Uranium is used in fuel for nuclear power plants.
contact Frank Rusco at (202) 512-3841 or       GAO reported DOE’s excess uranium inventories could be worth billions of
ruscof@gao.gov.
                                               dollars in additional revenue as fuel for commercial nuclear power plants.
                                                                                   United States Government Accountability Office
Chairman Stearns, Ranking Member DeGette, and Members of the
Subcommittee:

I am pleased to be here today to discuss budget considerations at the
Department of Energy (DOE). These issues are particularly important as
Congress and the administration seek to decrease the cost of
government while improving its performance and accountability.

In recent years, Congress has authorized large increases in funding for
DOE. For example, the American Recovery and Reinvestment Act of
2009 (Recovery Act), which Congress enacted in response to the recent
economic crisis to, among other things, preserve and create jobs and
promote economic recovery, provided DOE with more than $41.7 billion—
$35.2 billion for projects and activities and $6.5 billion in borrowing
authority—in areas such as energy efficiency, renewable energy, and
environmental cleanup. Congress also passed the America Creating
Opportunities to Meaningfully Promote Excellence in Technology,
Education, and Science Act of 2007 (America COMPETES Act), with the
overall goal of increasing federal investment in scientific research. 1 In this
context, the President’s fiscal year 2007 budget proposed doubling
funding for DOE’s Office of Science by fiscal year 2016, in part under the
goals of the America COMPETES Act. However, policy decisions made in
response to the current budget environment have since shifted the Office
of Science’s funding trajectory away from this target.

My testimony today draws on our recent work in which we made
recommendations intended to improve the management of DOE’s
programs. DOE has generally agreed with most of our recommendations,
but disagreed on certain points related to the timing of implementing our
recommendations. I will focus my remarks today on several key programs
and related budget issues at DOE concerning (1) the management of
selected programs that were expanded or created by recent funding
increases and (2) potential opportunities to achieve savings or enhance
revenue.

This statement is based largely on our prior work issued from February
2011 to March 2012, including our work on overlap and duplication of



1
 Pub. L. No. 110-69, 121 Stat. 572 (2007); reauthorized by Pub. L. No. 111-358, 124 Stat.
3982 (2011).




Page 1                                                                       GAO-12-659T
                       federal programs that may result in inefficient use of taxpayer funds, 2 and
                       updated with readily available data from DOE. Detailed information on our
                       scope and methodology for our prior work can be found in these reports.
                       (See our list of related GAO products at the end of this testimony.) We do
                       not provide budget summary data for all programs and initiatives
                       associated with the activities included in this testimony because many of
                       them (e.g., renewable energy initiatives, DOE contractor support costs,
                       diesel emissions, and excess uranium inventories) span a number of
                       DOE programs. We conducted the underlying performance audits in
                       accordance with generally accepted government auditing standards.
                       Those standards require that we plan and perform audits to obtain
                       sufficient, appropriate evidence to provide a reasonable basis for our
                       findings and conclusions based on our audit objectives. We believe that
                       the evidence obtained provides a reasonable basis for our statement
                       today.


                       From fiscal years 2007 through 2012, DOE’s budget requests rose in
Funding Increases      nominal terms from about $23.6 billion to $29.5 billion, and its
Have Expanded or       appropriations rose over that time from about $23.8 billion to $26.3 billion,
                       increasing to almost $33.9 billion in fiscal year 2009. DOE requested
Created Programs       approximately $27.2 billion for fiscal year 2013, as shown in table 1.
with Varying Results




                       2
                        GAO, 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and
                       Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP (Washington,
                       D.C.: Feb. 28, 2012). This statement does not discuss DOE’s National Nuclear Security
                       Administration (NNSA) or Office of Environmental Management.




                       Page 2                                                                     GAO-12-659T
Table 1: DOE Budget Requests and Appropriations, Fiscal Years 2007-2013

Dollars in thousands
Fiscal year                                                     Budget request                                        Appropriationsa
2007                                                                $23,556,755                                            $23,754,228
2008                                                                  24,259,251                                            24,032,338
2009                                                                  25,014,956                                            33,856,453
2010                                                                  26,393,982                                            26,425,673
2011                                                                  28,404,359                                            25,692,833
2012                                                                  29,546,730                                            26,299,547
                                                                                                                                        b
2013                                                                  27,155,072
                                       Source: DOE.


                                       Note: In fiscal year 2009, DOE received about $36.7 billion in Recovery Act appropriations, with
                                       varying obligation deadlines. During the yearly appropriations process, DOE generally receives no-
                                       year funding. No-year funding refers to appropriations that do not restrict the time by which funds
                                       must be obligated. For more information on DOE’s no-year funding, see GAO, DOE’s No-Year
                                       Funding, GAO/RCED-95-91R (Washington, D.C.: Mar. 8, 1995).
                                       a
                                        This column does not include Recovery Act appropriations.
                                       b
                                        Appropriations have not yet been determined for fiscal year 2013.

                                       According to agency documents, in addition to aligning its fiscal year
                                       2013 budget request with its strategic plan, DOE released a technology
                                       review in September 2011 that provided a framework for preparing
                                       budgets for some of its energy and science programs. Since then,
                                       according to these documents, DOE has worked closely with the Office of
                                       Management and Budget to develop, under its strategic plan, new priority
                                       goals—including maximizing the benefits of investments in scientific
                                       facilities—for fiscal year 2013.


DOE Programs Funded by                 Through the Recovery Act, Congress provided approximately $8 billion
the Recovery Act                       for three existing DOE programs: (1) $0.4 billion in initial funding for the
                                       Advanced Research Projects Agency-Energy to support advanced energy
                                       research, (2) $2.5 billion for the Loan Guarantee Program to guarantee
                                       loans for innovative energy projects, and (3) $5 billion for the
                                       Weatherization Assistance Program to make energy efficiency
                                       improvements to the homes of low-income families. Since these funding
                                       increases were implemented, we reviewed the programs receiving the
                                       funds and made several recommendations intended to improve their
                                       management. In addition, under the Advanced Technology Vehicles
                                       Manufacturing loan program, which received some Recovery Act funds,
                                       DOE can provide up to $25 billion in loans for fuel-efficient vehicle



                                       Page 3                                                                                 GAO-12-659T
                         projects, but at the time of our review, it could not be assured that
                         projects would be delivered as agreed. We also recently reported that,
                         among the 92 renewable energy-related initiatives DOE implemented in
                         fiscal year 2010, the Recovery Act established 7 and increased funding
                         for 36. 3


Advanced Research        The America COMPETES Act of 2007 established the Advanced
Projects Agency-Energy   Research Projects Agency-Energy (ARPA-E) within DOE to overcome the
                         long-term and high-risk technological barriers to the development of
                         energy technologies. However, ARPA-E did not receive an appropriation
                         until 2 years later, in 2009, in the Recovery Act. Including the Recovery
                         Act funds and subsequent appropriations, ARPA-E has received about
                         $855 million in appropriations. According to ARPA-E’s budget director, as
                         of March 1, 2012, the program has awarded no more than the $521.7
                         million that, as we reported in January 2012, was provided to universities,
                         public and private companies, and national laboratories to fund 181
                         projects that attempt to make transformational advances to a variety of
                         energy technologies, including high-energy batteries and renewable fuels.
                         This official told us that ARPA-E has not yet selected award recipients for
                         fiscal year 2012. Award winners must meet cost-share requirements,
                         through either in-kind contributions or outside nonfederal funding sources.
                         ARPA-E is required by statute to achieve its goals through energy
                         technology projects that, among other things, accelerate transformational
                         technological advances in areas that industry by itself is not likely to
                         undertake because of technical and financial uncertainty. At the same
                         time, the agency’s director is required to ensure, to the maximum extent
                         practicable, that its activities are coordinated with, and do not duplicate
                         the efforts of, programs and laboratories within DOE and other relevant
                         research agencies. Table 2 shows the program’s budget requests and
                         appropriations since receiving an appropriation through the Recovery Act
                         in fiscal year 2009.




                         3
                          GAO, Renewable Energy: Federal Agencies Implement Hundreds of Initiatives,
                         GAO-12-260 (Washington, D.C.: Feb. 27, 2012).




                         Page 4                                                                  GAO-12-659T
Table 2: Advanced Research Projects Agency-Energy Budget Requests and Appropriations, Fiscal Years 2010-2013

Dollars in thousands
Fiscal year                                                   Budget request                                          Appropriationsa
2010                                                                   $10,000                                                         0
2011                                                                   273,400                                                 179,640
2012                                                                   521,943                                                 275,000
                                                                                                                                       b
2013                                                                   350,000
                                       Source: DOE.


                                       Note: In fiscal year 2009, Advanced Research Projects Agency-Energy received about $400 million in
                                       Recovery Act appropriations.
                                       a
                                       This column does not include Recovery Act appropriations.
                                       b
                                       Appropriations have not yet been determined for fiscal year 2013.

                                       In January 2012, we reported that ARPA-E uses several selection criteria
                                       in making awards, although its requirements for information on private
                                       sector funding could be improved. 4 For example, we reported that ARPA-
                                       E’s program directors spent time and resources to determine the extent of
                                       prior funding for proposed ARPA-E projects. Also, our review suggested
                                       that most ARPA-E projects could not have been funded solely by the
                                       private sector. Furthermore, according to ARPA-E officials and
                                       documents, agency officials have taken steps to coordinate with other
                                       DOE offices in advance of awarding ARPA-E funds to help avoid
                                       duplication of efforts. We recommended that ARPA-E consider providing
                                       applicants guidance with a sample response explaining prior sources of
                                       funding, requiring applicants to provide letters from investors explaining
                                       why they are not willing to fund proposed projects, and using third-party
                                       venture capital data to identify applicants’ prior funding. DOE agreed with
                                       our recommendations.


Loan Guarantee Program                 Under the Energy Policy Act of 2005, the Loan Guarantee Program (LGP)
                                       was created to provide loan guarantees for innovative energy
                                       technologies. Until February 2009, the LGP was working exclusively
                                       under section 1703 of the act, which authorized loan guarantees for new



                                       4
                                        GAO, Department of Energy: Advanced Research Projects Agency-Energy Could Benefit
                                       from Information on Applicants’ Prior Funding, GAO-12-112 (Washington, D.C.: Jan. 13,
                                       2012).




                                       Page 5                                                                              GAO-12-659T
or innovative energy technologies that had not yet been widely
commercialized in the United States. At that time, Congress had
authorized DOE to guarantee approximately $42.5 billion in section 1703
loans. 5 Although Congress had provided funds to DOE to cover the
program’s administrative costs, it had not appropriated funds to pay the
“credit subsidy costs” of these guarantees. Credit subsidy costs are the
government’s estimated net long-term cost, in present value terms, of
direct or guaranteed loans over the entire period the loans are
outstanding (not including administrative costs). In February 2009, the
Recovery Act amended the Energy Policy Act of 2005, adding section
1705, which made certain commercial technologies eligible for loan
guarantees if they could start construction by September 30, 2011. 6 The
Recovery Act also provided $6 billion in appropriations—later reduced by
transfer and rescission to about $2.5 billion 7—to cover DOE’s credit
subsidy costs for an estimated $18 billion in additional loan guarantees. In
fiscal year 2011, Congress appropriated about $170 million to cover
subsidy costs of section 1703 loan guarantees for the first time. Table 3
shows the program’s budget requests and appropriations since fiscal year
2008.




5
 The LGP’s total authority for section 1703 loans was $34 billion, as of March 12, 2012.
6
 To be eligible for Recovery Act funding, projects were required to meet other
requirements as well, including that workers employed on the project were to be paid
wages not less than prevailing on similar work in the locality, in accordance with the
Davis-Bacon Act.
7
 In fiscal year 2009, the LGP received nearly $6 billion in Recovery Act appropriations to
pay the credit subsidy costs of projects supported under section 1705 with the limitation
that funding to pay the credit subsidy costs of leading-edge biofuel projects eligible under
this section would not exceed $500 million. Congress later authorized the President to
transfer up to $2 billion of the nearly $6 billion to expand the “Cash for Clunkers” program.
Pub. L. No. 111-47 (Aug. 7, 2009). The $2 billion was transferred to the Department of
Transportation, leaving nearly $4 billion to cover credit subsidy costs of projects supported
under section 1705. On August 10, 2010, Pub. L. No. 111-226 rescinded an additional
$1.5 billion from the loan guarantee appropriation to pay for education-related jobs,
Medicaid and other initiatives, further reducing available funding to $2.5 billion.




Page 6                                                                          GAO-12-659T
Table 3: Loan Guarantee Program Budget Requests and Appropriations, Fiscal Years 2008-2013

Dollars in thousands
Fiscal year                                                    Budget request                                           Appropriationsa
2008                                                                     $8,390                                                    $4,459
2009                                                                            0                                                         0
2010                                                                            0                                                         0
2011                                                                    500,000                                                   169,660
2012                                                                    200,000                                                           0
                                                                                                                                          b
2013                                                                            0
                                       Source: DOE.


                                       Notes: The table includes funding for section 1703 and section 1705 of the Energy Policy Act of 2005.
                                       In fiscal year 2009, the Loan Guarantee Program received $6 billion in Recovery Act appropriations,
                                       which were later reduced by transfer and rescission to about $2.5 billion.

                                       a
                                        This column does not include Recovery Act appropriations.

                                       b
                                        Appropriations have not yet been determined for fiscal year 2013.


                                       In March 2012, we reported that DOE had made $15 billion in loan
                                       guarantees and conditionally committed to an additional $15 billion as of
                                       September 30, 2011. 8 However, we also reported that the program does
                                       not have the consolidated data on application status needed to facilitate
                                       efficient management and program oversight. In addition, the program
                                       adhered to most of its established process for reviewing applications, but
                                       we reported that its actual process differed from its established process at
                                       least once on 11 of the 13 applications we reviewed. DOE agreed with
                                       our recommendations to (1) ensure that its records management system
                                       contains documents supporting past decisions, as well as those in the
                                       future, and (2) regularly update program policies and procedures. DOE
                                       disagreed with our recommendation to commit to a timetable to fully
                                       implement a consolidated system to provide information on program
                                       applications and measure overall program performance, stating that it did
                                       not agree to a hard timetable for implementing the recommendation. We
                                       continue to believe that DOE should commit to developing such a system
                                       in a timely fashion.




                                       8
                                        GAO, DOE Loan Guarantees: Further Actions Are Needed to Improve Tracking and
                                       Review of Applications, GAO-12-157 (Washington, D.C.: Mar. 12, 2012).




                                       Page 7                                                                                 GAO-12-659T
Weatherization Assistance              The Recovery Act appropriated $5 billion for the Weatherization
Program                                Assistance Program to help low-income families reduce their energy bills
                                       by making long-term energy efficiency improvements to their homes. 9
                                       This appropriation represented a significant funding increase for a
                                       program that had received about $225 million per year in recent years. As
                                       of February 28, 2012, we found that DOE had awarded 58 state-level
                                       grant recipients approximately $4.84 billion to implement the
                                       Weatherization Assistance Program under the Recovery Act, and these
                                       recipients reported spending about $4.22 billion and weatherizing
                                       709,138 homes, exceeding the program’s production target of 607,000
                                       homes. 10 Table 4 shows the program’s budget requests and
                                       appropriations since fiscal year 2007.

Table 4: Weatherization Assistance Program Budget Requests and Appropriations, Fiscal Years 2007-2013

Dollars in thousands
Fiscal years                                                       Budget request                                        Appropriationsa
2007                                                                       $164,198                                               $204,550
2008                                                                        144,000                                                227,222
2009                                                                                0                                              450,000
2010                                                                        220,000                                                210,000
2011                                                                        300,000                                                174,300
2012                                                                        320,000                                                  68,000
    b                                                                                                                                       c
2013                                                                        139,000
                                       Source: DOE.


                                       Notes: The table includes $250 million in emergency funding for the Weatherization Assistance
                                       Grants program provided by the Consolidated Security, Disaster Assistance, and Continuing
                                       Appropriations Act, 2009, Pub. L. No. 110-329, § 130(a) (Sept. 30, 2008). In fiscal year 2009, the
                                       Weatherization Assistance Program received almost $5 billion in Recovery Act appropriations.
                                       a
                                           This column does not include Recovery Act appropriations.
                                       b
                                        The budget request for fiscal year 2013 also includes Weatherization Training and Technical
                                       Assistance.
                                       c
                                           Appropriations have not yet been determined for fiscal year 2013.




                                       9
                                        These improvements include installing insulation, sealing leaks, and modernizing heating
                                       equipment and air conditioning equipment.
                                       10
                                         This information is based on updates provided by DOE officials to our data in GAO,
                                       Recovery Act: Progress and Challenges in Spending Weatherization Funds, GAO-12-195
                                       (Washington, D.C.: Dec. 16, 2011).




                                       Page 8                                                                                  GAO-12-659T
In December 2011, we reported that some grant recipients had been able
to exceed their production targets because of a lower average cost of
weatherizing homes and lower training and technical assistance
expenses than anticipated. 11 In addition, most recipients reported
experiencing more implementation challenges in the first year of the
Recovery Act than in the third year. We also reported that a long-term
Weatherization Assistance Program goal is to increase energy efficiency
through cost-effective weatherization work and that March 2010 cost-
benefit estimates from an Oak Ridge National Laboratory study indicate
that energy savings will likely exceed the program’s costs. That is, every
$1 spent on the weatherization program for 2009 through 2011 would
result in almost $2 in energy savings over the useful life of the
investment; the laboratory plans to issue more definitive estimates in
2013. 12 Also in our December 2011 report, we discussed actions DOE
took in response to a recommendation we made in a May 2010 report, 13
that DOE clarify production targets and funding deadlines, among other
things; DOE officials provided documentation concerning targets but did
not provide clarification of the consequences for not meeting the targets.
In response to concerns about whether or not program requirements were
being met, our May 2010 report included recommendations to DOE to
clarify its guidance, production targets, funding deadlines, and associated
consequences. DOE’s program guidance stated that recipients could
spend Recovery Act funds until March 31, 2012. According to DOE,
several grant recipients had requested additional time to spend these
funds. Between the issuance of our two reports, in September 2011, the
Office of Management and Budget released a memorandum stating that
Recovery Act funds should be spent by September 2013. In our
December 2011 report, we found that, as of November 2011, DOE had
not determined if an extension would be available for grant recipients. In
January 2012, DOE issued guidance stating that it was offering grant



11
 GAO-12-195.
12
  For its estimates, Oak Ridge National Laboratory considered the 50 states and the
District of Columbia and not the Native American tribes and the U.S. territories that are
also recipients of the weatherization program under the Recovery Act. Oak Ridge National
Laboratory assumed that the weatherization investment would yield energy savings over a
20-year period.
13
  GAO, Recovery Act: States’ and Localities’ Uses of Funds and Actions Needed to
Address Implementation Challenges and Bolster Accountability, GAO-10-604
(Washington, D.C.: May 26, 2010).




Page 9                                                                      GAO-12-659T
                                       recipients an opportunity to modify the original March 31, 2012 funding
                                       deadline.

Advanced Technology                    In December 2007, Congress enacted the Energy Independence and
Vehicles Manufacturing                 Security Act of 2007, which mandates more stringent average fuel
Loan Program                           economy standards for newly manufactured passenger vehicles sold in
                                       the United States by model year 2020 and established in DOE the
                                       Advanced Technology Vehicles Manufacturing (ATVM) loan program, to
                                       provide loans for projects to produce more fuel-efficient passenger
                                       vehicles and their components. The ATVM loan program is to provide up
                                       to $25 billion in loans for more fuel-efficient vehicles and components.
                                       Congress also provided $7.5 billion to pay the required credit subsidy
                                       costs of the loans, as shown in table 5.

Table 5: Advanced Technology Vehicles Manufacturing Loan Program’s Budget Requests and Appropriations, Fiscal Years
2009-2013

Dollars in thousands
Fiscal year                                                   Budget request                                        Appropriationsa
2009                                                                         $0                                           $7,510,000
2010                                                                    20,000                                                 20,000
2011                                                                      9,998                                                 9,978
2012                                                                      6,000                                                 6,000
                                                                                                                                     b
2013                                                                      9,000
                                       Source: DOE.


                                       Note: In fiscal year 2009, the Advanced Technology Vehicles Manufacturing Loan Program received
                                       $10 million in Recovery Act appropriations.

                                       a
                                       This column does not include Recovery Act appropriations.

                                       b
                                       Appropriations have not yet been determined for fiscal year 2013.


                                       In February 2011, we reported that the ATVM loan program had made
                                       $8.4 billion in loans that DOE expects to yield fuel economy
                                       improvements in the near term, along with greater advances through
                                       newer technologies, in years to come. 14 These loans represent about a
                                       third of the $25 billion authorized by law, but we reported that the program


                                       14
                                         GAO, Department of Energy: Advanced Technology Vehicle Loan Program
                                       Implementation Is Under Way, but Enhanced Technical Oversight and Performance
                                       Measures Are Needed, GAO-11-145 (Washington, D.C.: Feb. 28, 2011).




                                       Page 10                                                                            GAO-12-659T
                   had used 44 percent of the $7.5 billion allocated to pay credit subsidy
                   costs, which is more than was initially anticipated. These higher credit
                   subsidy costs were, in part, a reflection of the risky financial situation of
                   the automotive industry at the time the loans were made. As a result of
                   the higher credit subsidy costs, we reported that the program may be
                   unable to loan the full $25 billion allowed by statute. We also reported that
                   the ATVM loan program had set procedures for overseeing the financial
                   and technical performance of borrowers and had begun using the
                   procedures to oversee the loans; at the time of our report, however, it had
                   not yet engaged the engineering expertise needed for technical oversight,
                   as called for by its procedures. As a result, we reported that without
                   qualified oversight to analyze the information submitted by the borrowers
                   and to provide technical monitoring, DOE could not be adequately
                   assured that the borrowers are delivering the vehicle and component
                   projects as required by the loan agreements. In addition, we reported that
                   DOE had not developed sufficient performance measures that would
                   enable it to fully assess progress toward achieving its program goals.
                   DOE disagreed with our recommendations that the agency accelerate its
                   efforts to engage the expertise needed for effective oversight and develop
                   sufficient performance measures, although we continue to believe that the
                   agency should take these actions.


Renewable Energy   In February 2012, we reported that DOE had implemented 92 renewable
Initiatives        energy-related initiatives in fiscal year 2010. 15 These initiatives supported
                   every renewable energy source in our review, including bioenergy, solar,
                   and wind, and most initiatives supported more than a single energy
                   source. In addition, more than 70 percent of these initiatives supported
                   both the public and private sectors. These initiatives were distributed
                   across multiple federal responsibilities, with the largest percentage of
                   DOE’s initiatives supporting research and development. Approximately
                   one-third (36) of the 106 existing federal renewable energy-related
                   initiatives that received additional funding under the Recovery Act were
                   implemented by DOE, primarily involving research and development of
                   new renewable energy technologies. Overall, the Recovery Act affected
                   49 DOE initiatives: 7 were established, 36 received more funding, and 11




                   15
                    GAO-12-260.




                   Page 11                                                            GAO-12-659T
                           expanded or had their scope changed. 16 Several of the renewable
                           energy-related initiatives we reviewed have expired or will expire, in full or
                           in part, because of the expiration of legislative authority, depletion of
                           available appropriations, or some other expiration under the law as
                           written as of fall of 2011. 17 Our report contained no recommendations to
                           DOE.


                           We have previously reported on several areas at DOE that may provide
Opportunities May          opportunities for achieving increased savings and enhancing government
Exist to Achieve           revenue. Areas that may provide opportunities for increased savings
                           include (1) contractor support costs and (2) potential overlap of effort
Savings and Enhance        across certain activities for programs to reduce diesel emissions from
Revenue                    mobile sources. An area that may provide an opportunity for enhanced
                           government revenue concerns DOE’s uranium inventories, which are
                           worth potentially billions of dollars to commercial nuclear power plants
                           that can use the material as fuel in their reactors.


Contractor Support Costs   DOE spends 90 percent of its annual budget—which totaled $27 billion
                           for fiscal year 2011—on the contractors that carry out its diverse missions
                           and operate its sites nationwide. In January 2012, we reported that DOE
                           and contractors at some DOE sites, including the Office of Science, have
                           been carrying out a variety of efforts since 2007 to streamline and reduce
                           the costs of sites’ support functions. 18 Such functions include procuring
                           needed goods and services; recruiting and hiring workers; managing
                           health and retirement benefits; maintaining facilities and infrastructure;


                           16
                             The numbers total more than 49 because some initiatives were affected by the
                           Recovery Act in multiple ways. The Recovery Act also had an indirect or other impact on
                           three DOE initiatives.
                           17
                             We did not report budget requests or appropriations for these initiatives because our
                           data do not always match agencies’ reported information on these activities, such as
                           information contained in budget documents. In particular, we developed data on agencies’
                           initiatives that were related to renewable energy through a specific emphasis or focus,
                           even if renewable energy was part of a broader effort. Renewable energy activities may
                           be part of broader initiatives which are not primarily focused on renewable energy. In
                           these instances, renewable energy projects can be one of many eligible types of activities
                           that receive support under an initiative.
                           18
                             GAO, Department of Energy: Additional Opportunities Exist to Streamline Support
                           Functions at NNSA and Office of Science Sites, GAO-12-255 (Washington, D.C.: Jan. 31,
                           2012).




                           Page 12                                                                      GAO-12-659T
                   and providing day-to-day accounting, information technology, and
                   security. In addition, we found that contractors at sites have undertaken
                   their own streamlining and cost-reduction efforts, ranging from automating
                   hiring, training, or other human resources activities to reducing employee
                   health care and pension costs. Also in February 2012, in our annual
                   report on overlap and duplication of federal programs that may result in
                   inefficient use of taxpayer funds, we recommended that DOE assess
                   whether further opportunities could be taken to streamline support
                   functions, estimated to cost over $5 billion, at its contractor-managed
                   laboratories and other sites, including Office of Science sites, in light of
                   contractors’ historically fragmented approach to providing these
                   functions. 19 DOE agreed with the recommendation.


Diesel Emissions   Diesel engines play a vital role in public transportation, construction,
                   agriculture, and shipping, largely because they are more durable and
                   reliable than gasoline-powered engines, as well as 25 to 35 percent more
                   energy efficient. However, exhaust from diesel engines is a pervasive and
                   harmful form of air pollution that affects public health and the
                   environment. Table 6 shows funding, by program, for DOE activities to
                   reduce diesel emissions from mobile sources.




                   19
                     GAO, 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and
                   Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP (Washington,
                   D.C.: Feb. 28, 2012). In GAO-12-255, we examined sites overseen by both DOE’s Office
                   of Science and the National Nuclear Security Administration. As discussed in this report,
                   these DOE sites’ support costs for recent years are not fully known, because DOE
                   changed its data collection approach in 2010 to improve the quality of its cost data. Also,
                   DOE has not yet fully implemented a quality control process for these more recent data
                   but intends to do so in 2012.




                   Page 13                                                                        GAO-12-659T
Table 6: Estimated Federal Grants Obligated for DOE Activities to Reduce Diesel Emissions from Mobile Sources, by
Program, Fiscal Years 2007-2011

Dollars in thousands
Program                      Purpose                                                                                              Grants
Clean Cities program         To advance the nation’s economic, environmental, and energy security by                            $305,000
                             funding projects that reduce petroleum use in transportation
Energy Efficiency and        To support energy efficiency and conservation projects that reduce fossil fuel                      256,000
Conservation Block Grant     emissions and energy use and improve energy efficiency in the transportation
program                      and building sectors
State Energy Program         To support state development and implementation of strategies and goals that                         11,000
                             promote energy efficiency and conservation
                                         Source: GAO analysis of relevant laws and DOE data and documents.


                                         Note: The Recovery Act provided funding for DOE’s Clean Cities, Energy Efficiency and Conservation
                                         Block Grant, and State Energy programs.

                                         In February 2012, we reported that federal grant and loan funding for
                                         activities that reduce mobile source diesel emissions is fragmented
                                         across 14 programs at DOE, the Department of Transportation (DOT),
                                         and the Environmental Protection Agency (EPA). 20 Moreover, we reported
                                         that each of these programs overlaps with at least one other program in
                                         the specific activities they fund, the program goals, or the eligible
                                         recipients of funding. 21 In addition, we found that these programs
                                         generally do not collaborate. We previously reported that uncoordinated
                                         program efforts can waste scarce funds, confuse and frustrate program
                                         customers, and limit the overall effectiveness of the federal effort. 22 To
                                         help ensure the effectiveness and accountability of federal funding that
                                         reduces diesel emissions, we recommended that DOE, DOT, and EPA
                                         establish a strategy for collaboration in reducing mobile source diesel
                                         emissions. DOE agreed with our recommendation.




                                         20
                                           GAO-12-342SP.
                                         21
                                           We did not report budget requests or appropriations for these programs because only
                                         one has a specific purpose of reducing mobile source diesel emissions. The remaining
                                         programs focus on other goals or purposes, such as supporting energy efficiency projects
                                         or reducing petroleum use.
                                         22
                                           GAO, The Government Performance and Results Act: 1997 Governmentwide
                                         Implementation Will Be Uneven, GAO/GGD-97-109 (Washington, D.C.: June 1997).




                                         Page 14                                                                             GAO-12-659T
Excess Uranium   Uranium is used in fuel for nuclear power plants. Twenty percent of our
Inventories      nation’s electricity comes from nuclear power, and growing anxiety over
                 climate change generated by ever-growing demand for fossil fuels has
                 sparked interest in increasing the use of nuclear power, despite ongoing
                 concerns about the safety of such power in light of the March 2011
                 nuclear accident in Japan. In September 2011, we reported that a healthy
                 domestic uranium industry is considered essential to ensuring that
                 commercial nuclear power remains a reliable option for supporting the
                 nation’s energy needs. 23 DOE maintains large inventories of uranium that
                 it no longer requires for nuclear weapons or as fuel for naval nuclear
                 propulsion reactors. A large portion of these inventories consists of
                 depleted uranium hexafluoride, otherwise known as “tails”—a byproduct
                 of the uranium enrichment process. Recent increases in uranium prices
                 could transform these tails into a lucrative source of revenue for the
                 government. In addition, DOE maintains thousands of tons of natural
                 uranium, which likewise could be sold to utilities or others for additional
                 revenue.

                 We reported in March 2008 that marketing DOE’s excess uranium tails
                 could provide billions in revenue for the government. 24 In June 2011, we
                 reported our estimates of the value of the tails at $4.2 billion; this estimate
                 was based on May 2011 uranium prices and enrichment costs and
                 assuming sufficient re-enrichment capacity was available. 25 Executed in
                 accordance with federal law, sales of natural uranium by DOE could also
                 generate additional revenue for the government. In September 2011, we
                 reported that in seven transactions executed since 2009, DOE has, in
                 effect, “sold” nearly 1,900 metric tons of natural uranium into the market,
                 using its contractor as a sales agent, and receiving from $109 to $183 per
                 kilogram. 26 The total proceeds from these transactions funded over $250
                 million in environmental cleanup services by that contractor at the
                 Portsmouth uranium enrichment plant. DOE characterized these sales as


                 23
                  GAO, Excess Uranium Inventories: Clarifying DOE’s Disposition Options Could Help
                 Avoid Further Legal Violations, GAO-11-846 (Washington, D.C.: Sept. 26, 2011).
                 24
                   GAO, Nuclear Material: DOE Has Several Potential Options for Dealing with Depleted
                 Uranium Tails, Each of Which Could Benefit the Government, GAO-08-606R
                 (Washington, D.C.: Mar. 31, 2008).
                 25
                   GAO, Nuclear Material: DOE’s Depleted Uranium Tails Could be a Source of Revenue
                 for the Government, GAO-11-752T (Washington, D.C.: June 13, 2011).
                 26
                  GAO -11-846.




                 Page 15                                                                   GAO-12-659T
                  barter transactions. We reported that while DOE received no cash from
                  the transactions, our review found that the agency allowed a sales agent
                  to keep cash from the sales, which DOE would otherwise have owed to
                  the United States Treasury, thus violating the miscellaneous receipts
                  statute. 27 We therefore reported that Congress should consider providing
                  DOE with explicit authority to barter excess uranium and to retain the
                  proceeds from barters, transfers, and sales. Likewise, Congress could
                  direct DOE to sell uranium for cash and make those proceeds available
                  by appropriation for decontamination and decommissioning expenses at
                  DOE’s uranium enrichment plants. Congress has taken some actions in
                  response to our work. 28


                  Chairman Stearns, Ranking Member DeGette, and Members of the
                  Subcommittee, this concludes my prepared statement. I would be happy
                  to respond to any questions you may have at this time.


                  For further information regarding this testimony, please contact Frank
Contact and       Rusco at (202) 512-3841 or ruscof@gao.gov. Contact points for our
Acknowledgments   Offices of Congressional Relations and Public Affairs may be found on
                  the last page of this statement. Kim Gianopoulos, Chad M. Gorman, Carol
                  Herrnstadt Shulman, Kiki Theodoropoulos, Jeremy Williams, Michelle R.
                  Wong, and Arvin Wu made key contributions to this testimony.




                  27
                    The miscellaneous receipts statute requires an official or agent of the government
                  receiving money for the government from any source to deposit the money in the U.S.
                  Treasury.
                  28
                   GAO-12-342SP.




                  Page 16                                                                     GAO-12-659T
Related GAO Products


             Department of Energy: Advanced Research Projects Agency-Energy
             Could Improve Its Collection of Information from Applications,
             GAO-12-407T (Washington, D.C.: Jan. 24, 2012).

             2012 Annual Report: Opportunities to Reduce Duplication, Overlap and
             Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP
             (Washington, D.C.: Feb. 28, 2012).

             Diesel Pollution: Fragmented Federal Programs that Reduce Mobile
             Source Emissions Could be Improved, GAO-12-261 (Washington, D.C.:
             Feb. 7, 2012).

             Renewable Energy: Federal Agencies Implement Hundreds of Initiatives,
             GAO-12-260 (Washington, D.C.: Feb. 27, 2012).

             Department of Energy: Additional Opportunities Exist to Streamline
             Support Functions at NNSA and Office of Science Sites, GAO-12-255
             (Washington, D.C.: Jan. 31, 2012).

             Department of Energy: Advanced Research Projects Agency-Energy
             Could Benefit from Information on Applicants’ Prior Funding, GAO-12-112
             (Washington, D.C.: Jan. 13, 2012).

             Recovery Act: Progress and Challenges in Spending Weatherization
             Funds, GAO-12-195 (Washington, D.C.: Dec. 16, 2011).

             DOE Loan Guarantees: Further Actions Are Needed to Improve Tracking
             and Review of Applications, GAO-12-157 (Washington, D.C.: Mar. 12,
             2012).

             Excess Uranium Inventories: Clarifying DOE’s Disposition Options Could
             Help Avoid Further Legal Violations, GAO-11-846 (Washington, D.C.:
             Sept. 26, 2011).

             Nuclear Material: DOE’s Depleted Uranium Tails Could be a Source of
             Revenue for the Government, GAO-11-752T (Washington, D.C.: June 13,
             2011).

             Department of Energy: Advanced Technology Vehicle Loan Program
             Needs Enhanced Oversight and Performance Measures, GAO-11-745T
             (Washington, D.C.: June 9, 2011).




             Page 1                                                       GAO-12-659T
           Recovery Act: Status of Department of Energy’s Obligations and
           Spending, GAO-11-483T (Washington, D.C.: Mar. 17, 2011).

           Department of Energy: Advanced Technology Vehicle Loan Program
           Implementation Is Under Way, but Enhanced Technical Oversight and
           Performance Measures Are Needed, GAO-11-145 (Washington, D.C.:
           Feb. 28, 2011).




(361401)
           Page 2                                                       GAO-12-659T
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