Reading The Budgetary Tea Leaves.
The FY2011 Budget is out. The numbers provide useful indications of key Obama Administration environmental and energy policies. Highlights include an aggressive EPA 
rule-making agenda to control GHGs and more money for DOE 's renewable energy research but huge cuts in DOE's fossil fuel programs.
To begin with, the term "cap and trade", which was prominently featured in the FY2010 Budget (see for example page 21) is missing entirely from the FY2011 Budget. The new and apparently improved euphemism for mandatory GHG emission controls is "comprehensive market-based policy that will reduce greenhouse gas emissions." While the Administration has apparently jettisoned "cap and trade" as a political liability, it remains committed to regulating GHG emissions and has requested significant funding for EPA to do so through command and control regulations. The Administration allocates "$56 million– including $43 million in new funding – for the EPA and states to address climate change effectively through regulatory initiatives to control greenhouse gas emissions." The budget is $25 million for states to regulate GHG emissions under the New Source Review and Title V operating permits programs, $7 million for New Source Performance Standards (NSPS) to regulate GHG emissions from major stationary sources, $6 million to implement the 2010 auto emissions rule and to develop regulations for large mobile sources, and $5 million to develop guidance regarding the best available practices and technologies to control GHG emissions through command and control permits. My suggestion here that key Administration policymakers viewed GHG legislation as a mere side-show and were instead committed to administrative rule-makings seems to have been on the mark.
Other key EPA funding requests include $3 billion for water infrastructure projects and millions more for enforcement. Notably, EPA's Budget anticipates re-institution of the long-dead Superfund tax.
DOE's Budget emphasizes scientific research. $5.1 billion is allocated for the Office of Science and $300 million for ARPA-E. An additional $5 billion is promised for the successful 48C tax credit program as well as $36 billion in loan authority for nuclear power plants and $545 million for carbon capture technology. DOE seeks $302 million for solar, $220 million for biofuels and biomass R&D, $325 million for "advanced vehicle technologies" and $231 million for "energy efficient building technologies."
Fossil fuels take a beating. DOE proposes a 43% cut in funding for the U.S. Strategic Petroleum Reserve, no money at all for clean coal, and a 12.8% cut in funding for fossil fuel research and development.
What then do we learn from the FY2011 EPA/DOE Budget? Well, first and foremost, it is terribly unwise to underestimate the Obama Administration's ideological commitment to "climate change" regulation through restrictions on fossil fuel use and development, and stakeholders need to plan and act accordingly. Administrative rules, not legislation, appears to be the preferred mode of control and Federal agencies are moving very aggressively to implement the GHG control agenda.
It is gratifying to see DOE devoting serious money to "hard science" R&D, enlarging its successful loan guarantee and tax credit programs, and taking the first steps toward a serious domestic nuclear power effort. Still, the evisceration of its relatively small yet critical fossil fuel programs, including the Strategic Petroleum Reserve, is very troubling. As the President pointed out, domestic energy security requires a robust domestic fossil fuel industry. However, the FY2011 Budget suggests energy security is a lesser value, for the Administration has targeted existing tax breaks and incentives for domestic oil and coal exploration for termination, apparently because of its single-minded GHG agenda and without regard for domestic energy security or economic efficiency. This is a problem at many levels, reflecting, in the words of one Brookings Institution expert, a "profound ignorance of our petroleum industry."
