March 2, 2006

The Honorable Judd Gregg, Chairman
The Honorable Kent Conrad, Ranking Member
Committee on the Budget 
United States Senate
Washington, D.C. 20510

Dear Chairman Gregg and Senator Conrad:

 This letter is in response to your request of February 13, that the Senate Committee on Energy and Natural Resources provide to you by March 2 its views and estimates on the federal budget for fiscal year 2007.  After consultation with my Ranking Member, Senator Bingaman, we have determined that we will submit separate views to the Budget Committee.  This letter sets forth the views of the Republican Members of the Committee as to proposals in the Administration’s FY2007 budget submission for programs within this Committee’s jurisdiction.

MANDATORY PROGRAMS

Savings

 We do not expect a majority of the Committee to support Administration proposals to achieve the following mandatory savings, and therefore recommend that savings attributable to these proposals be excluded from budget resolution assumptions. 

• Elimination of Bureau of Land Management Range Improvements Fund
(-$47 million over five years and -$97 million over ten years.)

• Elimination of Geothermal Implementation Fund to be replaced with increased user fees (-$13.5 million over five years and -$27 million over 10 years)

• Pick-Sloan Project Cost Repayment (-$100 million over five years and
-$300 million over ten years)

• Repeal of Section 365 of the Energy Policy Act of 2005 and imposition of new oil and gas processing fees in its place (-$82.8 million over five years and -$186.3 million over 10 years)

• Power Marketing Administrations

            1.  The Administration proposes that the Bonneville Power Authority (BPA) use secondary market revenues in excess of $500 million per year to make advance amortization payments to the Treasury on BPA’s bond obligations (-$574 million over five years; -$924 million over ten years).  The Administration has construed existing enabling statutes to include authority for this proposal.  Such an interpretation is inconsistent with the manner in which BPA has interpreted those laws for over thirty years and is also contrary to legal opinions on this subject rendered by previous administrations.  A majority of the Committee neither agrees with the Administration’s interpretation of existing law nor would support legislation to authorize the Administration’s proposal.
            The Committee also notes that the budget documents reference legislation requested by the Administration in 2005 that would count third-party financing of transmission facilities against BPA’s borrowing authority.  A majority of the Committee remains opposed to that legislation.
 
             2.  The Administration proposes assigning agency borrowing rates to new debt incurred by  SEPA, SWPA, or WAPA.   While the Administration estimates that this borrowing rate increase would have minimal impacts on customers, the Committee is concerned with the precedent of this proposal.

Receipts

     ANWR   -- The Energy and Natural Resources Committee is likely to have a majority of Members in support of legislation to authorize the Administration’s proposal to open a portion of the Arctic National Wildlife Refuge (ANWR) to oil and gas exploration.  The Administration estimates $3.5 billion in Federal receipts over five years, and $4.0 billion in receipts over ten years.

 The Committee notes that there can be significant differences in the scoring of budget proposals between the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO).  It is critical that the Budget Committee use congressional scoring for the budget resolution so that the President’s policy proposals can be appropriately considered by the Senate.

       Sales of BLM Land – The Administration proposes enactment of legislation to amend the Federal Land Transaction Facilitation Act to permit the Bureau of Land Management to sell additional lands and to expand how those receipts could be used.   A majority of the Committee Members would not support such legislation.  No assumptions related to this proposal should be included in the budget resolution.
Spending

      County Payments  --  Senators Craig, Wyden, and others have introduced legislation (S. 267) to extend the authorization of the Secure Rural Schools and Community Self-Determination Act of 2000 (P.L. 106-393).  This program is designed to provide a stable source of revenue to states and counties that lose  revenue-sharing payments from National Forest and some Bureau of Land Management lands.  These funds are used by localities to benefit public education and public roads, and for joint projects to improve natural resource conditions on federal lands.  The program expires at the end of FY2006 with the final payments being provided in FY2007.  The estimated cost of extending this program is approximately $500 million per year.   The Committee will support legislation to extend this program and recommends that these funds be included for the five-year window in the budget resolution.   
     
      Abandoned Mine Land Program.  The Abandoned Mine Land (AML) program was established in 1977 as a 15-year program to complete the backlog
of abandoned coal mine reclamation by 1992.  The program has been extended through June 30, 2006.  Although the Administration has not renewed its specific legislative proposal to extend the coal fee and to modify the Surface Mining Control and Reclamation Act (SMCRA) formula, the Administration continues to support comprehensive reform of the AML program.
 The Committee held a hearing on AML legislation in the last Session, and there is interest in considering the legislation in the 109th Congress. The estimated cost of this legislation is likely to be in the range of $2.5 billion to $3.0 billion over ten years, and should be considered in the FY 2007 budget resolution.

DISCRETIONARY PROGRAMS

           Similar to FY2006, the President’s constrained budget request for non-defense, non-homeland security programs funded in annual spending bills presents a significant challenge to the Appropriations Committees of the Congress.  Some of these challenges for programs under the jurisdiction of this Committee are discussed below.   The Committee notes with approval requested increases in areas sorely in need of additional funding, new initiatives to address the nation’s long-term energy policy, as well as funding to implement much of the Energy Policy Act of 2005.   Areas of particular interest or concern are:

     Advanced Energy Initiative  --  To achieve his goal announced in the State of the Union address of replacing more than 75% of our oil imports by 2025, the Advanced Energy Initiative provides for a 22% increase in clean-energy research at the Department of Energy. The Committee is generally supportive of requested increases for further development of clean energy sources that could displace the nation’s reliance on foreign sources of fuel.  Many of these proposals were included in the Energy Policy Act of 2005 [EPACT].  However,  the Committee is concerned that some important programs authorized in EPACT, such as the Clean Coal Power Initiative and gas hydrates research, have been zeroed out or significantly reduced.  Similarly, while overall Nuclear Energy, Science and Technology is increased 18% from FY2006 levels, there are recommendations for large decreases in important programs such as Nuclear Power 2010 (17% decrease) and Generation IV Nuclear Energy Systems Initiative (42% decrease).  The Committee is especially concerned about the need to restore $27 million to support nuclear energy research and education programs at universities that produce the nuclear engineers so vital to efficient, safe operation of nuclear power plants.

      American Competitiveness Initiative(ACI) – The Committee Members strongly support the proposal to double funding over ten years for basic research in the physical sciences at the Department of Energy Office of Science and to promote career development in math and science.  The Administration’s request for the DOE Office of Science of a 14.1% increase will put the Office of Science on track to reach the ten-year goal.  The Committee strongly supports ACI but also notes that funding for all of the initiatives in the PACE-Energy Act [S. 2197] should be assumed in non-defense discretionary funding totals.

      Healthy Forests Issues – The Committee urges that the President’s full request for fire suppression, hazardous fuels reduction, and other components of the National Fire Plan be assumed in the FY2007 budget resolution.  The request represents the ten-year historical average for firefighting expenses which has been the traditional approach to funding these costs.  We also urge the Budget Committee to include language in the budget resolution, as it has done in the past, providing for an adjustment for wildland fire suppression funding.  Some areas in the West are still experiencing persistent drought which increases the risk of fires and thus the likelihood that additional funding may be needed to fight these fires.

      Water Resources – Another priority issue for the Committee related to the persistent drought in the West is water availability.  The Committee anticipates working to authorize the Bureau of Reclamation’s Water 2025 program in support of the Administration’s $14.5 million request and recommends that the budget resolution include this assumption.  The Committee will continue to focus on water issues this session and notes that the budgetary impact of potential water-related legislation, particularly settlement of disputes involving the federal government, could be hundreds of millions of dollars over the next ten years.

          Payment in Lieu of Taxes (PILT) – The Committee continues to support full funding of the PILT program which provides payments to county governments that have lost land from the tax rolls due to federal ownership.  These counties are increasingly called upon to provide services, such as search and rescue, fire, law enforcement, and other health and safety services to visitors to our federal public lands.  These counties also must maintain local roads used by visitors to federal parks, wilderness and recreation areas, and wildlife refuges.  The Administration budget reduces funding for PILT by $34.5 million to $198 million for FY2007.  The Committee strongly supports the PILT program and urges the Budget Committee to sustain at least the current FY2006 level of funding in the FY2007 budget resolution as well as assume increases necessary to reach full funding of the PILT program within four years.

 We appreciate the opportunity for Republican Members of the Senate Energy and Natural Resources Committee to provide their views and estimates to your Committee as you begin work on the FY 2007 budget resolution.  We look forward to working with you.

      Sincerely,

      Pete V. Domenici
      Chairman

Cc:   Senator Jeff Bingaman
        Ranking Minority Member