February 12, 2016

President Obama's FY17 Budget Request Proposes New Energy and Environmental Allocations

The President has unveiled his fiscal year 2017 budget request for the federal government. The figures are ambitious in the way that only a president in his last term would propose, and the budget includes numerous funding changes for the energy and environmental sectors.

An Ambitious Proposal

While some in the media are referring to it as Obama’s “YOLO” (you only live once) budget, the president is clearly hoping to go out with a bang as he sends this challenge to Republican leaders on Capitol Hill. The president is proposing $4.1 trillion in outlays for 2017 on receipts of $3.6 trillion.

Increased federal investments, major policy overhauls and tax hikes are the highlights of the budget. While some in the House of Representatives have already referred to the budget as dead on arrival, the President has stuck to the discretionary budget caps established in last year’s budget agreement and doesn’t seem keen on another sequester battle. This accomplishes two things immediately: first, the President starts on high ground to build support by playing by the rules of the caps, and second, Leader Ryan’s desire to see the appropriations process completed in “regular order” is more plausible with less to stall the process.

The budget’s overview provided by the White House mirrors the language favored by the administration — “forward looking,” “building on progress,” “innovating for a better future” and “global leadership” are common descriptors of the President’s goals. Prioritizing research and development by doubling clean energy R&D, protecting the nation’s water supply, adopting clean energy, and cutting carbon pollution are some of the major goals reflected by the budget.

Energy & Environment Appropriations Highlights

  • The President was getting attention for his boldest ask long before the budget was released — this is the proposed $10-per-barrel crude oil tax. The president sees current low oil prices as a good time to step in, but at today’s prices this tax would result in a nearly 50 percent tax on a barrel of oil to an industry already battered by low commodity prices. The budget also seeks to eliminate tax credits for the oil industry.
  • The EPA is receiving a small bump from last year’s request, up to $8.267 billion. Within the department, funds are being shifted to make room for new programs such as the Clean Power Plan and others aimed at cutting carbon and other greenhouse gas emissions.
  • With the recent Supreme Court decision to stay the implementation of the CPP, it remains to be seen how this will affect Congress’ allocation of funds to the agency. The budget calls for $50.5 million to pay for implementation and administrative costs, as well as $25 million for states to develop their compliance plans.
  • The budget calls for making permanent the wind and solar tax credits that were extended through 2020 in last year’s budget. $122 billion is projected to go toward the credits, jumping to $230 billion the following year and $345 billion by 2019. Furthermore, clean energy research funding would double to $12.8 billion.
  • No money was allocated to deal with the nation’s growing stockpile of nuclear waste; however, the budget calls for $56 million in funding for 2018.
  • The budget proposes $14 billion in cuts to 117 different programs, among them are FEMA Preparedness Grants (lose $460 million), Army Corps of Engineers Construction and Maintenance (lose $1.2 billion), Low Income Home Energy Assistance (lose $390 million), and EPA’s Clean Water and Drinking Water State Revolving Loans (lose $257 million).
  • The request seeks $1.3 billion for the Global Climate Change Initiative, an international climate change assistance program. Within this request, $750 million would go to undeveloped countries to help them cope with the effects of climate change.
  • The drought in the Western States is being addressed with a $98.6 million investment in the WaterSMART program, as well as modest increases for the U.S. Geological Survey and the Department of Energy’s desalination research efforts.
  • The Department of Energy overall would receive $30.2 billion under the proposal, with internal increases to clean energy R&D and the ARPA-E program. The agency will be directed to improve efficiency for the end use of products, as well as establish additional “manufacturing institutes” like those seen in last year’s funding.
  • The Department of the Interior loses funding, and would now receive $12.9 billion compared to last year’s $13.2 billion. Interior will be expected to make up the difference through user fees, which particularly affect oil and gas producers. Up to $2 billion over 10 years is being sought to boost the resilience of coastal communities that will be most affected by climate change. In total, the budget expects to spend $192 million in 2017 to “conserve natural resources for future generations,” with $843 million in outlays the following year.
  • The budget reinstates the Superfund tax that expired in 1995 with projected income of $22.3 billion over 10 years.
  • Through additional reforms to the leasing of public land for energy interests such as oil, gas and coal, the budget predicts $20 million in receipts for 2017, followed by $70 million in 2018, reaching the $100 million mark by 2020.
  • The Department of Transportation’s budget is also down: the administration is seeking $12 billion compared to last year’s budget of $14.2 billion. However, $495 billion over ten years would go to various transportation solutions, including public transportation, high-speed rail and autonomous vehicle research. This would largely be paid for by the controversial $10-a-barrel oil tax mentioned earlier.
  • The President’s idea for a national infrastructure bank, which has been included in previous budgets and rejected by Congress, is back with a request for $10 billion in seed money. The bank would be privately operated with an objective to finance infrastructure projects with non-federal dollars.

Next Steps in the Budget Process

While many of the President’s proposed budget ideas are either a boon or a bust, depending on your interest, it is important to remember that as of now they are simply proposals. Their aim is to help Congress determine the needs of the various agencies in the bureaucracy that will carry out these initiatives and ongoing missions, but ultimately the amount of money that is allocated to each interest will be determined over the next months during the appropriations cycle. We will continue to monitor this process closely, as it is one of the best opportunities to play a role in the political process.

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