Propane and Heating Oil:

Federal Oversight of the Propane Education and Research Council and National Oilheat Research Alliance Should Be Strengthened

GAO-10-583: Published: Jun 30, 2010. Publicly Released: Aug 5, 2010.

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Millions of Americans use propane and oil heat for such purposes as heating and cooking. Congress authorized creation of the Propane Education and Research Council (PERC) in 1996 and the National Oilheat Research Alliance (NORA) in 2000 to provide research and development, safety and training, and consumer education for propane and oil heat, as the highest priority activities. Congressional deliberations on the groups' creation emphasized providing funding for research and development. PERC and NORA fund operations by assessing fees on propane and oil heat sales. GAO examined (1) how PERC and NORA spent assessments collected; (2) the extent to which their reported activities help strategic goals; (3) the extent to which key statutory requirements were met; and (4) the extent of federal oversight. GAO analyzed the Propane and Oilheat Acts and PERC and NORA documents and interviewed representatives of PERC, NORA, and the Departments of Energy (DOE) and Commerce.

Based on GAO's analysis of their financial and annual reports, PERC and NORA spent over half of their assessments collected on what they classified as consumer education. From 1998 through 2008, PERC collected about $351 million. During those years, PERC spent about $318.5 million, including about $178.6 million for consumer education, $50.7 million for safety and training, $28.1 million for research and development, and $61.0 million total for engine fuel, industry, and agriculture programs, and for general and administrative expenses. The remaining balance of about $32.1 million was unspent, mostly reflecting, according to PERC officials, approved commitments to future spending. From 2001 through 2008, NORA collected over $107 million, spending about $101.6 million. NORA's spending included $68.4 million for consumer education, $17.8 million for education and training, $6.2 million for research and development, and about $8.9 million for general and administrative expenses. NORA officials stated that the unspent $5.8 million balance reflected mostly commitments to future spending. PERC and NORA report activities in all program areas, but it was not always clear how those activities achieved strategic goals. PERC's research and development and agriculture program activities appeared consistent with strategic goals, but it is not clear to what degree consumer education, safety and training, engine fuels, and industry activities helped achieve these goals. For example, a key goal of PERC's consumer education activities was to increase propane usage, but studies provided to GAO were inconsistent about whether propane usage increased. NORA's research and development activities were generally consistent with its strategic goals, but because NORA's strategic plan lacked goals for consumer education, education and training, and oil tank training, GAO could not determine if these activities achieved desired results. While some PERC and NORA activities appeared to meet statutory requirements, others raised issues such as whether certain types of activities involving Congress or politically affiliated entities were covered by specific lobbying restrictions in the Acts. Assuming PERC and NORA's activities were permitted, issues remain about whether Congress anticipated that the assessment funds would be used for these activities, particularly when classified as "consumer education" under the Acts. Issues also remain about whether Congress anticipated that such a high proportion of the groups' funding would go to education activities, in comparison to the relatively little support given to research and development, a key area of interest during congressional deliberations about the Acts. Federal oversight of PERC and NORA has been limited. Commerce recently completed the required analyses of oilheat prices, but DOE has not used oversight authority granted by the Propane and Oilheat Acts. For example, DOE has not overseen PERC and NORA's activities by reviewing budgets or making recommendations to PERC and NORA, as authorized by law. Congress may wish to clarify certain requirements and specify priority ranking, expenditures, and a DOE oversight role. DOE did not comment; Commerce agreed; NORA did not disagree and in some aspects agreed; and PERC interpreted certain information differently in several cases. PERC believes the Propane Act allows the congressional contacts it funds but welcomes clarification.

Matters for Congressional Consideration

  1. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Matter: As it considers whether to reauthorize NORA, or if it decides it wishes to amend PERC's authorizing statute, Congress may wish to impose greater specificity on the requirements it has established and to establish mechanisms to enhance compliance with those requirements. Specifically, Congress may wish to consider specifying any prioritization of activities it wants to be undertaken (for example, by ranking research and development, safety and training, and consumer education, and specifying the expected range of assessments to be spent on each), and detailing more specifically which activities are prohibited (such as those involving lobbying).

  2. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Matter: As it considers whether to reauthorize NORA, or if it decides it wishes to amend PERC's authorizing statute, Congress may wish to impose greater specificity on the requirements it has established and to establish mechanisms to enhance compliance with those requirements. Specifically, Congress may wish to consider subjecting PERC's and NORA's activities to review, interpretation and approval by an independent, designated entity that is directed to conduct such review, interpretation and approval. In that regard, Congress may wish to specify a federal oversight role by requiring DOE to monitor and oversee the expenditure of PERC and NORA funds, including authorizing DOE to oversee and enforce, among other provisions, the prohibitions against use of assessment funds for certain lobbying activities and require PERC funds and NORA funds granted to qualified state associations to be segregated in separate accounts, apart from other funds collected and used by those associations.

  3. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Matter: As it considers whether to reauthorize NORA, or if it decides it wishes to amend PERC's authorizing statute, Congress may wish to impose greater specificity on the requirements it has established and to establish mechanisms to enhance compliance with those requirements. Specifically, Congress may wish to consider establishing a specific enforcement mechanism, such as monetary penalties or other consequences of non-compliance and expressly authorizing DOE to refer any potential violations of law to appropriate enforcement authorities.

 

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