Federal Energy Oversight

The United States is the largest producer of fossil and alternative fuels in the world. The federal government manages and oversees a number of activities related to these industries, including oil and gas development on federal lands and waters, petroleum refining, oil and natural gas transportation, and federal biofuels requirements. The federal government also promotes the advancement and use of new and renewable energy technologies. For example, the Department of Energy (DOE) seeks to advance new technologies—such as advanced nuclear, carbon capture, and enhanced geothermal—through research, development, and demonstration.

However, federal agencies could improve how they manage and oversee these activities, and better address the challenges related to new and renewable technologies.  

For instance: 

• Royalties.  Royalties on the sale of oil and gas produced on federal lands are a significant source of federal revenue. From 2012-2022, companies paid the U.S. government $74 billion in royalties. The Interior Department's efforts to ensure that companies pay the royalties they owe produced $600 million in additional payments in this period. But Interior could improve its data quality and collect additional data to better select compliance cases that are more likely to yield additional payments. Interior’s revenue determination and collection has been on the High-Risk List since 2011.
• Decommissioning pipelines and offshore infrastructure. Interior’s Bureau of Safety and Environmental Enforcement (BSEE) helps manage oil and gas production offshore in federal waters. BSEE has allowed the offshore oil and gas industry to leave 97% of pipelines (18,000 miles) on the seafloor when no longer in use. Pipelines can contain oil or gas if not properly cleaned in decommissioning, but the bureau doesn't ensure that standards, like cleaning and burial, are met. Oil and gas companies with offshore infrastructure must also plug wells and remove platforms within set deadlines. As of June 2023, more than 2,700 wells and 500 platforms were overdue for decommissioning in the Gulf of Mexico. Delays can increase environmental, safety, and financial risks. For example, delays could indicate that companies are in financial trouble, leaving the government to pay for decommissioning. Interior only holds about $3.5 billion in bonds from companies to cover a potential cost of $40-$70 billion.
• Information technology. Interior's Bureau of Land Management (BLM) is tasked with protecting health and the environment and ensuring a fair return for allowing oil and gas production on federal lands. In 2013, BLM tried to modernize a critical IT system it uses to track oil and gas activities. However, Interior did not effectively lead this modernization project—and the agency declared it a failure in 2021. 
• Sustainable jet fuel. To reduce aviation greenhouse gas emissions, the White House challenged agencies to increase production of sustainable jet fuel to 100% of commercial demand by 2050. The Departments of Transportation, Energy, and Agriculture have created a roadmap to guide their efforts to support such an increase in sustainable jet fuel but haven’t established how they will track progress.
• Chemical dispersants. In 2010, in response to the Deepwater Horizon oil spill in the Gulf of Mexico, responders applied chemical dispersants at the wellhead more than 1,500 meters below the surface. Subsurface use of dispersants was unprecedented and controversial; however, more than a decade later, the risks and effectiveness of such use of dispersants on the environment and human health still are not well understood by the Coast Guard and the Environmental Protection Agency.
• Gas exports. In 2019, about 39% of U.S. natural gas exports went through export facilities—in which the gas is liquefied and loaded onto ships for transport. Multiple federal agencies regulate export facility design. Federal guidance says that agencies should review regulations every 3-5 years and adopt necessary technical standards for safety and environmental protection. But some regulations haven't been updated.
• Greenhouse gas emissions. To help reduce greenhouse gas emissions, the Renewable Fuel Standard requires that U.S. transportation fuels contain 36 billion gallons of renewable fuels by 2022. However, the nation will likely not meet the emissions goals set for it through 2022, largely because advanced biofuels—which reduce emissions more effectively—haven't been produced as expected.
• Strategic Petroleum Reserve. The Strategic Petroleum Reserve, managed by the Department of Energy (DOE), exists to minimize the effects of disruptions in the supply of petroleum products. As of March 2018, it held about 665 million barrels of crude oil. However, a review by DOE didn't determine an optimal size for the reserve. As of March 2024, DOE has not ensured that the agency periodically conducts and provides to Congress a strategic review of the reserve that, among other things, considers changes in crude oil and petroleum market conditions.
• New nuclear reactors. Nuclear power plants account for about 20% of the electricity and half of the carbon-free electricity generated in the U.S. However, plants are aging, and economic challenges have led to closures and planned shutdowns. In FY 2021, DOE made 3 awards totaling $4.6 billion to support the development of new reactor types that are expected to bring improvements over existing commercial reactors. To monitor these projects, DOE uses practices such as milestone tracking and plans to add additional practices—such as independent reviews—to oversee awards. However, DOE should document its processes for overseeing these projects.
• Licensing nuclear reactors. The Nuclear Regulatory Commission (NRC) expects a significant increase in licensing applications for advanced nuclear reactors in the coming years. NRC has begun updating its regulations and processes to include these reactors—but it has had difficulty hiring and retaining the staff needed to license them.
• Nuclear fusion. A 2022 experiment demonstrated that nuclear fusion could produce electricity. However, this technology faces challenges before it can produce electricity on a commercial scale. For example, new materials will need to be developed that can withstand the extreme conditions expected inside a power plant using fusion energy. There are several policy options that could help address such challenges.
• Carbon capture and storage. Since 2009, DOE has invested $1.1 billion in 11 demonstration projects to show how carbon dioxide emissions from coal-power and industrial facilities could be captured and stored. DOE initially committed to 8 coal projects, mostly new power plants with carbon-capture equipment. But 7 were not built, largely due to factors that made coal power less economically viable. Also, senior management directed DOE to bypass some cost controls to help struggling coal projects. As a result, DOE spent almost $300 million more than planned on 4 facilities that were never built.
• Renewable Fuel Standard. The Renewable Fuel Standard program calls for greater use of advanced biofuels—fuel made from waste fats and oils or crop residues, for example—in the transportation fuel supply. But there is not nearly enough of this fuel to meet the program's targets—nor will there likely be enough in the near future. According to industry experts, the high costs of creating advanced biofuel, the relatively low price of fossil fuel, the timing and cost to bring new tech to commercial-scale production, and regulatory uncertainty are some challenges to increasing production.
• Renewable energies. Deployment of energy storage and solar and other technologies could make the electricity grid operate more efficiently and provide other benefits—such as cleaner generation of electricity. However, these technologies also present challenges, such as uncertainty about how they perform over time and in various operating conditions. There are several policy options that could help address these challenges.
• Wind turbines. The development of offshore wind energy in the U.S. requires oceangoing vessels for turbine installation and other tasks. These vessels may need to comply with the Jones Act, which requires that vessels carrying merchandise between two points in the U.S. be built and registered in the U.S. However, there are currently no U.S.-built specialized ships for installing wind turbines. Stakeholders pointed to uncertainty of federal approval for offshore wind energy projects as a challenge to pursuing investments in these ships, which may cost up to $500 million in the U.S.

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