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entitled 'Propane and Heating Oil: Federal Oversight of the Propane
Education and Research Council and National Oilheat Research Alliance
Should Be Strengthened' which was released on August 5, 2010.
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Report to the Chairman, Committee on Energy and Natural Resources,
U.S. Senate:
United States Government Accountability Office:
GAO:
June 2010:
Propane and Heating Oil:
Federal Oversight of the Propane Education and Research Council and
National Oilheat Research Alliance Should Be Strengthened:
GAO-10-583:
GAO Highlights:
Highlights of GAO-10-583, a report to the Chairman, Committee on
Energy and Natural Resources, U.S. Senate.
Why GAO Did This Study:
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 achieve 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.
What GAO Found:
Based on GAO’s analysis of their financial and annual reports, PERC
and NORA spent over half of the assessments collected on what they
classified as consumer education. From 1998 through 2008, PERC
collected about $350.6 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 over $61 million 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, approved commitments to future
spending. From 2001 through 2008, NORA collected about $107.4 million
and spent 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, $300,000 on its oil tank
program, and $8.9 million for general and administrative expenses.
NORA officials said 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 its consumer education, education and training, and
oil tank programs, 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” by
PERC and NORA 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 analysis 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.
What GAO Recommends:
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.
To view the full product, including the scope and methodology, click
on GAO-10-583. For more information, contact Mark E. Gaffigan at (202)
512-3841 or gaffiganm@gao.gov.
[End of section]
Contents:
Letter:
Background:
PERC and NORA Reported Spending More Than Half of the Assessments They
Collected on National and State Consumer Education Programs:
While PERC and NORA Reported Activities in All Program Areas, in Some
Cases It Is Unclear to What Degree Those Activities Have Helped
Achieve Results:
Certain PERC and NORA Activities Appeared to Meet Key Statutory
Requirements, While Others Raise Issues about Coverage of the Acts and
Other Matters:
Commerce and DOE's Oversight of PERC and NORA Has Been Limited:
Conclusions:
Matters for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Extent to Which PERC's Activities Have Met Key
Requirements and Carried Out Statutorily Prescribed Functions:
Appendix III: Extent to Which NORA's Activities Have Met Key
Requirements and Carried Out Statutorily Prescribed Functions:
Appendix IV: Comments from the Department of Commerce:
Appendix V: Comments from the Propane Education and Research Council:
Appendix VI: Comments from the National Oilheat Research Alliance:
Appendix VII: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: PERC Activities Relative to the Propane Act and PERC's
Responses:
Table 2: NORA Activities Relative to the Oilheat Act and NORA's
Responses:
Figures:
Figure 1: PERC Reported Spending, Calendar Years 1998 through 2008:
Figure 2: NORA Reported Spending, Calendar Years 2001 through 20089:
Abbreviations:
CEO: chief executive officer:
CETP: Certified Employee Training Program:
DOE: Department of Energy:
NAORE: National Association for Oilheat Research and Education:
NORA: National Oilheat Research Alliance:
Oilheat Act: National Oilheat Research Alliance Act of 2000:
PERC: Propane Education and Research Council:
PMAA: Petroleum Marketers Association of America:
Propane Act: Propane Education and Research Act of 1996:
USDA: U.S. Department of Agriculture:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 30, 2010:
The Honorable Jeff Bingaman:
Chairman:
Committee on Energy and Natural Resources:
United States Senate:
Dear Mr. Chairman:
Tens of millions of Americans rely on propane and heating oil for
heat, hot water and--in the case of propane--cooking and motor fuel.
Within the last 15 years, Congress has authorized the creation of two
national entities to undertake propane and oilheat research and
development, safety and training, and consumer education programs and
provided the Department of Commerce and the Department of Energy (DOE)
with certain related authority. The Propane Education and Research Act
of 1996 (the Propane Act)[Footnote 1] and the National Oilheat
Research Alliance Act of 2000 (the Oilheat Act)[Footnote 2] authorized
the establishment of the Propane Education and Research Council (PERC)
and the National Oilheat Research Alliance (NORA), respectively. The
Oilheat Act expired on February 6, 2010, and is under consideration
for reauthorization.[Footnote 3] Conversely, the Propane Act does not
expire.
PERC and NORA fall into a category of congressionally-authorized
programs known as check-off programs. To fund check-off programs, a
fraction of the wholesale cost of a product is set aside by the
producer and deposited into a common fund to be used to benefit
producers and consumers. Similar programs are in place for agriculture
commodities, including milk, beef, pork, and cotton. To fund PERC
operations, each gallon of odorized propane gas sold is assessed
$0.005.[Footnote 4] To fund NORA operations, each gallon of heating
oil sold is assessed $0.002.
By statute, both PERC and NORA give a portion of the assessments
collected to state propane and oilheat associations with similar
missions.[Footnote 5] Specifically, pursuant to the Propane Act, PERC
gives 20 percent of its assessments to state propane associations.
According to PERC, its oversight of these funds includes a PERC
council review of a state association's proposed use for these funds
and the submission of periodic and final reports from the state
associations. The Oilheat Act requires NORA to give 15 percent of its
assessments to qualified state associations, which may then request to
receive any portion of the remaining 85 percent of the assessments
collected in their states. NORA's oversight of state expenditures is
similar to PERC's, but state associations are required by NORA to
submit quarterly reports on program spending.
In June 2003, we reported that oversight of PERC by Commerce and DOE
was insufficient and recommended that they provide more active
oversight.[Footnote 6] In this context, and as Congress considers
reauthorizing NORA's authorizing statute, you asked us to review
federal oversight of PERC and NORA and examine how these organizations
are spending the assessments. Specifically, we examined (1) how PERC
and NORA have spent the assessments they have collected, (2) the
extent to which PERC's and NORA's reported activities help to achieve
the results defined in their strategic goals, (3) the extent to which
PERC's and NORA's activities have met key requirements in their
authorizing statutes, and (4) the extent to which PERC's and NORA's
activities and spending received federal oversight.
In addressing these objectives, we examined PERC's and NORA's
spending, performance, response to the authorizing statutes, and
coordination with applicable federal agencies. We reviewed PERC and
NORA spending from the first year of operation--1998 for PERC and 2001
for NORA--through 2008. We did not review 2009 data for PERC or NORA
because audited financial statements were not available for timely
review.[Footnote 7] To assess the reliability of financial data from
PERC and NORA, we analyzed related documentation, examined the data to
identify obvious errors or inconsistencies, and worked with PERC and
NORA officials to identify data problems. We determined the data to be
sufficiently reliable for the purposes of this report. We reviewed
PERC and NORA financial statements, annual reports, meeting minutes,
and other reports and obtained information and views on both PERC and
NORA from a wide range of officials in the Departments of Commerce and
Agriculture (USDA),[Footnote 8] DOE, and the private sector. Appendix
I provides a more detailed explanation of our scope and methodology.
We conducted this performance audit from June 2009 through June 2010
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit 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
findings and conclusions based on our audit objectives.
Background:
Propane, also known as liquefied petroleum gas, is a byproduct of both
crude oil refining and natural gas processing, with approximately
equal amounts of total propane produced from each process. Propane is
used to power household appliances and fuel gas fireplaces and
barbeque grills, and less than 1 percent of U.S. homes use propane as
their main heating fuel.[Footnote 9] Additionally, propane is used on
farms to dry corn and power farm equipment and irrigation pumps.
Businesses and industry also use propane for off-road vehicles, such
as forklifts and power generating systems. Propane is also used to
fuel some over-the-road cars, buses, and trucks. Demand for propane,
according to 2007 data from the American Petroleum Institute, is
divided among the following sectors: chemical industry (51 percent);
residential/commercial (18 percent); gasoline blending (18 percent);
and other sectors, including agricultural and industrial. Propane
supply/demand is influenced by several factors, including changes in
domestic production, weather, and inventory levels. Prices of propane
follow crude oil price trends and are affected by the prices of
competing fuels in each market, the distance propane has to travel to
reach a customer, and the volume used by a customer, among other
things.
Oilheat is a petroleum product refined from crude oil. About 7.4
percent of U.S. homes rely on oilheat as their main heating fuel.
[Footnote 10] Heating homes is the primary use for oilheat, making the
demand for oilheat highly seasonal. Most of the oilheat use occurs
during October through March, primarily in the Northeast. Oilheat
prices are determined by the cost of crude oil, production, and
marketing and distribution, as well as industry profits and losses.
PERC and NORA provide the framework for propane and oilheat producers
and marketers to establish self-help, non-federal programs of research
and development, training, safety, and consumer education activities.
Both the Propane Act and the Oilheat Act outline key procedural,
administrative, and spending requirements to administer these
programs. To help with that administration, PERC has about 30 staff, a
national council, and 5 advisory committees, while NORA has 2 staff,
an executive committee, and 3 advisory committees. Both the Propane
and Oilheat Acts specify "functions" that PERC and NORA are required
to conduct--namely, "development [of] programs and projects" to
implement the statutes, including by conducting activities in three
basic areas. The Acts also identify essentially these same three areas
as mandatory "priorities" for PERC's and NORA's programs and projects;
within these broad areas, the Acts do not specify a particular funding
level or ranking. The three areas are:
* Research and development: The Propane Act requires PERC to develop
programs that "provide for research and development of clean and
efficient propane utilization equipment." The Oilheat Act directs
similar oilheat-related research and development projects and also
directs NORA to fund projects in the demonstration stage of
development.
* Safety and training/education and training: Both the Propane Act and
the Oilheat Act require development of "programs to enhance consumer
and employee safety and training." PERC refers to this program area as
"safety and training," while NORA refers to it as "education and
training." Projects that fall into this spending category include
developing employee training materials and conducting training courses
for industry personnel.
* Public/consumer education: The Propane Act directs PERC to develop
projects "to inform and educate the public about safety and other
issues associated with the use of propane ...." Similarly, the Oilheat
Act directs NORA to develop "consumer education" programs, defined as
programs that provide "information to assist consumers and other
persons in making evaluations and decisions regarding oilheat and
other nonindustrial commercial or residential space or hot water
heating fuels." Such activities have included the development of
radio, television, and print advertising directed at consumers and
industry professionals.[Footnote 11]
The Acts generally do not prohibit PERC and NORA from conducting
programs or projects beyond the statutory areas, and both
organizations have carried out additional activities. PERC, for
example, has spent funds on agriculture and engine fuel programs and,
in order to coordinate its activities with other parties, as required
by the Propane Act, has established an "industry programs" area to
provide support, data, and other services to the propane industry and
maximize the impact of the assessment rebate program. Likewise, in
2004 and 2005, NORA funded an oil tank training and education program
for tank installers, inspectors, and insurers in order to address
concerns about storage tanks. NORA's president stated that NORA's oil
tank program fulfilled several of the statutory priorities, such as
research and development, consumer education, and safety and training.
Finally, both PERC and NORA have used assessment funding to meet
general and--as expressly authorized by their statutes--administrative
expenses.
While the Propane and Oilheat Acts generally permit activities beyond
these designated statutory areas (provided the activities implement
the requirements of the Acts), the Acts prohibit or limit funding of
certain activities and conversely, specify certain minimum
expenditures. For example, the Propane Act prohibits PERC funds from
being used for over-the-road engine fuel projects in a percentage
exceeding the percentage of the propane market used for that purpose,
which was about 1 percent according to a 2009 PERC contractor report,
and limits expenditures for administrative expenses to 10 percent of
funds collected per fiscal year. The Propane Act also requires PERC to
use at least 5 percent of collected funds on programs to benefit the
U.S. agriculture industry and, as discussed in more detail below,
prohibits the use of PERC funds to conduct certain lobbying activities
(the Oilheat Act contains similar lobbying restrictions).
PERC and NORA Reported Spending More Than Half of the Assessments They
Collected on National and State Consumer Education Programs:
PERC and NORA reported spending over half of their combined $458
million in assessments collected between 1998 and 2008 on what they
characterized as "consumer education."[Footnote 12] They made other
major expenditures in the other two statutory priority areas: research
and development and safety and training programs (for PERC) and
education and training programs (for NORA).
PERC Reported Spending More Than Half of the Assessments It Collected
on Consumer Education Programs:
From 1998 to 2008, according to our analysis of PERC's audited
financial statements, annual reports, and other PERC information
provided to us, PERC collected about $350.6 million in assessments.
Consistent with PERC's authorizing statute, PERC allocated $69.5
million (19.8 percent) to state propane associations.[Footnote 13]
Together, PERC and the affiliated state associations reported spending
about $318.5 million (or about 90.8 percent of the $350.6 million
collected) as follows: $178.6 million (50.9 percent of the $350.6
million collected) on what it characterized as consumer education
programs, $50.7 million (14.5 percent) on safety and training
programs, $28.1 million (8.0 percent) on research and development, $20
million (5.7 percent) on industry programs, $12.5 million (3.6
percent) on agriculture programs, and $5.8 million (1.7 percent) on
engine fuel programs. In addition, PERC spent another $22.7 million
(6.5 percent) on general and administrative expenses. According to our
analysis of PERC financial data, PERC had not yet spent $32.1 million
[Footnote 14] (or 9.2 percent of the $350.6 million collected), but
PERC explained that approximately two-thirds of this amount has been
designated for future expenditure but has not yet been disbursed.
Figure 1 shows PERC spending for this period.[Footnote 15]
Figure 1: PERC Reported Spending, Calendar Years 1998 through 2008:
[Refer to PDF for image: pie-chart]
Consumer education: 50.9%;
Safety and training: 14.5%;
Research and development: 8.0%;
General and administrative: 6.5%;
Industry programs: 5.7%;
Agriculture: 3.6%;
Engine fuel: 1.7%;
Unspent: 9.2%.
Source: GAO analysis of data contained in PERC 1998-2008 audited
financial statements, annual reports,and other PERC information
provided us.
Note: Percentages may not add to 100 percent due to rounding.
[End of figure]
NORA Reported Spending Nearly Two-Thirds of the Assessments It
Collected on Consumer Education:
From 2001 to 2008, according to our analysis of NORA's audited
financial statements, annual reports, and other NORA information
provided us, NORA collected more than $107.4 million in assessments.
[Footnote 16] Consistent with its authorizing statute, NORA allocated
$80.4 million (74.9 percent) to state oilheat associations.[Footnote
17] Together, NORA and the affiliated state associations spent a total
of about $101.6 million, as follows: $68.4 million (63.7 percent of
the $107.4 million collected) on what it characterized as consumer
education programs, $17.8 million (16.5 percent) on education and
training, $6.2 million (5.8 percent) on research and development and
$300,000 (0.3 percent) on its oil tank program. In addition, NORA
spent another $8.9 million (8.3 percent) on general, administration
and special projects. NORA had not yet spent $5.8 million (or about
5.4 percent of the $107.4 million collected), but NORA officials
explained that approximately two-thirds of this amount has been
designated for future expenditure but has not yet been disbursed.
Figure 2 shows NORA spending for this period.
Figure 2: NORA Reported Spending, Calendar Years 2001 through 2008:
[Refer to PDF for image: pie-chart]
Consumer education: 63.7;
Education and training: 16.5%;
General and administrative: 8.3%;
Research and development: 5.8%;
Oil tank program: 0.3%;
Unspent: 5.4%.
Source: GAO analysis of data contained in NORA 2001-2008 audited
financial statements, annual reports, and other NORA information
provided to us.
[End of figure]
A review of its expenditures through 2008 reveals that PERC spending
for consumer education ($178.6 million) was over 6 times greater than
its research and development spending ($28.1 million). Furthermore, it
appears that marketing and promotion was an important part of PERC's
consumer education activities, because it described the overall
increase of propane usage as the strategic goal for PERC's consumer
education activities. The disparity between NORA's consumer education
spending and its research and development spending was even greater
during this period: NORA spent more than 11 times as much on consumer
education as it spent on research and development ($68.4 million
versus $6.2 million). As discussed later in this report, it appears
that Congress may not have anticipated that such a significant
proportion of the organizations' assessments would be spent on
consumer education, in comparison to the other statutory priority
areas. In addition, it is not clear that Congress anticipated that the
organizations would allocate funding (substantial funding, in PERC's
case) to communications and other activities related to Congress
itself or to politically affiliated entities, particularly when the
spending is classified as "consumer education."While PERC and NORA
Reported Activities in All Program Areas, in Some Cases It Is Unclear
to What Degree Those Activities Have Helped Achieve Results:
PERC and NORA both reported spending funds on activities in all
program areas--including the priority areas of consumer education,
safety and training, and research and development. Some of those
activities appear to be consistent with stated strategic goals while,
for other activities, the extent of that consistency is less clear.
Because both PERC and NORA officials advised us that their annual
reports alone do not provide a complete picture of their
accomplishments, we asked both entities to provide us an aggregate
summary of their reported activities and compared that information to
goals outlined in PERC and NORA strategic plans. For PERC, we could
not determine how some activities under certain program areas achieved
desired results as defined by their strategic goals. NORA lacked
strategic goals for some program areas, so we could not determine the
extent to which activities under these program areas achieved desired
results.
PERC Program Area Activities and Results:
PERC provided us with summaries of activities by program area. PERC's
activities under the research and development and agriculture program
areas appear to be consistent with its stated strategic goals.
However, for PERC's activities under the consumer education, safety
and training, engine fuel, and industry program areas, it is unclear
the extent to which some activities helped PERC achieve the desired
results identified in its strategic goals.
Research & development: PERC stated that, among other things, its
research has led to the commercialization of additional propane-fueled
engines, vehicles, and equipment; improved energy efficiency; and
reduced emissions of critical pollutants and greenhouse gases.
[Footnote 18] Those activities generally are consistent with the
desired results identified in PERC's strategic goals for research and
development which, as stated in its strategic plan for 2008 to 2012,
are to expand markets, reduce costs, enhance safety, and/or improve
environmental performance.
Agriculture: PERC stated that, among other things, its funding had
contributed to the development and commercialization of stationary
engines for agricultural applications--now approved for sale in all 50
states--and provided for funded research on propane use for poultry
house sanitation, weed control, and cotton defoliation. Those
activities seem to generally be consistent with the desired results
identified in PERC's goal for agriculture which, as stated in its 2008
to 2012 strategic plan, is to establish propane as a preferred energy
source in the U.S. agriculture industry.
Consumer education: PERC stated that its consumer education activities
included, among other things, a builder-focused Web site that
attracted 30,000 unique visitors in its first year of operation
(2008), and a consumer-focused Web site that attracted over 900,000
visitors in 2008. In addition, a PERC-commissioned 2006 report
credited PERC's advertising and outreach efforts with increasing
propane demand in one of PERC's six market sectors--residential
propane-heated housing.[Footnote 19] It is unclear, however, whether
such activities resulted in increased overall propane usage, which is
the strategic goal for consumer education. In attempting to identify
PERC's potential impact on increased overall propane usage, we found
that a 2007 propane consumer impact analysis prepared by the
Department of Commerce under authority of the Propane Act determined
that PERC's operations may have led to a slight increase in consumer
demand for propane. In contrast, a 2010 study commissioned by PERC
reported that total sales of propane, after peaking in 2003, had
actually fallen by more than 10 percent through 2006. The study
further noted that, although propane demand had increased somewhat in
2007 and 2008 due to colder weather, propane demand appears to have
declined again in 2009.
Safety and training: PERC stated that its safety and training
activities included, among other things, its Certified Employee
Training Program (CETP) for propane industry employees that has
certified more than 120,000 people since the late 1990s and is a
required course in eight states. PERC also indicated that it had
created the Safe Grilling Campaign, which utilizes advertisements,
brochures, and partnerships with food and agriculture organizations to
teach 60 million consumers annually to safely use and manage propane
grills. It is unclear, however, whether such activities helped to
reduce propane incidents and accidents, which is one of PERC's stated
strategic goals for safety and training. In attempting to identify
PERC's potential impact on incidents and accidents, we found that PERC
contracted for a study on propane-related incidents and accidents in
2006, and the PERC contractor reported that the number of propane
incidents and accidents had increased annually from about 31,500 in
1998 to about 34,800 in 2000. However, the PERC council took no action
on a contractor's proposal to continue this study, nor, according to
the contractor, did it support the contractor's desire to publish
various data from the study, including information on the causes of
the accidents and incidents. In the contractor's view, the propane
industry needed to see this information so that propane training could
be modified, as necessary, to address those causes.
Engine fuel: PERC stated that, among other things, its funding had
contributed to the introduction of several new propane-fueled products
for over-the-road and off-road use. For example, in 2009, PERC
approved a $1.4 million grant to help the Blue Bird Corporation secure
financing to buy 1,800 engines for its Blue Bird buses from General
Motors Corporation. Because General Motors had announced it intended
to stop making these engines, Blue Bird plans to stockpile these
engines for use over the next 2 to 3 years. Also, in 2008, PERC
approved a $4.8 million grant with Roush Industries to produce and
market propane-fueled engines in Ford F-150 and F-250 trucks and E-250
vans. Expenses included in that program were PERC funding for floor
mats and other marketing materials. PERC's strategic goal for engine
fuel, as stated in its 2008 to 2012 strategic plan, is to conduct
research with a commercialization focus to advance propane sales for
vehicle and other engines. It is not clear how the purchase of engines
and production and marketing of propane fueled engines involved the
conduct of research. In discussing this matter with DOE officials,
they said that the acquisition and placement of engines into vehicles,
in their view, was neither research nor development.
Industry programs: PERC stated that it has created an industry program
area which, among other things, had distributed millions of dollars to
state PERC associations; participated in industry trade shows,
meetings, and conventions; and funded various communication tools,
including a quarterly newsletter, a weekly e-mail newsletter, and
active outreach to trade publications. PERC also stated that its
industry programs have expanded the reach and frequency of its
consumer education, and that by encouraging states through matching
funds to use resources developed by PERC, rather than leaving each
state to develop its own resources, PERC helps to improve efficiency
and ensure there is no duplication of costs. Two of PERC's strategic
goals for industry programs are to (1) maximize the impact of PERC
dollars distributed to state associations and (2) coordinate
activities to avoid unnecessary duplication.[Footnote 20] It is
unclear, however, the extent to which these reported activities
maximized the impact of PERC dollars distributed to state associations
or coordinated activities to avoid unnecessary duplication. In fact,
coordination to avoid duplication is a requirement of the Propane Act,
and as discussed in the next section of this report, it is not clear
that PERC is meeting this requirement.
NORA Program Area Activities and Results:
Similar to PERC, NORA officials provided us a summary of activities by
program area. While NORA's activities under the research and
development program area appear to be consistent with its stated
strategic goals for this area, NORA's strategic plan lacked goals for
the consumer education, education and training, and oil tank program
areas. We therefore could not determine the extent to which activities
under these program areas achieved desired results.
Research & development: NORA stated that it had helped develop several
energy efficient products currently on the market, including a
condensing furnace and a condensing boiler that received an Energy
Star rating. NORA also indicated that it has helped to develop a Fuel
Saving Analysis Calculator that allows consumers considering
purchasing a new oil-or gas-fired home-heating system to assess the
cost savings of an upgrade. Those activities generally are consistent
with NORA's goal for research and development which, as stated in its
most recent (2007) strategic plan, is to grow technology in three
pathways--fuel, core technology,[Footnote 21] and new technology.
Education and training: NORA stated that it had developed training
manuals (including a new manual that is now the industry standard) and
manuals on topics ranging from storage tanks to efficiency. NORA also
manages a technician training program, which has certified more than
16,500 technicians. NORA's 2007 strategic plan contains no goals for
the education and training program area, however; therefore, we could
not determine whether NORA activities were achieving desired results.
Further, we found that NORA has produced no studies evaluating the
frequency and causes of oilheat safety accidents and incidents in the
United States. Without such an evaluation, NORA has no way of knowing
whether its training efforts are succeeding or need to be modified.
Our review of Internet-available data identified only one source of
information on oilheat-related accidents and incidents, namely, data
gathered by the Consumer Product Safety Commission. While we did not
evaluate the accuracy of these data, the data showed that incidents
increased from 3 incidents involving 3 individuals in 2001 to 7
incidents involving 21 individuals in 2008.[Footnote 22] NORA
officials said the Commission's information was the only oilheat
accident and incident data currently available and that some of the
incidents had been mischaracterized by the Commission.
Consumer education: NORA stated that its activities have included
advertisements, direct mail, and a Web site aimed at changing consumer
perception of oilheat as an outdated, unclean fuel and reducing
customer energy consumption. Again, however, NORA's 2007 strategic
plan contains no goals for the consumer education program area;
therefore, we could not determine whether NORA activities in consumer
education were achieving desired results. Somewhat related to consumer
education, NORA's 2007 strategic plan does contain a "public
awareness" strategic goal to increase public awareness of the unique
properties, uses, and benefits of heating oil. However, NORA officials
said that NORA has not conducted any studies to ascertain whether NORA-
specific activities have increased public awareness of oilheat. They
said that such studies, if comprehensive, could cost more than
$200,000 but said that NORA has been involved in smaller studies to
evaluate oilheat consumer usage and public attitudes, among other
things.
Oil tank program: NORA stated that it had also developed a tank
education program that includes a 300-page tank manual; tank
installation, oil delivery, and spill prevention videos; and tank
certification seminars attended by more than 1,500 technicians. Again,
however, NORA's 2007 strategic plan contains no goals for tank
insurance; therefore, we could not determine whether NORA tank
insurance activities were achieving desired results.
Certain PERC and NORA Activities Appeared to Meet Key Statutory
Requirements, While Others Raise Issues about Coverage of the Acts and
Other Matters:
We did not make a determination as to whether PERC and NORA complied
with specific requirements of the Propane and Oilheat Acts, as it is
the primary jurisdiction of the Department of Justice, as part of its
enforcement responsibilities, to make such determinations regarding
non-federal entities. Nonetheless, a number of PERC's and NORA's
activities appeared to meet the requirements of the Acts. Other
activities, such as certain activities involving Congress or
politically affiliated entities, raised issues such as whether they
are covered by the Acts' specific lobbying restrictions. Assuming that
these latter activities were permitted, issues remain about whether
Congress anticipated that assessment funds would be used for these
types of activities, particularly when PERC and NORA have classified
this spending as "consumer education," one of the functions that the
Acts actually require PERC and NORA to carry out. Issues also remain
about whether Congress anticipated that PERC and NORA would allocate
the majority of their funding to education activities over the past
decade, in comparison to the relatively little financial support given
to research and development, an activity that was a key area of
congressional interest as the laws were debated prior to enactment and
that ultimately was reflected as both a mandatory "function" and a
high-focus "priority" when the laws were enacted. Finally, issues
exist about areas such as PERC's coordination with federal agencies;
NORA's monitoring of the expenditures of its funds by state
associations; and PERC's activities previously designated as "consumer
education" but designated as "residential and commercial" matters
after price-based restrictions on consumer education restrictions were
triggered in 2009. A complete listing of the areas we examined and the
results of our review can be found in appendix II for PERC and
appendix III for NORA.
A Number of PERC Activities Appeared to Meet the Key Requirements of
the Propane Act:
We found that a number of PERC activities appeared to meet key
requirements of the Propane Act. For example, as called for by the
statute, PERC maintains a 21-member council, has submitted its annual
budget to the Secretary of Energy each year from 2000 through 2009,
and has had its financial records audited by a certified public
accountant at least annually since 1998. PERC has also prepared and
issued annual reports, and submitted notices of its meetings to DOE. A
listing of PERC activities that appeared to meet key requirements of
the Propane Act is included as part of appendix II.
Other PERC Activities Raised Issues about Coverage of the Propane Act
and Other Matters:
Other PERC activities raised issues about coverage of the Propane Act
and other matters. As discussed below, these activities include
communications and expenditures related to Congress and to politically
affiliated entities; activities previously designated as "consumer
education" but designated as "residential and commercial" matters
after price-based restrictions on consumer education restrictions were
triggered in 2009; and actions to ensure PERC's coordination with key
federal agencies. A detailed listing of these activities is included
as part of appendix II.
Issues Regarding Communications and Expenditures Related to Congress
and Politically Affiliated Entities:
As noted above, the Propane Act prohibits the use of assessments
collected by PERC to conduct certain "lobbying" activities. The
statute provides little guidance on exactly what those prohibited
activities are, however. The Propane Act provides:
"Lobbying Restrictions.
"No funds collected by the Council shall be used in any manner for
influencing legislation or elections, except that the Council may
recommend to the Secretary [of Energy] changes in this Act or other
statutes that would further the purposes of this Act."[Footnote 23]
(As discussed later in this report, the Oilheat Act contains similar,
although not identical, language.)
The Act does not define what is meant by the key phrase "in any manner
for influencing legislation or elections." In addition, there is
little legislative history on this provision;[Footnote 24] no court
has addressed what this language means as used in this statute; and
similar language in other federal statutes,[Footnote 25] which a court
might use as guidance in interpreting the Propane Act, has been
interpreted in different ways. The Internal Revenue Code, for example,
cited as relevant guidance by PERC and one of its grantees, prohibits
the deduction as a business expense of private monies spent for
"influencing legislation."[Footnote 26] The Code defines "legislation"
as an "action with respect to Acts, bills, resolutions or similar
terms by the Congress, any State legislature, ...or by the public in a
referendum [or] initiative,"[Footnote 27] and Internal Revenue Service
regulations likewise define "influencing legislation" to pertain only
to influencing a specific bill or specific legislative
proposal.[Footnote 28] Similarly, the Lobbying Disclosure Act, another
law cited as relevant guidance by PERC, pertains to registration and
reporting of "lobbying contacts," defined in relevant part as
"communication ...to ...a covered legislative branch official ...with
regard to ...the formulation, modification, or adoption of Federal
legislation (including legislative proposals) ...."[Footnote 29] Using
these statutes as analogies, PERC stated that it complied with the
Propane Act because it spent no assessment funds advocating for or
against a specific bill or a specific legislative proposal. To the
extent PERC funds were spent to communicate with Members of Congress
or their staffs, PERC stated that the communications were in the
context of responding to congressional requests for information,
providing information about how the Propane Act was being implemented,
or promoting propane generally--activities which, in PERC's view, do
not trigger the restrictions in these other statutes or, by analogy,
the restrictions in the Propane Act.
On the other hand, the Justice Department's Office of Legal Counsel,
interpreting a federal law that prohibited agency grantees from using
grant funds "to engage in any activity designed to influence
legislation ...pending before the Congress,"[Footnote 30] suggested
that the language applied not only to advocacy regarding specific
legislation, but also to general informational and educational
contacts with Congress of the type that PERC conducted. Among other
things, Justice emphasized the breadth of the language--that it
applied to "'any activity' designed to influence legislation pending
before Congress"--and the fact that the law was "conspicuously silent"
about whether grant funds could be used to engage in contacts with
Congress akin to the normal informational and educational contacts
that routinely and necessarily occur between federal agency employees
and Congress. Justice did not resolve whether it believed that such
other activities were prohibited as well.[Footnote 31]
Under these circumstances, although we found that PERC funded or
helped to fund certain activities that entailed communications or
expenditures related to members of Congress or their staffs or to
politically affiliated entities, it is not clear whether or not the
Propane Act's prohibition against the use of PERC funds "in any manner
for influencing legislation or elections" covers those activities.
[Footnote 32] We found, for example, the following:
* In 2004, PERC paid for a grantee to attend activities associated
with the Republican and Democratic national conventions. PERC's
payments also included $2,500 for lodging during the Republican
National Convention. PERC and its grantee stated these activities were
not within the Propane Act's restrictions because the contacts did not
involve advocacy about specific legislation.
* Annually between 2005 and 2009, PERC paid for a grantee to
contribute thousands of dollars to several politically active
organizations. PERC and its grantee stated these activities were not
restricted by the Propane Act because the organizations did not
advocate a position on specific legislation for PERC.
* Annually between 2005 and 2009, PERC paid for a grantee to spend
thousands of dollars to host Senate and House receptions. PERC and its
grantee stated these activities were not restricted by the Propane Act
because the contacts did not involve advocacy about specific
legislation. PERC also noted the grantee's legal counsel had reviewed
the activities in advance and determined they were not restricted.
* Annually between 2005 and 2009, PERC paid hundreds of thousands of
dollars to host a portion of an annual event called "Propane Days,"
where PERC members and associates could meet congressional members and
their staffs. For example, some PERC funds were used to pay for
grantee travel and per diem to attend Propane Days, which enabled the
grantee to engage in lobbying activities using its separate funds.
PERC stated these activities were not restricted by the Propane Act
because most PERC funds were used for general advertising, not
advocacy about specific legislation, and its grantee used its own
funds to address specific legislation.
* In 2009, PERC approved funding for a $6.2 million grant proposal
which stated that its purpose was, in part, to provide education and
information to "inside the beltway policy makers." PERC stated these
activities were not restricted by the Propane Act because the grant
was for educational purposes, not for advocacy relating to specific
legislation.
Assuming that the above types of activities are permitted under the
Propane Act, an additional issue is whether Congress anticipated that
PERC would use its assessment funds to support such activities. This
issue may be of particular congressional interest because PERC has
classified these activities as one of the three "function" areas
specifically mandated by the Act: public education. As PERC stated, it
"has always seen policy makers as members of the public to whom PERC
had a legitimate right and responsibility to provide education and
information so long as PERC stayed out of legislative or elective
matters."[Footnote 33]
Finally, assuming that PERC's activities constitute the type of
activities that Congress anticipated would be funded as public or
consumer education, an additional issue is whether Congress
anticipated that PERC would allocate such a substantial portion of its
funding to education (50.9 percent of PERC funding over the last
decade), in contrast to its allocation of a relatively small portion
of its funding to the priority area of research and development over
the same period (8 percent of PERC funding over the last decade). The
legislative history of the Propane Act suggests Congress was
particularly focused on research and development as the driving need
for the legislation. A June 1996 Senate Energy and Natural Resources
Committee report, for example, stated that, unlike assessments imposed
under the agricultural check-off programs, which emphasized marketing
and promotion, the emphasis of PERC's propane assessments would be
research and development. The Committee also noted the need for
legislation to support propane research and development, because of
the fact that the propane industry consists of numerous small
retailers "has inhibited the creation of a voluntary effort to
cooperate on research and development priorities."[Footnote 34]
Issues Regarding Potential PERC Consumer Education Expenditures
Following Recent Price-Based Trigger of Funding Restriction:
As noted above, the Propane Act specifies that if, in any year, the 5-
year average rolling price index of consumer grade propane exceeds a
particular price threshold, PERC's activities must be restricted to
three specific areas--research and development, training, and safety
matters--meaning that consumer education and other activities must
cease. The Propane Act also requires PERC to notify DOE and Congress
of any such restriction in its activities.[Footnote 35] The Department
of Commerce notified PERC in August 2009 that this price composite
index threshold had been exceeded, and in September 2009, PERC
notified DOE and Congress that it had immediately restricted its
activities in accordance with the statute.
We found that after PERC's September 2009 notification of DOE and
Congress, PERC approved three grants (including a no-cost change order
to a previously approved grant). These grants were initially proposed
and approved as "consumer education" grants (which would be prohibited
under the restriction) but were later amended as grants under a new
program area--"residential and commercial" matters. The Propane Act
does not define the scope of the three activities permitted under the
price restriction (research and development, training, or safety
matters), nor the activities, such as consumer education, that must
cease under the restriction.[Footnote 36] The resulting lack of a
precise statutory line between permitted and prohibited activities
creates difficulty in assessing compliance with the restriction and
may require clarification by Congress.
The three grants initially proposed and approved as "consumer
education" activities were as follows:
* As part of PERC-approved funding of a $1.8 million grant for
"construction professional communications," the initial grant proposal
stated that PERC intended to "create an ongoing dialogue with
construction pros to ensure propane messages stay front-and-center."
PERC states that it complied with the restriction because (1) the
grant was reduced in scope and amount to eliminate $500,000 in funding
for consumer education; (2) the remaining funding, $1.3 million, was
for safety and training, which, PERC stated, are permitted activities
under the restriction; and (3) the amended grant provided an
opportunity to support and promote new technologies entering the
marketplace. However, in our view, it remains unclear how promoting
new technologies constitutes safety and training.
* As part of PERC-approved continuation of a $5.9 million grant for
"residential advertising," the initial grant proposal stated that PERC
intended to "educate construction professionals about the benefits of
propane throughout the home." PERC stated that it complied with the
restriction because once it was triggered, PERC terminated all
educational components associated with the grant and the remaining
work constituted training. However, PERC records show that, unlike the
$1.8 million grant discussed above, it did not reduce the amount of
the grant and, instead, approved a no-cost change order to the grant
in October 2009, a month after the restriction was triggered.
* As part of PERC-approved funding of a $2 million grant for
"construction professional training support," the initial grant
proposal stated that PERC intended to provide "marketing activities no
longer allowable by direct PERC funding." PERC stated that it complied
with the restriction because it later amended the grant, terminating
the educational component and that the grantee, rather than PERC,
inserted the above wording into the proposal.
Issues Regarding PERC Coordination with Federal Agencies:
Section 5(f) of the Propane Act requires PERC to coordinate its
activities with industry trade associations and others as appropriate
to provide efficient delivery of services and to avoid the unnecessary
duplication of activities. We identified DOE and USDA as potentially
appropriate agencies for PERC's coordination because both agencies
fund propane-related research and development efforts. However, we
found that there has been a mixed level of coordination between PERC
and those agencies. Specifically, DOE Energy Efficiency and Renewable
Energy Office officials told us that PERC had been a good partner in
the education and training area, and that PERC had worked with DOE on
activities such as fleet-oriented education geared toward maintenance
personnel and drivers. However, in the research and development area,
these DOE officials said that PERC approached DOE to request funding
for a proposed project at the wrong time of the funding cycle,
demonstrating a lack of understanding of government cycles and
processes. These officials added that PERC, unlike the natural gas
industry, had not worked with DOE to develop a research and
development strategic plan, and they said they would have welcomed
such an effort with PERC. They further said that DOE officials had
ideas for propane-related research and development projects but that
PERC had never solicited those ideas from DOE. With regard to the PERC
safety and training program area, the chairman of the PERC Safety and
Training Advisory Committee told us that he was not aware of DOE's
activities in this area, while DOE Energy Efficiency and Renewable
Energy Office officials told us that DOE had been involved in some
safety and training that could have application to the propane
industry. PERC records show that DOE officials were contributors to
PERC's 2000 strategic plan but were not contributors to PERC's 2007
research and development plan, 2008-2012 strategic plan, or 2009
safety and training plan.
According to an official in USDA's National Institute of Food and
Agriculture, PERC's consumer outreach seems to be geared to a middle-
to high-income audience. Further, this official said that he had not
seen any PERC Spanish-language material. The official said that, in
his view, PERC should coordinate its outreach consumer education
activities better with organizations, including USDA. Another USDA
official with the Agricultural Research Service indicated that if PERC
vetted all research and development projects through the department,
it could help avoid duplication and foster coordination.
A Number of NORA Activities Appeared to Meet the Key Requirements of
the Oilheat Act:
We found that a number of NORA activities appeared to meet key
requirements of the Oilheat Act. For example, as called for by the
statute, NORA has coordinated its activities with industry
associations and others to ensure the efficient delivery of services
and avoid unnecessary duplication. In addition, NORA does not appear
to support advertising or promotions, in keeping with the Act's
provisions. NORA publishes a budget and an annual report for public
review and comment each year, and its council meetings, including
those of its executive committee, appear to be open to the public.
Also consistent with the Act, NORA's annual financial statements have
been reviewed by an independent auditor, and its investments have been
reviewed for compliance with the Act's provisions by outside counsel.
A more detailed listing of these activities is included as part of
appendix III.
Other NORA Activities Raised Issues about Coverage of the Oilheat Act
and Other Matters:
Other NORA activities raise issues about coverage of the Oilheat Act
and other matters. Examples of these activities are discussed below
and a more detailed listing is included as part of appendix III.
Issues Regarding Communications and Expenditures Related to Congress
and Politically Affiliated Entities:
Similar to the Propane Act, the Oilheat Act prohibits the use of
assessments collected by NORA to conduct certain "lobbying"
activities. Like the Propane Act, the Oilheat Act provides little
guidance on exactly what those prohibited activities are. The Oilheat
Act provides:
"Lobbying Restrictions.
"No funds derived from assessments ...collected by the Alliance shall
be used to influence legislation or elections, except that the
Alliance may use such funds to formulate and submit to the Secretary
[of Energy] recommendations for amendments to this [Act] or other laws
that would further the purposes of this [Act]."[Footnote 37]
Like the Propane Act, the Oilheat Act does not define what is meant by
the phrase "influencing legislation or elections;" there is little
legislative history on this provision;[Footnote 38] no court has
addressed what this language means as used in this particular statute;
and other federal statutes containing similar language have been
interpreted in different ways. Consequently, as with PERC, while we
found that NORA funded or helped fund certain activities that entailed
communications or expenditures related to Members of Congress or their
staffs or to politically affiliated entities, it is not clear whether
or not the Oilheat Act's prohibition against the use of NORA funds "to
influence legislation or elections" covers these activities. With
respect to expenditure of NORA funds, we found, for example, the
following:
* A January 25, 2010, NORA-qualified Maine state association Web site
posting contained a link to a Web page entitled, "How We Lobby." NORA
stated this was not within the Oilheat Act's restrictions because the
referenced lobbying activities were conducted with state funds, not
NORA funds. NORA submitted a sworn declaration to us by a Maine state
association official attesting to this.
* A January 25, 2010, NORA-qualified New York state association Web
site posting asked its readers to take action now by contacting
Congress to express support for pending legislation that would control
the manipulation of oilheat prices. The Web site included a link to a
form letter that readers could use to mail to their senators and
congressional representative. NORA stated this was not restricted by
the Oilheat Act because the referenced lobbying activities (which
might constitute "grassroots lobbying") were conducted with state
funds, not NORA funds. NORA submitted a sworn declaration to us by a
New York state association official attesting to this.
* A September 24, 2009, NORA-qualified Massachusetts state association
newsletter, which indicated that the association is a NORA partner,
encouraged its members and friends to send form letters to Congress
supporting NORA reauthorization. NORA stated this was not restricted
by the Oilheat Act because the referenced lobbying activities (which
might constitute "grassroots lobbying") were conducted with state
funds, not NORA funds. NORA submitted a sworn declaration by a
Massachusetts state association official attesting to this.
* The minutes of an August 2008 NORA executive committee meeting
indicated that the NORA president said that he was going to try to
persuade state senators to support NORA reauthorization, and a
December 2008 NORA-qualified Massachusetts state association
newsletter indicated that the NORA president traveled to Washington to
urge both Massachusetts senators to support NORA reauthorization. NORA
stated this was not restricted by the Oilheat Act because, contrary to
the minutes and the newsletter, which they said were in error, NORA's
president did not attend the senators' meeting in his capacity as
president of NORA, but rather in his dual capacity as president of the
National Association for Oilheat Research and Education (NAORE). NAORE
is a separate organization that pre-dated the creation of NORA; it is
funded by its own membership dues; and its president is officially
registered under the Lobbying Disclosure Act to conduct lobbying
activities.[Footnote 39] (NAORE is also the "qualified industry
organization" under the Oilheat Act required to carry out various
statutory functions.)
* A spring 2008 New York NORA-qualified association newsletter, which
noted that it was "brought to you in association with … [NORA],"
stated that the New York association was "actively involved in a
campaign to ask Congress to take action and take control of energy
prices." NORA stated this was not restricted by the Oilheat Act
because while NORA had paid for the newsletter, the newsletter was
only reporting information, it was not advocating a "call to action."
We nevertheless note that under NORA's own policies, rules, and
procedures, it "shall not approve grant or rebate funds to state
entities to support those aspects of newsletters, web sites, and other
means of communication that report on or advocate industry policy
and/or political positions-
-with respect to legislation or elections." (Emphasis added.)
Assuming that the above types of activities are permitted under the
Oilheat Act, an additional issue is whether Congress anticipated that
NORA or its qualified state associations would use assessment funds to
support such activities. As with PERC's activities, this issue may be
of particular congressional interest because NORA, like PERC, has
characterized these types of activities as constituting "consumer
education," one of the functions expressly mandated by the Act.
[Footnote 40]
Finally, as with PERC's similar activities, assuming that these and
other NORA-funded activities constitute the type of activities that
Congress anticipated would be funded as consumer education, an
additional issue is whether Congress anticipated that NORA would
allocate such a substantial portion of its funding to education (63.7
percent of NORA's funding from 2001 to 2008), in contrast to its
allocation of a relatively small portion of its funding to the
priority area of research and development over the same period (5.8
percent). The legislative history of the Oilheat Act suggests that
Congress was equally if not more focused than it was in enacting the
Propane Act on the need for research and development funding as a
driving force behind the legislation. At a hearing about a predecessor
bill to the Oilheat Act (H.R. 380, the National Oilheat Research
Alliance Act of 1999), House Energy and Power Subcommittee Chairman
Barton began the hearing by identifying several concerns with creating
an oilheat federal check-off program, including that federal
involvement might not be necessary to encourage greater oilheat use
and that such programs have the potential for abuse. Chairman Barton
observed, however, that the legislation would "give the industry
greater resources to undertake research and development activities."
[Footnote 41] This focus was reinforced at the hearing by the
testimony of industry representatives, who maintained that the
legislation was needed to facilitate pooling of resources for research
and development as the industry's foremost need. As the Vice President
of the Petroleum Marketers Association observed, the oilheat industry
is comprised of 7,000 small businesses, none with "enough market share
to fund these needs," and "check-off funds will support research and
development of new technologies and more efficient equipment and
appliances."[Footnote 42] Against this background, Senators Bingaman
and Murkowski sponsored the legislation in the Senate, and it was
enacted as part of the Energy Act of 2000.[Footnote 43]
Issues Regarding NORA's Monitoring of State Associations:
The Oilheat Act provides that NORA shall monitor the use of funds it
provides to state associations and "impose whatever terms, conditions,
and reporting requirements that [it] considers necessary to ensure
compliance" with the Act.[Footnote 44] The Act further provides that
NORA shall establish policies and procedures for auditing compliance
with the Act.[Footnote 45]
We conducted reviews and inquiries to better understand the nature of
any monitoring controls NORA has in place over the expenditures and
activities of NORA-qualified state organizations. NORA's president
told us that NORA's monitoring practices included the following:
* Inclusion of terms and conditions in grant agreements with the state
associations that specify the authorized and unauthorized use of NORA
assessment funds. These terms include that the grantee's work must be
in compliance with the Oilheat Act and, with respect to the Act's
lobbying restrictions, that the grant may not be used "for any
campaign, legislation, or other political purpose." The agreements
also provide that the grantee must comply with NORA's Policies,
Procedures, and Practices document, which includes a statement that
the Act prohibits use of NORA funds "to influence legislation or
elections" and that NORA shall not approve funds to support portions
of state newsletters, Web sites, or communications that "report on or
advocate industry policy and/or political positions with respect to
legislation or elections."
* Establishment of policies and procedures to review state grants and
disbursements.
* Reporting by state associations that describe how disbursements
align with the purpose of grant proposals.Reporting by state
associations that show the balance of grant accounts, including the
source and application of grant funds.
* General ledger entries and other available financial information.
Based on our review of general ledger entries, financial statements,
and certain other reports and information prepared by selected state
associations, however, we were unable to determine whether spending by
state associations of NORA funds met the requirements of the Oilheat
Act. For example, based on our review of the general ledger
expenditure entries for 2006 to 2008, we found that hundreds of
entries indicated only that a purchase was made. The entries provide
no details as to the type of or reason for the purchase. Although the
Oilheat Act provides NORA with broad discretion to determine what
monitoring measures it considers "necessary" to ensure compliance with
the Act's requirements, it is unclear whether NORA's monitoring
procedures are adequate to detect non-compliance if it occurs. As
noted in both public and private sector internal control guidance,
"monitoring" is one of the five standards or components for internal
control that should be performed continually and includes activities
such as comparisons and/or evaluations.[Footnote 46] Without effective
monitoring, NORA cannot reasonably ensure that state association
spending is in accordance with the Act.
We asked a NORA representative whether having state associations
establish separate accounts for NORA funds would help prevent the use
of those funds for unauthorized purposes, such as the use of NORA
funds for the lobbying activities identified under section 710 of the
Oilheat Act, and would assist NORA in overseeing how state
associations spend those funds. The representative said that while
such an arrangement might work, it could also constitute a heavy
administrative burden for such a small organization. The
representative added that NORA is evolving to an accounting
arrangement where each state NORA-affiliation purchase voucher must be
submitted to NORA prior to payment. NORA officials further noted that
each NORA-affiliated state association is required to enter into an
agreement specifying that the state association will provide NORA with
proper quarterly accounting and that, as noted previously, all
expenses will comply with the Oilheat Act. Also as noted above, NORA
provided us with sworn declarations from representatives of the state
associations whose activities we believed raised issues about the
coverage of the Act's lobbying restrictions. Those declarations stated
that any lobbying activities had been carried out with non-NORA funds,
from dues or other non-NORA revenue sources, and thus complied with
the Act. We agree that the grant agreements and NORA's Policies and
Procedures provide some "front-end" assurance ("preventive controls")
that state association spending is in compliance with the requirements
and restrictions of the Act. Without a stronger "back-end" monitoring
process ("detective controls") to review how the state associations
actually spent the funds, however, such as through comparisons and/or
evaluations cited in public and private sector internal control
guidance, we believe NORA cannot have reasonable assurance that the
states' spending is in accordance with the Act. The sworn statements
by the state association representatives that NORA provided to us do
provide a level of back-end assurance, but they were prepared
especially for our review, rather than in the normal course of
business, and thus are not indicative of a standard NORA operating
procedure.
Commerce and DOE's Oversight of PERC and NORA Has Been Limited:
The Department of Commerce has taken steps to meet its statutory
obligations under the Propane Act and the Oilheat Act. Conversely, DOE
has not taken steps to exercise the authority that Congress provided
in the Propane and Oilheat Acts to oversee PERC and NORA activities.
The Department of Commerce's Statutory Obligations Under the Propane
and Oilheat Acts:
The Department of Commerce has taken steps to meet statutory
obligations under the Propane and Oilheat Acts. The Propane Act
requires the Department of Commerce to prepare two reports relating to
PERC, and we found that Commerce has fulfilled this requirement. One
report is an annual analysis of changes in the price of propane
relative to other residential energy sources.[Footnote 47] As
discussed above, if, in any year, the 5-year average rolling price
index of propane exceeds the composite price index of other
residential energy sources by more than 10.1 percent, the Propane Act
requires PERC's activities to be restricted to research and
development, training, and safety matters. In 2003, we reported that
Commerce had not been preparing this analysis.[Footnote 48] In
response to our recommendation, the Secretary of Commerce directed his
staff to prepare propane price analyses according to the annual
reporting cycle established in the Act. Since then, Commerce has
prepared five propane price analyses.
In its most recent analyses issued in August 2009 and April 2010,
Commerce identified that the price of propane relative to other
residential energy sources was at 117 percent in 2007 and 122 percent
in 2008, respectively, exceeding the 110.1 percent price threshold
contained in the Propane Act.[Footnote 49] After completing the August
2009 analysis, Commerce notified PERC of its finding, and PERC, in a
September 2009 letter to the Secretary of Energy, indicated that it
had taken action to restrict its activities and comply with the
statutory restriction. The second report required of Commerce is an
analysis done at least every 2 years examining, among other things,
whether PERC's operation had an adverse impact on propane consumers
and propane prices. Since 2005, Commerce has prepared two propane
consumer impact analyses, with its most recent (2007) analysis showing
that PERC's operation may have led to a slight increase in consumer
demand for propane, and hence no adverse impact on the propane market.
Commerce is also required by the Oilheat Act to prepare an annual
report relating to NORA. Beginning in 2002 and every year thereafter,
the Oilheat Act requires Commerce to prepare an annual oilheat price
analysis similar to its price analysis of propane. At the commencement
of our current review, the department had not completed the required
analyses because it was unaware of this requirement and only became
aware of it after meeting with us. Commerce subsequently issued a 2008
oilheat price analysis in April 2010, which showed that oilheat prices
were at 96 percent, below the 110.1 percent price threshold contained
in the Oilheat Act. NORA's president told us that NORA had also
completed an oilheat analysis which showed that 2008 oilheat prices
were likewise below the price threshold.
Neither the Propane Act nor the Oilheat Act gives Commerce oversight
responsibility for the propane and oilheat markets. Under the Acts,
Commerce's role is limited to conducting specified analyses using data
provided by the Energy Information Administration and other public
sources. These analyses are then made available to Congress, the
Secretary of Energy, the appropriate entity (either PERC or NORA), and
the public.
DOE Has Not Taken Steps to Exercise the Oversight Authority Provided
by the Propane and Oilheat Acts:
DOE officials told us that the Department has not been exercising
oversight of either PERC or NORA because they believe that DOE has no
oversight role regarding either one. In a 2003 report, we found that
DOE's oversight of PERC was lacking and recommended that the
Department take corrective action.[Footnote 50] In its comments on our
report, DOE stated that the Commerce Department rather than it had
oversight responsibility and, therefore, DOE did not act on our
recommendation. We found that DOE's position regarding PERC remains
unchanged.
According to the Propane Act,[Footnote 51] PERC is required to submit
notice of council meetings and its annual budget to DOE, and DOE may
recommend activities and programs it considers appropriate. DOE is
expressly authorized to require reports from PERC on compliance
violations and complaints regarding implementation of the Propane Act.
DOE is also authorized to request reimbursement of oversight costs
incurred by the federal government.[Footnote 52] DOE officials told
us, however, that the Department has not conducted any in-depth
reviews of PERC's budget, provided any recommendations to PERC
regarding its programs and activities, or taken any other action to
determine whether propane assessment costs are improperly being passed
on to consumers. Finally, DOE officials said the Department has not
sought reimbursement for oversight costs incurred by the federal
government as stipulated in the Propane Act because no oversight costs
have been incurred.
The Oilheat Act contains many provisions similar to those of the
Propane Act. Under the Oilheat Act, NORA is required to submit its
annual budget to DOE, and DOE may recommend activities and programs it
considers appropriate. The Oilheat Act also requires NORA to submit
its audited financial statements to DOE. According to a DOE policy
analyst in the Office of Policy and International Affairs, NORA has
been providing its annual budget to his office largely because he and
the president of NORA worked together previously at another
organization. This DOE official stated, however, that his office was
not the most appropriate DOE office for overseeing NORA's work. This
official added that his office has offered neither formal nor informal
comments on NORA's budgets and that his office has never received any
of NORA's audited financial statements. Consistent with that, NORA was
unable to provide us any evidence that its audit reports had been
submitted to DOE. According to the president of NORA, DOE has not
conducted any in-depth reviews of NORA's budget, has not provided
recommendations to NORA regarding its programs and activities, and has
never sent comments to NORA on any of its proposed budgets.
In contrast to DOE's limited oversight of PERC and NORA, we found that
USDA routinely provides oversight of the various check-off programs
authorized by Congress and for which it has mandated responsibilities.
[Footnote 53] We also previously reported that USDA's commodity
divisions--such as the Livestock and Seed Division--ensure that check-
off programs are in compliance with the authorizing legislation
through routinely reviewing the check-off boards' budgets, financial
statements, plans, projects, and contracts.[Footnote 54] Our previous
report also noted that USDA officials attend board meetings and advise
board officials on how consistent their planned activities will be
with the authorizing legislation. Likewise, a 2008 USDA report to
Congress noted that USDA's Agricultural Marketing Service has day-to-
day oversight responsibilities for the dairy and fluid milk promotion
programs.[Footnote 55] In addition to reviewing and approving the
Boards' budgets, budget amendments, contracts, advertising campaigns,
and investment plans, the Agricultural Marketing Service, among other
things, ensures that the collection, accounting, auditing, and
expenditure of promotion funds is consistent with the enabling
legislation and USDA orders.
Conclusions:
Through 2008, PERC and NORA had received a total of $458 million in
federally authorized assessments collected from the sale of propane
and heating oil. These assessments are authorized by the Propane and
Oilheat Acts, which identify consumer education, research and
development, and safety and training as priorities. The Acts allow
other activities implementing the statutes' requirements to be
conducted using assessment funds, however, and because they do not
provide for a particular funding level for specific activities or
indicate a ranking among the activities designated as priorities, the
statutes afford PERC and NORA wide latitude in deciding how and in
what amounts they spend assessment dollars collected. Both PERC and
NORA reported spending over half their respective portions of the $458
million in total assessments on consumer education activities, in
comparison to a substantially smaller proportion (8 percent for PERC
and 5.8 percent for NORA) spent on research and development. Since the
legislative history of both Acts indicates that a need for research
and development funding was a key factor driving the legislation,
PERC's and NORA's spending to date raises the issue of whether
Congress anticipated that assessment funds would be allocated in this
way. In addition, while PERC and NORA provided summaries of their
activities in different program areas, it was not always clear how
these activities achieved desired results as defined by their
strategic goals.
In reviewing whether PERC and NORA met key statutory requirements, we
found that some PERC and NORA activities appeared to meet the
requirements, while others raised issues such as what activities are
covered under certain provisions in the statutes. For both entities,
for example, a lack of specificity in the language of the statutes
creates issues about whether certain types of communications and
expenditures related to Congress and politically affiliated entities
are covered by the statutes' particular lobbying restrictions, which
prohibit the use of assessment funds to "influence legislation or
elections." These statutory interpretation questions, as well as
factual uncertainties about some of the activities of PERC, NORA, and
their grantees (due in part to shortcomings in NORA's state monitoring
practices), raise issues about meeting this requirement. As noted
above, we did not determine, and do not express an opinion about,
whether or not the lobbying restrictions or other requirements were
met. Assuming PERC's and NORA's activities were permitted, the issue
remains whether Congress anticipated that assessment funds would be
used for these types of activities, and these uncertainties highlight
the need to clarify some of the statutes' definitions and requirements.
Compounding the lack of specificity in the statutes is the lack of a
specific enforcement mechanism that enhances compliance through
proactive federal oversight. First and foremost, the Acts contain no
specific monetary penalty or other consequence for noncompliance. The
Acts also do not require PERC's funds and NORA's grant funds to state
associations to be separated from other funds used by the
organizations, thereby making it more difficult to evaluate whether
PERC and NORA funds are being used for unauthorized activities. In
addition, while the Acts require certain oversight studies by Commerce
and allow DOE to take on an oversight role, the Acts do not require
Commerce to exercise proactive oversight, and it has not done so. As
to DOE, despite our 2003 recommendation that DOE exercise its
oversight role regarding PERC, DOE continues to believe it does not
have an oversight role for either PERC or NORA. In light of the lack
of any specific requirements in the statutes for federal agencies to
conduct oversight, federal oversight is likely to remain very limited.
Matters for Congressional Consideration:
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).
* 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.
* Establishing a specific enforcement mechanism, such as monetary
penalties or other consequences of noncompliance, and expressly
authorizing DOE to refer any potential violations of law to
appropriate enforcement authorities.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Secretary of Energy, the
Secretary of Commerce, and officials with PERC and NORA for their
review and comment. The Secretary of Energy declined to comment on the
report. The Secretary of Commerce provided written comments in which
he agreed with our findings, conclusions, and recommendations
regarding Commerce's statutory obligation to conduct certain analyses
and provided technical comments that we incorporated as appropriate
(see appendix IV).
NORA's president provided written comments, which are reproduced in
appendix VI. In general, NORA did not disagree with the report and
agreed with some aspects of the report. For example, the president of
NORA stated that he will review the final report with NORA's Directors
and recommend that they adopt several provisions for "back-end
reporting," based on concerns raised by GAO. In particular, NORA's
president stated that to ensure compliance with the Oilheat Act's
lobbying restrictions on expenditure of NORA funds, NORA has amended
its standard contract with NORA-qualified state organizations to
require affidavits attesting to compliance. NORA's president also
stated that in the past, NORA has been hampered in committing to
longer term research and development because of the Oilheat Act's
short sunset provisions and said that if the Oilheat Act is
reauthorized, NORA will proceed expeditiously to develop a laboratory
for such research. However, as our report discusses, oilheat industry
officials highlighted research and development as a key reason for
creation of NORA during congressional debate, and even at that time,
Congress anticipated authorization only for 5 years. We acknowledge
the planning that has been undertaken to establish a research capacity
and that may permit NORA to undertake additional research activities
upon reauthorization. However, if the statutory sunset provisions
hampered research in the past, it is unclear why they would not
continue to do so in the future.
PERC provided two comment letters that are reproduced in appendix V,
along with our detailed responses to specific comments. PERC also
provided technical comments, which we incorporated in the report as
appropriate. In PERC's first letter, its president and chief executive
officer (CEO) asserts that its submission of over 5,000 pages of
documents to GAO is evidence of PERC's transparency but recognizes
that such extensive documentation invites GAO interpretations that may
differ from PERC's interpretations. The letter then provides specific
comments and PERC's interpretation of the GAO concerns raised with 10
different PERC activities. In general, we agree that differences in
interpretation are possible and believe such differences may warrant
clarification by Congress, as suggested in our Matters for
Congressional Consideration. We have provided responses in appendix V
that address PERC's specific comments on each concern we raised.
PERC's second letter, written by its legal counsel, provides a more
detailed review of PERC's interpretation of the lobbying restrictions
in the Propane Act and an analysis of how PERC's expenditures have, in
PERC's view, complied with those restrictions. PERC's legal comment
letter also stated that our draft implied that the Act's restrictions
are broader (i.e., prohibit more activities) than PERC believes, under
its reading of the statute. We believe this misconstrues our report,
which expressly states that we did not make a determination on the
scope of the lobbying restrictions or PERC's compliance with them.
Rather, as we state in the report, the key statutory language in the
Propane Act's lobbying restrictions ("influencing legislation") is
undefined, is used differently in different statutes, and may warrant
clarification by Congress. While PERC did not agree that the lobbying
restrictions are unclear, it said it welcomes any clarification by
Congress. (See appendix V, comment 10 for our detailed response.)
Both PERC and NORA provided technical comments, which we incorporated,
as appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to the appropriate congressional committees, Secretary of Energy,
Secretary of Commerce, president and CEO of PERC, president of NORA,
and other interested parties. In addition, this report will be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-3841 or gaffiganm@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff that made major
contributions to this report are listed in appendix VII.
Sincerely yours,
Signed by:
Mark Gaffigan:
Director, Natural Resources and Environment:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
In our study of the Propane Education and Research Council (PERC) and
National Oilheat Research Alliance (NORA), we examined (1) how PERC
and NORA have spent the assessments they have collected, (2) the
extent to which PERC's and NORA's reported activities help to achieve
the results defined in their strategic goals, (3) the extent to which
PERC and NORA have met key requirements in their authorizing statutes,
and (4) the extent to which PERC's and NORA's activities and spending
received federal oversight.
To examine how PERC and NORA have spent the assessments they
collected, we reviewed and analyzed PERC's and NORA's financial
statements, annual reports, and other information produced by both
entities. More specifically, we examined how PERC and NORA spent
assessments collected from the propane and heating oil industries,
respectively, by obtaining and analyzing PERC's financial data from
1998 to 2008 and NORA's financial data from 2001 to 2008. Because PERC
allocates about 20 percent of its assessments collected to state
associations and NORA about 75 percent, we requested, obtained, and
analyzed state association spending data. PERC, at our request,
provided us with a breakout of spending data by priority spending
area--for example, research and development, safety and training, and
other categories. For almost every year, however, the amounts reported
on that breakout did not total to the amount shown on PERC's annual
reports or audited financial statements. Therefore, the data presented
in this report for PERC do not always match other publicly-available
information. In addition, while we were not able to analyze those data
in detail on a transaction by transaction basis, we did examine the
controls exercised by PERC and NORA over that spending. We did not
review PERC's or NORA's 2009 financial data because audited financial
statements were not available for timely review. To assess the
reliability of the financial data we received from PERC and NORA, we
tabulated the data from several different perspectives--for example,
across different lines of effort and by national and state level
programs. We compared our calculations with those reported by PERC and
NORA. Where needed, we met with their accountants and officials to
obtain explanations of any discrepancies. Moreover, as appropriate, we
asked for and examined documented evidence regarding those
explanations. We determined the data to be sufficiently reliable for
the purposes of this report.
To examine the extent to which PERC's and NORA's reported activities
help to achieve the results defined in their strategic goals, we
requested and obtained from these organizations evidence of any
claimed accomplishments by line of effort. We queried PERC and NORA
officials about the details of those accomplishments, and we requested
additional explanations and documentation as needed. Specifically, we
reviewed their strategic plans, road maps, and annual reports. We also
discussed PERC's and NORA's performance with officials within both
organizations as well as within the Departments of Agriculture,
Commerce and Energy--including the Energy Information Administration
and Brookhaven National Laboratory. Additionally, we reviewed data
produced by the Energy Information Administration and the Consumer
Product Safety Commission and reports prepared by the Department of
Commerce analyzing PERC's impact on consumers and propane prices. We
used information provided by the Department of Commerce to verify the
information contained in its 2008 Residential Propane Price Analysis,
which is required by the Propane Act. We also spoke with PERC and NORA
board members, accountants, and affiliated state associations. To gain
an industry perspective, we interviewed officials from the National
Propane Gas Association as well as scientists, an industry expert, and
former and current PERC and NORA grantees.
To examine the extent to which PERC and NORA met key requirements in
their authorizing statutes, we determined PERC's and NORA's respective
missions and requirements by reviewing the Propane Education and
Research Act, which established PERC, and the National Oilheat
Research Alliance Act, which established NORA. We then identified and
researched key statutory provisions and requirements for PERC and
NORA, obtained evidence regarding actions taken by the organizations
to satisfy those requirements, and queried PERC and NORA officials and
their legal counsel about any potential discrepancies between actions
taken and actions required by the statutes. Because about 75 percent
of NORA revenues are allocated to state associations for spending, we
also reviewed information on NORA state association Web sites to
assess how these state associations were responding to key provisions
of the NORA statute, and we reviewed information and sworn
declarations by state association officials that NORA provided to us.
To examine the extent to which PERC's and NORA's activities and
spending received federal oversight, we obtained documents and
interviewed officials at the federal agencies given an oversight role
by the Propane Act and the Oilheat Act. To determine the Departments
of Commerce and Energy's mandated roles, we reviewed the statutes and
our 2003 report on propane and interviewed agency officials regarding
their oversight roles and responsibilities. Additionally, we reviewed
PERC information provided to the Department of Commerce and PERC and
NORA information provided to the Department of Energy and discussed
with officials within both departments the level of oversight given to
that information.
We conducted this performance audit from June 2009 through June 2010
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit 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
findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Extent to Which PERC's Activities Have Met Key
Requirements and Carried Out Statutorily Prescribed Functions:
Propane Education and Research Council (PERC) activities under 7 of 16
key legislative requirements in the Propane Act appear to meet such
requirements and do not raise issues. These activities are:
1. Consistent with section 5(c) of the Propane Act, PERC has 21
members on its council.
2. Consistent with section 5(i) of the Propane Act, PERC has developed
rules, procedures, and bylaws.
3. Consistent with section 5(k) of the Propane Act, PERC has submitted
its budget to the Secretary of Energy annually.
4.Consistent with section 5(l) of the Propane Act, PERC's financial
records have been audited by a certified public accountant.
5. Consistent with section 5(l) of the Propane Act, PERC has submitted
notices of meetings to the Department of Energy (DOE).
6. Consistent with section 5(n) of the Propane Act, PERC has prepared
and issued annual reports each year since 1999.
7. Consistent with section 6(e) of the Propane Act, PERC has provided
the states with an assessment rebate equal to 19.8 percent of the
revenue collected for the years 1998 through 2008.
With regard to agriculture spending, section 5(g) of the Propane Act
specifies that not less than 5 percent of the assessments collected
shall be used for programs and projects to benefit the agriculture
industry in the United States, but does not specify whether the 5
percent threshold applies to annual spending or spending over some
other period of time. According to PERC's audited financial statements
for years 1998 to 2008, about 3.6 percent of the assessments collected
have been spent on agriculture activities.
Issues such as the scope of the Propane Act's requirements exist
regarding PERC's activities under 8 other legislative requirements or
priorities, including: (1) communications and expenditures related to
Congress and politically affiliated entities and whether these are
covered by the statute's specific lobbying restrictions; (2) grants
issued in late 2009 and whether the activities funded by the grants
were covered by a statutory propane-price restriction that was
triggered in 2009; (3) a reported mixed level of coordination with
federal agencies; (4) possible compensation of PERC council members
for their services; (5) possible spending over statutory formula-based
limits on projects related to the use of propane as an over-the-road
motor vehicle fuel; (6) providing greater funding to non-priority
areas than to some areas designated as priorities in the statute
(research and development, safety, education, and training); (7)
limitation of public access to executive sessions of PERC council
meetings; and (8) investment of PERC funds in non-approved ways. Our
questions relating to these 8 requirements or priorities are detailed
below.
Table 1: PERC Activities Relative to the Propane Act and PERC's
Responses:
PERC Activities: 1. Activities involving Congress or politically
affiliated entities;
Provisions in the Propane Act and PERC's Response: Sec. 8 "Lobbying
restrictions. No funds collected by the Council shall be used in any
manner for influencing legislation or elections, except that the
Council may recommend to the [DOE] Secretary changes in this [Act] or
other statutes that would further the purposes of this [Act]."
(Emphasis added.)
PERC Activities: PERC grantee records for 2005 show that the grantee
used PERC funds to:
* attend activities associated with the Democratic and Republican
National Conventions;
* provide $2,500 for staff lodging during the Republican National
Convention;
* provide more than $22,000 to the Ripon Society and the Ripon
Educational Fund. The Ripon Society, according to its website, is a
Republican public policy advocacy organization;
* make a $375 payment to the Bryce Harlow Foundation. The Foundation,
according to its website, is a non-profit organization that seeks to
promote the highest standards within the profession of lobbying and
government relations;
PERC Response:
General response: PERC stated that the Propane Act’s lobbying
restriction covers only the funding of advocacy about specific
legislation or specific legislative proposals and that it did not fund
such activities. PERC also stated that its activities related to
Congress constituted public or consumer education, because Members of
Congress are “the public.” Finally, PERC said its payment to the Ripon
Educational Fund was for an organizational membership fee needed to
provide opportunities to educate the public about propane-related
issues.
Regarding the Bryce Harlow Foundation: The PERC grantee stated that
this expense was to attend an awards dinner, not to advocate about
specific legislation.
PERC Activities: PERC grantee records for 2006 show that the grantee
used PERC funds to:
* make a $15,000 contribution to the Ripon Educational Fund;
* pay $6,900 for bus transportation services to transport persons to
Capitol Hill;
* pay for grantee members to attend Propane Days;
* pay $19,000 for a reception in the Senate restaurant;
* pay $3,000 to Advocacy Associates to make a keynote address at the
grantee's conference on Capitol Hill. Advocacy Associates, according
to its website, helps organizations and businesses utilize one of the
most powerful forces at their disposal to influence public policy -
grassroots lobbying;
PERC Response:
Regarding PERC's payment to the Ripon Educational Fund: PERC stated
that this was for an organizational membership fee needed to provide
opportunities to educate the public about propane-related issues;
PERC stated that these were grantee staff members who assisted PERC in
carrying out its programs and activities;
Regarding the Advocacy Associates keynote address: the PERC grantee
stated that the address was a motivational speech on the theme of
effective advocacy and that no specific legislation was discussed. In
addition, PERC stated that the address provided a training opportunity
for its membership which has information and education as one of its
missions.
PERC Activities: PERC grantee records for 2007 show that the grantee
used PERC funds to:
* pay for grantee officials' travel and lodging to attend Propane Days;
* pay about $8,500 for a Senate lunch;
* pay about $29,000 for a House reception;
* make a $10,000 contribution to the U.S. Chamber of Commerce;
PERC Response:
PERC stated that these were grantee staff members who assisted PERC in
carrying out its programs and activities;
PERC stated that this payment allowed the grantee's chief executive
officer (CEO) to participate in a group of CEO trade associations.
PERC stated that this payment to the U.S. Chamber of Commerce was for
an organizational membership fee needed to provide opportunities to
educate the public about propane-related issues.
PERC Activities: PERC grantee records for 2008 show that the grantee
used PERC funds to:
* pay grantee officials' travel and lodging expenses to attend Propane
Days, including $734 for a grantee staff dinner and $174 in taxi fares;
* pay $34,000 for a Senate reception;
* pay $16,000 for a House reception;
* make a $20,000 contribution to the Franklin Center. The Franklin
Center's mission, according to its website, is to direct the attention
of U.S. and global policymakers to the need for multilateral solutions
to international challenges. The Franklin Center also hosts multiple
policy forums annually to discuss legislative issues;
* pay $444 for congressional invitations to Propane Days;
PERC Response:
PERC stated that these were grantee staff members who assisted PERC in
carrying out its programs and activities;
PERC stated that the Franklin Center is non-partisan entity and the
contribution supported the Center's programs. PERC also stated that
the payment was for an organizational membership fee needed to provide
opportunities to educate the public about propane-related issues.
PERC Activities: PERC grantee records for 2009 show that the grantee
used PERC funds to:
* pay grantee officials' staff travel and lodging expenses to attend
Propane Days, including $170 for taxi fares;
* paid $46,000 to the D.C. Restaurant Association for various
activities including a congressional reception in the new Visitor's
Center;
* make a $16,000 contribution to the Franklin Center and a $10,000
contribution to the U.S. Chamber of Commerce;
PERC Response:
PERC stated that these were grantee staff members who assisted PERC in
carrying out its programs and activities;
PERC stated that the payments to the Franklin Center and U.S. Chamber
of Commerce were for organizational membership fees needed to provide
opportunities to educate the public about propane-related issues. PERC
also stated that the payment to the U.S. Chamber of Commerce allowed
the grantee's CEO to participate in a group of CEO trade associations.
PERC Activities: In addition to the aforementioned grant-related
information, we found that:
The July 1, 2004 issue of a propane trade industry magazine quoted the
PERC president as saying about PERC's capital awareness program that
"In a nutshell, we want to influence the influencers."
PERC Activities: A 2004-2005 PERC grantee's annual report indicated
that Propane Days activities will allow the propane industry to
achieve the vision of making the grantee "a powerhouse in the
Washington lobbying community".
PERC Activities: The 2006 Propane Days brochure indicated that the
purpose of Propane Days, which began in 2005, is to educate Washington
policymakers about propane's many uses, its role as a clean, efficient
energy source, and the propane industry's contribution to the U.S.
economy;
PERC Response:
PERC stated that Congress is part of "the public" and that educating
Congress falls within the required public education function of its
statute.
PERC Activities: According to the July 2007 PERC meeting minutes, the
PERC President stated that the year's Propane Days was the best
attended since the event began, and the timing was good as two major
pieces of energy and the environment legislation was being debated
that week.
PERC Activities: July 2008 PERC meeting minutes noted that a motion to
petition the National Propane Gas Association and the Gas Processors
Association "to make lobbying Congress to change … [the Propane Act's]
price analysis requirement a priority and also issue a white paper
that clarifies the issue was made, seconded, and approved" (emphasis
added). According to the minutes of the October 2008 PERC meeting, the
PERC council chairman stated that the National Propane Gas Association
agreed with those priorities.
PERC Activities: October 2008 PERC meeting minutes indicated that one
PERC council member "stressed the importance of participating in the
national policy dialogue and said that educating policymakers is the
key....It would happen only as a result of a focused lobbying effort."
(Emphasis added).
PERC Activities: February 2009 PERC meeting minutes recorded that PERC
approved a $6.2 million funding request entitled "National Energy
Conversation Initiative." The initiative, according to its proposal,
is a plan to provide education and information to "'inside the
beltway' policy makers, and 'outside the beltway' private and public
influencers." (Emphasis added);
PERC Response:
PERC stated that the purpose of the initiative was to inform a
national audience, including policy makers, on the use of propane to
reduce greenhouse gas emissions and air pollutants. According to PERC,
the National Energy Conversation messages did not urge action on
specific legislation.
PERC Activities: 2. Ensuring that PERC activities are restricted to
research and development, safety, and training matters once a propane
price threshold is exceeded;
Provisions in the Propane Act and PERC's Response:
Sec. 9(b) "Market survey and consumer protection ...Authority to
restrict activities. If in any year the 5-year average rolling price
index of consumer grade propane exceeds the 5-year rolling average
price composite index of residential electricity, residential natural
gas, and refiner price to end users of No. 2 fuel oil in an amount
greater than 10.1 percent, the activities of the Council shall be
restricted to research and development, training, and safety matters."
PERC Activities: The Department of Commerce determined in August 2009
that this average price composite index had been exceeded and notified
PERC. In September 2009, PERC notified DOE and Congress that it had
immediately restricted its activities in accordance with this
legislative provision. After the price restriction was triggered, PERC
approved or modified 3 grant proposals between October and December
2009. When initially proposed, each grant had been identified as a
"consumer education" grant that would be prohibited under the
September 2009 price restriction. After the restriction was triggered,
the grants were identified under a new program area--"residential and
commercial" matters.
PERC Activities: The 3 grants were as follows:
As part of PERC-approved funding of a $1.8 million grant for
"construction and professional communications," the grant proposal
stated that PERC intended to "create an ongoing dialogue with
construction pros to ensure propane messages stay front-and-center;"
PERC approved a no-cost change order to a $5.9 million grant for
"residential advertising." The grant proposal stated that PERC
intended to "educate construction professionals about the benefits of
propane throughout the home."
As part of PERC-approved funding of a $2 million grant for
"construction professional training support," the grant proposal
stated that PERC intended to provide "marketing activities no longer
allowable by direct PERC funding;"
PERC Response;
PERC stated that it amended the grant amount to $1.3 million by
eliminating $500,000 in funding for consumer education and retaining
the remaining funding for safety and training. PERC also stated that
the amended grant provided an opportunity to support and promote new
technologies entering the marketplace; PERC stated that after the
funding restriction went into place, it terminated all educational
components associated with this grant; PERC stated that the grantee,
rather than PERC, had inserted the wording into the proposal.
PERC Activities: 3. Coordination of PERC activities with key federal
agencies;
Provisions in the Propane Act and PERC's Response: Sec. 5(f) "[PERC]
...Functions....The Council shall coordinate its activities with
industry trade associations and others as appropriate to provide
efficient delivery of services and to avoid unnecessary duplication of
activities."
PERC Activities: DOE officials provided a range of views on PERC
coordination. DOE/Energy Efficiency and Renewable Energy officials
told us that PERC had been a good partner in the education and
training area and had worked with DOE on activities such as fleet-
oriented education geared toward maintenance personnel and drivers.
However, in the research and development area, these DOE officials
said that PERC displayed a lack of understanding of government cycles
and processes by approaching DOE at the wrong time of the funding
cycle. These officials added that PERC, unlike the natural gas
industry, had not worked with DOE to develop a research and
development strategic plan, and they said they would have welcomed
such an effort with PERC. They further said that DOE officials had
ideas for propane-related research and development projects but that
PERC had never solicited those ideas from DOE. In addition, according
to an official with the U.S. Department of Agriculture's National
Institute of Food and Agriculture, PERC's consumer outreach seems to
be geared only to the middle-to high-income audience; he had not seen
any PERC Spanish-language material; and PERC should coordinate its
outreach consumer education activities better with agencies such as
his. Another Agriculture official with the Agricultural Research
Service indicated that it would be a good idea if PERC vetted all
research and development projects through the Department in order to
avoid any possible duplication and to foster coordination;
PERC Response:
PERC stated that it has worked with federal agencies primarily on a
project by project basis and, as a result, had been able to
successfully leverage its research investments with government funding
for PERC projects totaling $8.1 million against a PERC share in the
projects of $6.1 million. PERC added that these sums have enabled PERC
to expand its research work beyond what would have been possible with
only assessment funds.
PERC Activities: 4. Ensuring no compensation of PERC council members
for their services;
Provisions in the Propane Act and PERC's Response: Sec. 5(d) "[PERC]
...Compensation. Council members shall receive no compensation for
their services, nor shall Council members be reimbursed for expenses
relating to their service."
PERC Activities: July 26, 2000, PERC press release indicated that the
Council approved funding for a multi-faceted Trade Show Initiative,
which included, among other things, funding for the council to attend
2 national trade shows in 2001; PERC council members attending the
July 16-17, 2009, board meeting were provided free meals and an open
bar event on the evening of July 16;
PERC Response:
PERC stated that the press release was in error and that the PERC
staff, rather than the council, attended these shows. PERC stated that
free meals were considered to be reasonable expenses and that the open
bar event was only of limited duration.
PERC Activities: 5. Restriction on PERC spending on projects related
to the use of propane as an over-the-road motor vehicle fuel;
Provisions in the Propane Act and PERC's Response: Sec. 5(g) "[PERC]
...Use of funds....The percentage of funds collected through
assessments pursuant to this [Act] to be used for projects relating to
the use of propane as an over-the-road motor fuel shall not exceed the
percentage of the total market for odorized propane that is used as a
motor vehicle fuel, based on the historical average of such use over
the previous 3-year period."
PERC Activities: A PERC grant stated that about 6.2 percent of PERC's
2009 budget would be spent on over-the-road motor vehicle fuel work,
while a 2009 PERC contractor report stated that only about 1 percent
of the odorized propane market for years 2005 to 2007 went to using
propane as an over-the-road motor vehicle fuel;
PERC Response:
PERC stated it interprets the term "motor vehicle fuel" in the Propane
Act to include fuel consumed by both off-road vehicles and over-the-
road vehicles. Under this interpretation, PERC states that it has
never exceeded the authorized level of spending on over-the-road motor
fuels.
PERC Activities: 6. Giving priority to research and development,
safety, education, and training activities;
Provisions in the Propane Act and PERC's Response: Sec. 5(h) "[PERC]
...Priorities. Issues related to research and development, safety,
education, and training shall be given priority by the Council in the
development of programs and projects."
PERC Activities: In 2009, PERC's budget for research and development,
safety and training, and consumer education was about $4.9 million,
$3.2 million, and $11.2 million, respectively. Other activities were
funded at similar or higher levels than PERC's safety and training
budget, including $4.6 million for Industry Programs, $6.2 million for
the National Energy Conversation Initiative, and $6.3 million for
Engine Fuel work;
PERC Response:
PERC stated that the industry programs area is cross-cutting and
includes work related to research and development, and training; the
National Energy Conversation Initiative was a part of the consumer
education area; and the engine fuel work was part of the research and
development area.
PERC Activities: 7. Providing public access to all PERC council
meetings;
Provisions in the Propane Act and PERC's Response: Sec. 5(m) "[PERC]
...Public access to Council proceedings....All meetings of the Council
shall be open to the public after at least 30 days advance public
notice....The minutes of all meetings of the Council shall be made
available to and readily accessible by the public."
PERC Activities: PERC's Policies, Rules, and Procedures indicate that
portions of council meetings ("executive sessions") may be closed to
the public for the purpose of discussing sensitive subjects such as
personnel matters and contracts;
PERC Response:
PERC stated that its executive sessions are closed to the public; it
keeps no meeting minutes regarding those sessions; the sessions are
largely used to discuss personnel matters; no official action is taken
during the executive sessions; and all actions must be proposed and
voted on by Council members in open session.
PERC Activities: 8. Investing PERC funds only in approved entities;
Provisions in the Propane Act and PERC's Response: Sec. 6(d)
"Assessments ...Investment of funds. Pending disbursement pursuant to
a program, plan, or project, the Council may invest funds collected
through assessments, and any other funds received by the Council, only
in obligations of the United States or any agency thereof, in general
obligations of any State or any political subdivision thereof, in any
interest-bearing account or certificate of deposit of a bank that is a
member of the Federal Reserve System, or in obligations fully
guaranteed as to principal and interest by the United States."
PERC Activities: PERC maintained investments in Freddie Mac and Fannie
Mae that PERC acknowledges do not meet the requirements of the Act;
PERC Response:
In response to our findings, PERC subsequently indicated that it had
promptly divested itself of such investments.
Source: GAO analysis of Propane Act provisions and PERC-provided
information.
[End of table]
[End of section]
Appendix III: Extent to Which NORA's Activities Have Met Key
Requirements and Carried Out Statutorily Prescribed Functions:
The activities of the National Oilheat Research Alliance (NORA) under
11 of the 18 key legislative requirements we reviewed in the Oilheat
Act appeared to meet these requirements and do not raise issues. These
activities are:
1. Consistent with section 705(d) of the Oilheat Act, NORA has not
compensated its members for their service nor for expenses relating to
their service.
2. Consistent with section 706(a)(2) of the Oilheat Act, NORA has
coordinated its activities as appropriate to provide efficient
delivery of services and to avoid unnecessary duplication by, for
example, coordinating its activities with the Department of Energy
(DOE) through the Brookhaven National Laboratory.
3. Consistent with section 706(a)(3)(A) of the Oilheat Act, NORA does
not appear to support advertising, promotions, or consumer surveys in
support of advertising or promotions.
4. Consistent with section 706(a)(3)(B)(ii) of the Oilheat Act, NORA's
research, development and demonstration activities do not appear to
support research, development and demonstration of oilheat utilization
equipment with respect to which technically feasible and commercially
feasible operations have been verified.
5. Consistent with section 706(b) of the Oilheat Act, NORA appears to
allocate its program expenses to education and training; research,
development, and demonstration; and consumer education.
6. Consistent with section 706(c)(1) of the Oilheat Act, NORA has
adopted bylaws for the conduct of business.
7. Consistent with section 706(e)(1) of the Oilheat Act, NORA has
published a budget for public review and comment each year.
8. Consistent with section 706(f)(2)(A) of the Oilheat Act, NORA's
annual financial statements have been reviewed by a certified public
accountant.
9. Consistent with section 706(g)(2) of the Oilheat Act, NORA's
council meetings, including those of the executive committee, appear
to be open to the public.
10. Consistent with section 706(h) of the Oilheat Act, NORA has
prepared an annual report each year since 2001.
11. Consistent with section 707(d) of the Oilheat Act, NORA's
investments have been reviewed for compliance with legislative
provisions by its counsel.
Issues such as the scope of the Oilheat Act's requirements exist
regarding NORA's or its qualified state associations' activities under
7 other legislative requirements or priorities, including: (1)
communications and expenditures related to Congress and politically
affiliated entities and whether these are covered by the statute's
specific lobbying restrictions; (2) monitoring of how state
associations spend NORA's funds; (3) the absence of formal policies
and procedures for auditing compliance with the Oilheat Act; (4) not
having the required minimum number of states represented on the NORA
council; (5) possible exceedance of term limits of NORA council
members; (6) submission of the NORA annual proposed budget to a
potentially inappropriate DOE office for review; and (7) possible
failure to submit the NORA annual audit report to the Secretary of
Energy. Our questions relating to these activities are detailed below.
Table 2: NORA Activities Relative to the Oilheat Act and NORA's
Responses:
NORA and NORA-Qualified State Association Activities:
1. Activities involving Congress or politically affiliated entities;
Provisions in the Oilheat Act and NORA's Response: Sec. 710. "Lobbying
restrictions. No funds from assessments under [this Act] collected by
the Alliance shall be used to influence legislation or elections,
except that the Alliance may use such funds to formulate and submit to
the [DOE] Secretary recommendations for amendments to this [Act] or
other laws that would further the purposes of this [Act]." (Emphasis
added.)
NORA and NORA-Qualified State Association Activities: January 25,
2010, NORA-qualified Maine state association website posting contained
a link to a webpage entitled "How We Lobby."; January 25, 2010, NORA-
qualified Massachusetts state association website posting stated that
"climate change legislation is one of the many legislative issues that
the state association addressed in 2009 and will continue to address
in 2010." The website also contained a link to an association letter
to one Senator in support of oilheat-related legislation. January 25,
2010, NORA-qualified New York state association website posting asked
its readers to take action now by contacting Congress and expressing
support for impending legislation that would control the manipulation
of oilheat prices. The website included a link to a form letter that
readers could use to mail to their Senators and Congressional
representative. January 25, 2010, NORA-qualified Pennsylvania state
association website posting provided a link to its 2009 year-end
report which stated that the association had worked hand-in-hand with
the Petroleum Marketers Association of America (PMAA) regarding NORA
reauthorization. September 24, 2009, NORA-qualified Massachusetts
state association newsletter indicated that the association is a NORA
partner and the association was encouraging its members and friends to
send form letters to Congress supporting NORA reauthorization. The
website contained a link to the form letter. September 22, 2009, PMAA
News from Capitol Hill indicated that "PMAA and ...[NORA] have asked
oilheat marketers in the 23 states that belong to NORA to urge their
Senators to support legislation reauthorizing NORA." The NORA Chairman
told us that NORA had asked PMAA to lobby Congress on its behalf.
August 2008 NORA executive committee meeting minutes indicated that
the NORA president said that NORA needed to try to get state senators
to support NORA reauthorization. December 2008 NORA-qualified
Massachusetts state association newsletter indicated that the NORA
president traveled to Washington to urge both Massachusetts senators
to support NORA reauthorization. A spring 2008 NORA-qualified New York
state association newsletter, which noted that it was "brought to you
in association with …[NORA]," stated that the state association was
"actively involved in a campaign to ask Congress to take action and
take control of energy prices."
NORA Response:
General response: NORA stated that the Oilheat Act's lobbying
restriction covers only the funding of advocacy about specific
legislation or specific legislative proposals and that it did not fund
such activities. NORA also provided us with sworn declarations by
representatives of four NORA-state qualified associations whose
activities we reviewed stating that no NORA funds were used to carry
out activities that constituted prohibited lobbying under the Act, as
they interpreted it; NORA stated that this was an editing error and
that both the NORA executive committee meeting minutes and the
Massachusetts state association newsletter should have indicated that
these activities were undertaken by the individual acting in his
capacity as the president of the National Association for Oilheat
Research and Education (NAORE), a separately funded organization for
which the individual is a registered lobbyist under the Lobbying
Disclosure Act, rather than in his capacity as the president of NORA;
NORA stated that it paid for the newsletter but stated that the
newsletter was reporting activity, not advocating a "call to action."
NORA and NORA-Qualified State Association Activities: According to a
February 2005 New York state association newsletter, NAORE was "in the
process of getting NORA re-authorized" in the 109th Congress. NORA
therefore requested that associations assist the effort by requesting
and collecting from the 22 NORA-qualified states "letters of praise,
affirmation, confirmation, thanks, etc., from any and all entities
that have been funded with the use of NORA dollars." These materials,
according to NORA records, were to be included "in the white-paper
packets being handed out to select legislators at NORA's Washington,
D.C. Day-On-The-Hill, scheduled to take place immediately after the
February 2nd NORA Board meeting."
Provisions in the Oilheat Act and NORA's Response: NORA stated that
this was an editing error and the newsletter should have indicated
that NAORE rather than NORA was requesting state association
assistance.
NORA and NORA-Qualified State Association Activities:
2. Monitoring how state associations spend NORA's funds; Provisions in
the Oilheat Act and NORA's Response: Sec. 707(e)(2)(A)(ii)(IV)
"Monitoring; terms, conditions, and reporting requirements. The
Alliance shall ...monitor the use of funds provided under this clause;
and ...impose whatever terms, conditions, and reporting requirements
that the Alliance considers necessary to ensure compliance with this
[Act]."
NORA and NORA-Qualified State Association Activities: The majority of
NORA's spending (75 percent) is provided to 20 state associations and
NORA implemented certain monitoring procedures so that spending by the
association would comply with the Oilheat Act's requirements. However,
based on our review of general ledger entries, financial statements,
and other information prepared by selected state associations, we were
unable to determine whether their spending of NORA funds complied with
the Act. For example, based on our review of state ledger expenditure
entries for 2006-2008, hundreds of entries indicate only that a
purchase was made; they included no details on the type or purpose of
the purchase. NORA's monitoring procedures appear to be inadequate to
detect non-compliance if it occurs;
NORA Response:
NORA stated that it includes terms and conditions in all grant
agreements with the state associations, which the associations agree
to, that specify the authorized and unauthorized use of NORA
assessment funds as specified in the Oilheat Act. NORA stated that its
other monitoring practices include: (1) establishment of policies and
procedures to review state grants and disbursements; (2) reporting by
state associations that describe how disbursements align with the
purpose of grant proposals; (3) reporting by state associations that
show the balance of grant accounts, including the source and
application of grant funds; and (4) general ledger entries and other
available financial information.
NORA and NORA-Qualified State Association Activities:
3. Promulgation of formal policies and procedures for auditing
compliance with the Oilheat Act;
Provisions in the Oilheat Act and NORA's Response: Sec. 706(f)(2)(C)
"Functions ...Policies and procedures. The Alliance shall establish
policies and procedures for auditing compliance with this [Act]."
NORA and NORA-Qualified State Association Activities: NORA has no
formal procedures for auditing compliance per se;
NORA Response: NORA provided us information showing that it has
procedures for reviewing state association budgets and disbursing NORA
funds to those associations.
NORA and NORA-Qualified State Association Activities:
4. Having specified minimum number of states represented on the NORA
council;
Provisions in the Oilheat Act and NORA's Response: Sec. 705(c)(1)(B)
"Membership....The membership of the Alliance shall be as follows:
...If fewer than 24 States are represented under subparagraph (A), one
member representing each of the States with the highest volume of
annual oilheat sales, as necessary to cause the total number of States
represented under subparagraph (A) and this subparagraph to equal 24."
NORA and NORA-Qualified State Association Activities: At the
commencement of our review, 20 states were represented on the NORA
council. Subsequently, 3 additional states were added.
NORA Response: NORA indicated that at various times it had attempted
to obtain representation from additional states without success.
NORA and NORA-Qualified State Association Activities:
5. Limiting number of terms of NORA council members;
Provisions in the Oilheat Act and NORA's Response: Sec. 705(e)
"Membership ...Terms. --Subject to paragraph (4) [regarding initial
appointments], a member of the Alliance shall serve a term of 3 years,
except that a member filling an unexpired term may serve a total of 7
consecutive years....A member may serve not more than two full
consecutive terms."
NORA and NORA-Qualified State Association Activities: NORA annual
reports and meeting minutes indicate that 4 individuals have been NORA
board members and/or NORA officers for 8 consecutive years;
NORA Response: The president of NORA stated that each of the 4
individuals had a break in service during the 8-year period, in
compliance with this requirement. NORA also provided sworn
declarations to us by each of these individuals attesting to this.
NORA stated that any conflicting statements in minutes or annual
reports are in error.
NORA and NORA-Qualified State Association Activities:
6. Submission of proposed NORA annual budget to appropriate DOE office
for review;
Provisions in the Oilheat Act and NORA's Response: Sec. 706(e)(2)
"Functions ...Budget ...Submission to the Secretary and Congress.
- After review and comment under paragraph (1), the Alliance shall
submit the proposed budget to the Secretary and Congress."
NORA and NORA-Qualified State Association Activities: NORA sends its
proposed budgets to DOE's Office of Policy and International Affairs
because, as explained by an official in that office, he and the
president of NORA had worked together previously at another
organization. The DOE official said there is no evidence that NORA's
budget is forwarded to either DOE's Office of Fossil Energy or Office
of Energy Efficiency and Renewable Energy, although both of those
offices have greater subject area expertise;
NORA Response: NORA stated that it provided its annual proposed budget
to DOE and it was DOE's responsibility to ensure that that budget was
forwarded to the appropriate DOE office for review.
NORA and NORA-Qualified State Association Activities:
7. Submission of NORA annual audit report to the Secretary of Energy;
Provisions in the Oilheat Act and NORA's Response: Sec. 706(f)(2)(B)
"Records; audits. - ...Availability of audit reports. Copies of each
audit report shall be provided to the Secretary, the members of the
Alliance, and the qualified industry organization, and, on request, to
other members of the oilheat industry."
NORA and NORA-Qualified State Association Activities: NORA provided no
indication that it had provided its annual audit reports to the
Secretary of Energy prior to our review, and officials from DOE's
Office of Policy and International Affairs said they were not aware of
ever having received these reports;
NORA Response:
NORA stated that it posts its annual audit report on its web page and
that such posting is equivalent to providing its audit report to the
Secretary.
Source: GAO analysis of the Oilheat Act's provisions and NORA-provided
information.
[End of table]
[End of section]
Appendix IV: Comments from the Department of Commerce:
United States Department Of Commerce:
The Secretary of Commerce:
Washington, D.C. 20230:
June 15, 2010:
Mr. Mark Gaffigan:
Director:
Natural Resources and Environment:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Gaffigan:
The U.S. Department of Commerce appreciates the opportunity to comment
on the United States Government Accountability Office's draft report
entitled Propane and Heating Oil: Federal Oversight of the Propane
Education and Research Council and National Oilheat Research Alliance
Should Be Strengthened (GAO-10-583).
We have reviewed the report and agree with GAO's general findings,
conclusions, and recommendations regarding the U.S. Department of
Commerce's statutory obligation to conduct price and consumer impact
analyses, as defined under the Propane Education and Research Act of
1996 and the National Oil Heat Research Alliance Act of 2000. The
Department's comments on this report are enclosed.
Sincerely,
Signed by:
Gary Locke:
Enclosure:
[End of section]
Appendix V: Comments from the Propane Education and Research Council:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
Propane Council:
1140 Connecticut Ave. NW.
Suite 1075:
Washington, DC 20036:
tel. 202 452 5975:
lax. 202 452 9054:
[hyperlink, http://www.propanecouncil.org]
June 16, 2010:
Mr. Mark Gaffigan:
Director:
Natural Resources and Environment:
United States Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Re: Comments of the Propane Education and Research Council Regarding
GAO Report GA0-10-586:
Dear Mr. Gaffigan:
In October 1996 Congress approved the Propane Education and Research
Act to foster research and development, training, education, and
safety programs for propane consumers and the businesses that serve
them. Prior to that action, government programs and funding for
propane-related activities were practically nonexistent and the
industry, composed overwhelmingly of small businesses, did not have
the market share or financial wherewithal to meet the costs of those
activities. Through the Propane Act, substantial progress has been
made on each of the functions that Congress directed the Propane
Education and Research Council (PERC) to perform. PERC began
collecting assessments and started full operations in 1998. The
Government Accountability Office reviewed PERC's activities for 1998-
2008.
PERC strives to be a good steward of the Act. Every program PERC has
undertaken, including those reviewed by GAO, share four essential
characteristics; they are 1) guided by a reasoned interpretation of
the law; 2) managed in accordance with a rigorous set of internal
controls to ensure that funds were used only for lawful purposes; 3)
well documented and available to the public through the Internet; and
4) broadly supported by the assessment payers.
PERC also strives to be a model of transparency, even though
transparency creates a risk that the expansive record, which often
includes individual statements and proposals by prospective grantees
that do not reflect the position or actions of PERC, will be
misinterpreted. During the course of the GAO review, PERC provided
more than 5,000 pages of documentation in response to more than 200
specific inquiries. PERC's interpretation of that record differs in
several instances with that of GAO.
PERC has taken careful note of the GAO's observations in this report
and, consistent with these observations, will make a special and
concerted effort to improve our operating processes to more
efficiently and effectively achieve the goals of the Act.
With respect to specific areas of concern, we offer the following
comments:
Coordination of Activities. [See comment 1]
"The Council shall coordinate its activities with industry trade
association [sic] and others as appropriate to provide efficient
delivery of services and to avoid unnecessary duplication of
activities." 15 USC 6404(f) [Emphasis added.]
PERC has made a good faith effort to coordinate its activities as
required by the Act. As GAO reported, PERC routinely submits to the
Department of Energy the mandated reports and proposed budgets.
Moreover, on its own initiative, PERC has worked with DOE and other
federal agencies on safety, research, technology deployment, and
energy efficiency projects, even though the Act does not specifically
mandate coordination with federal agencies other than to the extent
that they are among the "others" referenced in the Act above. PERC has
worked with federal and state agencies on dozens of projects,
primarily research projects that significantly leveraged PERC's
research and development investments. At PERC's invitation,
representatives of DOE, the Environmental Protection Agency, the
Department of the Interior, the Department of Agriculture, and other
federal and state agencies have participated in PERC-sponsored
workshops, seminars, and meetings. PERC has 15 ongoing engine fuel,
agriculture, and research projects that are co-funded by federal and
state agencies. PERC maintains a high level of coordination with
federal agencies and others and welcomes suggestions on how that
coordination can be improved. It is gratifying to note that GAO
identified no instance where PERC's level of coordination resulted in
the inefficient delivery of service or unnecessary duplication of
activities, which is the standard under the Act.
Allocation of Resources. [See comment 2] The GAO report raised the
question of resource allocation. PERC constantly reviews how resources
are allocated across the Act's four priority activities of research
and development, training, education, and safety. Congress did not
regulate funding among those priorities, although elsewhere in the Act
it did regulate funding levels for agriculture and engine fuel
activities, administrative expenses, and reimbursement of federal
oversight costs. Absent specific direction in the Act, PERC took on
that responsibility and has made funding decisions that were
reasonable and appropriate given the circumstances and market
conditions that existed at the time they were made. The overwhelming
majority of PERC funding has gone to the priority activities
designated by Congress and other mandatory functions under the Act.
Research and Development Programs. [See comment 3] PERC's record on
funding research and development is much greater than GAO reported. To
advance the research priority, PERC established three advisory
committees — research and development, engine fuel, and agriculture —
whose primary charge is to advance the research and development of
clean, efficient propane utilization equipment. The engine fuel and
agriculture advisory committees focus on specialty technologies unique
to those markets, and the Research and Development Advisory Committee
pursues a more diverse portfolio of technologies and processes. Each
advisory committee has leveraged its resources with funding from
private and public entities in order to expand the total resources
available to pursue PERC's research objectives. The GAO interpretation
of PERC's research spending appears to be based solely on projects
emanating from the Research and Development Advisory Committee and
gives consideration neither to the research projects carried out by
the engine fuel and agriculture committees nor to the third-party
funding that substantially expanded PERC's research investments.
PERC-funded research has resulted in improved energy efficiency,
reduced emissions of criteria air pollutants and greenhouse gas
emissions, and more cost-effective propane delivery systems. In
addition to research on end-use technology, PERC has investigated the
usable life, performance, and safety features of components in the
propane delivery system such as cylinders, relief valves, regulators,
and tanks — for improved safety and reliability.
PERC has invested a significant amount in developing energy-efficient
technology such as combined heat and power systems for residential and
commercial markets that use nearly 90 percent of the fuel energy,
nearly three times as much as grid-supplied electricity. PERC has
worked with U.S. manufacturers on hybrid power systems that combine
clean-burning propane generators with solar or wind power sources to
offer consumers lower costs and greater reliability than an all-
renewable option. PERC also has provided leadership on a global basis
to promote research and development of propane utilization equipment,
helping found the Global Technology Network in the World LP Gas
Association and organizing and hosting the industry's first Global
Technology Conference in 2006 in Chicago that attracted hundreds of
attendees from more than 40 nations.
Consumer Education Programs. [See comment 4] PERC has funded
substantial consumer education activities. At the outset, given the
level of expenditure, PERC established a detailed set of metrics to
benchmark and measure the progress of those activities. Among those
metrics were increased awareness of and favorability toward propane
among targeted audiences, unique visits to the website [hyperlink,
http://www.usepropane.com] consumers' use of the "Find a Propane
Retailer" application on the website, manufacturers' shipments of
propane utilization equipment, and propane market share in new home
construction. Across each of those metrics, as measured by third-party
professionals, the PERC consumer education program registered
significant gains. Propane space heating share of new home
construction increased threefold in key residential market segments.
While increased propane usage is an overarching goal, PERC recognizes
that its education programs, however successful, are not the most
significant influence in propane usage. Residential propane
consumption is variable and highly sensitive to weather patterns,
because the primary residential use of propane is for space heating.
Warmer winters, rising energy prices, increased consumer conservation,
improved structural and appliance efficiency, and the significant
decline of the manufactured housing sector (where propane space
heating once held a 70 percent market share) substantially reduced
propane demand over the last decade and continue to exert downward
pressure on propane consumption. Nonetheless, the consumer education
program's success in increasing propane market share in new home
construction helped contribute tens of millions of gallons to
residential propane demand, somewhat mitigating the decline while
expanding the consumer base. The consumer education program also
established high levels of consumer awareness of and favorability
toward propane as a clean, reliable energy source, and it saw
substantial numbers of consumers initiating contact with local propane
retailers through PERC's websites. PERC activities in the residential
market today are related solely to research, training, and safety.
PERC's consumer education activities have focused on residential
markets and reaching people who are buying, building, or renovating
homes through highly targeted television, radio, and print
advertising. Initially, these educational efforts focused on the
general benefits of propane as a residential energy source and are
generally referred to as "generic advertising." However, based on its
research findings, PERC determined that adding training programs for
construction professionals (developers, architects, builders,
plumbers, and HVAC contractors) could increase the effectiveness of
PERC's efforts in residential markets. For more than three years,
PERC's consumer education initiatives have been multi-functional, with
decreased funding for advertising and other educational tactics and
increased funding for training for construction professionals.
Training programs for construction professionals have been certified
by the National Association of Home Builders and the American
Institute of Architects.
Restriction of Education Activities. [See comment 5] After the August
4, 2009, notification of the restriction from the Department of
Commerce, when the department concluded that the price of propane
exceeded a threshold established in the Act, PERC conducted a detailed
analysis of all ongoing education programs and related contracts.
Rather than implement the restriction on a prospective basis, PERC
determined to implement the restriction as a cease-and-desist order
and began terminating contracts and shutting down ongoing education
activities that were approved and funded prior to the restriction.
Recognizing that the restriction is likely to be in place for years,
PERC reissued its proposed budget for calendar 2010 (it was initially
published just days before notification of the restriction). In
December, the Council approved the revised budget, which reduced the
assessment rate 20 percent to four-tenths of a cent per odorized
gallon of propane, eliminated education activities, and expanded
funding for research, training, and safety.
With respect to the dockets GAO referred to that were adopted after
the restriction, all were approved subject to legal review to bring
them into compliance with the restriction; the educational activities
were stripped from the measures and only permissible training
activities for construction professionals were continued, in some
cases at a higher funding level. Regarding GAO's implication that
under one of those training dockets PERC intended to pay for
"marketing activities no longer allowable by direct PERC funding," the
context from which GAO extracted that phrase makes it clear that PERC
grantees have to use their own funds — not PERC funds — to conduct any
education activities that PERC cannot fund because of the restriction.
Also after the restriction, PERC established the Residential and
Commercial Advisory Committee and charged it with implementing
training and safety programs for the residential and commercial
markets and to collaborate with the Research and Development Advisory
Committee to facilitate training for construction professionals
regarding propane utilization equipment being developed through PERC's
R&D investments.
Engine Fuel Programs. [See comment 6] PERC has invested in research
and development of new, advanced propane engine and vehicle
technologies to serve the needs of fleets for both over-the-road and
off-road use. PERC's engine fuel activities focus on four key market
segments: forklifts, off-road vehicles, trucks and vans for fleet use,
and agricultural engines for irrigation and generating electricity.
PERC's engine fuel programs have successfully produced propane engines
that compete with gasoline and diesel on economy and performance, and
excel in environmental benefits. Compared with gasoline, the propane
fuel systems that PERC developed with leading U.S. automotive
manufacturers and suppliers yield on average 50 percent less carbon
monoxide, 40 percent less hydrocarbons, 35 percent less nitrogen
oxides (NOx), and 50 percent less ozone-forming emissions. Propane
engines also play an important role in mitigating climate change. The
propane engines PERC developed for school buses, for instance, over
the full life cycle produce 24 percent less CO2 emissions than
comparable gasoline engines. Compared with like diesel engines, the
propane-powered version reduces NOx by more than 50 percent and
virtually eliminates harmful particulate emissions.
"The percentage of funds collected through assessments pursuant to
this Act to be used for projects relating to the use of propane as an
over-the-road motor fuel shall not exceed the percentage of the total
market for odorized propane that is used as motor vehicle fuel based
on the historical average of such use over the previous 3-year
period." 15 USC 6404(g) [Emphasis added.]
The Act limits PERC expenditures for over-the-road motor fuel. During
the review, PERC informed GAO of its basis for calculating and
accounting for the authorized spending level. The relevant provision
(above) contains two key terms describing the cap on over-the-road
motor fuel expenditures. The two distinguishing terms are "over-the-
road motor fuel" and "motor vehicle fuel." PERC was advised by counsel
that "motor vehicle fuel" was a larger universe of motor fuel
consumption and included off-road vehicles as well as over-the-road
vehicles. That is important for two reasons: 1) propane consumed by
off-road vehicles (primarily forklifts) is more than three times
greater than that consumed by over-the-road vehicles, and 2) the
figure GAO cites in the report reflects only the over-the-road portion
of the motor vehicle fuel calculation.
The Act appears to regulate the use of funds to prevent rapid and
expansive growth of propane use in over-the-road vehicles that could
possibly disrupt traditional propane markets. It is a reasonable
interpretation that Congress would have intended some growth in
propane use as an over-the-road motor fuel, given that propane is a
beneficial alternative fuel under the Clean Air Act that can reduce
greenhouse gas emissions and other air pollutants compared with
gasoline and diesel.
Because the limitation on over-the-road motor fuel expenditures is
based on a three-year rolling average of overall motor vehicle
consumption, PERC annually makes the calculation and reports that
figure in its financial statement with a treasurer's note that also
tracks expenditures against the cap on a cumulative basis. PERC has
never exceeded the authorized level of spending on over-the-road motor
fuel.
Safety and Training Programs. [See comment 7] PERC has developed an
extensive portfolio of safety and training products and programs.
Among them are numerous workforce training products, specialized
training for firefighters and other emergency responders, compliance
guides for federal (Department of Transportation and Occupational
Safety and Health Administration) training requirements, safe grilling
programs, consumer information on carbon monoxide risks, and
instructional materials for construction professionals on safe
installations, community tank systems, and energy efficiency, to name
a few. PERC's Propane Emergencies program was distributed free to
every fire department in the country and has been adopted by 35 state
fire service training academies. PERC maintains a dedicated safety and
training website [hyperlink, http://www.propanesafetv.com] that offers
a wide variety of safety and training resources for the public, the
industry, and emergency responders.
Of the nearly 200 safety and training projects PERC has conducted
since 1998, GAO discussed only one: a contractor's follow-on proposal
for new business that PERC declined to fund. GAO's description of that
project — "to identify PERC's impact on incidents and accidents" — is
erroneous. The contractor's initial study analyzed publicly available
data to develop a baseline to be used, in part, to determine if
incidents and accidents in propane homes and vehicles transporting
propane exceeded the rate of accidents and incidents in homes and
vehicles where propane was not present. (The study found no
significant difference between propane homes or vehicles and the
general population of homes and vehicles.) PERC advised GAO that the
contractor's proposed follow-on study was not suitable to measure the
effectiveness of PERC's safety and training initiatives because it was
to be based on data for a time period before the launch of significant
PERC consumer safety programs.
One ongoing PERC safety program that flowed from earlier safety
research is the longstanding safe grilling campaign that targets the
largest group of propane users, the estimated 50 million consumers who
use propane for outdoor cooking. Independently, the National Fire
Protection Association recently reported that structural fires
associated with propane grills have declined approximately 50 percent
since 1998. (Incidents related to charcoal grills were unchanged.)
PERC does not claim sole responsibility for these safety improvements,
although it believes that its safety and training programs contributed
to this positive trend in consumer safety. The Council is presently
conducting consumer safety research to determine how best to improve
its safety outreach to propane users.
Agriculture Programs. [See comment 8] The Act requires PERC to expend
not less than 5 percent of assessments on programs to benefit
agriculture and to coordinate its activities with agriculture
organizations. PERC routinely does so. The GAO report questioned
PERC's coordination with USDA. In fact, as PERC demonstrated during
the review, for several years PERC maintained a memorandum of
understanding with USDA's Agriculture Research Service and worked with
the service on several projects. The MOU was not renewed, at USDA's
request, based on its preference to work on a project-by-project
basis. The two organizations continue to collaborate on research and
energy efficiency initiatives and have five jointly funded projects
under way.
Industry Programs. [See comment 9] PERC's Industry Programs facilitate
the efficient implementation of the Act as well as PERC initiatives at
the state and local level. Industry Programs activities include the
collection of key statistical data and market trends and they support
information sharing between PERC and more than three dozen state
rebate recipients to maximize the impact of assessment funds, and
between PERC and national industry organizations.
Through this program PERC administers the distribution of 20 percent
of assessment collections to the states based on propane sales in each
state. State propane sales data is not available from government
sources, including the Energy Information Administration. To
administer the rebate in the absence of publicly available data, PERC
contracts through its Industry Programs with organizations with
relevant expertise to annually survey and calculate the sales of
propane state-by-state.
GAO questioned whether the Industry Programs improved efficiency and
avoided duplication. PERC provided GAO with a third-party examination
of the effectiveness of PERC Industry Programs in expanding the reach
and frequency of PERC's consumer education program. By encouraging
states through matching funds to use resources developed by PERC,
rather than leaving each state to develop its own, the coordination
program ensured that there was no duplication of production costs. In
addition, more than one-third of state rebate funds are used to
locally implement the safety and training programs that PERC has
developed, improving efficiency and eliminating the need for states to
develop their own training products.
Prohibition on Influencing Legislation or Elections. See comment 10.
(See also the following letter from PERC's legal counsel Patton Boggs
dated June 16, 2010). PERC has a heightened awareness of the Act's
prohibition on the use of assessment funds to influence legislation or
elections. PERC has consistently and proactively enforced this
provision, incorporating it into PERC's bylaws, its Policies, Rules,
and Procedures manual, its contracts, and its memoranda with grantees.
This prohibition also applies to the 20 percent of assessment funds
that are rebated to state entities. To ensure that rebated funds are
not co-mingled with state trade association funds, which can legally
be used for lobbying, PERC by rule requires the states to establish a
separate foundation under Section 501(c) of the Internal Revenue Code
in order to receive assessment rebates. PERC contractually bars states
from using rebate funds for lobbying and pays rebates only for
programs and projects approved in advance by PERC in order to provide
ongoing oversight of how assessment funds are used by the states.
Before receiving funds from PERC, every recipient must contract not to
use Council-provided funds for unlawful purposes. PERC has never
knowingly approved funds for any activity intended to influence
legislation or elections. Regarding the transactions questioned by
GAO, at the time PERC sought and received assurances from the grantee
that the specific expenditures had been thoroughly reviewed by legal
counsel and determined to be lawful and consistent with the Act and
other relevant laws. PERC's own subsequent review of the subject
expenditures found no use of assessment funds to influence legislation
or elections in any manner. GAO did not identify any legislation or
any election that assessment funds were used to influence in any
manner. In fact, assessment funds were never used in such manner.
PERC acknowledges that its National Energy Conversation (NEC)
education initiative was designed to educate the public about
propane's use to reduce greenhouse gas emissions, and that its
national advertising campaign included media buys in the Washington,
D.C., area. The NEC messages were factual and based on PERC research,
were generic in nature, and did not urge action by Congress or
encourage the public to contact Congress or take any other action.
Similarly, the events and communications activities PERC funded as
part of Propane Days were educational, focused on basic statistical
data about propane markets and propane utilization equipment,
appliances, and vehicles from PERC's three research committees; at no
time did PERC support directly or indirectly any advocacy or lobbying
efforts. As education initiatives, both the NEC and PERC's
participation in Propane Days were terminated last year immediately
after notification of the restriction of PERC's education activities.
GAO seems to imply that any communication with Congress, even sharing
basic educational materials or conveying the results of PERC's
implementation of the Act, may not be permissible and may be
prohibited by the Act's specific restrictions on the use of PERC funds
"for influencing legislation or elections." PERC's view differs on
this point and is based on expert legal advice. PERC waived its
attorney/client privilege on this subject and provided the information
to GAO. (The legal basis for PERC's actions is appended to the GAO
report.) Some communication between PERC and Congress is clearly
anticipated under the Act. (See 15 USC 6404(k) and 15 USC 6404(b).)
Indeed, the very provision of the Propane Act entitled "Lobbying
Restrictions" specifically authorizes PERC to "recommend to the
Secretary [of Energy] changes in this Act or other statutes that would
further the purposes of this Act." (See 15 USC 6407.) PERC seeks to
avoid even the appearance of impropriety and welcomes any
clarification regarding its communications with Congress and federal
agencies. Based on the overarching goals established and program
mandates of the Act, PERC believes it is not simply permitted, but is
obligated, to communicate regularly to Congress about programs
undertaken and progress achieved.
Conclusion. The Propane Education and Research Council has diligently
pursued the priority activities that Congress authorized it to
undertake and has produced results that are beneficial to the public
and that further the energy and environmental goals embodied in
federal policies.
The unique conditions that prompted Congress to create check-off
programs for propane and heating oil still exist today: the small-
business nature of the industries, their extremely small share of the
energy market, the lack of government programs relevant to the fuels
and the technology that use them, and the need for special employee
and consumer safety and training. Without Congress' foresight to
create PERC, the strides made over the past decade in propane safety,
training, and research and development of clean, efficient propane
technology would not have been realized.
Additional information about PERC activities is available at
[hyperlink, http://www.percfacts.com].
Respectfully submitted,
Signed by:
Roy W. Willis:
President and Chief Executive Officer:
[End of letter]
Patton Boggs:
Attorneys At Law:
2550 M Street, NW:
Washington, DC 2007-1150:
202-457-6315:
Facsimile: 202-457-0315:
[hyperlink, http://wwwpattonboggs.com]
Michael J. Nardotti, Jr.
(202 457-6125:
mnardotti@pattonboggs.com
June 16, 2010:
Mr. Mark Gaffigan:
Director, Natural Resources and Environment:
United States Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Re: Comments on GAO Draft Report Entitled, "Propane and Heating Oil:
Federal Oversight of the Propane Education and Research Council and
National Oilheat Research Alliance Should Be Strengthened"
Dear Mr. Gaffigan: [See comment 10]
The Propane Education and Research Council ("PERC" or "the Council")
submits the comments below to address the GAO's observations regarding
the application of the "Lobbying Restrictions" provisions of the
Propane Education and Research Act ("PERA or "the Act").
Although the Act creates a mandatory framework for collecting industry
funds and establishes the processes for governance, it imposes few
specific rules with respect to how the funds are spent. As the GAO
report states, PERC has expended its funds on a variety of activities
that arc consistent with the priorities set forth in the Act and for
other activities not expressly prohibited. The report questions
whether several of these activities are covered by the Act's lobbying
restrictions.
To be clear, there is no disagreement that the Act restricts the use
of PERC funds, "...in any manner for influencing legislation or
elections..."[Footnote 1] PERC understands the plain meaning of this
language to impose a restriction on specific lobbying activities
(i.e., influencing legislation or elections) but not to impose a flat
prohibition on all activities that are related to any interaction with
the Legislative Branch. PERC believes this understanding is consistent
with a reading of statutes which explicitly define activities which
constitute "influencing legislation"[Footnote 2] or "lobbying
contacts" and "lobbying activities"[Footnote 3] intended to accomplish
the same goal.
Based on this understanding of the Act's specific lobbying
restrictions, PERC believes informational and educational contacts
with Congress, such as those identified in the report as potentially
prohibited under the Act, are permissible. Further, as explained
below, PERC and NPGA believe such contacts are anticipated under PERA.
The GAO Draft Report, however, suggests that PERC's lobbying
restrictions could extend considerably beyond influencing legislation
or elections. In the section of the report entitled, "Issues Regarding
Communications and Expenditures Related to Congress and Politically
Affiliated Entities", the GAO, relying on a 1981 opinion of the Office
of Legal Counsel ("OLC") of the Department of Justice,[Footnote 4]
suggests that general informational or educational contacts of the
type that PERC conducted might not be permitted.[Footnote 5]
PERC strongly disagrees with the suggestion that the Act's specific
lobbying restrictions may be read as a restriction on general
informational and educational contacts with Congress. The OLC opinion
relied on by GAO is distinguishable in significant respects and make
its application to PERA questionable. That case involved restrictions
applicable to the now-abolished Community Services Administration
("CSA"), an independent Federal agency which coordinated and
administered antipoverty programs between 1975 and 1981.[Footnote 6]
The restrictive language interpreted by OLC was contained in an "anti-
lobbying" rider which provided:
...No part of any appropriation contained in this Act shall be used to
pay the salary or expenses of any grant or contract recipient or agent
acting for such recipient to engage in any activity designed to
influence legislation or appropriations pending before
Congress."[Footnote 7]
The GAO appears to argue that because the language of this restriction
on "any activity designed to influence legislation or appropriations"
is essentially analogous to PERC's restriction on the use of PERC
funds "in any manner for influencing legislations or elections" that
the broader restriction — possibly reaching informational and
educational contacts — also applies.
PERA does not believe that the application of the broader restriction
necessarily or even reasonably follows. A more restrictive approach
may be argued in the CSA case because of other significant
distinctions.
First, the funds at issue in the CSA case were appropriated funds. The
operations of the CSA, including the salaries of its employees, were
paid for by the U.S. taxpayer. PERU, funds are not appropriated funds.
PERC is authorized by Congress through PERA to collect assessments and
to use those assessments to carry out the mandates of the Act. The
U.S. taxpayer, however, funds no part of the cost of PERC's operations.
Further, under the Act PERC members cannot receive compensation for
their participation on the Council. Nor can PERC members - other than
public members - be reimbursed for expenses (i.e., travel, lodging, or
meals) related to their service as a Council member. Regardless of
their membership on PERC, however, Council members in their individual
capacities have a right to contact Members of Congress on matters of
concern, including matters related to the propane industry. Their
status as Council members does not preclude such contacts. The use of
PERC funds to do so, however, is.
The circumstances would have been quite different for employees or
officials of the CSA. It would have been difficult for those persons
to essentially "shed" their status as federal employees in discussing
matters of concern to CSA with members of Congress. It would have been
understandable in that circumstance for Congress to have placed limits
on the ability of salaried government employees to lobby Congress.
Whether those limits should extend to informational and educational
contacts with Congress would he another matter, however — especially
as applied to persons who are not salaried government employees and
who receive no form of appropriated fund support.
For these reasons, PERC believes the OLC opinion relied on by the GAO
has little or no applicability to the lobbying restrictions set forth
in PERA.
PERC next addresses why informational and educational contacts with
Congress are in fact anticipated under the Act. First, there is at
least one specific mandate in the Act for PERC to communicate with
Congress and which clearly would constitute an informational and
educational contact. Section 6404 of the Act requires that PERC
publish for public comment and review a budget plan which will
include, among other information, the probable costs of all programs,
projects and contracts. Following public comment and review, PERC then
is required to submit the proposed budget to the Secretary of Energy
and Congress. Also, Section 6404(n) requires PERC to prepare and make
available to the public an annual report which descries all the
programs and projects undertaken by PERC in the prior year and those
planned for the current year. While this document is not submitted
directly to Congress, it is a public document readily available to
Congress.
These statutory requirements for PERC to submit a budget annually to
Congress and to make available to the public — including Congress — an
annual report of programs and projects clearly would be inconsistent
with an interpretation of PERA's lobbying restrictions as including a
limitation on informational and educational contacts with Congress.
Finally, it is difficult to accept this interpretation as consistent
with overall intent and goals encompassed in the Congressional
"Findings" and mandates of PERA.
Section 6401 of the Act, Congress states, in part, that:
(1) propane gas is an essential energy commodity...;
(2) the use of propane is especially important to rural citizens and
farmers...;
(3) propane has been recognized as a clean fuel and can contribute in
many ways to reducing pollution in our cities and towns; and;
(4) propane is primarily domestically produced and its use provides
energy security and jobs for Americans.
Based on these findings, Congress allowed the creation of PERC, and if
established, required the Council, pursuant to Section 6404 of PERA to
develop, through the collection of Council member assessments and not
through the use of appropriated funds, programs:
...to enhance areas of consumer and employee safety and training, to
provide for research and development, and to inform and educate the
public about safety and other issues associated with the use of
propane...
Consistent with the stated finding of public importance and the
specific mandates resulting from the establishment of PERC, it has
been incumbent on PERC to do more than simply rely on its annual
budget submission to Congress and the publication of its annual report
to inform and educate Congress about the progress achieved under the
Act. As a practical matter, PERC has viewed regular communication with
Congress not only as permissible but as necessary to explain how it is
fulfilling its requirements under the Act and achieving PERA's
overarching goals.
The GAO's suggestion that there may be limitations on the
informational and educational contacts between PERC and Congress based
on the Act's lobbying restrictions would therefore seem to be at cross
purposes with these ends and, in the opinion of PERC, would not be a
reasonable interpretation of the Act.
We appreciate the opportunity to offer these comments.
Sincerely,
Signed by:
Michael J. Nardotti, Jr.
Major General, U.S. Army, Retired:
Patton Boggs letter footnotes:
[1] Section 6407 of the Act (15 U.S.C. Section 6407), entitled
"Lobbying Restrictions" provides: "No tends collected by the Council
shall be used in any manner for influencing legislation or elections,
except that the Council may recommend to the Secretary [of Energy]
changes in the Act or other statutes that would further the purposes
of this Act." The phrases "influencing legislation" and "influencing
elections" are not defined in PERA. The legislative history of PERA
also does not explain Congress' intent. For these reasons, PERC has
looked for guidance to the other statutes detailed below which use and
define these terms.
[2] See, e.g., Section 162(c)(1) of the Internal Revenue Code ("IRC")
which defines "influencing legislation" as "any attempt to influence
any legislation through communication with any member or employee of a
legislative body, or with any government employee who may participate
in the formulation of legislation." 26 1.1.S.0 Section 162(c)(1). See
also Section 501(h) of the IRC which defines "influencing legislation"
in the same way.
[3] See, e.g., The Lobbying Disclosure Act of 1995, Section 1602(7)
which defines "lobbying activities" as ...lobbying contacts and
efforts in support of such contacts, including preparation and
planning activities, research and other background work that is
intended, at the time it is performed, for use in contacts, and
coordination with lobbying activities of others" and Section 1602(8)
which defines four categories of lobbying contacts, only one of which
involves influencing legislation. More specifically, Section
1602(8)(A)(i) includes in the definition of lobbying contacts "the
formulation, modification, or adoption of Federal legislation
(including legislative proposals)...' 2 U.S.C. Section 1602(8)(A)(i).
[4] Anti-Lobbying Restrictions Applicable to Community Services
Administration Grantees, 5 Op Off. Legal Counsel 180 (June 17, 1981).
[5] In response to the authorities cited by PERC, the GAO states: "On
the other hand, the Justice Department's Office of Legal Counsel,
interpreting another federal law with similar language, suggested that
general informational or educational contacts of the type that PERC
conducted might not be permitted. Like the propane Act, the statute
that the Justice Department reviewed provide that the use of federal
grant or contract funds "to engage in any activity designed to
influence legislation...pending before Congress" was prohibited
[citation omitted]. Among other things, Justice emphasized that the
breadth of the language — that it applied to "any activity designed to
influence legislation pending before Congress" — and that the law was
"conspicuously silent' about any exception permitting "direct contact
with, Congress" akin to normal informational and educational contacts
between agency officials and Congress. Justice concluded that this
language "flatly" prohibited the use of federal funds to influence
"specific measures actually pending before Congress" and it raised,
but did not resolve whether other activities were prohibited as well."
(emphasis added). GAO Draft Report, pp. 18-19.
[6] See Records of the Community Services Administration, Record Group
381 1963 81, The National Archives website at [hyperlink,
http://w,nv.archives.goviresearch/guide-fed-records/groups/381.html].
[6] Op. Off Legal Counsel 180,181 (June 17, 1981).
[End of Patton Boggs letter]
The following are GAO's comments to two Propane Education and Research
Council (PERC) letters dated June 16, 2010.
GAO Comments:
1. Coordination of activities: PERC asserts that it has made a good
faith effort to coordinate its activities as required by the Propane
Act and cites numerous examples of coordination with federal agencies,
state agencies, and others across a range of efforts. However, we
found that there has been a mixed level of coordination between PERC
and those agencies. Department of Energy (DOE) program officials told
us that PERC had been a good partner in the education and training
area and that PERC had worked with DOE on activities such as fleet-
oriented education geared toward maintenance personnel and drivers;
however, in the research and development area, these DOE officials
said that PERC approached DOE to request funding for a proposed
project at the wrong time of the funding cycle, demonstrating a lack
of understanding of government cycles and processes. These officials
added that PERC, unlike the natural gas industry, had not worked with
DOE to develop a research and development strategic plan, and they
said they would have welcomed such an effort with PERC. PERC indicates
it welcomes suggestions on how coordination can be improved, and our
report offers suggestions from DOE that PERC work with DOE to develop
a research and development strategic plan. The report also offers
suggestions from the U.S. Department of Agriculture (USDA) that PERC
coordinate its outreach consumer education activities with USDA.
2. Allocation of resources: We agree with PERC's assertion that the
overwhelming majority of its funding has gone to priority activities
designated by Congress and other mandatory functions in the Propane
Act. We further agree with PERC that Congress did not regulate funding
across the priorities but did so for agriculture, engine fuels,
administration expenses, and reimbursement of federal oversight costs.
Our main point is not that PERC did not spend funding on priority
activities but that within those priority areas, PERC spent almost 51
percent of its assessments on consumer education and only 8 percent on
research and development. We further note that issues remain about
whether Congress anticipated that PERC would allocate the majority of
its funding to education activities in comparison to the relatively
little financial support given to research and development--a
statutory priority area that was a key area of congressional interest
as the law was debated prior to enactment. However, as we note in our
report, the Act did not specify a particular funding level or ranking
for research and development relative to the other priority areas of
consumer education and safety and training. Therefore, as PERC notes,
absent specific direction in the Act, PERC took on the responsibility
of regulating funding levels among the priorities and chose to
provide, according to our analysis, almost 51 percent of its
assessments for consumer education and 8 percent for research and
development. As noted in our report, Congress may wish to consider
specifying a 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).
3. Research and development: PERC holds that its funding for research
and development is actually much greater than GAO found, since its
agriculture and engine fuel programs also contain components of
research and development. First, it is important to note that the PERC
research and development funding outlined in this report is based on
PERC's and state associations' reported spending for research and
development. We agree that PERC's agriculture and engine fuel programs
may contain research and development elements and discussed this with
PERC officials during our review. However, PERC officials were not
able to provide a breakdown of the research and development spending
associated with these other programs. Furthermore, we question the
extent to which all funding for agriculture and engine fuel programs
is properly categorized as research and development. For example, as
stated in our report, under its engine fuel program, in 2009, PERC
approved a $1.4 million grant to help the Blue Bird Corporation secure
financing to buy 1,800 engines for its Blue Bird buses from General
Motors Corporation. Because General Motors had announced it intended
to stop making these engines, Blue Bird plans to stockpile these
engines for use over the next 2 to 3 years. Also, in 2008, PERC
approved a $4.8 million grant with Roush Industries to produce and
market propane-fueled engines in Ford F-150 and F-250 trucks and E-250
vans. Expenses included in that program were PERC funding for floor
mats and other marketing materials. Although PERC's strategic goal for
engine fuel, as stated in its 2008 to 2012 strategic plan, is to
conduct research with a commercialization focus to advance propane
sales for vehicle and other engines, it is not clear how the purchase
of engines and production and marketing of propane-fueled engines
involved the conduct of research. DOE officials with whom we discussed
these matters said that the acquisition and placement of engines into
vehicles was neither research nor development. Finally, PERC makes a
point that GAO numbers do not include leveraged resources through
third-party funding. This report's objective on the use of assessments
was focused on the amount of assessments PERC collected and how it
spent them; therefore, the amount of third-party spending is not
relevant to addressing that objective. If anything, the availability
of third-party financing to be leveraged by PERC funding highlights
the potential additional benefits of increased PERC spending on
research and development--an activity for which PERC chose to spend 8
percent of its assessments.
4. Consumer education: We agree with PERC that it has funded
substantial consumer education activities. Our report, in fact, states
that PERC spent about 51 percent of the assessments it collected on
consumer education. However, as noted above, issues remain about
whether Congress anticipated that PERC would allocate the majority of
its funding to education activities in comparison to the relatively
little financial support given to research and development. Regarding
the actual consumer education activities, the report is only trying to
make the point that it is unclear whether these consumer education
activities resulted in increased overall propane usage, which is
PERC's strategic goal for consumer education. We are not aware of
detailed metrics to measure achievement of this goal and the examples
PERC offers, such as increased awareness and favorability and visits
to Web sites, do not directly measure progress toward the strategic
goal of increased overall propane usage. As noted in our report, our
attempts to identify PERC's impact on this goal found studies
highlighting both increased and decreased propane usage. Finally, we
note that PERC's response states that "consumer education initiatives
have been multi-functional, with decreased funding for advertising and
other educational tactics and increased funding for training for
construction professionals." The inclusion of funding for training, a
separate priority activity, under consumer education, makes it even
less clear how training activities support goals under consumer
education.
5. Restriction of education activities: According to PERC, after the
August 4, 2009, notification of the restrictions against further
consumer education activities, PERC conducted a detailed analysis of
ongoing education programs and contracts, began terminating contracts
and activities, reduced its assessment rate accordingly, and subjected
its activities to a legal review. PERC states that GAO took out of
context a training docket announcement that PERC intended to pay for
marketing activities no longer allowable by direct funding, because
the funding reference in this case was to PERC grantee funds. The
report notes, according to PERC, that it complied with the education
restriction because it later amended the grant, terminating the
educational component and that the grantee, rather than PERC, inserted
the above wording into the proposal. We feel this language is
sufficiently comprehensive and needs no further clarification.
Importantly, GAO notes that the Propane Act does not define the scope
of the three activities permitted under the price restriction
(research and development, training, or safety matters), nor the
activities, such as consumer education, that must cease under the
restriction. The lack of a precise statutory line between permitted
and prohibited activities creates difficulty in assessing compliance
with the restriction and may require clarification by Congress. For
example, as noted above, PERC's response letter claims that consumer
education activities have been multi-functional and have included
training, a separate priority activity under the Act.
6. Engine fuel programs: We agree that the Act limits the percent of
PERC's assessments collected that can be spent on over-the-road motor
fuel projects to the percentage of the market for propane used as a
'motor vehicle fuel.' However, different interpretations of what is
included in the market for motor vehicle fuel can lead to different
calculations of the limit--the more that is included in motor vehicle
fuel, the higher the limit for over-the-road motor fuel projects.
Based on its counsel's legal analysis, PERC concludes that motor
vehicle fuel includes both off-road vehicles (primarily forklifts) and
over-the-road vehicles. This is significant, because by including
forklifts (which consume three times more propane than over-the road
vehicles), the limit on over-the-road fuels is much higher. GAO raised
this as an issue because we believe another interpretation of what
constitutes motor vehicle fuel is reasonable. That is, that propane
for forklifts is not considered as a motor vehicle fuel, and thus the
limit on over-the-road motor fuel projects would be much lower, which
raises the question as to the standard to be used under the Act.
Again, we make no determination on compliance but offer this as
another example of different interpretations of the statute that may
warrant congressional consideration to provide greater specificity on
the requirements it has established and to establish mechanisms to
ensure compliance with those requirements. PERC further states that it
has invested in research and development for new advanced propane
engine and vehicle technologies, and its engine fuel programs have
produced engines that compete with gasoline and diesel in economy and
performance. Our report discusses PERC's spending for engine fuels;
however, as stated under comment 3, some spending on the Bluebird Bus
and the Roush engines in Ford trucks and vans may constitute
commercialization activities, and those efforts do not appear to
constitute research and development.
7. Safety and training: PERC's comments pointed out that it has
developed an extensive portfolio of safety and training products and
programs. Our report already contains discussions of some of those
efforts. In addition, a key point PERC makes focuses on GAO's
characterization of the purpose of a 2006 study regarding propane-
related accidents and incidents. PERC read the draft report as saying
that the 2006 study was an attempt to identify the potential impact of
PERC's safety and training efforts and explained that this was not the
purpose of the 2006 study. GAO has clarified the final report to make
it clear that GAO attempted to identify PERC's potential impact on
accidents and incidents and that GAO used the report for those
purposes. GAO focused on identifying the impact of accidents and
incidents because it was a key strategic goal for PERC's safety and
training programs, the impacts against it could be quantified, and it
had been studied in a report PERC had commissioned. We found that the
other strategic goals for safety and training were so broad and non-
specific--e.g., improving safety awareness, enhance the industry
workforce, and improve regulatory and consumer confidence--that
performance against them was difficult to measure.
8. Agriculture programs: PERC points out that the Propane Act requires
it to spend not less than 5 percent on programs to benefit
agriculture, and PERC "routinely does so." Actually, as noted in our
report, according to PERC's audited financial statements for years
1998 to 2008, only about 3.6 percent of the assessments collected have
been spent on agriculture activities. While section 5(g) of the
Propane Act indeed specifies that not less than 5 percent of the
assessments collected shall be used for programs and projects to
benefit the agriculture industry in the United States, it does not
specify whether the 5 percent threshold applies to annual spending or
spending over some other period of time. Regarding the coordination
aspects of PERC's agriculture programs, an official in USDA's National
Institute of Food and Agriculture stated that PERC should coordinate
its consumer education activities better with organizations, including
USDA, while an official with the Agricultural Research Service
indicated that if PERC vetted all research and development projects
through the Department, doing so could help avoid duplication and
foster coordination.
9. Industry programs: Our report raises the concern that it is unclear
how industry program activities maximize the impact of PERC dollars
distributed to state associations or coordinate activities to avoid
duplication. According to PERC, its industry programs facilitate the
efficient implementation of the Act as well as PERC initiatives at the
state and local level. In its comments, PERC did provide additional
information about its outreach and frequency of contacts for consumer
education purposes and its requirement for state associations to use
matching funds, that we will reflect in the report. However, as PERC's
comments do not provide measures for assessing the extent to which its
industry program has maximized the impact of PERC dollars or avoided
duplication, we still believe is unclear how these activities support
these goals.
10. Prohibition on influencing legislation or elections: PERC
commented that our draft implied the Propane Act's lobbying
restrictions are broader and prohibit more activities than PERC
believes they do based on its interpretation of the Act. We explain in
the report that PERC misconstrued our draft because as our report
stated, we did not make a determination of which specific activities
are covered by the lobbying restrictions or PERC's compliance with
them. Rather, in response to PERC's citation of statutes containing
the same "influencing legislation" term used in the Propane Act's
lobbying restrictions, which PERC believed were analogous for purposes
of interpreting the Propane Act, we noted an example of another
potentially analogous statute using this same term, which had been
broadly interpreted in an opinion by the Justice Department. Our point
was that the term is interpreted differently in different statutes and
that its undefined meaning in the Propane Act is not clear. This lack
of clarity may warrant clarification by Congress, as suggested in our
Matters for Congressional Consideration, and endorsed in PERC's
comments (although PERC did not agree the current statute is unclear):
PERC stated that it "seeks to avoid even the appearance of impropriety
and welcomes any clarification regarding its communications with
Congress ...."
[End of section]
Appendix VI: Comments from the National Oilheat Research Alliance:
NATIONAL OILHEAT RESEARCH ALLIANCE:
600 Cameron Street, Suite 206:
Alexandria, VA 22314:
Phone: 703-340-1660:
Fax: 703-340-1661:
Email: infor@nora-oiheat.org.
Chairmen: Jim Townsend:
President: John Huber:
June 16, 2010:
Mr. Mark Gaffigan:
Director, Natural Resources and Environment:
Government Accountability Office:
441 G St., NW:
Washington, DC 20548:
Dear Mr. Gaffigan:
Thank you for providing a copy of the recently prepared draft report
"Propane And Heating Oil: Federal Oversight of the Propane Education
and Research Council and National Oilheat Research Alliance Should Be
Strengthened" for comment.
I have carefully reviewed the report, and will review the final report
with the Board of Directors for the Alliance. At that meeting, I will
recommend that we formally adopt several of the provisions noted by
GAO for back end reporting. We are confident that the monies have been
spent not only within the confines of the law, and in accordance with
the stipulations in the contracts that grantees have executed; however
we understand that greater transparency in that process and more
evidenced compliance is appropriate. I am also confident that the
members of Congress who have worked to reauthorize NORA will review
this report and work to make appropriate changes to the statute to
increase and improve federal oversight.
The GAO raised a number of concerns regarding potential lobbying
activities. As was noted, many of the organizations that receive
grants from NORA participate in government affairs work independent of
NORA and are supported by member dues in those efforts. Each of the
executives for those associations have been trained and noticed on the
legislative limitation. We will continue to monitor this area
carefully, and we have amended our contract to require an affidavit
indicating compliance as part of the final accountings from the
qualified organizations, as recommended by GAO.
Additionally, within its internal operations, NORA has been careful to
distinguish work described within the statute and that which is
prohibited by the statute. Prior to the creation of NORA, the industry
established the National Association for Oilheat Research and
Education (NAORE) to provide government relations support to the
oilheating industry. That organization files regular lobbying reports
with the Congress, and employs a firm for lobbying in Washington. On
occasion, John Huber, President of NORA does limited work for NAORE.
At such times, he bills NAORE for the time, and redUces his
compensation from NORA by a similar amount. This arrangement was
developed with assistance of counsel, reviewed by the Board, and is
reflected in the minutes of the organization.
GAO has also noted the substantial amounts of funds dedicated to
consumer education versus research and development. Budget numbers
viewed without context, however, do not present a complete picture of
the special challenges of funding meaningful, longer term research and
development. As we explained previously, NORA's ability to plan for
longer term for research and development projects clearly is hampered
by the Act's relatively short sunset provisions. As an example, we
would note that NORA entered into talks and after considerable time
and effort reached an agreement in principle with the New York State
Energy Research and Development Authority (NYSERDA) to develop an
operational laboratory in Saratoga, New York. NORA went as far as
conducting site reviews for the lab's placement. However, NORA was
unable to proceed, due to the timing of its reauthorization, and the
significant costs of setting up a laboratory, acquiring appropriate
test equipment, and relocating employees, when the statute's
expiration was imminent. If the statute is reauthorized, NORA intends
to proceed expeditiously to develop a laboratory for oilheating and
renewable liquid fuels. The NORA Board is committed to establishing
such a platform for research and was disappointed that the prolonged
negotiations with NYSERDA during the last short term reauthorization
prevented it from occurring.
Nevertheless, notwithstanding the handicap caused of the Act's sunset
provision, NORA has made significant progress in its relatively short
statutory life. The further development of useful and affordable
biofuels, the evolution of oil tank design and maintenance to prevent
leaks, and the enhancement of technician training and certification
programs are significant and positive improvements which directly
benefit consumers.
While the amounts expended by NORA on consumer education have been
significant, they have been extremely important as well. During the
decade of 2001-2010 decade, energy prices have been both high and
volatile. The NORA Board concluded that providing customer's
information on ways to save energy by installing new equipment such as
automatic setback thermostats, new more efficient equipment, and
lifestyle changes would be a vital service to oilheat customers. While
developing the next and ever more efficient equipment is extremely
important, vital, it was felt that helping customers save with
existing technology is essential as well. It should be noted also that
time needed to develop and execute an effective consumer education
initiative for needs such as these is considerably shorter than the
time need to accomplish the same goal in longer term research and
development and the positive results of consumer education can be
realized more quickly. While NORA unquestionably intends to do have a
more expansive research and development program if reauthorized, the
need for solid educational initiatives for consumers will continue.
Finally, NORA, and its contractors have spent a considerable amount of
time providing and responding to GAO's inquiries, and a significant
amount of information has been aggregated which can provide a more
nuanced view. We would be pleased to work with any reader of this
report who desires additional insight or more detail on our operations.
Sincerely,
Signed by:
John Huber:
President:
[End of section]
Appendix VII: GAO Contact and Staff Acknowledgments:
GAO Contact:
Mark Gaffigan, (202) 512-3841 or gaffiganm@gao.gov:
Acknowledgments:
In addition to the contact named above, Ernie Hazera (Assistant
Director), Bob Baney, Jennifer Andreone, Amanda Cherrin, Robert Dacey,
Abe Dymond, Karen Keegan, Alison O'Neill, Kiki Theodoropoulos, Susan
Sawtelle, and Barbara Timmerman made key contributions to this report.
[End of section]
Footnotes:
[1] Pub. L. No. 104-284, 110 Stat. 3370 (Oct. 11, 1996).
[2] Pub. L. No. 106-469, 114 Stat. 2029 (Nov. 9, 2000).
[3] The Congressional Budget Office, in a March 2, 2010, cost
estimate, determined that reauthorizing NORA for one additional year
would have no impact on the federal budget. The Budget Office also
stated that NORA's activities should be considered governmental in
nature because assessments collected by NORA are compulsory and
enforced by the federal government's sovereign authority.
[4] As propane is naturally odorless, a chemical called an odorant is
added to give it a distinct odor as a means of detecting a leak.
Virtually all commercial propane is odorized.
[5] The PERC and NORA state associations are private enterprises and
not state government entities.
[6] GAO, Propane: Causes of Price Volatility, Potential Consumer
Options, and Opportunities to Improve Consumer Information and Federal
Oversight, [hyperlink, http://www.gao.gov/products/GAO-03-762],
(Washington, D.C.: June 27, 2003).
[7] PERC issued its audited financial statement for 2009 in May 2010.
NORA presented a draft of its audited financial statement for 2009 at
its April 2010 council meeting.
[8] We contacted USDA to determine whether PERC had been coordinating
its statutorily-mandated agricultural research and development
activities with the Department.
[9] According to a 2009 propane market report by a PERC contractor, of
new home construction starts in 2007, about 6.5 percent used propane
as their main heating fuel.
[10] According to a 2009 PERC contractor report, of new home
construction starts in 2007, about 1.3 percent used heating oil as
their main heating fuel.
[11] The Propane Act limits PERC's activities to "research and
development, training, and safety matters" in any year in which the 5-
year average rolling price index of consumer grade propane exceeds the
5-year rolling average price composite index of residential
electricity, residential natural gas, and refiner price to end users
of No. 2 fuel oil by greater than 10.1 percent. PERC's activities in
response to this funding restriction are discussed later in this
report.
[12] The Propane Act provides that PERC should, among other things,
undertake programs to inform and educate the "public" about safety and
other issues associated with the use of propane. PERC, in its
financial statements, has reported such programs as "consumer
education and communication."
[13] According to PERC data, state propane associations spent about
49.3 percent of the assessments PERC provided to them on consumer
education, 38.5 percent on safety and training, 9.8 percent on
industry programs, 0.7 percent on agriculture, 1.1 percent on research
and development, and 0.5 percent on engine fuel work.
[14] In estimating PERC's unspent balance, we encountered
discrepancies between the rebate totals in its annual financial
statements and annual reports, and a requested breakdown of cost data
by program area--for example, consumer education and research and
development. As a result, the $32.1 million includes some amount
representing the discrepancy involving these data.
[15] In calculating PERC's spending data, we used the best available
information at the time we performed our analysis. However, as a
result of discrepancies and inconsistencies in the data PERC provided,
following direction from PERC officials, we used data from several
different documents in order to analyze PERC's spending from 1998
through 2008. Therefore, the data presented in this report do not
match some publicly-available information, such as amounts in PERC's
annual reports or audited financial statements.
[16] NORA's outside accountant informed us that, of the $107 million
total, NORA had collected approximately $103 million and had accrued
receivables of $4 million at the end of 2008.
[17] According to NORA data, state associations spent about 81.4
percent of the assessments NORA provided to them on consumer
education, 18.0 percent on education and training, and 0.6 percent on
research and development.
[18] PERC explained that some separate program areas--such as engine
fuel and agricultural programs--also qualify as research and
development applications.
[19] Propane's other markets include resellers, agriculture,
commercial, industrial, and internal combustion.
[20] PERC's third goal for industry programs is to provide support,
data, and other services to the propane industry and its organizations.
[21] Under the core technology pathway, NORA's strategic plan
indicates NORA intends to take advantage of non-condensing high
performance characteristics of fuel oil and further develop new
engineered plastic or other cost effective venting systems to take
advantage of liquid fuel combustion properties.
[22] A NORA contractor concluded that, since the Commission
information did not indicate the reasons for the incidents, no
conclusions could be reached from the information.
[23] Propane Act section 8, 15 U.S.C. § 6407 (emphasis added).
[24] The Senate Energy and Natural Resources Committee report on the
bill noted only that the lobbying provision "disallows the use of any
funds collected by [PERC] for political activities or to influence
legislation. However, [PERC] may recommend [to the DOE Secretary]
changes in the Act or other statutes that would further the purposes
of the Act." S. Rep. No. 298, 104th Cong., 2d Sess., at 7. The House
Energy and Natural Resources Committee report similarly noted only
that the bill "prohibits the use of any funds to lobby Congress." H.
Rep. No. 655, Part 1, 104th Cong., 2d Sess., at 11.
[25] See, e.g., 2 U.S.C. § 441c (prohibition on federal contractors
making contributions to a political party or candidate in connection
with a federal election during contract); 31 U.S.C. § 1352 (limitation
on use of appropriated funds to influence certain federal contracting
and financial transactions); Consolidated Appropriations Act, 2010,
Pub. L. No. 111-117, Division C, § 720 (Dec. 16, 2009) (appropriated
funds prohibited from use for publicity or propaganda purposes to
support or defeat pending legislation).
[26] 26 U.S.C. § 162(e)(1)(A).
[27] 26 U.S.C. §§ 162(e)(4), 4911(e)(2).
[28] 26 C.F.R § 1.162-29(b); 26 C.F.R. § 56.4911-2(b)(ii).
[29] 2 U.S.C. § 1602(8)(A).
[30] Pub. L. No. 96-536, 94 Stat. 3166 (1980), as amended by Act of
June 5, 1981, Pub. L. No. 97-12, 95 Stat. 14.
[31] See Anti-Lobbying Restrictions Applicable to Community Services
Administration Grantees, 5 Op. Off. Legal Counsel 180 (June 17, 1981).
The Justice Department's legal opinion discussed these additional
types of contacts because after the law under review was enacted, the
Chair of the Senate subcommittee of jurisdiction told the agency head
that the subcommittee did not intend the law to apply to a grantee's
use of funds to respond to congressional information requests, to
provide educational information to Congress on the effects of
legislative issues, or to provide information to Congress concerning
legislative issues directly affecting the continued existence of the
granting federal agency or its grantees. Justice did not indicate
whether it agreed or disagreed with this interpretation because it
found the Chairman's letter was "subsequent" legislative history that
has little legal significance.
[32] Based on the two statutes it asserts are most analogous to the
Propane Act, PERC disagrees that the Propane Act's lobbying
restrictions apply to anything other than advocacy on specific
legislation or elections. It therefore objects to what it asserts is
GAO's implication--because of our citation of the Justice Department's
reading of similar language in another potentially analogous statute--
that the Propane Act also applies to the use of PERC funds for general
informational or educational contacts with Congress. PERC misconstrues
our purpose in citing Justice's opinion, which was not to imply that
the statute under review there is necessarily a better analogy to the
Propane Act or that Justice necessarily interpreted that statute
correctly--subjects on which we do not express an opinion. Rather, we
cited Justice's opinion to demonstrate that the phrase "influencing
legislation" is interpreted differently in different statutes and that
its undefined meaning in the Propane Act is not clear.
[33] Section 5(f) of the Propane Act requires PERC to "develop
programs and projects ...including programs ...to inform and educate
the public about safety and other issues related to the use of
propane." 15 U.S.C. § 6404(f) (emphasis added). The Propane Consumer's
Coalition raised concerns about what activities could properly be
considered and funded as "public education" or "consumer education" in
1996, when Congress was considering the Propane Act legislation. The
Coalition stressed the need for adequate federal oversight to ensure
that propane marketing and promotional programs were not undertaken
under the guise of "educational" programs. U.S. Cong., Subcomm. on
Energy & Power of the Comm. on Commerce, House of Rep., 104th Cong.,
1st Sess. (Oct. 28, 1995). Also regarding the meaning of "public
education" under the Act, in PERC's view, its public information and
education mandate also authorized funding of certain activities not
directly related to propane, such as the cost of organizational
memberships in order to gain the opportunity to highlight propane-
related issues (PERC reported funding $36,000 in membership fees for
the U.S. Chamber of Commerce, $37,000 in such fees for the Ripon
Educational Fund, and $20,000 in such fees for the Franklin Center).
PERC also states its public education mission authorized its annual
2005-2009 funding of speakers for Propane Days on non-propane subjects
of general relevance to the propane industry, as well as its 2006
funding, through a grantee, of a $3,000 general motivational speech
about effective advocacy. Such activities likewise raise the issue of
whether Congress anticipated the use of PERC funds for such activities
as "public education" activities.
[34] S. Rep. No. 298, 104th Cong., 2d Sess., at 2-3 (1996). The
primary sponsor of the Senate bill, Senator Domenici, also noted the
importance of supporting research as a need for the legislation. As he
explained, "A companion bill, H.R. 1514, was introduced in the House
of Representatives and currently enjoys broad bipartisan support. This
enthusiasm underscores the wide, regional appeal of this innovative
approach to meeting our domestic energy research needs." 141 Cong.
Rec. E868 (daily ed. April 7, 1995) (emphasis added).
[35] Specifically, section 9 (b) of the Propane Act , 15 U.S.C. §
6408(b), provides in part that "if in any year the 5-year average
rolling price index of consumer grade propane exceeds the 5-year
rolling average price composite index of residential electricity,
residential natural gas, and refiner price to end users of No. 2 fuel
oil in an amount greater than 10.1 percent, the activities of [PERC]
shall be restricted to research and development, training, and safety
matters. [PERC] shall inform [DOE] and Congress of any restriction of
activities under this subsection."
[36] The Oilheat Act (section 703(2)) contains a broad definition of
"consumer education": "the provision of information to assist
consumers and other persons in making evaluations and decisions
regarding oilheat and other nonindustrial commercial or residential
space or hot water heating fuels."
[37] Oilheat Act section 710. Unlike the Propane Act, which prohibits
the use of PERC funds "in any manner for influencing legislation or
elections," the Oilheat Act does not include the phrase "in any
manner."
[38] There is no report history for the lobbying restriction in the
bill as enacted in 2000. The most recent report that addressed the
restriction was in 1999, for S. 348, whose lobbying restriction was
identical to the final bill. The report on that bill stated only that
it "prohibits lobbying with assessment funds." S. Rep. No. 109, 106th
Cong., 1st Sess., at 4 (July 20, 1999). The 1998 House bill, H.R.
3610, contained slightly different language: it included the same "in
any manner" phrase contained in the Propane Act. Dropping this phrase
in the final bill arguably loosened the restriction.
[39] Section 705(c)(2) of the Oilheat Act allows NORA board members to
also be employed by NAORE or by an industry trade association. In this
case, the same person is the president of both NORA and NAORE,
creating the potential for confusion and uncertainty as to which
organization or function that individual is serving at any given time.
[40] Section 706(a)(1)(A)(iii) of the Oilheat Act requires NORA to
"develop programs and projects ...including programs ...for consumer
education ...." As with the public education mandate in the Propane
Act, concerns were raised during Congress's consideration of the
Oilheat Act about whether activities not strictly for consumer benefit
would nonetheless be paid for as "consumer education" using NORA
funds. Representative Waxman, after criticizing the bill as "an anti-
consumer mandate that consolidates power in an entity [NAORE]
controlled by the biggest interests [that] will favor their concerns
over those of consumers and small businesses," and as effectively
imposing a new tax on consumers, raised concerns that assessment funds
would go to support advertising and promotions rather than consumer
education. Noting that the bill prohibits advertising and promotion
funding, Mr. Waxman observed that "there is no precise line between
advertising and consumer education." See 146 Cong. Rec. H 10565 (1999).
[41] U.S. Cong., Subcomm. on Energy and Power of the Comm. on
Commerce, House of Rep., 106th Cong., 2nd Sess. (April 5, 2000)
("Hearing")(emphasis added).
[42] Hearing at 4, 6 (emphasis added).
[43] 146 Cong. Rec. S10809 (Oct. 19, 2000).
[44] Oilheat Act section 707(e)(2)(A)(ii)(IV). The Propane Act
contains no similar explicit monitoring requirement for PERC.
[45] Oilheat Act section 706(f)(2)(C).
[46] GAO, Internal Control: Standards for Internal Control in the
Federal Government, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-21.3.1], Nov. 1999; and
Internal Control - Integrated Framework, available through the
American Institute of Certified Public Accountants, 1992.
[47] These other residential energy sources are residential
electricity, residential natural gas, and refiner price to end users
of No. 2 fuel oil.
[48] GAO, Propane: Causes of Price Volatility, Potential Consumer
Options, and Opportunities to Improve Consumer Information and Federal
Oversight, [hyperlink, http://www.gao.gov/products/GAO-03-762]
(Washington, D.C.: June 27, 2003).
[49] According to the statute, if PERC's activities are restricted
under this provision, the Secretary of Commerce is to conduct the
price analysis again 180 days later. PERC's activities are to be
restricted until the price index excess falls to 10.1 percent or less.
[50] [hyperlink, http://www.gao.gov/products/GAO-03-762].
[51] The Propane Act: requires PERC to annually reimburse the
Secretary of Energy for costs incurred by the federal government
relating to PERC (15 U.S.C. § 6404(j)); requires PERC to annually
submit its proposed budget to the Secretary of Energy who may then
recommend appropriate programs and activities (15 U.S.C. § 6404(k));
provides that the Secretary of Energy shall receive notice of PERC
meetings and may require reports on PERC activities, as well as
reports on compliance, violations, and complaints regarding
implementation of the Act (15 U.S.C. § 6404(l)); provides that PERC
may recommend changes in the Act or other statutes that would further
the act's purposes to the Secretary of Energy (15 U.S.C. § 6407);
requires the Secretary of Commerce to make an annual analysis of
changes in the price of propane relative to other energy sources
available to the Secretary of Energy, as well as to the public (15
U.S.C. § 6408(a)); requires PERC to inform the Secretary of Energy,
along with Congress, of any restriction of its activities resulting
from a propane price index exceeding a certain amount (15 U.S.C. §
6408(b)); and requires the Secretary of Commerce to submit a biannual
report (the Secretary of Energy may request a report more often than
every two years) examining the effect of PERC's operations to the
Secretary of Energy, as well as to Congress (15 U.S.C. § 6411).
[52] According to section 5(j) of the Propane Act (15 U.S.C. § 6404
(j)), the reimbursement shall not exceed the amount that the Secretary
determines is the average annual salary of two employees of the DOE.
[53] Congress has authorized check-off programs for items such as
beef, blueberries, cotton, dairy products, eggs, peanuts, popcorn,
pork, and potatoes, and USDA has mandated oversight activities of
these programs.
[54] GAO, Agricultural Marketing: Federally Authorized Commodity
Research and Promotion Programs, [hyperlink,
http://www.gao.gov/products/GAO/RCED-94-63] (Washington, D.C.: Dec.
29, 1993)
[55] USDA Agricultural Marketing Service Dairy Programs, Vol. 24,
Report to Congress on the National Dairy Promotion and Research
Program and the National Fluid Milk Processor Promotion Program (July
1, 2008).
[End of section]
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