FY 2007 Budget Highlights

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....101 Hearings and Appeals........................................................................................................... .........104 SECTION 6. FEDERAL ENERGY REGULATORY COMMISSION....................................................105 INTRODUCTION ENERGY, SCIENCE AND SECURITY cScientific and technological research are a high calling for any individual. And promoting research is an important role of our federal government. d cScience and technology have never been more essential to the defense of the nation and the health of our economy. d - President George W. Bush Over the last six years America has faced and overcome many challenges. From the Blackout of 2003 to the devastation caused by hurricanes Katrina and Rita, American families now more than ever understand the key relationship between our nation 9s energy security and America 9s economic security. It is with this in mind, that the Department of Energy 9s budget for Fiscal Year (FY) 2007 was crafted. While seeking to meet America 9s short-term energy needs, the $23.5 billion FY 2007 budget is also focused on the future. The budget request makes bold investments to improve America 9s energy security while protecting our environment, puts policies in place that foster continued economic growth, spurs scientific innovation and discovery, and addresses the threat of nuclear proliferation. Most notably, this budget request contains: " A Landmark Investment in Scientific Research The FY 2007 budget includes a $505 million increase in DOE 9s Science programs, which is part of a commitment to double funding for certain high-leverage science agencies over the next ten years. The American Competitiveness Initiative recognizes that scientific discovery and understanding drive economic strength and security. Developing revolutionary breakthroughs in science-driven technology lie at the heart of the Department of Energy 9s strategy to achieve its mission-driven goals. The increase proposed for the Department 9s Science programs reflects the significant contribution DOE and its world-class research facilities make to the Nation. " Strategic Investments to Create a Global Nuclear Energy Partnership for Greater Energy Security in a Cleaner, Safer World The Department 9s FY 2007 budget features $250 million to begin investments in the Global Nuclear Energy Partnership. GNEP is a comprehensive strategy to enable an expansion of nuclear power in the U.S. and around the world, to promote nuclear nonproliferation goals; and to help resolve nuclear waste disposal issues. The Energy Information Administration projects that over the next 25 years, demand for electricity in the United States alone will grow by over 40 percent. Nuclear power is an abundant, safe, reliable and emissions-free way to help meet this growing Page 1 demand for energy throughout the world. As part of the GNEP strategy, the United States will work with key international partners to develop and demonstrate new proliferation resistant technologies to recycle spent nuclear fuel to reduce waste. To encourage clean development and reduce proliferation risks, the international GNEP partners will also develop a fuel services program to supply developing nations with reliable access to nuclear fuel in exchange for their commitment to forgo developing enrichment and recycling technologies. As a complement to the GNEP strategy, the Department will continue to pursue a permanent geologic storage site for nuclear waste at Yucca Mountain , and the FY 2007 budget includes $544.5 million to support this goal. Based on technological advancements that would be made through GNEP, the volume and radiotoxicity of waste requiring permanent disposal at Yucca Mountain will be greatly reduced, delaying the need for an additional repository indefinitely. GNEP builds upon the successes of programs initiated under President Bush 9s leadership to encourage the construction of new nuclear power plants here in the U.S. The FY 2007 budget includes $632.7 million for nuclear energy programs, a $97.0 million increase above the FY 2006 appropriation. In addition to the $250 million for GNEP within the Advanced Fuel Cycle Initiative , Generation IV (Gen IV) research and development ($31.4 million) will improve the efficiency, sustainability, and proliferation resistance of advanced nuclear systems and Nuclear Power 2010 ($54.0 million), will lead the way, in a cost-sharing manner, for industry to order new, advanced light-water reactors by the end of this decade. In addition, ongoing implementation of the Energy Policy Act of 2005 (EPAct) will establish federal insurance to protect sponsors of the first new nuclear power plants against the financial impact of certain delays during construction or in gaining approval for operation that are beyond the sponsors' control. " Strategic Investments to Reduce America 9s Reliance on Oil and to Promote Clean Energy The FY 2007 budget request emphasizes investment in alternative fuel technologies. This budget contains two new Departmental efforts ( Biofuels and Solar America Initiatives ) that can deliver significant public benefits in our lifetime. These two new activities, which will be part of the Department 9s Biomass and Biorefinery Systems Research and Development program and the Solar Energy program, respectively, will promote energy security by accelerating research to make alternative energy sources more cost competitive. Specifically, the FY2007 budget request proposes $149.7 million for Biomass and Biorefinery Systems Research and Development program to support Biofuels and $148.4 million for Solar Energy to support Solar America . In addition, the budget request continues to pursue the vision of reducing America 9s dependence on oil for transportation fuels through the development of a hydrogen economy. The budget requests a total of $288.1 million to support implementation of the President 9s Hydrogen Fuel Initiative . Finally, the FY 2007 budget provides $60.0 million for U.S. participation in ITER , an experimental reactor that puts us on a pathway to tapping the enormous potential of nuclear fusion as a source of plentiful, environmentally safe energy. Page 2 Given America 9s growing energy needs, we must also make better, more efficient use of our most abundant resource, namely coal. The Fossil Energy budget maintains an emphasis on the tremendous potential of U.S. coal resources and includes $54 million in FY 2007 for the FutureGen project, which will establish the capability and feasibility of co-producing electricity and hydrogen from coal with near-zero atmospheric emissions of pollutants and greenhouse gasses. The Administration remains committed to the FutureGen project and provides an additional $268 million for supporting technologies that will be used in FutureGen and similar next generation coal-fueled power plants. The Department of Energy 9s budget request also focuses on other key priorities. In the area of national security, the budget proposes a total of $9.3 billion in FY 2007, a $211.3 million increase from the FY 2006 appropriation. The majority of the increase, $111.4 million, is in Defense Nuclear Nonproliferation programs to accelerate efforts to secure nuclear material in the former Soviet Union and advance an aggressive global nuclear nonproliferation agenda. At $6.4 billion, Weapons Activities remain essentially level with the FY 2006 appropriations to continue the transformation of the nation 9s nuclear deterrent and supporting infrastructure to be more responsive to the threats of the 21 st Century. To meet our environmental cleanup commitments left over from the Manhattan Project and the Cold War, the budget submission requests $5.8 billion to clean up legacy nuclear waste sites. To date, DOE has accelerated cleanup of 20 DOE legacy nuclear waste sites and recently announced completion of cleanup at Rocky Flats, a former nuclear weapons plant located outside of Denver, Colorado. In 2006, DOE will also complete environmental cleanup of the Fernald and Columbus sites in Ohio, the Sandia National Laboratory in New Mexico, and several other sites. To continue to provide budgetary rigor and out-year context to programmatic decisions the Department expanded the development of five-year budget plans . A consolidated plan for the entire Department will include detailed five-year plans for the Department 9s major programs. This multi-year planning effort assures that the FY 2007 budget decisions are based on a sound corporate approach to allocating scarce financial resources to our most compelling priorities. Reflected throughout the FY 2007 budget are the integration of performance measures and the incorporation of sound business practices in the Department 9s operation consistent with the President 9s Management Agenda. Secretary Bodman has also established straight-forward operating principles which set the tone for further improving the management of the Department. These principles are: § Accept no compromises in safety and security § Act with a sense of urgency § Work together § Treat people with dignity and respect § Make the tough choices § Keep our commitments § Embrace risk-taking Page 3 MEETING THE DEPARTMENT 9S MISSION cTo advance the national, economic, and energy security of the United States; to promote scientific and technological innovation in support of that mission; and to ensure the environmental cleanup of the national nuclear weapons complex. d - U.S. Department of Energy Mission Statement ADVANCING AMERICA 9S NATIONAL SECURITY The National Nuclear Security Administration (NNSA) continues significant efforts to meet Administration and Secretarial priorities leveraging science to promote national security. The FY 2007 budget proposes $9.3 billion to meet defense-related objectives. The budget request maintains commitments to the nuclear deterrence requirements of the Administration 9s Nuclear Posture Review and continues to fund an aggressive strategy to mitigate the threat of weapons of mass destruction. Key investments include: § Transforming the nuclear weapons stockpile and infrastructure while meeting Department of Defense requirements; § Conducting innovative programs in the nations of the former Soviet Union and other countries to address nonproliferation priorities; § Supporting naval nuclear propulsion requirements for the U.S. Navy; § Upgrading the security infrastructure to address the 2005 Design Basis Threat; § Providing nuclear emergency response assets in support of homeland security; § Reducing the deferred maintenance backlog and achieving facility footprint reduction goals; and, § Providing corporate management and oversight for NNSA programs and operations. The FY 2007-2011 budget proposal takes no explicit action on the recent Secretary of Energy Advisory Board (SEAB) study of the weapons complex as the recommendations are under review. Weapons Activities: The United States continues a fundamental shift in national security strategy to address the realities of the 21 st century. The Administration 9s Nuclear Posture Review (NPR) addresses a national security environment in which threats may evolve more quickly and be less predictable and more variable than in the past. The NPR recognizes the need to transition from a threat-based nuclear deterrent with large numbers of deployed and reserve weapons, to a deterrent consisting of a smaller nuclear weapons stockpile with greater reliance on the capability and responsiveness of the Department of Defense (DoD) and NNSA infrastructure to respond to threats. The NNSA infrastructure must be able to meet new requirements in a timely and agile manner while also becoming more sustainable and affordable. Efforts are underway to consolidate the facilities and infrastructure needed for ongoing stockpile stewardship from the current Cold War configuration. Page 4 The FY 2007 budget request of $6.4 billion for Weapons Activities strongly supports implementation of the responsive infrastructure and the ongoing program of work that forms the backbone of the nuclear weapons deterrent. This includes all programs to meet the immediate needs of the stockpile, stockpile surveillance, annual assessment, and life extension programs. NNSA will continue to move ahead with the Reliable Replacement Warhead program to establish the path forward for stockpile transformation. The campaigns are focused on long-term vitality in science and engineering and on R&D supporting future DoD requirements. In addition, NNSA is implementing a responsive infrastructure of people, science and technology base, and facilities and equipment needed to support a right-sized nuclear weapons infrastructure. Defense Nuclear Nonproliferation : Preventing weapons of mass destruction from falling into the hands of terrorists is one of this Administration 9s top national security priorities. The FY 2007 request of $1.7 billion strongly supports the international programs that are denying terrorists the nuclear materials, technology and expertise needed to develop or otherwise acquire nuclear weapons. The FY 2007 budget request for Defense Nuclear Nonproliferation increases by $111.4 million or 6.9 percent over the FY 2006 appropriation. NNSA continues unprecedented efforts to protect the U.S. and our allies from threat, including $261 million for cutting-edge nonproliferation research and development for improved technologies to detect and monitor nuclear proliferation and nuclear explosions worldwide. There are also major efforts focused on potential threats abroad. The budget request includes $207 million to help complete the shut down of three Russian nuclear reactors still producing 1.2 metric tons of plutonium per year and to replace them with conventional fossil fuel power plants. Also, this budget requests $290 million for construction of the U.S. Mixed Oxide Fuel Fabrication Plant at DOE 9s Savannah River Site in South Carolina. This facility will dispose of 34 metric tons of U.S. surplus plutonium. A key breakthrough in nonproliferation efforts achieved in 2005 with the agreement announced by Presidents Bush and Putin in Bratislava to accelerate U.S. and Russian efforts to improve security at a number of military warhead sites in Russia. Together with NNSA 9s ongoing materials protection and recovery programs, and border and port nuclear detection efforts, this agreement represents a great stride forward in reducing the threat from proliferation of warheads and weapons-usable nuclear materials. Naval Reactors: NNSA continues to support the US. Navy 9s nuclear propulsion systems. The FY 2007 request of $795 million is an increase of 1.7 percent over the FY 2006 level. This increase allows the Naval Reactors program to develop new technologies, methods, and materials to support reactor plant design for the next generation reactors for submarines and aircraft carriers, and continue stewardship and remediation for their facilities and sites to maintain outstanding environmental performance. Safeguards and Security : The Defense Nuclear Security program is responding to a revision in threat guidance affecting physical security at all NNSA sites. Meeting the new Design Basis Threat will require further upgrades to equipment, personnel and facilities. NNSA is committed to completing these upgrades. The FY 2007 budget request for Cyber Security program activities, protecting information and IT Page 5 infrastructure, is essentially level with the FY 2006 funding level. The FY 2007 request includes funding for the DOE Diskless Conversion initiative. Meeting the post-9/11 security requirements has required a significant long-term investment, reflecting DOE 9s continuing commitment to meet these requirements. ADVANCING AMERICA 9S ECONOMIC AND ENERGY SECURITY The President 9s 2002 National Energy Policy coupled with the Energy Policy Act of 2005, serve as the roadmap to lead the United States to a secure energy future. The FY 2007 budget request of $2.6 billion to support energy programs is a significant investment in President 9s Bush 9s pledge to promote a strong, secure economy and expand our Nation 9s energy supply by developing a diverse, dependable, and clean energy portfolio. Nuclear power, which generates 20 percent of the electricity in the United States, contributes to a cleaner and more diverse energy mix. In FY 2007 a total of $632.7 million is requested for nuclear energy activities. Included in that total is $250 million that will support the Global Nuclear Energy Partnership (GNEP). GNEP is a comprehensive strategy to enable an expansion of nuclear power in the U.S. and around the world, to promote nuclear nonproliferation goals; and to help resolve nuclear waste disposal issues. GNEP will build upon the Administration 9s commitment to develop nuclear energy technology and systems, and enhance the work of the United States and our international partners to strengthen nonproliferation efforts. GNEP will accelerate efforts to l: " Enable the expansion of emissions-free nuclear power domestically and abroad to support economic growth here at home and around the world; " Reduce the risk of nuclear proliferation by developing and deploying the latest in proliferation resistant technologies as well as enhanced nuclear safeguards. " Utilize new technologies to recover more energy from nuclear fuel and dramatically reduce the volume of nuclear waste; and Through GNEP, the United States will work with key international partners to develop new recycling technologies that do not result in separated plutonium, a traditional proliferation risk. Recycled fuel would then be processed through advanced burner reactors to extract more energy, reduce waste and actually consume plutonium, dramatically reducing proliferation risks. As part of GNEP, the U.S and other nations with advanced nuclear technologies would ensure developing nations a reliable supply of nuclear fuel in exchange for their commitment to forgo enrichment and reprocessing facilities of their own, also alleviating a traditional proliferation concern. GNEP will also help resolve America 9s nuclear waste disposal challenges. By recycling spent nuclear fuel, the heat load and volume of waste requiring permanent geologic disposal would be significantly reduced, delaying the need for an additional repository indefinitely. Page 6 The Administration continues its commitment to open and license Yucca Mountain as the nation 9s permanent geologic repository for spent nuclear fuel, a key complement to the GNEP strategy. Managing and disposing of commercial spent nuclear fuel in a safe and environmentally sound manner is the mission of DOE 9s Office of Civilian Radioactive Waste Management (RW). To support the near-term domestic expansion of nuclear energy, the FY 2007 budget seeks $54.0 million for the Nuclear Power 2010 program to support continued industry cost-shared efforts to reduce the barriers to the deployment of new nuclear power plants. The technology focus of the Nuclear Power 2010 program is on Generation III+ advanced light water reactor designs, which offer advancements in safety and economics over the Generation III designs. If successful, this seven-year, $1.1 billion project (50% to be cost-shared by industry) could result in a new nuclear power plant order by 2009 and a new nuclear power plant constructed by the private sector and in operation by 2014. Funding of $1.8 million is provided in FY 2007 to implement a new program authorized in the recently enacted Energy Policy Act of 2005. The program will allow DOE to offer risk insurance to protect sponsors of the first new nuclear power plants against the financial impact of certain delays during construction or in gaining approval for operation that are beyond the sponsors' control. This program would cover 100 percent of the covered cost of delay, up to $500 million for the first two new reactors and 50 percent of the covered cost of delay, up to $250 million each, for up to four additional reactors. This risk insurance offers project sponsors additional certainty and incentive to provide for the construction of a new nuclear power plant by 2014. The FY 2007 budget request includes $31.4 million to continue to develop next-generation nuclear energy systems known as cGeneration IV (GenIV) d . These technologies will offer the promise of a safe, economical, and proliferation resistant source of clean, reliable, sustainable nuclear power with the potential to generate hydrogen for use as a fuel. Resources in FY 2007 for GenIV will be primarily focused on long-term research and development of the Very-High Temperature Reactor. The University Reactor Infrastructure and Educational Assistance program was designed to address declining enrollment levels among U.S. nuclear engineering programs. Since the late 1990s, enrollment levels in nuclear education programs have tripled. In fact, enrollment levels for 2005 have reached upwards of 1,500 students, the program 9s target level for the year 2015. In addition, the number of universities offering nuclear-related programs also has increased. These trends reflect renewed interest in nuclear power. Students will continue to be drawn into this course of study, and universities, along with nuclear industry societies and utilities, will continue to invest in university research reactors, students, and faculty members. Consequently, Federal assistance is no longer necessary, and the 2007 budget proposes termination of this program. The termination is also supported by the fact that the program was unable to demonstrate results from its activities when reviewed using the Program Assessment Rating Tool (PART), supporting the decision to spend taxpayer dollars on other priorities. Funding for providing fresh reactor fuel to universities is included in the Research Reactor Infrastructure program, housed within Radiological Facilities Management. Page 7 Recognizing the abundance of coal as a domestic energy resource, the Department remains committed to research and development to promote its clean and efficient use. U.S. coal accounts for twenty five percent of the world 9s coal reserves. For the last three years, the Department has been working to launch a public-private partnership, FutureGen , to develop a coal-based facility that will produce electricity and hydrogen with near-zero atmospheric emissions. This budget includes $54 million in FY 2007 and proposes an advance appropriation of $203 million for the program in FY 2008. Funding for FutureGen will be derived from rescinding $203 million and transferring $54 million in balances no longer needed to complete active projects in the Clean Coal Technology program. Better utilization of these fund balances to support FutureGen will generate real benefits for America 9s energy security and environmental quality. The budget request for FY 2007 includes $4.6 million to support Alaska Natural Gas Pipeline activities authorized by Congress in 2004. Within the total amount of $4.6 million, $2.3 million will be used to support an Office of the Federal Coordinator and the remaining $2.3 million will support the Loan Guarantee portion of the program. According to the Energy Information Administration, total consumption of natural gas is projected to increase from 22.4 trillion cubic feet in 2004 to 27.0 trillion cubic feet in 2025. Alaska's production would be 8.2 percent of domestic consumption. The budget request continues to shift resources away from oil and gas research and development programs, which have sufficient market incentives for private industry support, to other energy priorities. The decision reflected strategic consideration by assessing the program 9s technical effectiveness and comparing it to other programs which have achieved more clearly demonstrated and substantial benefits. Federal staff, paid from the program direction account, will work toward an orderly termination of the program in FY 2007. The Energy Policy Act of 2005 established a new mandatory oil and gas research and development (R&D) program, called the Ultra-Deep and Unconventional Natural Gas and Other Petroleum Research program, that is to be funded from federal revenues from oil and gas leases beginning in FY 2007. These R&D activities are more appropriate for the private-sector oil and gas industry to perform. Therefore the FY 2007 budget proposes to repeal the program through a separate legislative proposal. The FY 2007 budget request of $1.2 billion for energy efficiency and renewable energy activities was formulated to reallocate resources to emphasize technologies with the potential for reducing our growing reliance on oil and to promote clean energy production in the U.S. The FY 2007 budget proposes $149.7 million as part of the Biofuels Initiative to develop affordable, domestically-produced bio-based transportation fuels, such as ethanol, and encourage the development of biorefineries. Biomass has the promise to deliver a plentiful domestic energy resource with economic benefits to the agricultural sector. The Solar America Initiative in FY 2007 is funded at $148.4 million, a substantial increase of $65.3 million above FY 2006 funding for solar R&D. The increase accelerates the development of solar photovoltaics, a technology that converts energy from the sun into electricity in a highly efficient manner. Further Page 8 development can help this emissions-free technology achieve efficiencies to make it more cost-competitive with other electricity generation sources. In addition to funding increases for biomass and solar energy, the Energy Efficiency and Renewable Energy budget request includes $195.8 million to support continued research and development in hydrogen and fuel cell technology which holds the promise of an ultra-clean and secure energy option for America 9s energy future. The increase of $40.2 million above the FY 2006 appropriation accelerates activities geared to further improve the development of hydrogen production technologies and evaluate the use of hydrogen as an emissions-free transportation fuel source. The President 9s Hydrogen Fuel Initiative is funded at $289.5 million and includes $195.8 million for DOE 9s Energy Efficiency and Renewable Energy program, $23.6 million for DOE 9s Fossil Energy program, $18.7 million for DOE 9s Nuclear Energy program, $50.0 million for DOE 9s Science program, and $1.4 million for the Department of Transportation. While the budget proposes increases for Biomass, Solar and Hydrogen research, the Geothermal Program will be closed out in FY 2007 using prior year funds. While geothermal energy remains an important regional contributor to energy needs, the FY 2007 request realigns the Energy Efficiency and Renewable Energy budget priorities to focus on programs that will have a greater impact on national security priorities. The FY 2007 budget includes $124.9 million for a refocused portfolio of energy reliability and assurance activities in the Office of Electricity Delivery and Energy Reliability. This will support research and development in areas such as high temperature superconductivity, and simulation work needed to enhance the reliability and effectiveness of the nation 9s power supply. This office also operates the Department 9s energy emergency response capability and led DOE 9s support effort during and after the Gulf Coast hurricanes. The Department of Energy 9s Power Marketing Administrations (PMAs) , consisting of the Southeastern (SEPA), Southwestern (SWPA), Western Area (WAPA) and Bonneville (BPA) Power Administrations, play an important role in meeting energy demands and fueling our economy. The electricity generated at federal hydroelectric facilities and sold by the PMAs represents approximately four percent of the nation 9s electricity supply. In FY 2007, $229 million is requested for SEPA, SWPA, and WAPA to continue their activities. The budget includes a proposal that would increase rates paid by some Power Marketing Administration customers. The rate increases are estimated to be less than 1 percent. The budget proposes that the interest rate for new obligations incurred by SEPA, SWPA and WAPA paid to the Treasury for power related investments be set at the rate government corporations borrow in the market. This proposed change would set SEPA 9s, SWPA 9s and WAPA 9s interest rates on Treasury-owned obligations similar to interest rates current law sets for BPA 9s borrowing from the U.S. Treasury. However, this change applies only to investments whose interest rates are not set by law. Existing PMA amounts owed to Treasury will continue to retain their existing interest rates. This change is expected to increase total receipts to the U.S. Treasury, beginning in FY 2007, by approximately $2-3 million annually. Page 9 BPA, unlike the other three PMAs, is cself-financed d by the ratepayers of the Pacific Northwest and receives no direct annual appropriations from Congress because it is a revolving fund. Under the Federal Columbia River Transmission System Act of 1974, BPA funds the expense portion of its budget and repays the Federal investment with revenues from electric power and transmission rates. Beginning in FY 2007 and consistent with sound business practices, the budget provides that BPA will use any net secondary market revenues in excess of $500 million per year, to make advance amortization payments to the United States Treasury on BPA 9s bond obligations. This administrative action will provide BPA with needed financial flexibility to meet its future energy investment needs, including the need to build critical transmission capacity. The budget estimates a total of $924 million will be available from FY 2007 through FY 2016 from expected higher-than-historical net secondary revenues. In addition, the FY 2007 budget reflects the agreement that Energy Northwest will refinance a portion of its debt in calendar years 2006 and 2007. The effect of refinancing these obligations will make additional funding available ($70 million in 2006 and $312 million in 2007) to reduce BPA 9s debt to the U.S. Treasury. During FY 2006 and FY 2007, these deficit reduction proposals will allow an additional $1.3 billion in existing U.S. Treasury borrowing authority to become available to BPA. PROMOTING SCIENCE AND TECHNOLOGICAL INNOVATION As the millennium unfolds, we stand on the threshold of scientific revolutions in biotechnology and nanotechnology, in materials science, in fusion energy and high- intensity light sources, and in high-speed computing, to touch on only a few important fields. The nations that lead these scientific revolutions will likely dominate the global high-tech economy for the foreseeable future. We are on the verge of major new discoveries about the nature of our universe, solutions to some of the deepest mysteries of the cosmos and the fundamental understanding of matter - insights that will transform the way we think about ourselves and our world. Twenty-first century science requires sophisticated scientific facilities. Private industry has neither the resources nor the near-term incentive to make the significant investment on the scale required for scientific discovery today. Indeed, in recent years, corporate research has declined. That is why the Department 9s Office of Science, which is responsible for ten world-class U.S. national laboratories and is the primary builder and operator of scientific facilities in the United States, plays such a critical role. Investment in these facilities is much more than bricks and mortar: it is an investment in discovery and in the future of our Nation. The Office of Science is also educating and training our next generation of scientists and engineers. Roughly half of the researchers at Office of Science-run facilities come from universities, and about a third of Office of Science research funds go to institutions of higher learning. The President 9s FY 2007 budget request of $4.1 billion for the Office of Science will move us forward on several scientific fronts, designed to produce discoveries that will strengthen our national competitiveness. Our science success continues three years after Page 10 President Bush announced U.S. participation in ITER , a fusion experimental reactor designed to demonstrate the scientific and technological feasibility of fusion energy. Capable of producing a sustained, burning fusion fuel, ITER will be the penultimate experiment before commercialization of fusion as a plentiful, environmentally friendly source of energy. Final international negotiations to implement one of the world 9s most complex technologies are close to being completed with our six ITER international partners. A request of $60.0 million in FY 2007 provides funding for the second year of the ITER project, which holds the promise of discovering how to harness the energy of nuclear fusion - the heartbeat of the stars - to warm our homes and fuel our economy. The return on investment will expand across international borders and has the promise of tremendous economic opportunity and development. The FY 2007 budget also includes $105.9 million to enable us to continue construction of the Linac Coherent Light Source (LCLS), the world 9s first x-ray free electron laser. The LCLS will allow us to watch matter in action, one molecule at a time, and witness chemical reactions at the microscopic level in real time. The structural knowledge obtained with x-rays holds the key to understanding the properties of matter such as mechanical strength, magnetism, transport of electrical currents and light, energy storage, and catalysis. Likewise, in biology much of what we know about structure and function on a molecular level comes from x-ray studies. Such knowledge forms the basis for the development of new materials and molecules and the enhancement of their properties, which in turn will advance technology, fuel our economy, and improve our quality of life. In addition, the FY 2007 budget requests $19.2 million in FY 2007 for the first full year of operations of each of four facilities for nanoscience research and $19.4 million to continue with construction of a fifth. The FY 2007 budget provides $171.4 million for the Spallation Neutron Source (SNS) , which enters its first full year of operation as the world's forefront facility for neutron scattering. The FY 2007 budget request also includes $135.3 million for the Genomes: GTL research, which will help us understand how nature 9s own microbial communities can be harnessed to remove carbon from the atmosphere, generate hydrogen for fuel, and turn cellulose into ethanol. Within the $4.1 billion FY 2007 budget request for Science, $143.3 million is provided to support full operation of the Relativistic Heavy Ion Collider (RHIC) , which gives us a lens into the early universe, and $80.0 million is allocated to allow full operation of the Continuous Electron Beam Accelerator Facility (CEBAF) , which will give new insight on the quark-structure of matter. Early studies of nuclear and particle physics provided the foundation for technologies that have changed our daily lives, giving us televisions, transistors, medical imaging devices, and computers, and has enormous potential to lead to unexpected discoveries. The Large Hadron Collider (LHC) at CERN in Switzerland, scheduled to be completed in 2007, will open a new chapter in illuminating the structure of matter, space and time. At this new energy frontier, qualitatively new phenomena of nature should emerge that have not been seen since just after the big bang that began the universe. There are many possibilities - supersymmetry, extra space dimensions, or unexpected new symmetries of nature - but finding out which, if any, are true can only be settled by experiment. In FY 2007, $56.8 million is requested to support U.S. participation in the LHC research program. The new results anticipated Page 11 at the LHC can be significantly advanced by discoveries at a potential next generation International Linear Collider (ILC) which would break new ground in our understanding of nature. In FY 2007, spending on ILC research and development doubles with a funding request of $60.0 million. The budget also includes $318.7 million to solidify America 9s leadership in the economically vital field of high-speed computing , a tool increasingly integral not only to advanced scientific research, but also to industry. The budget will provide the pathway toward the petaflop era, when computers will be so powerful that researchers will be able to attack a wide range of scientific problems through modeling and simulation that was previously impossible, enabling the U.S to maintain leadership in this strategic area. Additionally, from development of the suite of scientific software and applications for the petascale computers, U.S. industry may be able to accelerate innovation, saving billions in development costs and giving our economy untold competitive advantages. We are, in short, on the verge of a revolution across multiple sciences as profound as any humanity has witnessed - one that will transform our vision of nature and, ultimately, our industry and economy. ENSURING A CLEAN ENVIRONMENT Just as important as advances in national security, energy independence and scientific discovery are the Department 9s programs that protect human health and the environment by cleaning up Cold War legacy waste and improving management of spent nuclear fuel through the establishment of the national permanent nuclear waste repository at Yucca Mountain, Nevada. Like many of the Department 9s major programs, the environmental cleanup program and the nuclear waste repository activities have undergone management and programmatic reforms to further improve operations and implement effective and efficient practices. To deliver on the Department 9s environmental cleanup commitments following 50 years of nuclear research and production from the Cold War, in 2002 the Environmental Management program underwent and completed a major transformation that would enable the Department to accelerate cleanup faster than previously estimated. Working in partnership with the public, states and regulators, the Environmental Management program has made significant progress in the last four years to shift away from risk management toward risk reduction. By the end of 2006, the cleanup of thirteen DOE legacy nuclear sites, including the recently announced completion of Rocky Flats, Colorado and Fernald, Ohio will be completed. While encouraged by the results demonstrated thus far, the program continues to stay focused on the mission and is working aggressively to enhance and refine project management approaches and address the regulatory and legal challenges incumbent in this complex environmental cleanup program. In FY 2007, the budget includes $5.8 billion to continue environmental cleanup with a focus on site completion, with eight sites or areas to be completed in the 2007 to 2009 timeframe. This budget request is reduced from the FY 2006 budget request of Page 12 $6.5 billion primarily reflecting cleanup completion at some sites in FY 2006 and the subsequent transfer of post-closure work activities. As cleanup work is completed over the next five years at sites without a continuing mission, the Environmental Management program (EM) will transfer long-term surveillance and monitoring activities and management of pension and benefit programs to the Office of Legacy Management. For those with continuing missions, these activities will be transferred to the cognizant program office. Demonstrating the importance of remaining steadfast to the operating principles of reducing risk and environmental liability, while staying focused on the mission reduce risk by cleaning up sites, the FY 2007 budget request of $5.8 billion will support the following key activities: " Stabilizing radioactive tank waste in preparation for disposition (about 30 percent of the FY 2007 request for EM); " Dispositioning transuranic and low-level wastes (about 15 percent of the request for EM); " Storing and safeguarding nuclear materials (about 15 percent of the request for EM); " Decontaminating and Decommissioning excess facilities (about 20 percent of the request for EM); and " Remediating major areas of our large sites (Hanford, Savannah River Site, Idaho National Laboratory, and Oak Ridge Reservation) (about 10 percent of the request for EM). One of the significant cleanup challenges is the management and treatment of high-level radioactive liquid waste at the Hanford Waste Treatment and Immobilization Plant (WTP) . In FY 2007, $690 million is proposed for the WTP project. The plant is a critical component of the program 9s plans to clean up 53 million gallons of radioactive waste currently stored in 177 aging underground storage tanks. By June 2006, the U.S. Army Corps of Engineers is expected to complete an independent cost validation (with more than 25 professionals experienced in cost estimating, design, construction, and commissioning). The Department plans to utilize the results from several reviews to validate cost and schedule for this project. The Department, while responsible for the cleanup and disposal of high-level radioactive waste generated from the Cold War, is also responsible for managing and disposing of commercial spent nuclear fuel in a safe and environmentally sound manner. The latter responsibility is the mission of DOE 9s Office of Civilian Radioactive Waste Management (RW). The nation 9s commercial and defense high-level radioactive waste and spent nuclear fuel will be safely isolated in a geologic repository to minimize risk to human health and the environment. This repository is being developed at Yucca Mountain , Nevada. This Administration is strongly committed to establishing Yucca Mountain as the nation's first Page 13 permanent repository for high-level waste and spent nuclear fuel. Licensing and developing a repository for the disposal of these materials will help set the stage for an expansion of nuclear power through the President 9s GNEP initiative, which could help to diversify our energy supply and support our economic future. Permanent geological disposal at Yucca Mountain offers the safest, most environmentally sound solution for dealing with this challenge. The FY 2007 budget request of $544.5 million to establish a geologic repository at Yucca Mountain reflects the Department 9s new operational strategy to pursue a cclean canisterized d approach to fuel handling at the repository site. This strategy will result in Yucca Mountain operating as a primarily cclean d or non-contaminated repository site minimizing radiation exposure issues to the workers, the public and the environment. The new approach will use a smaller, less complex surface facilities cfootprint d which will simplify the design, licensing and construction processes. In addition, multi purpose canisters suitable for the transportation, aging, and disposal of spent nuclear fuel and high-level waste will be developed which will simplify transportation and handling operations. Operating the site based on this cclean canisterized d approach will improve the safety, operation, and long-term performance of the repository. To further advance the Administration 9s commitment to the establishment of Yucca Mountain, the Department intends to submit to Congress legislation to address regulatory, funding and other issues that have been impediments to the program 9s success. As the Environmental Management program completes cleanup of sites throughout the DOE complex, management of post closure activities at these sites will transfer to the Office of Legacy Management (LM) . In FY 2007, $201.0 million is proposed to provide long-term surveillance and maintenance, long-term response actions, oversight and payment of pensions and benefits for former contractor retirees, and records management activities at closure sites transferred to LM. The majority of funding ($122.4 million) is associated with the transfer of post closure responsibilities and funding of three major sites from the Environmental Management program to LM in FY 2007. These sites include: Rocky Flats, $90.9 million; Fernald, $26.4 million; and a group of sites known as the Nevada offsites, $5.1 million. The cumulative effect of these three transfers results in a 150-percent increase in the Legacy Management budget matched by a corresponding decrease in the Environmental Management budget. IMPROVING MANAGEMENT FOR RESULTS The Department of Energy has continued to make great strides in meeting President Bush 9s challenge to become more efficient, more effective, more results-oriented, and more accountable for performance. Over the past four years, the President 9s Management Agenda (PMA) has been the framework for organizing the Department 9s management reform efforts. To better manage human capital, the Department implemented a performance management system to better link employee achievement to mission accomplishment. Page 14 In FY 2007, DOE will publish, communicate and implement a revised five-year Human Capital Management Strategic Plan as well as a formal leadership succession plan. The Department completed six competitive sourcing studies and has three others underway. The completed studies encompass over 1,300 federal and 1,000 contractor positions with $532.6 million in expected savings. During FY 2007, DOE anticipates studying approximately 100 to 300 positions. The Department streamlined its financial reporting process enabling success in meeting the accelerated financial reporting deadlines. Due to challenges associated with implementing a new financial accounting system and the start-up of consolidated finance and accounting services operation, DOE did not receive a clean audit opinion in 2005. DOE will work in 2006 to improve accounting system performance, data quality, and training, as well as operations and controls. In FY 2006 and FY 2007, DOE will expand the availability of financial data in support of decision making by further implementing the Integrated Management Navigation (I-MANAGE) system, specifically in the areas of budget and procurement through the Integrated Data Warehouse (IDW). The Department continues to apply Earned Value Management principles to each of its major information technology investments. In addition, DOE is partnering with other government agencies to develop a standardized and integrated human resources information system and to develop a consolidated grants management system. The Department continued its effort to institutionalize multi-year planning and strengthen the link between program performance and resource allocation decisions. The Program Assessment Rating Tool (PART) process continues to be used to promote improved program performance. For programs which have not formally been reviewed by OMB, the PART process has been used for internal self-assessment. A number of important milestones were reached in Real Property Management including the approval of the Asset Management Plan (AMP) by the Deputy Secretary. The AMP outlines an overall framework for the strategic management of the Department 9s $77 billion portfolio of Real Property Assets. Additionally, the 20,000 real property records in the Facilities Information Management System, the Department 9s repository of real property information, were populated and updated as required by the Federal Real Property Council for support of the Federal Real Property Profile. This information will be used to support real property management decisions department-wide. As these examples indicate, the Department of Energy is using the PMA to meet its many management challenges. The results are clear: the Department is more streamlined, more efficient, more results-oriented, and is committed to continue these improvements in FY 2007. Page 15 Page 16 Department of Energy Budget by Organization (discretionary dollars in thousands) FY 2005 FY 2006 FY 2007 Current Current Congressional Approp. Approp. Request $ % Discretionary Summary By Organization National Security Weapons................................................................................ 6,625,542 6,369,597 6,407,889 +3 8,292 +0.6% Defense Nuclear Nonproliferation.......................................... 1,507,966 1,614,839 1,726,213 +111,374 +6.9% Naval Reactors....................................................................... 801,437 781,605 795,133 +13,528 +1 .7% Office of the Administrator...................................................... 363,350 338,450 386,576 +48,126 +14.2% Total, National Nuclear Security Administration...................... 9,298,295 9,104,491 9,315,811 +211,320 +2.3% Energy, Science and Environment Energy Energy Efficiency and Renewable Energy........................... 1,234,313 1,173,843 1,176,421 +2,578 +0.2% Electricity Delivery & Energy Reliability................................ 116,053 161,878 124,928 -36,950 -22.8% Fossil Energy........................................................................ 629,242 841,639 648,876 -192,763 -22.9% Nuclear Energy, Science and Technology........................... 503,792 535,660 632,698 +97,038 +18.1% Total, Energy.......................................................................... 2,483,400 2,713,020 2,582,923 -1 30,097 -4.8% Science................................................................................... 3,635,650 3,596,391 4,101,710 +505,319 +14.1% Environment Environmental Management................................................ 7,276,168 6,590,250 5,828,038 -762,212 -11.6% Civilian Radioactive Waste Management............................ 572,384 495,000 544,500 +49,500 +10.0% Office of Legacy Management............................................. 77,137 77,812 200,990 +123,178 +158.3% Total, Environment................................................................. 7,925,689 7,163,062 6,573,528 -589,5 34 -8.2% Total, Energy, Science and Environment................................. 14,044,739 13,472,473 13,258,161 -214,312 -1.6% Corporate Management Office of the Secretary............................................................ 4,644 5,365 5,539 +174 +3.2% Competitive Sourcing............................................................. 2,480 2,464 2,982 +518 +21.0% Cost of Work and Revenues.................................................. -39,833 -42,793 -69,318 -26,525 -62.0% Chief Information Officer........................................................ 94,581 86,616 108,822 +22,206 +25.6% Chief Financial Officer............................................................ 35,542 37,402 36,790 -612 -1.6% Management........................................................................... 53,743 53,853 55,237 +1,384 +2.6% Human Resources.................................................................. 17,342 17,348 22,029 +4,681 +27.0% Board of Contract Appeals..................................................... 648 644 147 -497 -77.2% Hearings and Appeals............................................................ 4,283 4,310 4,422 +112 +2.6% Congressional and Intergovernmental Affairs........................ 4,826 4,795 4,866 +71 +1.5% Public Affairs.......................................................................... 2,682 4,475 4,419 -56 -1.3% General Counsel.................................................................... 21,774 23,069 24,725 +1,656 +7.2% Policy and International Affairs............................................... 15,947 15,844 19,876 +4,032 +25.4% Economic Impact and Diversity.............................................. 5,922 6,136 5,969 -167 -2.7% Inspector General................................................................... 41,176 41,580 45,507 +3,927 +9.4% Security................................................................................... 296,118 4 4 4 4 4 4 4 4 Security and Safety Performance Assurance........................ 4 4 304,024 298,497 -5,527 -1.8% Independent Oversight and Performance Assurance............ 24,472 4 4 4 4 4 4 4 4 Environment, Safety and Health............................................ 141,096 103,979 109,935 +5,956 +5.7% Energy Information Administration......................................... 83,819 85,314 89,769 +4,455 +5.2% Power Marketing Administrations........................................... 208,794 269,725 251,975 -17,750 -6.6% Colorado River Basins........................................................... ---- -23,000 -23,000 4 4 4 4 Total, Corporate Management................................................. 1,020,056 1,001,150 999,188 -1,962 -0.2% Federal Energy Regulatory Commission................................. -18,452 -15,542 -16,405 -863 -5.6% Total, Discretionary Funding................................................. 24,344,638 23,562,572 23,556,755 -5,817 -0.0% FY 2007 vs. FY 2006 Page 17 Department of Energy Budget by Appropriation (discretionary dollars in thousands) FY 2005 FY 2006 FY 2007 Current Current Congressional Approp. Approp. Request $ % Discretionary Summary By Appropriation Energy And Water Development, And Related Agencies Appropriation Summary: Energy Programs Energy supply and Conservation...................................... 1,801,815 1,812,627 1,923,361 +110,734 +6.1% Fossil energy programs Clean coal technology.................................................... -160,000 -20,000 4 4 +20,000 +100.0% Fossil energy research and development...................... 560,852 592,014 469,686 -122,328 -20.7% Naval petroleum and oil shale reserves......................... 17,750 21,285 18,810 -2,475 -11.6% Elk Hills school lands fund............................................. 36,000 84,000 4 4 -84,000 -100.0% Strategic petroleum reserve........................................... 126,710 207,340 155,430 -51,910 -25.0% Northeast home heating oil reserve............................... 4,930 4 4 4,950 +4,950 N/A Strategic petroleum account.......................................... 43,000 -43,000 4 4 +43,000 +100.0% Total, Fossil energy programs........................................... 629,242 841,639 648,876 -192,763 -22.9% Uranium enrichment D&D fund......................................... 495,015 556,606 579,368 +22,762 +4.1% Energy information administration..................................... 83,819 85,314 89,769 +4,455 +5.2% Non-Defense environmental cleanup................................ 439,601 349,687 310,358 -39,329 -11.2% Science.............................................................................. 3,635,650 3,596,391 4,101,710 +505,319 +14.1% Nuclear waste disposal..................................................... 343,232 148,500 156,420 +7,920 +5.3% Departmental administration............................................. 128,598 128,519 128,825 +306 +0.2% Inspector general............................................................... 41,176 41,580 45,507 +3,927 +9.4% Total, Energy Programs....................................................... 7,598,148 7,560,863 7,984,194 +423,331 +5.6% Atomic Energy Defense Activities National nuclear security administration: Weapons activities......................................................... 6,625,542 6,369,597 6,407,889 +38,292 +0.6% Defense nuclear nonproliferation................................... 1,507,966 1,614,839 1,726,213 +111,374 +6.9% Naval reactors................................................................ 801,437 781,605 795,133 +13,528 +1.7% Office of the administrator.............................................. 363,350 338,450 386,576 +48,126 +14.2% Total, National nuclear security administration................. 9,298,295 9,104,491 9,315,811 +211,320 +2.3% Environmental and other defense activities: Defense environmental cleanup..................................... 6,800,848 6,130,447 5,390,312 -740,135 -12.1% Other defense activities.................................................. 687,149 635,578 717,788 +82,210 +12.9% Defense nuclear waste disposal.................................... 229,152 346,500 388,080 +41,580 +12.0% Total, Environmental & other defense activities................ 7,717,149 7,112,525 6,496,180 -616,345 -8.7% Total, Atomic Energy Defense Activities.............................. 17,015,444 16,217,016 15,811,991 -405,025 -2.5% Power marketing administrations: Southeastern power administration................................... 5,158 5,544 5,723 +179 +3.2% Southwestern power administration.................................. 29,117 29,864 31,539 +1,675 +5.6% Western area power administration.................................. 171,715 231,652 212,213 -19,439 -8.4% Falcon & Amistad operating & maintenance fund............. 2,804 2,665 2,500 -165 -6.2% Colorado River Basins...................................................... 4 4 -23,000 -23,000 4 4 4 4 Total, Power marketing administrations............................... 208,794 246,725 228,975 -17,750 -7.2% Federal energy regulatory commission................................ 4 4 4 4 4 4 4 4 4 4 Subtotal, Energy And Water Development and Related Agencies.................................................................................. 24,822,386 24,024,604 24,025,160 +556 +0.0% Uranium enrichment D&D fund discretionary payments...... -459,296 -446,490 -452,000 -5,510 -1.2% Excess fees and recoveries, FERC..................................... -18,452 -15,542 -16,405 -863 -5.6% Total, Discretionary Funding................................................. 24,344,638 23,562,572 23,556,755 -5,817 -0.0% FY 2007 vs. FY 2006 Page 18 SECTION 1. DEFENSE STRATEGIC GOAL Defense Strategic Goal: To protect our national security by applying advanced science and nuclear technology to the nation 9s defense. (discretionary dollars in thousands) FY 2005 FY 2006 FY 2007 Current Current Congressional Approp. Approp. Request $ % National Nuclear Securit Administratio Weapons........................................................................................ 6,625,542 6,369,597 6,40 7,889 +38,292 +0.6% Defense Nuclear Nonproliferation................................................... 1,507,966 1,614,839 1,726,213 +111,3 74 +6.9% Naval Reactors............................................................................... 801,437 781,605 795,133 +1 3,528 +1.7% Office of the Administrator.............................................................. 363,350 338,450 386,576 +48,12 6 +14.2% Total, National Nuclear Security Administration........................... 9,298,295 9,104,491 9,315,811 +211,320 +2.3% FY 2007 vs. FY 2006 The Defense Strategic Goal is supported by the following three general goals: General Goal 1. Nuclear Weapons Stewardship: Ensure that our nuclear weapons continue to serve their essential deterrence role by maintaining and enhancing the safety, security, and r

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