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United States Government Accountability Office: 
GAO: 

Energy Policy: 

Information on Federal and Other Factors Influencing U.S. Energy 
Production and Consumption from 2000 through 2013: 

Energy Policy: 

Report to the Ranking Member, Committee on Energy and Natural 
Resources, U.S. Senate: 

September 2014: 

GAO-14-836: 

GAO Highlights: 

Highlights of GAO-14-836, a report to the Ranking Member, Committee on 
Energy and Natural Resources, U.S. Senate. 

Why GAO Did This Study: 

Federal energy policy since the 1970s has focused primarily on 
ensuring a secure supply of energy while protecting the environment. The
federal government supports and intervenes in U.S. energy production
and consumption in various ways, such as providing tax incentives, 
grants, and other support to promote domestic production of energy, as 
well as setting standards and requirements. 

GAO was asked to provide information on federal activities and their 
influence on U.S. energy production and consumption over the past 
decade. This report provides information on U.S. production and 
consumption of fossil, nuclear, and renewable energy from 2000 through 
2013 and major factors, including federal activities, that influenced 
energy production and consumption levels. It also provides information 
on other federal activities that may have influenced aspects of U.S. 
energy production and consumption from 2000 through 2013 but were not 
targeted at a specific energy source, as well as information on 
federal research and development. GAO analyzed DOE historical data on
energy production and consumption, reviewed studies and reports from
federal agencies and governmental organizations on federal energy-
related activities, and analyzed data on federal spending programs and 
tax incentives, among other things. 

What GAO Found: 

According to the studies and reports GAO reviewed, several major 
factors, including federal activities, influenced U.S. production and 
consumption of fossil, nuclear, and renewable energy from 2000 through 
2013. Examples of these factors include the following: 

* Fossil energy. Advances in drilling technologies enabled economic
production of natural gas and crude oil from shale and similar 
geological formations. These advances led to increases in domestic 
production of natural gas and crude oil beginning around 2008 and 
contributed to declines in domestic prices of natural gas, as well as 
lower prices for crude oil in some regions of the United States. Some 
federal activities also may have influenced these trends. For example, 
the federal government limited oil producers' liability associated 
with some oil spills, lowering the producers' costs for liability 
insurance. In addition, the federal government provided tax incentives 
encouraging production for oil and gas producers, resulting in 
billions of dollars in estimated federal revenue losses. Moreover, 
partly because of lower natural gas prices, domestic coal production 
decreased in recent years as utilities switched from coal to natural 
gas for electricity generation. 

* Nuclear energy. Declining prices for a competing energy source—natural
gas—may have led to decreases in the production and consumption of
nuclear energy in recent years. Federal activities may have also 
influenced this trend. For example, the Department of Energy (DOE) 
announced plans to terminate its work to license a disposal facility 
for certain nuclear power plant waste in 2009, creating uncertainty 
about how this waste would be managed. This uncertainty may have 
provided a disincentive for some nuclear power operators to stay in 
the market or expand capacity because of the cost of storing nuclear 
waste. 

* Renewable energy. Federal tax credits for ethanol and federal policies
requiring the use of ethanol in transportation fuels were major factors
influencing an 8-fold increase in the production and consumption of 
ethanol from 2000 to 2013. In addition, state policies requiring the 
use of renewable energy in electricity production, as well as federal 
outlays and tax credits for renewable energy producers, were major 
factors influencing a 30-fold increase and a 19-fold increase in 
production and consumption of electricity from wind and solar energy, 
respectively, from 2000 to 2013. 

According to the studies and reports GAO reviewed, other federal 
activities may have influenced aspects of U.S. energy production and 
consumption from 2000 through 2013 but were not targeted at a specific 
energy source. For example, the federal government strengthened energy 
efficiency standards for vehicle fuel economy and consumer products 
such as appliances and lighting, provided electricity and transmission 
services to customers through its power marketing administrations and 
the Tennessee Valley Authority, and spent billions of dollars helping 
low-income households cover heating and cooling costs. In addition, the
federal government supported research and development targeting a wide 
range of energy-related technologies at government-owned laboratories 
and through funding to universities and other research entities. 

What GAO Recommends: 

GAO is not making recommendations in this report. DOE, the Department of
the Treasury, and the U.S. Department of Agriculture reviewed a draft 
of this report and provided technical comments that GAO incorporated as
appropriate. 

View [hyperlink, http://www.gao.gov/products/GAO-14-836]. For more 
information, contact Frank Rusco at (202) 512-3841 or ruscof@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Major Factors Influencing U.S. Production and Consumption of Energy 
from 2000 through 2013: 

Agency Comments: 

Appendix I: Scope and Methodology: 

Appendix II: Federal Sources of Data on Energy-Related Outlays and Tax 
Expenditures: 

Appendix III: Information on Major Factors Influencing Fossil Energy 
Production and Consumption: 

Appendix IV: Information on Major Factors Influencing Nuclear Energy 
Production and Consumption: 

Appendix V: Information on Major Factors Influencing Renewable Energy 
Production and Consumption: 

Appendix VI: Federal Tax Expenditures, Outlays, and Loan Guarantees 
Related to Renewable Energy: 

Appendix VII: Information on Other Federal Activities Related to 
Aspects of U.S. Energy Production and Consumption: 

Appendix VIII: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Types of Tax Expenditures: 

Table 2: 16 Federal Tax Expenditures Targeting or Related to Fossil 
Energy, Fiscal Year 2000-2013: 

Table 3: Three Federal Tax Provisions Related to Fossil Energy: 

Table 4: DOE's Title 17 Innovative Technology Loan Guarantee Program 
Targeting Solar and Wind Energy, Fiscal Year 2000-2013: 

Table 5: Seven Federal Tax Expenditures Targeting or Related to 
Renewable Energy, Fiscal Year 2000-2013: 

Table 6: Three Federal Programs with Outlays Targeting or Related to 
Renewable Energy, Fiscal Year 2000-2013: 

Table 7: Two Federal Loan Guarantee Programs Targeting or Related to 
Renewable Energy, Fiscal Year 2000-2013: 

Table 8: Five Federal Programs and Activities with Outlays Generally 
Related to Energy Production and Consumption, Fiscal Year 2000-2013: 

Table 9: 13 Federal Tax Expenditures Generally Related to Energy 
Production and Consumption, Fiscal Year 2000-2013: 

Table 10: Four Federal Programs with Outlays for R&D Related to 
Specific Energy Sources, Fiscal Year 2000-2013: 

Table 11: Four Federal Programs with Outlays for R&D Generally Related 
to Energy Production and Consumption, Fiscal Year 2000-2013: 

Figures: 

Figure 1: U.S. Consumption of Energy by Source, 2013: 

Figure 2: U.S. Consumption of Energy by Sector, 2013: 

Figure 3: U.S. Natural Gas Production and Consumption, 2000-2013: 

Figure 4: U.S. Natural Gas Consumption by Sector, 2000 and 2013: 

Figure 5: Sources of U.S. Natural Gas Production, 2000-2012: 

Figure 6: U.S. Natural Gas Prices, 2000-2013: 

Figure 7: U.S. Crude Oil Production and Usage of Crude Oil at U.S. 
Refineries, 2000-2013: 

Figure 8: U.S. Consumption of Petroleum Products, 2000-2013: 

Figure 9: U.S. Consumption of Petroleum Products by Sector, 2000 and 
2013: 

Figure 10: Crude Oil Prices, 2000-2013: 

Figure 11: U.S. Coal Production and Consumption, 2000-2013: 

Figure 12: U.S. Coal Prices, 2000-2012: 

Figure 13: Revenue from Federal Excise Taxes Targeting or Related to 
Fossil Energy, Fiscal Year 2000-2012: 

Figure 14: Revenue from Royalty and Other Payments for Federal Oil, 
Gas, and Coal Leases, Fiscal Year 2003-2013: 

Figure 15: Estimated Revenue Losses Associated with Federal Tax 
Expenditures Targeting or Related to Fossil Energy, Fiscal Year 2000-
2013: 

Figure 16: Estimated Revenue Losses Associated with Royalty Relief for 
Federal Oil and Gas Leases, 2000-2012: 

Figure 17: U.S. Nuclear Energy Production and Consumption, 2000-2013: 

Figure 18: U.S. Prices of Uranium Oxide, 2000-2013: 

Figure 19: Revenue Losses Associated with a Federal Tax Expenditure 
Targeting Nuclear Energy Production and Consumption, Fiscal Year 2000-
2013: 

Figure 20: U.S. Renewable Energy Production and Consumption, 2000-2013: 

Figure 21: U.S. Ethanol Production and Consumption, 2000-2013: 

Figure 22: Revenue Losses Associated with Alcohol Fuel Credits, Fiscal 
Year 2000-2013: 

Figure 23: U.S. Ethanol Prices, 2000-2013: 

Figure 24: U.S. Wind Energy Production and Consumption, 2000-2013: 

Figure 25: U.S. Solar Energy Production and Consumption, 2000-2013: 

Figure 26: Revenue Losses and Outlays Associated with the Production 
Tax Credit, Investment Tax Credit, and Section 1603 Program, Fiscal 
Year 2000-2013: 

Figure 27: Federal Outlays Generally Related to Energy Production and 
Consumption, Fiscal Year 2000-2013: 

Figure 28: Federal Revenue Losses Associated with Tax Expenditures 
Generally Related to Energy Production and Consumption, Fiscal Year 
2000-2013: 

Figure 29: Federal Outlays for R&D Related to Specific Energy Sources, 
Fiscal Year 2000-2013: 

Figure 30: Federal Outlays for R&D Generally Related to Energy 
Production and Consumption, Fiscal Year 2000-2013: 

Abbreviations: 

Btu: British thermal unit: 

CAFE: corporate average fuel economy: 

CBO: Congressional Budget Office: 

CRS: Congressional Research Service: 

DOE: Department of Energy: 

EIA: Energy Information Administration: 

EISA: Energy Independence and Security Act of 2007: 

EPA: Environmental Protection Agency: 

EPAct: Energy Policy Act of 2005: 

Interior: Department of the Interior: 

JCT: Joint Committee on Taxation: 

NRC: Nuclear Regulatory Commission: 

OMB: Office of Management and Budget: 

Recovery Act: American Recovery and Reinvestment Act of 2009: 

R&D: research and development: 

Treasury: Department of the Treasury: 

TVA: Tennessee Valley Authority: 

USDA: U.S. Department of Agriculture: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

September 30, 2014: 

The Honorable Lisa Murkowski: 
Ranking Member: 
Committee on Energy and Natural Resources: 
United States Senate: 

Dear Senator Murkowski: 

Americans' daily lives, as well as the economic productivity of the 
United States, depend on energy. Most sectors of American society rely 
upon a readily available and affordable supply of energy to function. 
However, the production and consumption of energy involve economic and 
environmental trade-offs. For example, fossil energy provides 
relatively inexpensive sources of fuels that power automobiles, 
generate electricity, and power industrial processes. However, burning 
these fuels increases air pollution and greenhouse gas emissions, 
according to the Environmental Protection Agency (EPA). According to 
the Congressional Research Service (CRS), federal energy policy since 
the 1970s has focused primarily on ensuring a secure supply of energy 
while protecting the environment.[Footnote 1] 

In pursuing the goals of a secure energy supply and a healthy 
environment, the federal government subsidizes or otherwise provides 
support to energy companies and consumers.[Footnote 2] For example, 
the federal government provides tax incentives and other support to 
promote the domestic production of energy (including the extraction of 
coal, oil, and natural gas) and the development of renewable energy 
(including wind and solar power). The federal government also 
intervenes in energy markets in other ways, such as setting standards 
and requirements (through laws and regulations) that may not be 
directed at specific sources of energy but that nonetheless may 
influence the types and quantities of energy that are produced or 
consumed. For example, the federal government promotes energy 
efficiency through appliance efficiency standards that are written 
into law and regulates pollutants that are created in the production 
and consumption of energy. 

The federal government has established a number of important energy 
policies over the past decade, and several federal organizations have 
studied some of the costs associated with these policies. For example, 
Congress passed several key laws affecting energy producers and 
consumers over the past 10 years, including the Energy Policy Act of 
2005 (EPAct), the Energy Independence and Security Act of 2007 (EISA), 
and the American Recovery and Reinvestment Act of 2009 (Recovery Act). 
[Footnote 3] Several federal organizations, including the Department 
of Energy's (DOE) Energy Information Administration (EIA), CRS, and 
the Congressional Budget Office (CBO), have published reports 
identifying and quantifying aspects of federal support for energy 
production and consumption associated with these policies.[Footnote 4] 
In general, these reports focused on costs associated with federal 
energy-related tax incentives, outlays, or loan or loan guarantee 
programs. 

You asked us to provide a broader context for understanding how 
federal activities have influenced U.S. energy production and 
consumption over the past decade. In this report, we provide 
information on U.S. production and consumption of fossil, nuclear, and 
renewable energy from 2000 through 2013 and major factors, including 
federal activities, that influenced energy production and consumption 
levels. We also provide information on other federal activities that 
may have influenced aspects of U.S. energy production and consumption 
from 2000 through 2013 but were not targeted at a specific energy 
source, as well as information on federal support for research and 
development (R&D). 

To provide information on U.S. production and consumption of fossil, 
nuclear, and renewable energy from 2000 through 2013, we reviewed and 
analyzed EIA historical data, as well as EIA articles and monthly and 
annual reports. We assessed the reliability of EIA's data and 
determined them to be sufficiently reliable for our purposes. To 
provide information on major factors, including federal activities, 
that influenced energy production and consumption levels, we reviewed 
our prior work. We also reviewed reports and studies from federal 
agencies and government organizations, including CBO, CRS, DOE, 
Department of the Treasury (Treasury), EIA, congressional Joint 
Committee on Taxation (JCT), Office of Management and Budget (OMB), 
and U.S. Department of Agriculture (USDA). To identify these reports 
and studies, we conducted searches of various databases, such as 
ProQuest and PolicyFile, and asked agency officials to recommend 
studies. In addition, we reviewed and analyzed data and documentation 
on outlays, royalties collected, excise taxes collected, tax 
expenditures, forgone royalties, and federal credit programs collected 
from DOE, Department of the Interior (Interior), JCT, OMB, and 
Treasury. Based on a review of this information, we assessed the 
reliability of these data and determined them to be sufficiently 
reliable for our purposes. To provide information on other federal 
activities that may have influenced aspects of U.S. energy production 
and consumption from 2000 through 2013 but were not targeted at a 
specific energy source, and to provide information on federal support 
for R&D, we reviewed our prior work and the reports and studies from 
federal agencies and governmental organizations (as described above). 
We also reviewed and analyzed data and documentation on outlays, tax 
expenditures, and federal credit programs from DOE, JCT, OMB, and 
Treasury. Based on a review of this information, we assessed the 
reliability of these data and determined them to be sufficiently 
reliable for our purposes. Overall, we relied on our prior work and 
the work of other federal agencies and governmental organizations to 
identify major factors that influenced U.S. energy production and 
consumption levels. However, this work may not have identified all of 
the relevant factors that influenced energy production and consumption 
from 2000 through 2013. In addition, we did not examine permitting 
issues on federal lands, including issues related to infrastructure 
and oil and gas development. Appendix I provides additional 
information on the scope and methodology of our review. 

We conducted this performance audit from August 2013 to September 2014 
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: 

U.S. Sources and Uses of Energy: 

The United States consumes energy from three major categories of 
sources: fossil, nuclear, and renewable. Fossil energy comes from 
coal, natural gas, crude oil, and petroleum products.[Footnote 5] 
Nuclear energy comes from uranium, which is mined and processed into 
nuclear fuel. This fuel undergoes nuclear fission in a nuclear reactor 
to produce heat, which is converted into electricity using steam 
turbine technology. Renewable energy comes from a variety of sources, 
including biomass, which is organic material from plants and animals 
and includes liquid biofuels (such as ethanol and biodiesel), wood, 
and waste (such as municipal solid waste and agricultural byproducts); 
hydroelectric power; geothermal; wind; and solar.[Footnote 6] Many 
sources of renewable energy are converted into electricity before 
being consumed. The United States domestically produces most of the 
energy it consumes. However, it also imports a portion, mostly in the 
form of crude oil and petroleum products. 

In 2013, the United States consumed over 97 quadrillion British 
thermal units (Btu)[Footnote 7] of energy, including over 12 
quadrillion Btus of imported energy, according to EIA data.[Footnote 
8] As shown in figure 1, most of this energy (or about 82 percent) 
came from fossil energy sources. The rest came from renewable and 
nuclear energy sources. 

Figure 1: U.S. Consumption of Energy by Source, 2013: 

[Refer to PDF for image: pie-chart] 

Fossil energy: 79.7 quadrillion Btus (82%); 
Renewable energy: 9.2 quadrillion Btus (9%); 
Nuclear energy: 8.3 quadrillion Btus (9%). 

Source: GAO analysis of Energy Information Administration data. 
GAO-14-836. 

Note: Btu stands for British thermal unit. 

[End of figure] 

There are four major sectors of the U.S. economy that consume energy 
at the point of end use: 

* the industrial sector, which includes facilities and equipment used 
for manufacturing, agriculture, mining, and construction; 

* the transportation sector, which generally comprises vehicles (such 
as cars, trucks, buses, trains, aircraft, and boats, among others) 
that transport people or goods; 

* the residential sector, which consists of homes and apartments; and: 

* the commercial sector, which includes buildings such as offices, 
malls, stores, schools, hospitals, hotels, warehouses, restaurants, 
and places of worship, among others, as well as federal, state, and 
local facilities and equipment. 

End-use sectors obtain energy from different combinations of sources. 
The industrial sector mainly consumes natural gas and electricity but 
also uses some petroleum products as feedstock. The transportation 
sector mainly consumes gasoline, diesel, and jet fuel; it also 
consumes biofuels and natural gas, as well as small amounts of 
electricity. The residential and commercial sectors mainly consume 
energy from electricity and natural gas but also use some petroleum 
products. As described above, every sector consumes electricity 
produced by the electric power sector, which takes electricity 
generated from fossil, nuclear, or renewable energy and delivers it to 
the end-use sectors through transmission and distribution lines. As 
shown in figure 2, the industrial sector consumed the largest share of 
energy (32 percent or 31.3 quadrillion Btus) in 2013, followed by the 
transportation, residential, and commercial sectors. 

Figure 2: U.S. Consumption of Energy by Sector, 2013: 

[Refer to PDF for image: pie-chart] 

Industrial: 31.3 quadrillion Btus (32%); 
Transportation: 27.0 quadrillion Btus (28%); 
Residential: 21.1 quadrillion Btus (22%); 
Commercial: 17.9 quadrillion Btus (18%). 

Source: GAO analysis of Energy Information Administration data. 
GAO-14-836. 

Note: Btu stands for British thermal unit. 

[End of figure] 

Not all of the energy produced is available for consumption at the 
point of end use, mainly because energy losses occur whenever energy 
is converted from one form to another. For example, coal-fueled power 
plants produce electricity by burning coal in a boiler to heat water 
and produce steam. The steam, at tremendous pressure and temperature, 
flows into a turbine, which spins a generator to produce electricity. 
During this process, the burning of coal produces heat energy, some of 
which converts water into steam. In turn, some of the energy in the 
steam is converted into electrical energy. At each point in this 
process, some of the original energy contained in the coal is lost. 
[Footnote 9] According to EIA, about two-thirds of the energy consumed 
to generate electricity is lost in conversion, and most of these 
losses occur in fossil-fueled and nuclear power plants that generate 
steam to turn turbines.[Footnote 10] 

According to general economic principles, a number of factors may 
affect the production and consumption of energy. These factors include 
the following: 

* Changes in the supply of energy relative to changes in demand may 
affect the price that consumers pay. For example, if the supply of 
gasoline increases faster than the demand for it, the price of 
gasoline will most likely decrease. In contrast, if the demand for 
gasoline increases faster than the ability to supply it, the price of 
gasoline will most likely increase. 

* Prices of energy provide signals to producers and consumers and may 
affect their behavior. For example, lower gasoline prices provide an 
incentive for consumers to consume more gasoline, while higher 
gasoline prices provide an incentive for consumers to consume less 
gasoline. (However, incentives or disincentives may not actually 
change behavior if they are insufficient to outweigh other factors or 
considerations.) 

* Costs associated with producing energy provide signals to producers 
and may affect their behavior. For example, lower production costs 
provide an incentive for oil companies to produce more gasoline, while 
higher production costs provide an incentive for oil companies to 
produce less gasoline. 

Factors Influencing Overall U.S. Energy Production and Consumption: 

Three important factors--energy efficiency, energy conservation, and 
the global economic recession of 2007 to 2009--had a major influence 
on U.S. energy production and consumption over the past decade but 
generally affected all energy producers and consumers rather than 
affecting only a specific source of energy. The first two factors are 
related but have distinct meanings. Energy efficiency is the use of 
technology that requires less energy to perform the same function, 
such as using a compact fluorescent light bulb in place of an 
incandescent bulb. Energy conservation is any behavior that results in 
the use of less energy, such as turning the lights off when you leave 
the room. Both energy efficiency and conservation reduce our 
consumption of energy and thereby influence the total amount of energy 
produced and consumed in the United States. 

Some data suggest that the United States increased the efficiency with 
which it used energy from 2000 to 2013. For example, according to 
Federal Highway Administration data, the fuel economy of U.S. motor 
vehicles increased from an average of 16.9 miles per gallon in 2000 to 
17.6 miles per gallon in 2012 (the latest year for which data are 
available). Another measure of the efficiency with which the United 
States uses its energy is to compare U.S. energy consumption with the 
U.S. gross domestic product, which is a measure of the value of all 
final goods and services produced within the United States in a given 
period.[Footnote 11] By making this comparison, we can measure whether 
it takes less energy over time to produce the same value of goods and 
services. According to EIA data, the consumption of energy per dollar 
value of gross domestic product decreased from about 7,900 Btus per 
dollar in 2000 to about 6,200 Btus per dollar in 2013, indicating that 
the United States became more energy efficient.[Footnote 12] 

The third factor, the global economic recession of 2007 to 2009, 
resulted in reduced economic activity in general, which reduced energy 
demand and had long-term effects on global energy markets.[Footnote 
13] For example, according to a 2009 International Energy Agency 
report, the recession's effects on both energy producers and consumers 
included the following: [Footnote 14] 

* Energy companies drilled fewer oil and gas wells and reduced 
spending on refineries, pipelines, and power stations. 

* Businesses and households spent less on energy-using appliances, 
equipment, and vehicles. 

* Tighter credit and lower prices made investment in energy savings 
less attractive financially, while the economic crisis encouraged 
energy consumers to reduce overall spending. As a result, the 
deployment of more energy-efficient equipment was delayed. 

* Equipment manufacturers were expected to reduce investment in 
research, development, and commercialization of more energy-efficient 
models. 

Key Methods of Federal Support and Interventions: 

The federal government supports or intervenes in U.S. energy 
production and consumption through a number of key methods, including 
(1) setting standards and requirements, (2) directly providing goods 
and services, (3) assuming risk, (4) providing funds, and (5) 
collecting or forgoing revenue from taxes or fees. The federal 
government also conducts and provides funding for energy-related R&D. 

Setting Standards and Requirements: 

Through laws and regulations, the federal government sets standards 
and requirements for (or prohibitions against) certain 
activities.[Footnote 15] Some laws and regulations focus on affecting 
economic activity by controlling prices, output, or the entry and exit 
of firms in a market. For example, under the Atomic Energy Act, as 
amended,[Footnote 16] the Nuclear Regulatory Commission is responsible 
for issuing licenses to commercial nuclear reactors and conducting 
oversight of activities under such licenses to protect the health and 
safety of the public, among other things. Without such licenses, firms 
cannot operate nuclear reactors and generate electricity from nuclear 
energy. Other laws and regulations focus on the effects of economic 
activity on the health and welfare of citizens. For example, under the 
Clean Air Act,[Footnote 17] EPA is responsible for regulating 
emissions of a variety of air pollutants from coal-fueled power plants 
and other energy producers. While laws and regulations vary widely in 
how they are designed, they tend to function by influencing the 
decisions of producers and consumers in the market. In addition, laws 
and regulations may impose a variety of costs, such as costs on 
regulated entities to comply with the laws and regulations 
("compliance costs"), and costs on government agencies to administer 
and enforce them. To the extent that the compliance costs affect the 
costs of engaging in particular energy-related activities, laws and 
regulations may change the behavior of energy producers and consumers. 

Directly Providing Goods and Services: 

The federal government provides some goods or services directly--that 
is, through a government agency--rather than providing funds to 
another entity to provide these goods or services. For example, the 
federal government may produce and sell electricity generated at 
federally-owned facilities and produce reports and information on 
energy markets, among other things. Government provision of goods or 
services may be deemed necessary to address certain circumstances, 
such as economic inequalities among segments of the public or a need 
for a good or service considered unlikely to be met by the private 
sector. Such activities may affect energy producers and consumers in 
different ways. For example, production and sales of electricity 
generated at federally-owned facilities may involve energy sources and 
prices that differ from those of electricity produced and sold by 
private market participants. 

Assuming Risk: 

The federal government assumes risk (and potential costs associated 
with risk) in a number of ways, such as: 

* making direct loans--disbursing funds to nonfederal borrowers under 
contracts requiring the repayment of such funds either with or without 
interest; 

* guaranteeing loans--providing a guarantee, insurance, or other 
pledge regarding the payment of all or a part of the principal or 
interest on any debt obligation of a nonfederal borrower to a 
nonfederal lender; 

* limiting liability; and: 

* providing or subsidizing insurance. 

By assuming some or all of the costs associated with risks for certain 
energy activities, the government may make those activities relatively 
less expensive, thus providing an incentive to pursue those 
activities. For example, if the federal government assumes the risk of 
default on a loan to a manufacturer of turbines (that generate 
electricity from wind energy), nonfederal lenders may offer a lower 
interest rate to the manufacturer than they would in the absence of 
the federal guarantee. Lowering the costs of capital for developers 
could result in certain projects being financed that would otherwise 
not be built. 

Providing Funds: 

The federal government directly provides (or outlays) funds for 
different purposes.[Footnote 18] In some cases, an agency may provide 
funds in the form of a grant. For example, USDA may provide grants to 
help farmers, ranchers, and rural small businesses purchase and 
install renewable energy systems. In other cases, an agency may need 
to purchase goods or services. For example, federal agencies purchase 
energy for their buildings, as well as vehicles and fuel for these 
vehicles. To the extent that federal outlays lower the cost associated 
with a particular activity, federal outlays may lead to changes in the 
behavior of energy producers and consumers. 

Collecting or Forgoing Revenues: 

The federal government collects revenues using different methods. One 
prominent method is through the tax system, which includes personal 
income taxes, corporate income taxes, and excise taxes based on the 
value of goods and services sold, among other types of taxes.[Footnote 
19] The primary purpose of the federal tax system is to collect the 
revenue needed to fund the operations of the federal government. Taxes 
may alter taxpayers' behavior by inducing them to shift resources from 
higher-taxed uses to lower-taxed uses in an effort to reduce tax 
liability. 

The federal government also collects revenues associated with its 
management of federal lands. The federal government owns and manages 
roughly 30 percent of the nation's total surface area (or about 700 
million acres onshore). It also has jurisdiction and control over the 
outer continental shelf, which includes about 1.8 billion acres of 
submerged lands in federal waters off the coast of Alaska, in the Gulf 
of Mexico, and off the Atlantic and Pacific coasts.[Footnote 20] The 
federal government leases federal lands for the production of oil, 
gas, minerals such as coal, or other resources. In exchange, the 
government generally collects revenues, including payments in the form 
of rents and bonuses, which are required to secure and maintain a 
lease, and royalties, which are based on the value of the minerals 
that are extracted. 

However, the federal government may choose to forgo certain revenues. 
Tax expenditures are tax provisions that are exceptions to the "normal 
structure" of individual and corporate income tax necessary to collect 
federal revenue.[Footnote 21] These preferences can have the same 
effects as government spending programs; hence the name tax 
expenditures.[Footnote 22] The Congressional Budget and Impoundment 
Control Act of 1974[Footnote 23] identified six types of tax 
provisions that are considered tax expenditures when they are 
exceptions to the normal tax, as described in table 1. Tax 
expenditures may affect the behavior of energy producers and consumers 
by providing an incentive to engage in certain types of activities. 
For some tax expenditures, forgone revenues can be of the same 
magnitude or larger than related federal spending for some mission 
areas.[Footnote 24] 

Table 1: Types of Tax Expenditures: 

Type: Exclusion; 
Description: Excludes income that would otherwise constitute part of a 
taxpayer's gross income. 

Type: Exemption; 
Description: Reduces gross income for taxpayers because of their 
status or circumstances. 

Type: Deduction; 
Description: Reduces gross income due to expenses taxpayers incur. 

Type: Credit[A]; 
Description: Reduces tax liability dollar-for-dollar. Additionally, 
some credits are refundable meaning that a credit in excess of tax 
liability results in a cash refund. 

Type: Deferral; 
Description: Delays recognition of income or accelerates some 
deductions otherwise attributable to future years. 

Type: Preferential tax rate; 
Description: Reduces tax rates on some forms of income. 

Source: GAO. GAO-14-836. 

Note: These tax expenditures are identified in the Congressional 
Budget and Impoundment Control Act of 1974. 

[A] Certain business tax credits, including some energy credits, are 
claimed as part of a general business tax credit. The total credit can 
reduce current year tax liability but is not refundable; unused 
general business credits may be carried back one year and forward 20 
years. 

[End of table] 

In addition to forgoing tax revenues, the federal government may 
choose to forgo revenues associated with its leases of federal lands 
and waters. "Royalty relief" is a waiver or reduction of royalties 
that companies would otherwise be obligated to pay for their leases of 
federal lands or waters. For example, the Outer Continental Shelf Deep 
Water Royalty Relief Act of 1995[Footnote 25] mandated royalty relief 
for oil and gas leases issued in the deep waters of the Gulf of Mexico 
from 1996 to 2000. 

Research and Development: 

Energy-related R&D takes place across a spectrum of activities, 
including basic research, applied research, and demonstration. 
[Footnote 26] Basic research includes efforts to explore and define 
scientific or engineering concepts or to investigate the nature of a 
subject without targeting any specific technology. Applied research 
includes efforts to develop new scientific or engineering knowledge to 
create new and improved technologies. Demonstration includes efforts 
to operate new or improved technologies to collect information on 
their performance and assess readiness for commercialization and 
deployment for widespread use. 

The federal government plays a critical role in supporting energy-
related R&D, which may involve conducting R&D at government-owned 
laboratories or funding another entity to conduct R&D. For example, as 
one of the largest research agencies in the federal government, DOE 
spends billions of dollars every year on R&D to support its diverse 
missions, including advancing scientific research and technology 
development and ensuring efficient and secure energy, among other 
things. However, because long time lags may occur between basic 
research activities and activities related to commercialization and 
deployment, it is often difficult to link government-funded R&D to 
specific effects on energy production, consumption, and prices in the 
future. 

DOE's R&D covers a broad range of activities, and DOE program offices 
manage 17 national laboratories.[Footnote 27] The following DOE 
program offices and laboratories primarily support energy-related R&D: 

* The Office of Science oversees six national laboratories with 
research areas focusing on energy: Ames Laboratory in Iowa, Argonne 
National Laboratory in Illinois, Brookhaven National Laboratory in New 
York, Oak Ridge National Laboratory in Tennessee, Pacific Northwest 
National Laboratory in Washington, and Princeton Plasma Physics 
Laboratory in New Jersey. The Office of Science is the nation's single 
largest funding source for supporting research in energy sciences. 

* The Office of Nuclear Energy oversees the Idaho National Laboratory 
in Idaho. The office's primary mission is to advance nuclear power as 
a resource capable of meeting the nation's energy, environmental, and 
national security needs by resolving technical, cost, safety, 
proliferation resistance, and security barriers. 

* The Office of Fossil Energy oversees the National Energy Technology 
Laboratory in Pennsylvania. The office's primary mission is to ensure 
reliable fossil energy resources for clean, secure, and affordable 
energy while enhancing environmental protection. 

* The Office of Energy Efficiency and Renewable Energy oversees the 
National Renewable Energy Laboratory in Colorado. The office's mission 
is to develop solutions for energy-saving homes, buildings, and 
manufacturing; sustainable transportation; and renewable electricity 
generation. 

Federal agencies other than DOE also provide funding for energy-
related R&D. For example, as we found in February 2012, the Department 
of Defense and USDA implemented numerous initiatives to help develop 
renewable energy technologies.[Footnote 28] In addition, as we found 
in August 2012, the National Aeronautics and Space Administration, 
National Science Foundation, EPA, and National Institute of Standards 
and Technology implemented a number of energy initiatives related to 
batteries and energy storage.[Footnote 29] 

Major Factors Influencing U.S. Production and Consumption of Energy 
from 2000 through 2013: 

The following three sections provide information on U.S. production 
and consumption of fossil, nuclear, and renewable energy from 2000 
through 2013 and major factors, including federal activities, that 
influenced energy production and consumption levels. The fourth 
section provides information on other federal activities that may have 
influenced aspects of U.S. energy production and consumption from 2000 
through 2013 but were not targeted at a specific energy source, as 
well as information on federal support for R&D. 

Major Factors Influencing U.S. Production and Consumption of Fossil 
Energy: 

According to the studies and reports we reviewed, several major 
factors influenced U.S. production and consumption of fossil energy 
from 2000 through 2013: 

* Advances in drilling technologies enabled economic production of 
natural gas from shale and other tight formations.[Footnote 30] These 
advances led to increases in domestic production of natural gas 
starting around 2008 and contributed to declines in domestic prices of 
natural gas starting around 2009. As domestic production rose and 
prices declined, domestic consumption increased, imports of natural 
gas decreased, and companies began taking steps to gain approval to 
export liquefied natural gas.[Footnote 31] 

* The same advances in drilling technologies also enabled the economic 
production of crude oil from shale formations. These advances led to 
increases in the domestic production of crude oil beginning around 
2009, reversing a decades-long trend of decreasing production. Global 
crude oil prices generally increased between 2000 and 2013, the 
largest, sustained price increase since comparable data were 
available. Increased domestic production contributed to lower prices 
for some regions of the country; however, the impact of increased 
domestic crude oil production on global crude oil prices was likely 
small. Imports of crude oil decreased beginning around 2008 as 
domestic production displaced imported crude oil to U.S. petroleum 
refiners. Around 2010, U.S. refiners began consuming greater 
quantities of crude oil to produce more petroleum products. As 
domestic consumption of petroleum products generally decreased 
beginning around 2008, exports of petroleum products (mostly diesel 
fuel) increased. 

* Due in part to lower prices of natural gas, the use of coal for 
electricity generation decreased in recent years as utilities switched 
to natural gas. Domestic coal production decreased in recent years; 
however, coal exports increased as domestic consumption declined 
faster than domestic production. 

The studies and reports we reviewed also indicated that federal 
activities may have influenced fossil energy markets, generally by 
providing incentives or disincentives for the production and 
consumption of fossil energy. These activities included setting 
standards and requirements related to fossil energy emissions, 
assuming risks associated with oil spills and the Strategic Petroleum 
Reserve, collecting revenues associated with excise taxes on 
transportation fuels and royalty payments for oil and gas leases, and 
forgoing revenues associated with tax expenditures for fossil energy 
producers and royalty relief for oil and gas production. (See appendix 
III for more information on the major factors that influenced U.S. 
production and consumption of fossil energy from 2000 through 2013.) 

Major Factors Influencing U.S. Production and Consumption of Nuclear 
Energy: 

According to the studies and reports we reviewed, several major 
factors may have influenced U.S. production and consumption of nuclear 
energy from 2000 through 2013. Specifically, declining natural gas 
prices, along with the 2011 accident at Japan's Fukushima Daiichi 
commercial nuclear power plant, may have led to decreases in the 
production and consumption of nuclear energy in recent years. Federal 
activities also may have influenced this trend, generally by providing 
incentives or disincentives for the production and consumption of 
nuclear energy. These activities included setting standards and 
requirements related to the operation of nuclear power plants, 
providing services related to the storage of nuclear waste, assuming 
risks associated with nuclear power plant operations, and forgoing 
revenues associated with tax expenditures for nuclear energy 
producers. (See appendix IV for more information on the major factors 
that influenced U.S. production and consumption of nuclear energy from 
2000 through 2013.) 

Major Factors Influencing U.S. Production and Consumption of Renewable 
Energy: 

According to the studies and reports we reviewed, several major 
factors influenced U.S. production and consumption of renewable 
energy--particularly from ethanol, wind energy, and solar energy--from 
2000 through 2013: 

* Federal tax credits for ethanol and federal policies requiring the 
use of ethanol in transportation fuels were major factors influencing 
an 8-fold increase in the production and consumption of ethanol from 
2000 through 2013. As domestic production of ethanol outpaced 
consumption in recent years, U.S. exports of ethanol increased. 

* State policies requiring the use of renewable energy in electricity 
production, as well as federal activities such as outlays and tax 
credits for renewable energy producers, were major factors influencing 
production and consumption of electricity from wind and solar energy. 
Technological advances also played an important role. These factors 
supported a 30-fold increase in production and consumption of wind 
energy from 2000 through 2013 and a 19-fold increase in the production 
and consumption of solar energy. 

See appendix V and appendix VI for more information on the major 
factors that influenced U.S. production and consumption of renewable 
energy from 2000 through 2013. 

Other Federal Activities Influencing Aspects of U.S. Energy Production 
and Consumption: 

According to the studies and reports we reviewed, other federal 
activities were not targeted specifically at fossil, nuclear, or 
renewable energy production and consumption but may have influenced 
aspects of U.S. energy production and consumption from 2000 through 
2013. Relevant federal activities included setting standards and 
requirements for energy efficiency, selling electricity, providing 
loans and loan guarantees related to energy efficiency, making outlays 
for energy consumption and energy efficiency, and forgoing revenues 
through tax expenditures for electricity transmission and energy 
efficiency, among other things. Many of these federal efforts, 
particularly activities related to energy efficiency, provided 
disincentives for energy production and use; in contrast, other 
federal efforts, such as selling electricity, provided incentives for 
energy production and consumption. In addition, the federal 
government, and DOE in particular, supported energy-related R&D, which 
typically is directed at the early stages of technological advances 
and therefore not generally linked to actual production or consumption 
of energy. Some of this R&D related to specific energy sources, while 
other R&D was more general. (See appendix VII for more information on 
federal activities that may have influenced other aspects of U.S. 
energy production and consumption from 2000 through 2013.) 

Agency Comments: 

We provided a draft of this report to DOE, Interior, Treasury, and 
USDA for review and comment. DOE, Treasury, and USDA provided 
technical or clarifying comments, which we incorporated as 
appropriate. Interior indicated they had no comments on the report. 

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; the Secretaries of 
Agriculture, Energy, the Interior, and the Treasury; the Administrator 
of EIA; the Director of OMB; and other interested parties. In 
addition, this report will be available at no charge on the GAO 
website at [hyperlink, http://www.gao.gov]. 

If you or your staff members have any questions about this report, 
please contact me at (202) 512-3841 or ruscof@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 members who made 
major contributions to this report are listed in appendix VIII. 

Sincerely yours, 

Signed by: 

Frank Rusco: 
Director, Natural Resources and Environment: 

[End of section] 

Appendix I: Scope and Methodology: 

This report provides information on U.S. production and consumption of 
fossil, nuclear, and renewable energy from 2000 through 2013 and major 
factors, including federal activities, that influenced energy 
production and consumption levels. It also provides information on 
other federal activities that may have influenced aspects of U.S. 
energy production and consumption from 2000 through 2013 but were not 
targeted at a specific energy source, as well as information on 
federal support for research and development (R&D). 

To provide information on U.S. production and consumption of fossil, 
nuclear, and renewable energy from 2000 through 2013, we reviewed and 
analyzed Department of Energy (DOE) Energy Information Administration 
(EIA) historical data, as well as EIA articles and monthly and annual 
reports. To assess the reliability of EIA data, we took several steps 
including reviewing available documentation on the collection of the 
data. We determined the EIA data to be sufficiently reliable for our 
purposes. 

To provide information on the major factors, including federal 
activities, that influenced energy production and consumption levels 
from 2000 through 2013; to provide information on other federal 
activities that may have influenced U.S. energy production and 
consumption from 2000 through 2013 but were not targeted at a specific 
energy source; and to provide information on federal R&D, we performed 
the following steps: 

* We reviewed information from our prior work related to the 
production and consumption of crude oil, petroleum products, natural 
gas, coal, nuclear energy, ethanol, wind energy, solar energy, energy 
efficiency, electricity transmission, and federal R&D. We relied on 
our prior work to identify the major factors that influenced U.S. 
energy production and consumption levels. However, this work may not 
have identified all of the relevant factors that influenced energy 
production and consumption from 2000 through 2013. In addition, we did 
not examine permitting issues on federal lands, including issues 
related to infrastructure and oil and gas development. 

* We reviewed information related to U.S. energy production and 
consumption from federal agencies and government organizations, 
including reports and studies by the Congressional Budget Office 
(CBO), Congressional Research Service (CRS), EIA, congressional Joint 
Committee on Taxation (JCT), and U.S. Department of Agriculture 
(USDA). To identify reports and studies, we conducted searches of 
various databases, such as ProQuest and PolicyFile, for studies 
published since 2008. We also asked agency officials and other 
stakeholders we contacted to recommend reports and studies. We relied 
on these reports and studies to identify the major factors that 
influenced U.S. energy production and consumption levels. However, 
these reports and studies may not have identified all of the relevant 
factors that influenced energy production and consumption from 2000 
through 2013. 

* We reviewed and analyzed data on outlays, royalties collected, and 
excise taxes collected from DOE, Department of the Interior 
(Interior), Department of the Treasury (Treasury), and Office of 
Management and Budget (OMB). To assess the reliability of these data 
sets, we interviewed individuals with knowledge of them and reviewed 
available documentation on the collection of the data and on any 
methods that were used in calculating the data. From this review, we 
determined that the data sets were sufficiently reliable for our 
purposes. 

* We reviewed and analyzed data on estimates of tax expenditures, 
forgone royalties, and federal credit programs collected from DOE, 
JCT, and Treasury.[Footnote 32] We also relied on lists of tax 
expenditures and estimates of their cost compiled annually by Treasury 
and JCT under the energy budget function. In general, we used Treasury 
revenue loss estimates for each tax expenditure except in cases where 
only JCT reported a tax expenditure.[Footnote 33] Regarding data on 
tax expenditures, changes in economic conditions and estimation 
techniques can affect revenue loss estimates for tax expenditures, 
making them differ from year to year. Also, legislation affecting tax 
rates or the tax structure affects tax expenditure estimates. When 
statutory rates increase, a taxpayer's ability to reduce tax on a 
portion of income is worth more; consequently, tax expenditures are 
worth more. Likewise, when rates decrease, tax expenditures are worth 
relatively less. To assess the reliability of these data sets, we 
interviewed individuals with knowledge of them and reviewed available 
documentation on the collection of the data and on any methods that 
were used in calculating the data. From this review, we determined 
that the data sets were sufficiently reliable for our purposes. 

We conducted this performance audit from August 2013 to September 2014 
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: Federal Sources of Data on Energy-Related Outlays and Tax 
Expenditures: 

The federal budget provides data on energy-related outlays. The 
federal budget is divided into different functional areas, which is a 
way of grouping budgetary resources so that all budget authority and 
outlays of on-budget and off-budget federal entities and tax 
expenditures can be presented according to the national needs being 
addressed. National needs are grouped in 17 broad areas, one of which 
is "energy." The energy area includes (1) promoting an adequate supply 
and appropriate use of energy to serve the needs of the economy and 
(2) energy programs of the Department of Energy (DOE) and its 
predecessor agencies. It also excludes atomic energy defense 
activities and general science research not closely related to energy. 
The Office of Management and Budget's (OMB) public budget database 
contains historical data on outlays associated with each functional 
area, including the energy area. 

However, the federal budget does not provide a comprehensive source 
for all federal outlays that might be related to energy production and 
consumption. Instead, the 17 functional areas in the federal budget 
relate to the primary area of a given account, even though the 
programs within the account may serve a variety of purposes. As a 
result, the public budget database may not identify all energy-related 
activities in the energy functional area. For example, the federal 
budget identifies seven agencies, including DOE and the U.S. 
Department of Agriculture (USDA), with outlays in the energy supply 
subfunction in fiscal year 2010. However, as we found in February 
2012, 17 federal agencies beside DOE and USDA--such as the Departments 
of Defense and the Interior--implemented renewable energy initiatives 
for fiscal year 2010.[Footnote 34] 

The Department of the Treasury (Treasury) and the congressional Joint 
Committee on Taxation (JCT) report revenue loss estimates for energy-
related tax expenditures. Both Treasury and JCT estimate the revenue 
loss[Footnote 35] associated with each tax provision they have 
identified as a tax expenditure.[Footnote 36] Treasury's list is 
included in the President's annual budget submission; and JCT issues 
annual tax expenditure estimates as a stand-alone product. Both 
organizations calculate a tax expenditure as the difference between 
tax liability under current law and what the tax liability would be if 
the provision were eliminated and the item were treated as it would be 
under a "normal" income tax. In general, the tax expenditure lists 
that Treasury and JCT publish are similar, although these lists differ 
somewhat in the number of tax expenditures reported and the estimated 
revenue losses for particular expenditures. In addition, as with the 
federal budget, both lists of tax expenditures are divided into 
different functional areas, including one related to energy. 

However, Treasury's list and JCT's list of tax expenditures may not 
include all tax expenditures that provide a benefit to energy 
producers. For example, both Treasury and JCT list the deduction for 
income attributable to domestic production activities as a tax 
expenditure. This tax expenditure allows a deduction of 6 percent from 
taxable income for oil extraction, among other things. According to 
Treasury estimates, repealing this provision would result in more than 
$17 billion in revenue related to oil and natural gas production for 
fiscal years 2014 through 2023. However, because this tax expenditure 
is available to other industries beside oil production, Treasury and 
JCT do not list this tax expenditure under the energy functional area. 

[End of section] 

Appendix III: Information on Major Factors Influencing Fossil Energy 
Production and Consumption: 

This appendix provides more detailed information on U.S. production 
and consumption of fossil energy from 2000 through 2013 and major 
factors, including federal activities, that influenced fossil energy 
production and consumption levels. 

Natural Gas Production and Consumption: 

The year-to-year pattern of domestic production of natural gas 
fluctuated from 2000 through 2006 and then began to increase around 
2007, according to Energy Information Administration (EIA) data, and 
as shown in figure 3. Specifically, the United States produced about 
19.2 trillion cubic feet of natural gas in 2000; by 2005 and 2006, 
production had fallen below 19 trillion cubic feet but then began to 
increase, reaching over 24 trillion cubic feet in 2012 and 2013. 
Domestic consumption of natural gas exceeded domestic production 
throughout the period, with the difference coming from imports, 
primarily from Canada.[Footnote 37] However, as shown in figure 3, the 
difference between the domestic consumption and production of natural 
gas generally decreased between 2007 and 2013, leading to a reduction 
in natural gas imports. 

Figure 3: U.S. Natural Gas Production and Consumption, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000; 
Production: 19.2 trillion cubic feet; 
Consumption: 23.3 trillion cubic feet. 

Year: 2001; 
Production: 19.6 trillion cubic feet; 
Consumption: 22.2 trillion cubic feet. 

Year: 2002; 
Production: 18.9 trillion cubic feet; 
Consumption: 23.0 trillion cubic feet. 

Year: 2003; 
Production: 19.1 trillion cubic feet; 
Consumption: 22.3 trillion cubic feet. 

Year: 2004; 
Production: 18.6 trillion cubic feet; 
Consumption: 22.4 trillion cubic feet. 

Year: 2005; 
Production: 18.1 trillion cubic feet; 
Consumption: 22.0 trillion cubic feet. 

Year: 2006; 
Production: 18.5 trillion cubic feet; 
Consumption: 21.7 trillion cubic feet. 

Year: 2007; 
Production: 19.3 trillion cubic feet; 
Consumption: 23.1 trillion cubic feet. 

Year: 2008; 
Production: 20.2 trillion cubic feet; 
Consumption: 23.3 trillion cubic feet. 

Year: 2009; 
Production: 20.6 trillion cubic feet; 
Consumption: 22.9 trillion cubic feet. 

Year: 2010; 
Production: 21.3 trillion cubic feet; 
Consumption: 24.1 trillion cubic feet. 

Year: 2011; 
Production: 22.9 trillion cubic feet; 
Consumption: 24.5 trillion cubic feet. 

Year: 2012; 
Production: 24.1 trillion cubic feet; 
Consumption: 25.5 trillion cubic feet. 

Year: 2013; 
Production: 24.3 trillion cubic feet; 
Consumption: 26.0 trillion cubic feet. 

Source: GAO analysis of Energy Information Administration data. 
GAO-14-836. 

Note: Production refers to "dry" production of natural gas, which is 
the natural gas that remains after the liquid constituents (i.e., 
natural gas plant liquids) have been removed. 

[End of figure] 

Natural gas is used by a number of sectors in the economy, most 
notably for electricity generation; for industrial use as a source of 
heat or as a feedstock for petrochemical production, among other 
things; for residential heating and other home uses; and for 
commercial heating and other uses. Figure 4 shows the share of natural 
gas consumption by sector in 2000 and 2013. Specifically, according to 
EIA data, natural gas consumption for electricity generation (as well 
as other energy needs of the electric power sector) increased from 
about 5.2 trillion cubic feet in 2000 to about 8.2 trillion cubic feet 
in 2013. Natural gas consumption for commercial use also increased, 
from about 3.2 trillion cubic feet in 2000 to about 3.3 trillion cubic 
feet in 2013. Industrial and residential uses declined over the same 
period. 

Figure 4: U.S. Natural Gas Consumption by Sector, 2000 and 2013: 

[Refer to PDF for image: vertical bar graph] 

Power sector: Electric power; 
2000: 5.2 trillion cubic feet; 
2013: 8.2 trillion cubic feet. 

Power sector: Industrial; 
2000: 9.3 trillion cubic feet; 
2013: 8.9 trillion cubic feet. 

Power sector: Residential; 
2000: 5 trillion cubic feet; 
2013: 4.9 trillion cubic feet. 

Power sector: Commercial; 
2000: 3.2 trillion cubic feet; 
2013: 3.3 trillion cubic feet. 

Source: GAO analysis of Energy Information Administration data. 
GAO-14-836. 

Note: The transportation sector consumes about 3 percent of annual 
natural gas production and is excluded from this chart. 

[End of figure] 

Major Factors Influencing Natural Gas Production and Consumption: 

The studies and reports we reviewed indicated that increases in the 
domestic production of natural gas were due primarily to increases in 
the extraction of natural gas from shale formations. As shown in 
figure 5, the production of natural gas from shale formations caused 
an increase in total domestic natural gas production starting around 
2008 and continuing through 2012 (the latest year for which annual 
data were available). According to EIA data, natural gas withdrawals 
from shale formations increased from about 2 trillion cubic feet in 
2007 to over 10 trillion cubic feet in 2012. These increases were 
largely due to technological advances in horizontal drilling and 
hydraulic fracturing-
-a process that injects a combination of water, sand, and chemical 
additives under high pressure to create and maintain fractures in 
underground rock formations that allow oil and natural gas to flow. 
For example, as we reported in January 2012, improvements in 
horizontal drilling and hydraulic fracturing led to a boom in the 
production of natural gas from shale formations.[Footnote 38] In 
addition, according to the Congressional Research Service (CRS), in 
recent years the oil and gas industry improved its extraction rate of 
natural gas from shale formations from about 5 percent to about 15 
percent of total estimated gas resources in the ground (thereby 
tripling the amount of recoverable natural gas).[Footnote 39] 

Figure 5: Sources of U.S. Natural Gas Production, 2000-2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Year: 2000; 
Gas wells: 17.7 trillion cubic feet; 
Oil wells: 6.5 trillion cubic feet. 

Year: 2001; 
Gas wells: 18.1 trillion cubic feet; 
Oil wells: 6.4 trillion cubic feet. 

Year: 2002; 
Gas wells: 17.8 trillion cubic feet; 
Oil wells: 6.2 trillion cubic feet. 

Year: 2003; 
Gas wells: 17.9 trillion cubic feet; 
Oil wells: 6.2 trillion cubic feet; 
Coalbed wells: 0.2 trillion cubic feet. 

Year: 2004; 
Gas wells: 17.9 trillion cubic feet; 
Oil wells: 6.1 trillion cubic feet; 
Coalbed wells: 1.2 trillion cubic feet. 

Year: 2005; 
Gas wells: 17.5 trillion cubic feet; 
Oil wells: 6.0 trillion cubic feet; 
Coalbed wells: 1.22 trillion cubic feet. 

Year: 2006; 
Gas wells: 18 trillion cubic feet; 
Oil wells: 5.5 trillion cubic feet; 
Coalbed wells: 1.3 trillion cubic feet. 

Year: 2007; 
Gas wells: 15.0 trillion cubic feet; 
Oil wells: 5.7 trillion cubic feet; 
Coalbed wells: 2 trillion cubic feet; 
Shale: 2.0 trillion cubic feet. 

Year: 2008; 
Gas wells: 15.1 trillion cubic feet; 
Oil wells: 5.6 trillion cubic feet; 
Coalbed wells: 2.0 trillion cubic feet; 
Shale: 2.9 trillion cubic feet. 

Year: 2009; 
Gas wells: 14.4 trillion cubic feet; 
Oil wells: 5.7 trillion cubic feet; 
Coalbed wells: 2.0 trillion cubic feet; 
Shale: 4.0 trillion cubic feet. 

Year: 2010; 3 trillion cubic feet; 25; 
Oil wells: 5.8 trillion cubic feet; 
Coalbed wells: 1.9 trillion cubic feet; 
Shale: 5.8 trillion cubic feet. 

Year: 2011; 
Gas wells: 12.3 trillion cubic feet; 
Oil wells: 5.9 trillion cubic feet; 
Coalbed wells: 1.8 trillion cubic feet; 
Shale: 8.5 trillion cubic feet. 

Year: 2012; 
Gas wells: 12.7 trillion cubic feet; 
Oil wells: 5.0 trillion cubic feet; 
Coalbed wells: 1.5 trillion cubic feet; 
Shale: 10.3 trillion cubic feet. 

Source: GAO analysis of Energy Information Administration data. 
GAO-14-836. 

Note: Sources of natural gas production include gross withdrawals of 
natural gas from oil wells, gas wells, coalbed wells, and shale 
formations. Gross withdrawals include liquid constituents (i.e., 
natural gas plant liquids) and dry constituents of natural gas. 2012 
is the latest year for which data were available. 

[End of figure] 

Increases in domestic natural gas production contributed to decreases 
in domestic natural gas prices, according to CRS.[Footnote 40] The 
price of natural gas, as with other commodities, is driven by supply 
and demand. The Henry Hub spot market in Louisiana is the best known 
spot market for natural gas.[Footnote 41] As shown in figure 6, annual 
prices for natural gas in the Henry Hub spot market generally 
increased between 2000 and 2008 (although some fluctuations occurred) 
before decreasing between 2008 and 2013. Specifically, in 2000, the 
annual spot price was $4.31 per million British thermal units (Btu) of 
natural gas. This price generally increased to $8.69 per million Btus 
in 2005 and $8.86 per million Btus 2008. Since 2008, the annual price 
generally decreased to $3.73 per million Btus in 2013. 

Figure 6: U.S. Natural Gas Prices, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Price per million Btus: 

Year: 2000: $4.31. 

Year: 2001: $3.96. 

Year: 2002: $3.38. 

Year: 2003: $5.47. 

Year: 2004: $5.89. 

Year: 2005: $8.69. 

Year: 2006: $6.73. 

Year: 2007: $6.97. 

Year: 2008: $8.86. 

Year: 2009: $3.94. 

Year: 2010: $4.37. 

Year: 2011: $4.00. 

Year: 2012: $2.75. 

Year: 2013: $3.73. 

Source: GAO analysis of Energy Information Administration data 
GAO-14-836. 

Note: Btu stands for British thermal units. Prices refer to average 
annual Henry Hub natural gas spot prices. Data are not adjusted for 
inflation. 

[End of figure] 

In recent years, natural gas prices in the United States were much 
lower than in other parts of the world, according to CRS.[Footnote 42] 
This price difference encouraged some American companies to apply for 
authorization to export domestically produced liquefied natural gas 
from the contiguous 48 states. Specifically, since 2010, the 
Department of Energy (DOE) has received more than 30 applications for 
permission to export liquefied natural gas to countries that do not 
have a free trade agreement with the United States.[Footnote 43] DOE 
has fully approved 3 applications and approved 6 others on the 
condition that the Federal Energy Regulatory Commission issues a 
satisfactory environmental review of the associated liquefied natural 
gas export facility.[Footnote 44] Moreover, EIA has projected that the 
United States could be a net exporter of liquefied natural gas by 
2016.[Footnote 45] 

Production and Consumption of Crude Oil and Petroleum Products: 

The United States produces crude oil, which is refined along with 
imported crude oil into petroleum products such as gasoline, diesel, 
and jet fuel. U.S. refineries use both domestically produced crude oil 
and imported crude oil to produce petroleum products. According to EIA 
data, there were 143 petroleum refineries in the United States as of 
January 2013, with a capacity to process 17.8 million barrels of crude 
oil per day.[Footnote 46] The United States also both exports and 
imports petroleum products. 

Domestic production of crude oil declined from 2000 through 2008, 
continuing a downward trend beginning in the 1970s, but increased 
beginning in 2009, according to EIA data. Specifically, as shown in 
figure 7, between 2000 and 2008, domestic crude oil production 
decreased from an average of about 5.8 million barrels of oil per day 
to 5.0 million barrels per day. However, by 2013, domestic crude oil 
production had increased to an average of almost 7.5 million barrels 
per day, the highest level of oil production since 1989. In 2013, an 
average of about 15.3 million barrels per day of crude oil was refined 
into petroleum products at U.S. refineries. As domestic crude oil 
production increased, imports of foreign crude oil decreased. 
Specifically, crude oil imports decreased from an average of about 9.8 
million barrels per day in 2008 to 7.7 million barrels per day in 2013. 

Figure 7: U.S. Crude Oil Production and Usage of Crude Oil at U.S. 
Refineries, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Barrels (millions per day): 

Year: 2000; 
Crude oil production: 5.8 million barrels; 
Crude oil imports: 9.1 million barrels; 
Refinery usage of crude oil: 15.1 million barrels. 

Year: 2001; 
Crude oil production: 5.8 million barrels; 
Crude oil imports: 9.3 million barrels; 
Refinery usage of crude oil: 15.1 million barrels. 

Year: 2002; 
Crude oil production: 5.7 million barrels; 
Crude oil imports: 9.1 million barrels; 
Refinery usage of crude oil: 14.9 million barrels. 

Year: 2003; 
Crude oil production: 5.6 million barrels; 
Crude oil imports: 9.7 million barrels; 
Refinery usage of crude oil: 15.3 million barrels. 

Year: 2004; 
Crude oil production: 5.4 million barrels; 
Crude oil imports: 10.1 million barrels; 
Refinery usage of crude oil: 15.5 million barrels. 

Year: 2005; 
Crude oil production: 5.2 million barrels; 
Crude oil imports: 10.1 million barrels; 
Refinery usage of crude oil: 14.9 million barrels. 

Year: 2006; 
Crude oil production: 5.1 million barrels; 
Crude oil imports: 10.1 million barrels; 
Refinery usage of crude oil: 15.2 million barrels. 

Year: 2007; 
Crude oil production: 5.1 million barrels; 
Crude oil imports: 10.0 million barrels; 
Refinery usage of crude oil: 15.2 million barrels. 

Year: 2008; 
Crude oil production: 5.0 million barrels; 
Crude oil imports: 9.8 million barrels; 
Refinery usage of crude oil: 14.6 million barrels. 

Year: 2009; 
Crude oil production: 5.4 million barrels; 
Crude oil imports: 9.0 million barrels; 
Refinery usage of crude oil: 14.3 million barrels. 

Year: 2010; 
Crude oil production: 5.5 million barrels; 
Crude oil imports: 9.2 million barrels; 
Refinery usage of crude oil: 14.7 million barrels. 

Year: 2011; 
Crude oil production: 5.7 million barrels; 
Crude oil imports: 8.9 million barrels; 
Refinery usage of crude oil: 14.8 million barrels. 

Year: 2012; 
Crude oil production: 6.5 million barrels; 
Crude oil imports: 8.5 million barrels; 
Refinery usage of crude oil: 15.0 million barrels. 

Year: 2013; 
Crude oil production: 7.5 million barrels; 
Crude oil imports: 7.7 million barrels; 
Refinery usage of crude oil: 15.3 million barrels. 

Source: GAO analysis of Energy Information Administration data 
GAO-14-836. 

Note: Refinery usage of crude oil includes domestically produced crude 
oil and imported crude oil, as well as usage from domestic inventories 
of crude oil. 

[End of figure] 

Overall domestic consumption of petroleum products--including 
gasoline, diesel, and jet fuel--peaked in 2005 and then generally 
declined through 2013, according to EIA data. Specifically, as shown 
in figure 8, consumption of petroleum products increased from an 
average of 19.7 million barrels per day in 2000 to 20.8 million 
barrels per day in 2005 before declining to between 18-19 million 
barrels per day in recent years. Amid declining domestic consumption 
and somewhat increasing U.S. refining capacity, refiners have 
increasingly exported petroleum products. Specifically, U.S. exports 
of petroleum products grew from an average of about 1.1 million 
barrels per day in 2005 to about 3.5 million barrels per day in 2013. 
[Footnote 47] The United States had been a net importer of petroleum 
products since 1949, but in 2011 it became a net exporter, primarily 
of diesel. 

Figure 8: U.S. Consumption of Petroleum Products, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Barrels (million per day): 

Year: 2000: 19.7 million barrels. 

Year: 2001: 19.7 million barrels. 

Year: 2002: 19.8 million barrels. 

Year: 2003: 20.0 million barrels. 

Year: 2004: 20.7 million barrels. 

Year: 2005: 20.8 million barrels. 

Year: 2006: 20.7 million barrels. 

Year: 2007: 20.7 million barrels. 

Year: 2008: 19.5 million barrels. 

Year: 2009: 18.8 million barrels. 

Year: 2010: 19.2 million barrels. 

Year: 2011: 18.9 million barrels. 

Year: 2012: 18.5 million barrels. 

Year: 2013: 18.9 million barrels. 

Source: GAO analysis of Energy Information Administration data 
GAO-14-836. 

Note: Data reflect petroleum products supplied, which approximately 
represent consumption of petroleum products, including gasoline, 
diesel, jet fuel, liquefied petroleum gases, and other petroleum 
products. 

[End of figure] 

The primary users of petroleum products in the United States are the 
transportation and industrial sectors, according to EIA data. As shown 
in figure 9, the transportation sector consumed the largest share of 
petroleum products in 2000 and 2013 (at about 4.8 billion barrels). 
The industrial sector consumed the next largest share of petroleum 
products (at about 1.8 billion barrels in 2000 and about 1.7 billion 
barrels in 2013), while the remaining sectors (commercial, 
residential, and electric power) consumed the smallest share (at about 
0.7 billion barrels in 2000 and about 0.3 billion barrels in 2013). 
Overall, total consumption of petroleum products increased from about 
7.2 billion barrels in 2000 to about 7.6 billion barrels in 2007 
before decreasing to about 6.9 billion barrels in 2013. 

Figure 9: U.S. Consumption of Petroleum Products by Sector, 2000 and 
2013: 

[Refer to PDF for image: vertical bar graph] 

Sector: Transportation; 
2000: 4.75 million barrels; 
2013: 4.81 million barrels. 

Sector: Industrial; 
2000: 1.79 million barrels; 
2013: 1.74 million barrels. 

Sector: Other; 
2000: 0.65 million barrels; 
2013: 0.31 million barrels. 

Source: GAO analysis of Energy Information Administration data 
GAO-14-836. 

Note: Other includes the commercial, residential, and electric power 
sectors. 

[End of figure] 

Major Factors Influencing Production and Consumption of Crude Oil and 
Petroleum Products: 

The studies and reports we reviewed indicated that increases in 
domestic crude oil production came primarily from increased production 
from shale formations. As we found in March 2014, the technological 
advances in horizontal drilling and hydraulic fracturing that 
contributed to increasing U.S. production of natural gas have also 
allowed companies that develop petroleum resources to extract crude 
oil from shale and other formations that were previously considered to 
be inaccessible because traditional techniques did not yield 
sufficient amounts for economically viable production.[Footnote 48] 
According to EIA data, much of the increase in crude oil production 
has been from shale and other tight formations, such as the Bakken 
formation in North Dakota and the Eagle Ford formation in Texas. 
Production from these two states accounted for 87 percent of the 
increase in U.S. crude oil production from 2008 through 2013. 

Prices of crude oil increased considerably between 2000 and 2013 but 
show a distinctive pattern, according to EIA data. First, crude oil 
prices generally increased from 2000 to 2008. Crude oil is a widely 
traded global commodity, and prices of crude oil are generally 
determined by global supply and demand rather than exclusively by 
events in a single oil-producing country such as the United States. 
Since the mid-1980s, benchmark crude oil prices such as West Texas 
Intermediate in the United States and Brent in Europe have served as 
reference points that the global oil market uses for pricing other 
crude oils.[Footnote 49] As shown in figure 10, crude oil prices in 
these two markets increased from about $30 per barrel in 2000 to 
almost $100 per barrel in 2008--one of the largest and most sustained 
crude oil price increases since comparable data were available. In 
2009, crude oil prices in both markets decreased to about $62 per 
barrel, reflecting the effects of the global economic recession of 
2007 to 2009 and the consequent falling demand for petroleum products. 
In 2010, crude oil prices in both markets increased. 

Figure 10: Crude Oil Prices, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Price per barrel: 

Year: 2000; 
Brent (crude oil price in Europe): $28.66; 
West Texas Intermediate (crude oil price in the United States): $30.38. 

Year: 2001; 
Brent (crude oil price in Europe): $24.46; 
West Texas Intermediate (crude oil price in the United States): $25.98. 

Year: 2002; 
Brent (crude oil price in Europe): $24.99; 
West Texas Intermediate (crude oil price in the United States): $26.18. 

Year: 2003; 
Brent (crude oil price in Europe): $28.85; 
West Texas Intermediate (crude oil price in the United States): $31.08. 

Year: 2004; 
Brent (crude oil price in Europe): $38.26; 
West Texas Intermediate (crude oil price in the United States): $41.51. 

Year: 2005; 
Brent (crude oil price in Europe): $54.57; 
West Texas Intermediate (crude oil price in the United States): $56.64. 

Year: 2006; 
Brent (crude oil price in Europe): $65.16; 
West Texas Intermediate (crude oil price in the United States): $66.05. 

Year: 2007; 
Brent (crude oil price in Europe): $72.44; 
West Texas Intermediate (crude oil price in the United States): $72.34. 

Year: 2008; 
Brent (crude oil price in Europe): $96.94; 
West Texas Intermediate (crude oil price in the United States): $99.67. 

Year: 2009; 
Brent (crude oil price in Europe): $61.74; 
West Texas Intermediate (crude oil price in the United States): $61.95. 

Year: 2010; 
Brent (crude oil price in Europe): $79.61; 
West Texas Intermediate (crude oil price in the United States): $79.48. 

Year: 2011; 
Brent (crude oil price in Europe): $111.26; 
West Texas Intermediate (crude oil price in the United States): $94.88. 

Year: 2012; 
Brent (crude oil price in Europe): $111.63; 
West Texas Intermediate (crude oil price in the United States): $94.05. 

Year: 2013; 
Brent (crude oil price in Europe): $108.56; 
West Texas Intermediate (crude oil price in the United States): $97.98. 

Source: GAO analysis of Energy Information Administration data 
GAO-14-836. 

Note: Prices refer to average annual spot prices. A spot price is a 
price for one-time open market transactions for immediate delivery of 
a specific quantity of product at a specific location where the 
commodity is purchased at current market rates. Data are not adjusted 
for inflation. 

[End of figure] 

Starting in 2010, increases in U.S. production of crude oil 
contributed to lower prices for some domestic crude oils and may have 
had a small effect on some global oil prices, according to EIA. 
[Footnote 50] Specifically, as shown in figure 10, West Texas 
Intermediate crude oil began to sell at a large discount relative to 
Brent crude oil starting around 2011. This price divergence was due to 
increases in domestic crude oil production--existing crude oil 
pipelines were constrained in their ability to ship additional 
quantities of oil from the midcontinental United States and Canada to 
refineries, which limited the ability of this oil to reach global oil 
markets.[Footnote 51] In terms of global effects, in 2013 U.S. crude 
oil production grew more than the combined increase in the rest of the 
world, which contributed to relatively stable global crude oil prices 
in 2013, according to EIA.[Footnote 52] 

Coal Production and Consumption: 

The United States has the largest recoverable coal reserves in the 
world, according to EIA, and most domestically produced coal comes 
from five states: Wyoming, West Virginia, Kentucky, Pennsylvania, and 
Illinois.[Footnote 53] Domestic production of coal fluctuated somewhat 
during the past decade but declined by about 16 percent from 2008 
through 2013, according to EIA data. Specifically, as shown in figure 
11, the United States produced 1.07 billion short tons of coal in 
2000;[Footnote 54] by 2008, production had risen to 1.17 billion short 
tons. However, coal production fell below 1 billion short tons by 
2013--the lowest level in almost 2 decades, according to EIA data. 
Domestic consumption of coal generally increased from 2000 (at 1.08 
billion short tons) to 2007 (at 1.13 billion short tons). However, 
starting in 2008, coal consumption generally decreased and reached 
0.93 billion short tons in 2013. As domestic consumption of coal fell, 
the United States generally exported more coal to Europe and Asia. The 
vast majority of coal consumed in the United States is used for 
generating electricity. 

Figure 11: U.S. Coal Production and Consumption, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Short tons in billions: 

Year: 2000; 
Production: 1.07 billion; 
Consumption: 1.08 billion. 

Year: 2001; 
Production: 1.13 billion; 
Consumption: 1.06 billion. 

Year: 2002; 
Production: 1.09 billion; 
Consumption: 1.07 billion. 

Year: 2003; 
Production: 1.07 billion; 
Consumption: 1.09 billion. 

Year: 2004; 
Production: 1.11 billion; 
Consumption: 1.11 billion. 

Year: 2005; 
Production: 1.13 billion; 
Consumption: 1.13 billion. 

Year: 2006; 
Production: 1.16 billion; 
Consumption: 1.11 billion. 

Year: 2007; 
Production: 1.15 billion; 
Consumption: 1.13 billion. 

Year: 2008; 
Production: 1.17 billion; 
Consumption: 1.12 billion. 

Year: 2009; 
Production: 1.07 billion; 
Consumption: 1 billion. 

Year: 2010; 
Production: 1.08 billion; 
Consumption: 1.05 billion. 

Year: 2011; 
Production: 1.1 billion; 
Consumption: 1 billion. 

Year: 2012; 
Production: 1.02 billion; 
Consumption: 0.89 billion. 

Year: 2013; 
Production: 0.98 billion; 
Consumption: 0.93 billion. 

Source: GAO analysis of Energy Information Administration data 
GAO-14-836. 

Note: A short ton is 2,000 pounds. 

[End of figure] 

Major Factors Influencing Coal Production and Consumption: 

The studies and reports we reviewed indicated that the recent decrease 
in domestic coal production and consumption came partly from declines 
in the use of coal to generate electricity. In the past, the fuel cost 
of generating one kilowatt-hour[Footnote 55] of electricity from 
natural gas had typically been higher than that of coal, according to 
EIA.[Footnote 56] However, coal began losing its price advantage over 
natural gas for electricity generation in some parts of the country in 
2009, particularly in the eastern United States, according to EIA. In 
addition, new natural gas-fueled generating units generally are able 
to convert fuel into electricity more efficiently than existing coal-
fueled generating units, meaning they can convert a unit of fuel 
energy into more electricity than coal-fueled units.[Footnote 57] 
Newer designs of coal-fueled units exist that can operate at higher 
efficiencies, but few have been built in the United States. In 
addition, recently proposed or finalized EPA regulations affecting 
coal-fueled electricity generating units may also have played a role 
in recent decreases in domestic coal production and consumption. 
[Footnote 58] 

The price of coal depends on its type, in part because different types 
of coal produce differing amounts of energy when burned. According to 
EIA, two of the most common types in the United States are bituminous 
and subbituminous coal.[Footnote 59] Bituminous coal is the oldest and 
most abundant coal type found in the United States. West Virginia, 
Kentucky, and Pennsylvania are the primary producers of bituminous 
coal. Subbituminous coal contains less energy than bituminous coal; 
however, large quantities are found in thick beds near the surface, 
resulting in low mining cost and, correspondingly, lower prices. 
Wyoming produces the vast majority of subbituminous coal. As shown in 
figure 12, annual U.S. prices for bituminous and subbituminous coal 
generally increased from 2000 to 2012 (the latest year for which data 
are available). For example, for bituminous coal, prices increased 
from $24.15 per short ton in 2000 to $66.04 per short ton in 2012, or 
an increase of over 170 percent. Some of these cost increases may be 
due to increases in coal transportation costs and declines in mine 
productivity during this period, according to EIA.[Footnote 60] As the 
price of coal increased, it reduced coal's price advantage relative to 
other energy sources, such as natural gas, which decreased in price 
over this period. 

Figure 12: U.S. Coal Prices, 2000-2012: 

[Refer to PDF for image: vertical bar graph] 

Dollars (per short ton): 

Year: 2000; 
Bituminous: $24.15; 
Subbituminous: $7.12. 

Year: 2001; 
Bituminous: $25.36; 
Subbituminous: $6.67. 

Year: 2002; 
Bituminous: $26.57; 
Subbituminous: $7.34. 

Year: 2003; 
Bituminous: $26.73; 
Subbituminous: $7.73. 

Year: 2004; 
Bituminous: $30.56; 
Subbituminous: $8.12. 

Year: 2005; 
Bituminous: $36.8; 
Subbituminous: $8.68. 

Year: 2006; 
Bituminous: $39.32; 
Subbituminous: $9.95. 

Year: 2007; 
Bituminous: $40.80; 
Subbituminous: $10.69. 

Year: 2008; 
Bituminous: $51.39; 
Subbituminous: $12.31. 

Year: 2009; 
Bituminous: $55.44; 
Subbituminous: $13.35. 

Year: 2010; 
Bituminous: $60.88; 
Subbituminous: $14.11. 

Year: 2011; 
Bituminous: $68.5; 
Subbituminous: $14.07. 

Year: 2012; 
Bituminous: $66.04; 
Subbituminous: $15.34. 

Source: GAO analysis of Energy Information Administration data 
GAO-14-836. 

Note: Prices are annual free-on-board prices--that is, prices at the 
coal mine or prices at the producer country's port of loading--before 
the cost of insurance, freight, and credit. 2012 is the latest year 
for which data were available. Data are not adjusted for inflation. 

[End of figure] 

Federal Activities That May Have Influenced Fossil Energy Production 
and Consumption: 

In addition to the major factors we identified above from the studies 
and reports we reviewed, we identified a number of federal activities 
that may have also played a role in influencing U.S. production and 
consumption of fossil energy from 2000 through 2013. These activities 
included setting standards and requirements for emissions from 
electricity generating units, assuming risks associated with oil 
production, collecting excise taxes and royalty payments, and 
providing tax expenditures and royalty relief. Some of these 
activities provided an incentive to produce and consume fossil energy, 
while others provided a disincentive for its production and 
consumption. 

Setting Standards and Requirements: 

The federal government established or strengthened a number of 
standards and requirements related to fossil energy production from 
2000 through 2013. For example, under the Clean Air Act,[Footnote 61] 
the Environmental Protection Agency (EPA) establishes national ambient 
air quality standards for six pollutants which states are, primarily, 
responsible for attaining.[Footnote 62] States attain these standards, 
in part, by regulating emissions of these pollutants from certain 
stationary sources, such as electricity generating units. In 
particular, according to EPA, fossil fuel-fired electricity generating 
units are among the largest emitters of sulfur dioxide and nitrogen 
oxides, which have been linked to respiratory illnesses and acid rain, 
as well as of carbon dioxide, the primary greenhouse gas contributing 
to climate change. Numerous Clean Air Act requirements apply to 
electricity generating units, including New Source Review, a 
permitting process established in 1977. Under New Source Review, 
owners of generating units must obtain a preconstruction permit that 
establishes emission limits and requires the use of certain emissions 
control technologies. New Source Review applies to (1) generating 
units built after August 7, 1977, and (2) existing generating units--
regardless of the date built--that seek to undertake a "major 
modification," a physical or operational change that would result in a 
significant net increase in emissions of a regulated pollutant. 

In general, the cost of complying with New Source Review requirements 
provided a disincentive for producing electricity from fossil energy 
sources. As we found in June 2012, EPA has investigated most coal-
fired generating units at least once for compliance with New Source 
Review requirements since 1999, and has alleged noncompliance at more 
than half of the units it investigated.[Footnote 63] Specifically, of 
the 831 units EPA investigated, 467 units were ultimately issued 
notices of violation, had complaints filed in court, or were included 
in settlement agreements. In total, EPA reached 22 settlements 
covering 263 units, which will require affected unit owners to, among 
other things, install around $12.8 billion in emissions controls. 
According to our analysis of EPA data, these settlements will reduce 
emissions of sulfur dioxide by an estimated 1.8 million tons annually, 
and nitrogen oxides by an estimated 596,000 tons annually. 

Assuming Risk: 

The federal government assumed some risks related to fossil energy 
production and consumption from 2000 through 2013. For example, the 
federal government assumed financial risks associated with potential 
cleanup costs for some oil spills, and the federal government acquired 
billions of dollars worth of crude oil to hold in reserve in case of 
supply disruptions, as discussed below: 

* Cleanup costs for oil spills. Under the Oil Pollution Act of 1990, 
as amended, which was enacted after the Exxon Valdez oil spill in 
1989, the federal government established a "polluter pays" system that 
places the primary burden of liability for costs of spills on the 
responsible parties, up to a specified limit of liability.[Footnote 
64] In general, the level of potential financial liability under the 
act depends on the kind of vessel or facility from which a spill 
originates and is limited in amount. However, if the oil discharge is 
the result of gross negligence or willful misconduct, or a violation 
of federal operation, safety, and construction regulations, then 
liability under the act is unlimited. In addition, the act provides 
the Oil Spill Liability Trust Fund to pay for oil spill costs when the 
responsible party cannot or does not pay.[Footnote 65] The fund's 
primary revenue source is an 8-cent-per-barrel tax on petroleum 
products--a small fraction of the price of a barrel in 2013--either 
produced in the United States or imported from other countries. 
[Footnote 66] The fund is subject to a $1 billion cap on the amount of 
expenditures from the fund per incident. 

* Stockpiling crude oil. Congress created the Strategic Petroleum 
Reserve in 1975, following the Arab oil embargo of 1973 to 1974, to 
help protect the U.S. economy from damage caused by oil supply 
disruptions. The reserve is owned by the federal government and 
operated by DOE. It can store up to 727 million barrels of crude oil 
in salt caverns. The President has discretion to authorize release of 
oil in the Strategic Petroleum Reserve to minimize significant supply 
disruptions.[Footnote 67] In the event of such a disruption, the 
reserve can supply oil to the market by either selling stored crude 
oil or trading this oil in exchange for a larger amount of oil to be 
returned later. From fiscal year 2000 through 2013, the federal 
government received almost $3.9 billion from the sale of crude oil 
from the reserve, spent about $0.5 billion to purchase crude oil, and 
spent $2.5 billion for operations and maintenance of the reserve. 
[Footnote 68] 

The assumption of liability by the federal government for some oil 
spills may have provided an incentive for oil production and 
consumption by potentially decreasing the overall cost associated with 
certain production-related activities. For example, the liability 
limitations established under the Oil Pollution Act may have lowered 
costs for liability insurance or other insurance paid for by oil 
producers. However, the extent to which this federal intervention 
influenced changes in petroleum or natural gas production or 
consumption is difficult to precisely measure. Moreover, the fund--
which is paid by oil producers--raises the cost of producing oil by a 
small fraction, which may have a negative impact on oil production. 
[Footnote 69] 

DOE's operation of the Strategic Petroleum Reserve may have had little 
to no impact on fossil energy production and consumption between 2000 
and 2013. For example, we found in August 2006 that filling the 
Strategic Petroleum Reserve from late 2001 through 2005 during a time 
of tight supply and demand conditions had minimal impact on oil prices 
because the volume was so small compared with world oil demand, 
according to most of the experts with whom we spoke.[Footnote 70] 
However, some experts believed the existence of the Strategic 
Petroleum Reserve may have a stabilizing effect on oil prices, 
particularly during extreme supply or demand events, whether or not it 
is actually used. If true, the reserve could have had positive effects 
on oil producers or consumers by reducing the risks associated with 
unstable prices. 

Collecting or Forgoing Revenue: 

From 2000 through 2013, the federal government collected revenues 
through excise taxes and royalty payments related to fossil energy 
production and consumption while forgoing other related revenues 
through tax expenditures and royalty relief. Regarding excise taxes, 
the federal government collected about $637 billion through excise 
taxes targeting or related to fossil energy--primarily motor fuels 
(gasoline, diesel, and others)--from fiscal year 2000 through 
2012.[Footnote 71] The federal excise tax rate on gasoline is 18.4 
cents per gallon (the same amount as in 1993). Most revenues from 
these taxes are dedicated to the Highway Trust Fund, which was 
established by Congress in 1956 and is a major source of funding for 
various surface transportation programs.[Footnote 72] As shown in 
figure 13, revenues from excise taxes targeting or related to fossil 
energy were about $45 billion a year from fiscal year 2000 through 
2004 and increased to about $50 billion a year for the rest of the 
period. 

Figure 13: Revenue from Federal Excise Taxes Targeting or Related to 
Fossil Energy, Fiscal Year 2000-2012: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000: $46.5 billion; 
Year: 2001: $44.7 billion; 
Year: 2002: $44.6 billion; 
Year: 2003: $45.7 billion; 
Year: 2004: $46.3 billion; 
Year: 2005: $50.9 billion; 
Year: 2006: $52.6 billion; 
Year: 2007: $53 billion; 
Year: 2008: $51.5 billion; 
Year: 2009: $48.5 billion; 
Year: 2010: $49.4 billion; 
Year: 2011: $50.7 billion; 
Year: 2012: $52.5 billion. 

Source: GAO analysis of Internal Revenue Service data. GAO-14-836. 

Note: The most recent data available from the Internal Revenue Service 
on excise taxes collected are for 2012. These data include excise tax 
collections from sales of motor fuels (gasoline, diesel, kerosene, 
aviation-grade kerosene, liquefied natural gas, liquefied fuel derived 
from coal, liquefied hydrogen, compressed natural gas, liquid 
petroleum gas, and others), passenger vehicles that are less fuel-
efficient (the "gas-guzzler" tax), trucks and tires, coal, passenger 
transportation by air and water, and others. Data are not adjusted for 
inflation. 

[End of figure] 

Regarding royalty payments, the federal government collected more than 
$124 billion in revenues from royalty and other payments for federal 
oil, gas, and coal leases from fiscal year 2003 through 2013.[Footnote 
73] As shown in figure 14, revenues from royalty and other payments 
increased from almost $8 billion in fiscal year 2003 to $23.4 billion 
in fiscal year 2008, then decreased to about $9 billion in fiscal 
years 2009 and 2010 before increasing to about $13.2 billion in fiscal 
year 2013. 

Figure 14: Revenue from Royalty and Other Payments for Federal Oil, 
Gas, and Coal Leases, Fiscal Year 2003-2013: 

[Refer to PDF for image: vertical bar graph] 

Year: 2003: $7.95 billion; 
Year: 2004: $7.68 billion; 
Year: 2005: $9.79 billion; 
Year: 2006: $11.94 billion; 
Year: 2007: $10.87 billion; 
Year: 2008: $23.4 billion; 
Year: 2009: $9.33 billion; 
Year: 2010: $8.95 billion; 
Year: 2011: $10.51 billion; 
Year: 2012: $11.1 billion; 
Year: 2013: $13.23 billion. 

Source: GAO analysis of Interior data. GAO-14-836. 

Note: According to Department of the Interior (Interior) 
documentation, comparable data were not available for 2000 through 
2002, so data on royalty and other payments are not included for those 
years. Data are not adjusted for inflation. 

[End of figure] 

Regarding tax expenditures, the federal government incurred revenue 
losses of almost $50 billion from fiscal year 2000 through 2013 due to 
16 tax expenditures we identified as targeting or related to fossil 
energy according to the Department of the Treasury (Treasury) and the 
Joint Committee on Taxation (JCT) estimates. As shown in figure 15, 
revenue losses associated with these 16 tax expenditures increased 
from less than $2 billion in fiscal year 2000 to over $4.6 billion in 
both fiscal year 2006 and 2007. They decreased from fiscal year 2007 
through 2010 before increasing to about $4.6 billion in fiscal year 
2012 and declining to $4.1 billion in fiscal year 2013. 

Figure 15: Estimated Revenue Losses Associated with Federal Tax 
Expenditures Targeting or Related to Fossil Energy, Fiscal Year 2000-
2013: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000: $1.73 billion; 
Year: 2001: $1.63 billion; 
Year: 2002: $2.76 billion; 
Year: 2003: $2.65 billion; 
Year: 2004: $3.04 billion; 
Year: 2005: $3.92 billion; 
Year: 2006: $4.65 billion; 
Year: 2007: $4.63 billion; 
Year: 2008: $4.28 billion; 
Year: 2009: $3.7 billion; 
Year: 2010: $3.52 billion; 
Year: 2011: $3.69 billion; 
Year: 2012: $4.61 billion; 
Year: 2013: $4.11 billion. 

Sources: GAO analysis of Treasury and Joint Committee on Taxation 
data. GAO-14-836. 

Note: Summing tax expenditure estimates is a useful gauge of size but 
does not take into account possible interactions among individual tax 
expenditures. Data are not adjusted for inflation. 

[End of figure] 

Table 2 provides descriptions of these 16 federal tax expenditures. 
The table also provides information from Treasury on tax expenditures 
that will or have expired, in full or in part, due to an expiration of 
legislative authority or some other expiration under the law as of the 
fall of 2014, as well as on tax expenditures that currently have no 
expiration. In addition, the table provides information on revenue 
loss estimates from Treasury (unless otherwise specified). 

Table 2: 16 Federal Tax Expenditures Targeting or Related to Fossil 
Energy, Fiscal Year 2000-2013: 

Name: Nonconventional fuel credit (also called alternative fuel 
production credit)[A]; 
Description: The tax code provides a credit of $3 per oil-equivalent 
barrel of production (in 1979 dollars) for certain types of liquid, 
gaseous, and solid fuels produced from selected types of alternative 
energy sources (or "nonconventional fuels"). Qualifying fuels include 
synthetic fuels (such as coke or coke gas) produced from coal, as well 
as gas produced from biomass, among other things. The credit is 
generally available if the price of oil stays below $29.50 (in 1979 
dollars). 
Expiration information: Qualifying facilities producing coke or coke 
gas must be placed in service by December 31, 2009. 
Estimated revenue losses: $14.83 billion. 

Name: Excess of percentage over cost depletion, fuels[B]; 
Description: The tax code allows firms that extract oil, gas, or other 
minerals a deduction to recover their capital investment in a mineral 
reserve, which depreciates due to the physical and economic depletion 
or exhaustion as the mineral is recovered. There are two methods of 
calculating this deduction: cost depletion and percentage depletion. 
Cost depletion allows for the recovery of the actual capital 
investment--the costs of discovering, purchasing, and developing a 
mineral reserve--over the period during which the reserve produces 
income from the specified total recoverable units. Under this method, 
the total deductions cannot exceed the original capital investment. 
Under percentage depletion, the deduction for recovery of capital 
investment is a fixed percentage of the "gross income"--i.e., revenue-
-from the sale of the mineral. Because eligible taxpayers must claim 
the higher of cost or percentage depletion, total deductions under 
percentage depletion may exceed the capital invested to acquire and 
develop the reserve. The percentage depletion rate for oil and gas is 
15 percent and is limited to average daily production of 1,000 barrels 
of oil, or its equivalent in gas, and only for wells located in the 
United States. Percentage depletion is available for independent 
producers and royalty owners but not for integrated producers. 
Expiration information: No expiration under current law. 
Estimated revenue losses: $10.15 billion. 

Name: Expensing of exploration and development costs, fuels[C]; 
Description: Firms engaged in the exploration and development of oil, 
gas, or geothermal properties have the option of expensing rather than 
capitalizing certain intangible drilling and development costs. 
Intangible drilling and development costs are amounts paid by the 
operator for fuel, labor, repairs to drilling equipment, materials, 
hauling, and supplies. They are expenditures incidental to and 
necessary for drilling wells and preparing a site for the production 
of oil, gas, or geothermal energy. They include the cost to operators 
of any drilling or development work done by contractors under any form 
of contract. 
Expiration information: No expiration under current law. 
Estimated revenue losses: $7.50 billion. 

Name: Temporary 50 percent expensing for equipment used in the 
refining of liquid fuels; 
Description: Taxpayers may elect to expense 50 percent of the cost of 
qualified refinery property used to process liquid fuel from crude oil 
and other qualified fuels. The deduction is allowed in the taxable 
year in which the refinery property is placed in service. The 
remaining 50 percent of the cost is recovered using a 10-year recovery 
period. Eligible refineries must have a binding construction contract 
entered into before January 1, 2010. As of October 3, 2008, qualified 
refineries include those used in the refining of liquid fuels directly 
from shale or tar sands. 
Expiration information: Eligible refineries must be placed in service 
before January 1, 2014. 
Estimated revenue losses: $3.87 billion. 

Name: Exceptions for publicly traded partnership with qualified income 
derived from certain energy-related activities[D]; 
Description: The tax code generally treats a publicly traded 
partnership--i.e., a partnership traded on an established securities 
market or secondary market--as a corporation for federal income tax 
purposes. However, a notable exception occurs if 90 percent of the 
gross income of a partnership is passive-type income, such as 
interest, dividends, real property rents, gains from the disposition 
of real property, and similar income or gains. In these cases, the 
partnership is exempt from corporate level taxation, thus allowing it 
to claim pass-through status for tax purposes. In general, publicly 
traded partnerships favor the owners of publicly traded partnerships 
whose main source of qualifying income is from energy related 
activities. In contrast to an otherwise similar corporation, the 
owners of such a publicly traded partnership are not subject to a 
corporate level tax. 
Expiration information: No expiration under current law. 
Estimated revenue losses: $3.70 billion[E]. 

Name: Credit for enhanced oil recovery costs; 
Description: Taxpayers may claim a credit equal to 15 percent of 
enhanced oil recovery costs. An enhanced oil recovery project is 
generally a project that involves the use of one or more tertiary 
recovery methods to increase the amount of recoverable domestic crude 
oil. Qualified costs include (1) amounts paid for depreciable tangible 
property; (2) intangible drilling and development expenses; (3) 
tertiary injectant expenses; and (4) construction costs for certain 
Alaskan natural gas treatment facilities. This credit is reduced over 
a $6 phase-out range when the reference price for domestic crude oil 
exceeds $28 per barrel (adjusted for inflation after 1991). This tax 
preference is currently phased out due to high crude oil prices. 
Expiration information: No expiration under current law. 
Estimated revenue losses: $1.98 billion. 

Name: Capital gains treatment of royalties on coal; 
Description: Owners of coal mining rights who lease their property 
usually receive royalties on mined coal. If the owners are 
individuals, these royalties can be taxed at a lower individual 
capital gains tax rate rather than at the higher individual top tax 
rate. 
Expiration information: No expiration under current law. 
Estimated revenue losses: $1.34 billion. 

Name: Credit for investment in clean coal facilities; 
Description: An investment tax credit is available for selected types 
of advanced coal technologies. The Energy Improvement and Extension 
Act of 2008 allocated $1.25 billion in credits for power generation 
projects that use integrated gasification combined cycle or other 
advanced coal-based electricity generation technologies. Qualifying 
taxpayers may be eligible for a 30 percent credit. The Energy 
Improvement and Extension Act of 2008 also allocated $250 million in 
credits for qualified gasification projects (with a credit rate of 30 
percent). Prior allocations were awarded under the Energy Policy Act 
of 2005 and provided $800 million for integrated gasification combined 
cycle projects and $500 million for other advanced coal-based 
electricity generation technologies. The Energy Policy Act of 2005 
also allocated $350 million for qualified gasification projects. 
Expiration information: No expiration under current law (other than 
the credit allocation limit). 
Estimated revenue losses: $1.41 billion. 

Name: Amortization of air pollution control facilities; 
Description: Prior to 2005, investments in pollution control equipment 
for pre-1976 coal-fired plants were amortizable over 5 years. In 
addition, pollution control equipment added to "newer" plants (those 
placed in service after 1975) was depreciated using the same methods 
that apply to other electric generating equipment on the date they are 
placed in service (15-or 20-year recovery period). However, under the 
Energy Policy Act of 2005, investments in pollution control equipment 
made in connection with post-1975 power plants qualify for 
amortization over seven years rather than five years. Qualifying 
pollution control equipment means any technology that is installed in 
or on a qualifying facility to reduce air emissions of any pollutant 
regulated by the Environmental Protection Agency (EPA) under the Clean 
Air Act. 
Expiration information: No expiration under current law. 
Estimated revenue losses: $1.30 billion[E]. 

Name: Alternative fuel mixture credit[F]; 
Description: The tax code provides a 50-cents-per gallon excise tax 
credit for certain alternative fuels used as fuel in a motor vehicle, 
motor boat, or airplane and a 50-cents-per gallon credit for 
alternative fuels mixed with a traditional fuel (gasoline, diesel or 
kerosene) for use as a fuel. Examples of qualifying fuels include 
liquefied petroleum gas, compressed or liquefied natural gas, 
liquefied hydrocarbons derived from biomass, and liquefied hydrogen. 
If excise tax credits exceeded excise tax liability, the credits could 
be claimed as income tax credits or received as payments. 
Expiration information: Excise tax credits for alternative fuels 
expired after December 31, 2013. Excise tax credits for liquefied 
hydrogen fuel will expire after September 30, 2014. 
Estimated revenue losses: $0.97 billion. 

Name: Accelerated depreciation recovery periods for specific energy 
property: natural gas[G]; 
Description: A taxpayer is allowed to recover, through annual 
depreciation deductions, the cost of certain property used in a trade 
or business or for the production of income. For natural gas 
distribution lines placed in service between 2005 and 2011, the tax 
code allows a recovery period over a 15-year period. 
Expiration information: Property had to be placed in service before 
January 1, 2011. 
Estimated revenue losses: $0.69 billion. 

Name: Amortization of geological and geophysical expenditures 
associated with oil and gas exploration; 
Description: Geological and geophysical costs --exploratory costs 
associated with determining the precise location and potential size of 
a mineral deposit --are amortized by independent producers over 2 
years and by major integrated oil companies over 7 years. 
Expiration information: No expiration under current law. 
Estimated revenue losses: $0.58 billion. 

Name: Exception from passive loss limitation for working interests in 
oil and gas properties; 
Description: This provision exempts working interests (investments) in 
gas and oil exploration and development from being categorized as 
"passive income (or loss)" with respect to the Tax Reform Act of 1986. 
In general, a working interest is an interest with respect to an oil 
and gas property that is burdened with the cost of development and 
operation of the property. The exception allows owners of working 
interests to offset their losses from passive activities against 
active income. Under normal rules, passive losses that remain after 
being netted against passive income can only be carried forward to 
apply against passive income in future years. The exception from 
passive loss limitation provision on oil and natural gas properties 
applies principally to partnerships and individuals rather than 
corporations. This categorization permits the deduction of losses in 
oil and gas projects against other active income earned without 
limitation and is believed to act as an incentive to induce investors 
to finance oil and gas projects. 
Expiration information: No expiration under current law. 
Estimated revenue losses: $0.31 billion. 

Name: Carbon dioxide sequestration credit; 
Description: A credit of $10 per metric ton is available for qualified 
carbon dioxide that is captured by the taxpayer at a qualified 
facility, used by such taxpayer as a tertiary injectant (including 
carbon dioxide augmented waterflooding and immiscible carbon dioxide 
displacement) in a qualified enhanced oil or natural gas recovery 
project and disposed of by such taxpayer in secure geological storage. 
In addition, a credit of $20 per metric ton is available for qualified 
carbon dioxide captured by a taxpayer at a qualified facility and 
disposed of by such taxpayer in secure geological storage without 
being used as a tertiary injectant. Both credit amounts are adjusted 
for inflation after 2009. 
Expiration information: No set expiration date. This provision will 
expire at the end of the year in which the Secretary of Energy 
determines that 75 million metric tons of carbon dioxide have been 
captured and sequestered. 
Estimated revenue losses: $0.22 billion. 

Name: Deduction for small refiners with capital costs associated with 
EPA sulfur regulation compliance; 
Description: A small business refiner may immediately deduct as an 
expense 75 percent of the costs paid or incurred for purposes of 
complying with EPA's Highway Diesel Fuel Sulfur Control requirement. A 
cooperative that qualifies as a small business refiner may elect to 
pass this deduction through to its owners. Costs qualifying for the 
deduction are those costs paid or incurred with respect to any 
facility of a small business refiner during the period beginning on 
January 1, 2003, and ending on the earlier of the date that is 1 year 
after the date on which the taxpayer must comply with the applicable 
EPA regulations or December 31, 2009. 
Expiration information: In general, qualifying costs must have been 
paid or incurred no later than December 31, 2009. 
Estimated revenue losses: $0.04 billion. 

Name: Partial expensing of investments in advanced mine safety 
equipment; 
Description: Section 404 of the Tax Relief and Welfare Act of 2006 
allowed qualified mine safety equipment to be expensed rather than 
capitalized. 
Expiration information: This provision expired as of December 31, 2013. 
Estimated revenue losses: $0.03 billion. 

Sources: GAO analysis of Treasury, Joint Committee on Taxation, and 
Congressional Research Service information. GAO-14-836. 

Note: Revenue losses reflect Treasury estimates from the President's 
budget unless otherwise specified. Revenue loss estimates do not 
incorporate any behavioral responses and thus do not reflect the exact 
amount of revenue that would be gained if a specific tax expenditure 
were repealed. In addition, while sufficiently reliable as a gauge of 
general magnitude, summing individual tax expenditures' revenue loss 
estimates does not take into account interactions between individual 
provisions. 

[A] The nonconventional fuel credit may include revenues losses 
associated with biomass. 

[B] Depreciation--a normal business expense under an income tax 
system--is an annual deduction from income that allows taxpayers to 
recover the cost or other basis of certain property used in a business 
or other income-producing activity over the useful life of the 
property. Depletion, like depreciation, is a form of capital recovery 
in that an asset (i.e., the mineral reserve itself) is being expended 
in order to produce income. 

[C] Expensing refers to deducting costs in the year they are paid or 
incurred; capitalizing refers to recovering such costs through 
depletion or depreciation. Expensing costs is an exception to general 
tax rules that provide for the capitalization of costs related to 
generating income from capital assets. 

[D] The exception for publicly traded partnerships with qualified 
income derived from certain energy related activities may include 
revenue losses not associated with fossil energy production. 

[E] The revenue loss estimate is reported by the Joint Committee on 
Taxation only. 

[F] The alternative fuel mixture credit may include revenues losses 
associated with biomass. 

[G] The Joint Committee on Taxation generally classifies as tax 
expenditures cost recovery allowances that are more favorable than 
those provided under the alternative depreciation system (Internal 
Revenue Code Section 168(g)), which provides for straight-line 
recovery over tax lives that are longer than those permitted under the 
accelerated system. Accelerated depreciation, in effect, reduces the 
cost of acquiring energy properties by allowing businesses to deduct 
larger amounts from their taxable income sooner than they would be 
able to do under straight-line depreciation. Reducing tax liability 
earlier provides a benefit to the taxpayer because of the time value 
of money--having a lower tax payment today is worth more to the 
taxpayer than having the lower payment in the future. 

[End of table] 

The federal government may have incurred additional revenue losses 
associated with other tax provisions related to fossil energy; 
however, we were unable to identify data on the level of federal 
revenue losses. For example, JCT and Treasury identified three tax 
provisions as being related to the oil and gas industry but also 
broadly available to taxpayers engaged in energy-related and non-
energy-related activities, such as manufacturing or trade. These three 
tax provisions are described in table 3.[Footnote 74] For these 
provisions, JCT and Treasury did not estimate annual revenue losses 
attributable to fossil energy production or consumption for fiscal 
year 2000 through 2013, and therefore this information was not readily 
available. 

Table 3: Three Federal Tax Provisions Related to Fossil Energy: 

Name: Foreign tax credit and dual capacity taxpayers; 
Description: The tax code provides a tax credit for income taxes paid 
to foreign countries, which helps to protect taxpayers who earn income 
abroad from double taxation. If a multinational company is subject to 
a foreign country's levy, and it also receives a specific economic 
benefit from that foreign country, it is classified as a "dual-
capacity taxpayer." Dual-capacity taxpayers cannot claim a credit for 
any part of the foreign levy unless it is established that the amount 
paid under a distinct element of the foreign levy is a tax, rather 
than a compulsory payment for some direct or indirect economic 
benefit. JCT estimated that repealing this provision will increase 
revenue related to oil and gas production by $7.5 billion from fiscal 
year 2012 through 2022; 
Expiration information: No expiration under current law. 

Name: Last-in, first-out inventory accounting method; 
Description: In general, for federal income tax purposes, taxpayers 
must account for inventories if the production, purchase, or sale of 
merchandise is a material income-producing factor to the taxpayer. 
Under the last-in, first-out ("LIFO") method, it is assumed that the 
last items entered into the inventory are the first items sold. 
Because the most recently acquired or produced units are deemed to be 
sold first, cost of goods sold is valued at the most recent costs; 
the effect of cost fluctuations is reflected in the ending inventory, 
which is valued at the historical costs rather than the most recent 
costs. Compared to first-in, first-out ("FIFO"), LIFO produces net 
income that more closely reflects the difference between sale proceeds 
and current market cost of inventory. When costs are rising, the LIFO 
method results in a higher measure of cost of goods sold and, 
consequently, a lower measure of income when compared to the FIFO 
method. The inflationary gain experienced by the business in its 
inventory is generally not reflected in income, but rather, remains in 
ending inventory as a deferred gain until a future period in which 
sales exceed purchases. JCT estimated that repealing this provision 
will increase revenue by $106 billion from fiscal year 2014 through 
2024; while OMB estimated that repealing this provision will increase 
revenue by almost $81 billion from fiscal year 2014 through 2023. 
However, neither JCT nor OMB quantified how much of its revenue 
estimate is related to fossil fuel production; 
Expiration information: No expiration under current law. 

Name: Deduction for income attributable to domestic production 
activities; 
Description: Section 199 of the American Jobs Creation Act of 2004 
allows a deduction of qualified production activities from taxable 
income of 3 percent in 2005-2006, 6 percent in 2007-2009, and 9 
percent thereafter. The deduction cannot exceed total taxable income 
of the firm and is limited to 50 percent of wages related to the 
qualified activity. This provision lowers the effective tax rate on 
the favored property, in most cases when fully phased in, from the top 
corporate tax rate of 35 percent to 31.85 percent. Production property 
is property manufactured, produced, grown, or extracted within the 
United States. Eligible property also includes domestic film, energy, 
and construction, and engineering and architectural services. For the 
latter, the services must be produced in the United States for 
construction projects located in the United States. The law 
specifically excludes the sale of food and beverages prepared at a 
retail establishment, the transmission and distribution of 
electricity, gas, and water, and receipts from property leased, 
licensed, or rented to a related party. The benefits are also allowed 
for Puerto Rico for 2007 through 2011. Oil extraction is permanently 
limited to a 6 percent deduction. JCT estimated that repealing this 
provision will increase revenues related to oil and gas production by 
$14.4 billion from fiscal year 2012 through 2022; 
while OMB estimated $17.4 billion in revenue from fiscal year 2014 
through 2023 related to fossil energy production; 
Expiration information: This deduction was allowed for Puerto Rico 
from 2006 through 2013. Otherwise, there is no expiration under 
current law. 

Sources: GAO analysis of Treasury and Joint Committee on Taxation 
documentation. GAO-14-836. 

[End of table] 

Regarding royalty relief, the federal government provided nearly $12 
billion in royalty relief for oil and gas production from 2000 through 
2012, according to Interior estimates.[Footnote 75] As shown in figure 
16, revenue losses associated with royalty relief increased from $40 
million in 2000 to more than $2 billion in 2011, before declining to 
about $1.9 billion in 2012 (the most recent estimate available). 

Figure 16: Estimated Revenue Losses Associated with Royalty Relief for 
Federal Oil and Gas Leases, 2000-2012: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000: $0.04 billion; 
Year: 2001: $0.04 billion; 
Year: 2002: $0.1 billion; 
Year: 2003: $0.46 billion; 
Year: 2004: $0.78 billion; 
Year: 2005: $0.91 billion; 
Year: 2006: $0.95 billion; 
Year: 2007: $0.88 billion; 
Year: 2008: $1.01 billion; 
Year: 2009: $1.07 billion; 
Year: 2010: $1.74 billion; 
Year: 2011: $2.09 billion; 
Year: 2012: $1.87 billion. 

Source: GAO analysis of Interior data. GAO-14-836. 

Note: These estimates reflect forgone revenues in the calendar year in 
which the sale of product took place irrespective of when the lease 
was issued. Forgone royalties were calculated by Interior based on 
production, average annual reported price, and average reported 
royalty rates in the Gulf of Mexico. 2012 is the latest year for which 
data on revenue loss estimates were available. Data are not adjusted 
for inflation. 

[End of figure] 

These federal activities--collecting revenues from excise taxes and 
royalties and forgoing revenues from tax expenditures and royalty 
relief--may have influenced U.S. fossil energy production and 
consumption in different ways, as described below: 

* Excise taxes. Because excise taxes raised prices on motor fuels, 
they provided a disincentive for consuming such fuels.[Footnote 76] 
However, because much of the revenue from these excise taxes was used 
to improve roads and other transportation infrastructure, these taxes 
could also have provided an incentive for motor vehicle use and 
thereby increased consumption of motor fuels. 

* Royalties. Because royalty payments raised costs associated with the 
development and sales of fossil energy, they provided a disincentive 
to produce and consume fossil energy. However, we cannot say to what 
extent the federal royalties provided a disincentive for oil and gas 
development on federal lands relative to other places because oil and 
gas companies that lease federal lands look for the best economic 
terms across a wide range of land owners (such as state, private, 
federal, and international owners). We found in 2008 that studies of 
many resource owners indicated that the federal government collected 
less in total revenues than most other resource owners,[Footnote 77] 
but we do not have more recent comparisons of revenues collected. 

* Tax expenditures and royalty relief. In general, tax expenditures 
and royalty relief provided incentives for fossil energy production by 
lowering the costs associated with the exploration and development of 
oil and gas resources. 

[End of section] 

Appendix IV: Information on Major Factors Influencing Nuclear Energy 
Production and Consumption: 

This appendix provides more detailed information on U.S. production 
and consumption of nuclear energy from 2000 through 2013 and on major 
factors, including federal activities, that may have influenced 
nuclear energy production and consumption levels. 

Nuclear Energy Production and Consumption: 

The United States has 100 operating commercial nuclear reactors, all 
of which are used to generate electricity. The year-to-year pattern of 
domestic production and consumption of nuclear energy fluctuated from 
2000 through 2013, as shown in figure 17. In general, nuclear energy 
production and consumption increased from 754 million megawatt-hours 
[Footnote 78] in 2000 to 806 million megawatt-hours in 2007, according 
to Energy Information Administration (EIA) data. From 2007 through 
2010, nuclear energy production and consumption remained steady 
between about 800 million megawatt-hours and 807 million megawatt-
hours. From 2011 through 2013, nuclear energy production and 
consumption decreased below 800 million megawatt-hours. The proportion 
of electricity generated by nuclear power in the United States changed 
little during the period we reviewed, with nuclear reactors accounting 
for about 20 percent of total U.S. electricity generation in 2000 and 
about 19 percent in 2013. 

Figure 17: U.S. Nuclear Energy Production and Consumption, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Megawatt-hours (in millions): 

Year: 2000: 753.9 million; 
Year: 2001: 768.8 million; 
Year: 2002: 780.1 million; 
Year: 2003: 763.7 million; 
Year: 2004: 788.5 million; 
Year: 2005: 782 million; 
Year: 2006: 787.2 million; 
Year: 2007: 806.4 million; 
Year: 2008: 806.2 million; 
Year: 2009: 798.9 million; 
Year: 2010: 807 million; 
Year: 2011: 790.2 million; 
Year: 2012: 769.3 million; 
Year: 2013: 789 million. 

Source: GAO analysis of Energy Information Administration data 
GAO-14-836. 

Note: Data are for net electricity generation, which equals gross 
electricity generation minus station use. The Energy Information 
Administration assumes nuclear electric power production and 
consumption is equal to nuclear electric power electricity net 
generation. 

[End of figure] 

Major Factors Influencing Nuclear Energy Production and Consumption: 

The studies and reports we reviewed indicated that recent decreases in 
U.S. nuclear energy production and consumption may be due to a number 
of major factors, including reductions in natural gas prices and the 
Fukushima Daiichi nuclear accident. Regarding natural gas prices, some 
nuclear plant operators cited price reductions as an important factor 
in their decisions regarding nuclear power reactor operations. For 
example, the Vermont Yankee Nuclear Power Station in Vernon, Vermont, 
began operations in 1972, and the owners obtained a renewed license in 
2011 to operate the plant for an additional 20 years. However, in 
August 2013, the owners announced plans to permanently close the plant 
in 2014. According to the owners, their decision to close the plant 
was driven in part by lower natural gas prices, which had reduced the 
comparative profitability of the plant. 

In March 2011, a 9.0-magnitude earthquake and subsequent tsunami 
devastated northeastern Japan and severely damaged the Fukushima 
Daiichi nuclear power plant. The resulting radiological emergency 
involved the most extensive release of radioactive material at a 
nuclear power plant since the 1986 Chernobyl disaster. Following this 
release, the Japanese government evacuated people within 12 miles of 
the plant, and later extended the evacuation zone to 19 miles. In 
total, almost 150,000 people were evacuated. In response to the 
incident, Japan shut down all of its nuclear power reactors, and 
concerns heightened about the safety of commercial nuclear power 
plants worldwide. For example, Germany closed 8 of the country's 17 
reactors and decided to shut down the remainder by 2022. In the United 
States, the Fukushima incident affected some plans to build new 
nuclear power plants. For example, in 2011, a company planning to 
construct two nuclear reactors in Texas cited uncertainties related to 
the Fukushima incident as a reason for abandoning the project. 
[Footnote 79] 

U.S. nuclear energy production and consumption trends may also have 
been affected, to a more limited extent, by increases in the price of 
uranium oxide, which is processed into fuel used by nuclear power 
reactors. As shown in figure 18, uranium oxide prices have increased 
considerably from 2000 to 2013, according to EIA data. Specifically, 
the average domestic price of uranium oxide increased from $11.45 per 
pound in 2000 to $52.51 per pound in 2013, an increase of more than 
300 percent. 

Figure 18: U.S. Prices of Uranium Oxide, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Dollars (per pound): 

Year: 2000: $11.45; 
Year: 2001: $10.45; 
Year: 2002: $10.35; 
Year: 2003: $10.84; 
Year: 2004: $11.91; 
Year: 2005: $13.98; 
Year: 2006: $18.54; 
Year: 2007: $33.13; 
Year: 2008: $43.43; 
Year: 2009: $44.53; 
Year: 2010: $44.88; 
Year: 2011: $53.41; 
Year: 2012: $56.51; 
Year: 2013: $52.51. 

Source: GAO analysis of Energy Information Administration data 
GAO-14-836. 

Note: Prices refer to average prices for domestic purchases of uranium 
oxide. Data are not adjusted for inflation. 

[End of figure] 

Federal Activities That May Have Influenced Nuclear Energy Production 
and Consumption: 

In addition to the major factors we identified above from the studies 
and reports we reviewed, we identified a number of federal activities 
that may have also played a role in influencing U.S. production and 
consumption of nuclear energy from 2000 through 2013. These activities 
included setting standards and requirements related to the operation 
of nuclear power reactors, directly providing goods and services 
related to the storage of spent nuclear fuel, assuming risk associated 
with the operation of nuclear power reactors, and forgoing revenues 
associated with tax expenditures for nuclear energy producers. Some of 
these activities provided an incentive to produce and consume nuclear 
energy, while others provided a disincentive for its production and 
consumption. 

Setting Standards and Requirements: 

The federal government established or strengthened a number of 
standards and requirements related to nuclear energy from 2000 through 
2013. For example, after the Fukushima incident, the Nuclear 
Regulatory Commission (NRC) accepted 12 recommendations from a task 
force that NRC had convened in 2011 to review its processes and 
regulations and determine whether lessons learned from the accident 
could inform its oversight processes. The task force recommended that 
NRC require licensees to reevaluate and upgrade seismic and flooding 
protection of reactors and related equipment, strengthen capabilities 
at all reactors to withstand loss of electrical power, and take other 
actions to better protect their plants for a low-probability, high-
impact event.[Footnote 80] NRC's activities to strengthen the safety 
and security of nuclear power plants after the Fukushima incident may 
have increased the costs associated with operating commercial nuclear 
power reactors, thereby providing a disincentive for nuclear power 
production. 

Directly Providing Goods and Services: 

The federal government engaged in activities related to providing for 
the management of spent nuclear fuel--i.e., fuel that has been used 
and removed from the reactor core of a nuclear plant--from 2000 
through 2013. The nation currently has about 70,000 metric tons of 
commercial spent nuclear fuel stored at 75 sites in 33 states. This 
fuel is extremely hazardous: without protective shielding and proper 
handling, its intense radioactivity can kill a person directly exposed 
to it or cause long-term health hazards, such as cancer, as well as 
contaminate the environment. The Nuclear Waste Policy Act of 1982 
directed the Department of Energy (DOE) to investigate sites for a 
federal deep geological repository for spent nuclear fuel and high-
level radioactive waste. In 1987, Congress amended the Nuclear Waste 
Policy Act to direct DOE to focus its efforts only on Yucca Mountain 
in Nevada for a repository. The act, as amended, authorized DOE to 
contract with commercial nuclear reactor operators to take custody of 
spent fuel for disposal at the repository beginning in 1998. DOE spent 
billions of dollars related to this effort and in 2008 submitted a 
license application for the construction of a permanent repository at 
Yucca Mountain to NRC, which has regulatory authority over the 
construction and operation of a repository.[Footnote 81] 

However, as we reported in August 2012: [Footnote 82] 

* In 2009, DOE announced that it planned to terminate its work related 
to the Yucca Mountain repository and in 2010 filed a motion to 
withdraw the license application. NRC's licensing board denied the 
motion, but DOE continued to take steps to dismantle the repository 
project. 

* In September 2011, the NRC commissioners[Footnote 83] considered 
whether to overturn or uphold the licensing board's decision, but they 
were evenly divided and unable to take final action on the matter. 
Instead, the NRC commissioners directed the licensing board to suspend 
work by September 30, 2011. 

* NRC's failure to consider the application, among other things, was 
contested in federal court. Several parties filed a petition against 
NRC asking the federal court to compel NRC to provide a proposed 
schedule with milestones and a date for approving or disapproving the 
license application, among other things.[Footnote 84] 

Federal activities related to the Yucca Mountain repository may have 
provided a disincentive for nuclear energy production and consumption. 
For example, DOE's actions regarding its license application for the 
construction of the repository may have caused uncertainty about the 
federal government's long-term strategy for storing nuclear waste 
because Congress has not agreed upon a path forward. This uncertainty 
may have provided a disincentive for some nuclear plant operators to 
stay in the market or expand capacity because storing nuclear waste is 
expensive. 

Assuming Risk: 

The federal government assumed certain risks related to nuclear energy 
production and consumption from 2000 through 2013. For example, under 
the Price-Anderson Act, the federal government limited the liability 
of nuclear plant operators in the case of a nuclear accident.[Footnote 
85] The act requires each licensee of a nuclear plant to have primary 
insurance coverage equal to the maximum amount of liability insurance 
available from private sources--currently $375 million--to settle any 
such claims against it. In the event of an accident at any plant where 
liability claims exceed the $375 million primary insurance coverage, 
the act also requires licensees to pay retrospective premiums (also 
referred to as secondary insurance).[Footnote 86] The act places a 
limit on the total liability per incident, which is currently about 
$13 billion. 

In addition, the federal government assumed risks related to nuclear 
energy production and consumption by establishing a loan guarantee 
program. Specifically, Section 1703 of the Energy Policy Act of 
2005[Footnote 87] authorized DOE to issue loan guarantees for projects 
that avoid, reduce, or sequester greenhouse gases using new or 
significantly improved technologies. In 2010, DOE made conditional 
commitments under Section 1703 to provide $8.3 billion in loan 
guarantees for the construction of two advanced nuclear reactors at 
the Vogtle Electric Generating Plant in Georgia.[Footnote 88] 

These federal activities provided an incentive for nuclear energy 
production and consumption by decreasing the overall cost associated 
with certain production-related activities. For example, according to 
the Congressional Budget Office (CBO), the Price-Anderson Act provides 
a benefit to nuclear plant operators by reducing their cost of 
carrying liability insurance.[Footnote 89] CBO estimated that the 
potential level of support was about $600,000 annually per reactor, 
which would be about $62 million annually for all reactors in the 
United States. Without the liability limitations provided by the Price-
Anderson Act, the cost of obtaining insurance for nuclear power plant 
operators might have been higher. Consequently, the act may have 
supported higher levels of nuclear power production in the United 
States between 2000 and 2013 than would have otherwise occurred 
because the lower cost provided an incentive for increased production 
and consumption. 

Forgoing Revenue: 

The federal government incurred revenue losses related to nuclear 
energy production and consumption from 2000 through 2013. 
Specifically, we identified one tax expenditure targeting nuclear 
energy that resulted in $7.9 billion in revenue losses from fiscal 
year 2000 through 2013.[Footnote 90] This tax expenditure--the special 
tax rate for nuclear decommissioning reserve funds--increased from 
$100 million in fiscal year 2000 to $1.1 billion in fiscal year 2013, 
as shown in figure 19. Under the special tax rate for nuclear 
decommissioning reserve funds, taxpayers (e.g., utilities) who are 
responsible for the costs of decommissioning nuclear power plants can 
elect to create reserve funds to be used to pay for decommissioning. 
The funds receive special tax treatment: amounts contributed are 
deductible in the year the contributions are made and are not included 
in the taxpayer's gross income until the year they are distributed, 
thus effectively postponing tax on the contributions. Amounts actually 
spent on decommissioning are deductible in the year they are made. 
Gains from the funds' investments are subject to a 20 percent tax 
rate--a lower rate than that which applies to most other corporate 
income.[Footnote 91] In general, this tax expenditure supported 
nuclear energy production and consumption by lowering the costs of 
nuclear energy production and providing an incentive to engage in 
nuclear power production. 

Figure 19: Revenue Losses Associated with a Federal Tax Expenditure 
Targeting Nuclear Energy Production and Consumption, Fiscal Year 2000-
2013: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000: $0.1 billion; 
Year: 2001: $0.1 billion; 
Year: 2002: $0.2 billion; 
Year: 2003: $0.3 billion; 
Year: 2004: $0.3 billion; 
Year: 2005: $0.4 billion; 
Year: 2006: $0.5 billion; 
Year: 2007: $0.6 billion; 
Year: 2008: $0.7 billion; 
Year: 2009: $0.8 billion; 
Year: 2010: $0.9 billion; 
Year: 2011: $0.9 billion; 
Year: 2012: $1 billion; 
Year: 2013: $1.1 billion. 

Source: GAO analysis of Joint Committee on Taxation data. GAO-14-836. 

[End of figure] 

[End of section] 

Appendix V: Information on Major Factors Influencing Renewable Energy 
Production and Consumption: 

This appendix provides more detailed information on U.S. production 
and consumption of renewable energy from 2000 through 2013 and on 
major factors, including federal activities, that influenced renewable 
energy production and consumption levels. 

Renewable Energy Production and Consumption: 

U.S. production and consumption of renewable energy generally 
increased from 2000 through 2013, as shown in figure 20, according to 
Energy Information Administration (EIA) data.[Footnote 92] 
Specifically, in terms of energy content (i.e., British thermal units 
[Btu]), production and consumption of all sources of renewable energy--
including liquid biofuels (such as ethanol and biodiesel), other forms 
of biomass (i.e., wood and waste), hydroelectric power, geothermal, 
wind, and solar--increased from 6.1 quadrillion Btus in 2000 to 9.2 
quadrillion Btus in 2013. As a proportion of total energy consumption, 
consumption of renewable energy increased from about 6 percent in 2000 
to 9 percent in 2013. Hydroelectric power and wood were the two 
largest sources of renewable energy during this time period and 
accounted for about 50 percent of all renewable energy consumed in 
2013. However, the overall increase in domestic production and 
consumption of renewable energy from 2000 through 2013 can be 
attributed primarily to increases in the production and consumption of 
ethanol, wind energy, and solar energy. 

Figure 20: U.S. Renewable Energy Production and Consumption, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Btus (in quadrillions): 

Year: 2000; 
Biofuels: 0.236; 
Wind energy: 0.057; 
Solar energy: 0.066; 
Other renewable energy: 5.748. 

Year: 2001; 
Biofuels: 0.253; 
Wind energy: 0.07; 
Solar energy: 0.064; 
Other renewable energy: 4.776. 

Year: 2002; 
Biofuels: 0.303; 
Wind energy: 0.105; 
Solar energy: 0.063; 
Other renewable energy: 5.257. 

Year: 2003; 
Biofuels: 0.404; 
Wind energy: 0.113; 
Solar energy: 0.062; 
Other renewable energy: 5.369. 

Year: 2004; 
Biofuels: 0.499; 
Wind energy: 0.142; 
Solar energy: 0.063; 
Other renewable energy: 5.377. 

Year: 2005; 
Biofuels: 0.577; 
Wind energy: 0.178; 
Solar energy: 0.063; 
Other renewable energy: 5.424. 

Year: 2006; 
Biofuels: 0.771; 
Wind energy: 0.264; 
Solar energy: 0.068; 
Other renewable energy: 5.546. 

Year: 2007; 
Biofuels: 0.99; 
Wind energy: 0.341; 
Solar energy: 0.076; 
Other renewable energy: 5.134. 

Year: 2008; 
Biofuels: 1.37; 
Wind energy: 0.546; 
Solar energy: 0.089; 
Other renewable energy: 5.198. 

Year: 2009; 
Biofuels: 1.568; 
Wind energy: 0.721; 
Solar energy: 0.098; 
Other renewable energy: 5.252. 

Year: 2010; 
Biofuels: 1.837; 
Wind energy: 0.923; 
Solar energy: 0.126; 
Other renewable energy: 5.195. 

Year: 2011; 
Biofuels: 1.948; 
Wind energy: 1.168; 
Solar energy: 0.171; 
Other renewable energy: 5.787. 

Year: 2012; 
Biofuels: 1.902; 
Wind energy: 1.34; 
Solar energy: 0.234; 
Other renewable energy: 5.322. 

Year: 2013; 
Biofuels: 1.993; 
Wind energy: 1.595; 
Solar energy: 0.32; 
Other renewable energy: 5.276. 

Source: GAO analysis of Energy Information Administration data 
GAO-14-836. 

Note: Btu stands for British thermal unit. Other renewable energy 
includes energy from forms of biomass (i.e., wood, waste) other than 
biofuels, hydroelectric power, and geothermal energy. Production 
equals consumption for all renewable energy sources except biofuels. 

[End of figure] 

Ethanol Production and Consumption: 

Domestically produced ethanol primarily comes from corn grown in the 
Midwest; the cornstarch is converted into sugar and then fermented and 
distilled into ethanol. Ethanol is used as a transportation fuel; 
almost all ethanol is blended into gasoline as an additive to make 
fuel containing up to 10 percent ethanol by volume.[Footnote 93] As 
shown in figure 21, ethanol production increased from 1.6 billion 
gallons in 2000 to almost 14 billion gallons in 2011 and about 13 
billion gallons in both 2012 and 2013. Consumption of ethanol followed 
a similar pattern until 2010, when domestic consumption of ethanol 
remained relatively flat at around 13 billion gallons per year. The 
United States increased its exports of ethanol beginning in 2010, 
mostly to Brazil and Canada.[Footnote 94] 

Figure 21: U.S. Ethanol Production and Consumption, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Gallons (in billions): 

Year: 2000; 
Production: 1.62; 
Consumption: 1.65. 

Year: 2001; 
Production: 1.77; 
Consumption: 1.74. 

Year: 2002; 
Production: 2.14; 
Consumption: 2.07. 

Year: 2003; 
Production: 2.8; 
Consumption: 2.83. 

Year: 2004; 
Production: 3.4; 
Consumption: 3.55. 

Year: 2005; 
Production: 3.9; 
Consumption: 4.06. 

Year: 2006; 
Production: 4.88; 
Consumption: 5.48. 

Year: 2007; 
Production: 6.52; 
Consumption: 6.89. 

Year: 2008; 
Production: 9.31; 
Consumption: 9.68. 

Year: 2009; 
Production: 10.94; 
Consumption: 11.04. 

Year: 2010; 
Production: 13.3; 
Consumption: 12.86. 

Year: 2011; 
Production: 13.93; 
Consumption: 12.89. 

Year: 2012; 
Production: 13.22; 
Consumption: 12.88. 

Year: 2013; 
Production: 13.31; 
Consumption: 13.18. 

Source: GAO analysis of Energy Information Administration data 
GAO-14-836. 

[End of figure] 

Major Factors Influencing Ethanol Production and Consumption: 

The studies and reports we reviewed indicated that several federal 
activities had a major impact on the increase in ethanol production 
and consumption--most notably federal tax expenditures and 
requirements for the use of ethanol in transportation fuel. Regarding 
federal tax expenditures, alcohol fuel credits provided a 45-cent-per-
gallon tax credit to gasoline suppliers who blend ethanol with 
gasoline.[Footnote 95] According to the Department of the Treasury 
(Treasury) data, the alcohol fuel credits resulted in more than $39 
billion in revenue losses from fiscal year 2000 through 2013. As shown 
in figure 22, revenue losses associated with alcohol fuel credits 
increased from about $0.9 billion in fiscal year 2000 to $7 billion in 
fiscal year 2011, before decreasing to $3.7 billion in fiscal year 
2012 and about $50 million in fiscal year 2013.[Footnote 96] 

Figure 22: Revenue Losses Associated with Alcohol Fuel Credits, Fiscal 
Year 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000: $0.86 billion; 
Year: 2001: $1.02 billion; 
Year: 2002: $1.1 billion; 
Year: 2003: $1.13 billion; 
Year: 2004: $1.48 billion; 
Year: 2005: $1.54 billion; 
Year: 2006: $2.62 billion; 
Year: 2007: $3.36 billion; 
Year: 2008: $4.46 billion; 
Year: 2009: $5.21 billion; 
Year: 2010: $5.75 billion; 
Year: 2011: $7.02 billion; 
Year: 2012: $3.68 billion; 
Year: 2013: $0.05 billion. 

Sources: GAO analysis of Office of Management and Budget and Treasury 
data. GAO-14-836. 

Note: Data are not adjusted for inflation. 

[End of figure] 

Regarding federal requirements, the Energy Policy Act of 2005 (EPAct) 
created a federal renewable fuel standard that generally required 
gasoline and diesel sold in the United States to contain 4 billion 
gallons of renewable fuels, such as ethanol and biodiesel, in 2006 and 
7.5 billion gallons in 2012.[Footnote 97] The Energy Independence and 
Security Act of 2007 (EISA) expanded the renewable fuel standard by 
requiring that U.S. transportation fuel contain 9 billion gallons of 
renewable fuels in 2008, with the amount required increasing annually 
to 36 billion gallons in 2022.[Footnote 98] The 36-billion-gallon 
total must include at least 21 billion gallons of advanced biofuels 
(defined as renewable fuels other than ethanol derived from corn 
starch that meet certain criteria) and can include up to 15 billion 
gallons of conventional biofuels (defined as ethanol derived from 
cornstarch). 

In our previous work, we found that the alcohol fuel credits were 
important in establishing and expanding the domestic ethanol industry. 
[Footnote 99] However, we also found that the alcohol fuel credits 
became less important over time for sustaining the ethanol industry 
because (1) most of the capital investment had already been made and 
(2) the credits were duplicative with the renewable fuel standard. We 
recommended in 2009 that Congress consider modifying or phasing out 
the alcohol fuel credits.[Footnote 100] Congress allowed the alcohol 
fuel credits to expire at the end of 2011.[Footnote 101] 

In addition to the alcohol fuel credits and renewable fuel standard, 
the federal government may have influenced ethanol production and 
consumption from 2000 through 2013 in a number of other ways, 
according to the studies and reports we reviewed, including the 
activities described below. While the precise effects of these 
activities on changes in ethanol production and consumption are 
difficult to measure, some of these activities provided incentives for 
the production and consumption of ethanol. 

* Requirements for federal fleets to use ethanol and other alternative 
fuels. The Energy Policy Act of 1992 requires that 75 percent of all 
vehicles acquired by the federal fleet in fiscal year 1999 and 
afterward be "alternative fuel vehicles," which can use ethanol and 
blends of 85 percent or more of ethanol with gasoline, among other 
fuels. EPAct generally requires that all such vehicles be fueled with 
alternative fuel.[Footnote 102] In addition, EISA[Footnote 103] 
requires that no later than October 2015 and each year thereafter, 
agencies must achieve a 10 percent increase in vehicle alternative 
fuel consumption relative to a baseline established by the Energy 
Secretary for fiscal year 2005. 

* Excise taxes. The federal excise tax rate on ethanol in motor fuels 
is 18.4 cents per gallon.[Footnote 104] We did not separately analyze 
the portion of revenues from excise taxes on ethanol from the portion 
on gasoline. However, we believe the effects of these excise taxes may 
be similar to the effects of excise taxes on gasoline. 

Another factor likely affecting ethanol production and consumption 
from 2000 through 2013 was the price of ethanol relative to the prices 
of corn and gasoline, according to U.S. Department of Agriculture 
(USDA) research. Ethanol prices generally increased from 2000 through 
2013, according to USDA data, as shown in figure 23. Specifically, 
ethanol prices increased from an annual average of $1.35 per gallon in 
2000 to $2.47 per gallon in 2013. Because ethanol is used as a 
gasoline substitute, and because nearly all ethanol produced in the 
United States comes from corn, the relationship between prices of 
ethanol, gasoline, and corn is complex. As gasoline prices rise, 
ethanol's appeal as a substitute increases, as does the profitability 
of ethanol production and the demand for corn. As a result, according 
to USDA's Economic Research Service, prices of corn, ethanol, and 
gasoline have become more interrelated in recent years.[Footnote 105] 
Specifically, from March 2008 to March 2011, ethanol supply and demand 
accounted for about 23 percent of the variation in the price of corn, 
while corn market conditions accounted for about 27 percent of 
ethanol's price variation. At the same time, about 16 and 17 percent 
of gasoline price variation could be attributed to ethanol and corn 
markets conditions, respectively. 

Figure 23: U.S. Ethanol Prices, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Dollars (per gallon): 

Year: 2000: $1.35; 
Year: 2001: $1.48; 
Year: 2002: $1.12; 
Year: 2003: $1.35; 
Year: 2004: $1.69; 
Year: 2005: $1.80; 
Year: 2006: $2.58; 
Year: 2007: $2.24; 
Year: 2008: $2.47; 
Year: 2009: $1.79; 
Year: 2010: $1.93; 
Year: 2011: $2.70; 
Year: 2012: $2.37; 
Year: 2013: $2.47. 

Source: GAO analysis of USDA Economic Research Service data. 
GAO-14-836. 

Note: Prices are rack prices (wholesale truckload sales or smaller of 
gasoline where title transfers at a terminal). Data are not adjusted 
for inflation. 

[End of figure] 

Production and Consumption of Wind and Solar Energy: 

Wind is transformed into electricity using wind turbines. In terms of 
the electricity generated from wind turbines, domestic production and 
consumption of wind energy increased from 5.6 million megawatt-hours 
in 2000 to 167.7 million megawatt-hours in 2013 (an increase of almost 
3,000 percent), as shown in figure 24. According to the Department of 
Energy (DOE), wind energy comprised 43 percent of all additions to 
U.S. generating capacity in 2012, overtaking natural gas-fired 
electricity generation as the leading source of new capacity for that 
year.[Footnote 106] 

Figure 24: U.S. Wind Energy Production and Consumption, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Megawatthours (in millions): 

Year: 2000: 5.59; 
Year: 2001: 6.74; 
Year: 2002: 10.35l 
Year: 2003: 11.19; 
Year: 2004: 14.14; 
Year: 2005: 17.81; 
Year: 2006: 26.59; 
Year: 2007: 34.45; 
Year: 2008: 55.36; 
Year: 2009: 73.89; 
Year: 2010: 94.65; 
Year: 2011: 120.18; 
Year: 2012: 140.82; 
Year: 2013: 167.67. 

Source: GAO analysis of EIA data. GAO-14-836. 

Note: Data are for net electricity generation. Production equals 
consumption for wind energy. 

[End of figure] 

Solar energy is used to heat, cool, and power homes and businesses 
using a variety of technologies that convert sunlight into usable 
energy. The most widely used solar technology is the photovoltaic 
cell, which uses semiconducting materials to convert sunlight into 
electricity. Sunlight can also be used to heat water (for later use) 
or to boil water, which produces steam that can be used in a turbine 
to generate electricity. In terms of the electricity generated from 
solar energy, domestic production and consumption of solar energy 
increased from about 0.5 million megawatt-hours in 2000 to 9.3 million 
megawatt-hours in 2013 (an increase of almost 1,900 percent), as shown 
in figure 25. According to the Solar Energy Industries Association, 
photovoltaic solar installations grew 76 percent from 2011 to 2012, 
and 8 of the 10 largest photovoltaic installations in the United 
States were built in 2012.[Footnote 107] 

Figure 25: U.S. Solar Energy Production and Consumption, 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Megawatthours (in millions): 

Year: 2000: 0.49; 
Year: 2001: 0.54; 
Year: 2002: 0.56; 
Year: 2003: 0.53; 
Year: 2004: 0.58; 
Year: 2005: 0.55
Year: 2006: 0.51; 
Year: 2007: 0.61; 
Year: 2008: 0.86; 
Year: 2009: 0.89; 
Year: 2010: 1.21; 
Year: 2011: 1.82; 
Year: 2012: 4.33; 
Year: 2013: 9.25. 

Source: GAO analysis of Energy Information Administration data. 
GAO-14-836. 

Note: Data are for net electricity generation. Production equals 
consumption for solar energy. 

[End of figure] 

Major Factors Influencing Production and Consumption of Wind and Solar 
Energy: 

The studies and reports we reviewed indicated that the increase in 
wind and solar energy production and consumption resulted from a 
number of major factors--most notably state policies and federal 
activities, as well as technological advances. Regarding state 
activities, many states have created policies known as renewable 
portfolio standards that encouraged the production and use of 
renewable energy. These state policies generally require a percentage 
of electricity sold or generated in the state to come from eligible 
renewable resources, including wind and solar energy. According to 
EIA, 29 states and the District of Columbia had enforceable renewable 
portfolio standards or similar laws as of October 2013.[Footnote 108] 
According to the Congressional Research Service (CRS), state policies 
have been the primary creator of demand for wind projects.[Footnote 
109] 

Regarding federal activities, the studies and reports we reviewed 
indicated that the federal government influenced increases in the 
production and consumption of wind and solar energy primarily through 
tax incentives. Specifically, the production tax credit and the 
investment tax credit, along with a related program that provided 
grants in lieu of these tax credits, resulted in almost $14 billion in 
revenue losses and almost $20 billion in outlays from fiscal year 2000 
through 2013. These tax credits and grants, which are described below, 
supported wind and solar energy production by lowering the costs 
associated with production and providing an incentive to those firms 
engaged in the construction and operation of wind and solar energy 
projects. 

* Production tax credit. This credit provided a 10-year, inflation-
adjusted income tax credit based on the amount of renewable energy 
produced at wind and other qualified facilities. The amount of the 
credit varied depending upon the source. The value of the credit was 
2.2 cents per kilowatthour in 2012 for certain resources (e.g., wind, 
geothermal, and certain biomass electricity production) and was raised 
to 2.3 cents per kilowatthour in 2013. This credit resulted in about 
$9.6 billion in revenue losses from fiscal year 2000 through 2013. 
Specifically, as shown in figure 26, revenue losses associated with 
this tax credit increased from $40 million in fiscal year 2000 to $1.5 
billion or more annually from fiscal year 2010 through 2013. This 
credit, which has periodically expired and then been extended, is 
available to facilities for which construction began before January 1, 
2014.[Footnote 110] As we reported in March 2013, new additions of 
wind energy capacity fell dramatically in years following the credit's 
expiration.[Footnote 111] 

* Investment tax credit. This credit, which has not expired, provides 
an income tax credit for business investments in solar systems and 
small wind turbines, among other things.[Footnote 112] Investments in 
solar and small wind turbine systems qualify for a 30 percent tax 
credit. In addition, temporary provisions enacted under the American 
Recovery and Reinvestment Act of 2009 (Recovery Act) allow taxpayers 
to claim this credit for property that otherwise would have qualified 
for the production tax credit. This credit resulted in over $4 billion 
in revenue losses from fiscal year 2000 through 2013. As shown in 
figure 26, no revenue loss estimates were reported for this tax credit 
from fiscal year 2000 through 2005; revenue losses then generally 
increased from $80 million in fiscal year 2006 to almost $2 billion in 
fiscal year 2013.[Footnote 113] 

* Section 1603 program. Section 1603 of the Recovery Act, as amended, 
allows taxpayers eligible for the production or investment tax credit 
to receive a payment from the Treasury in lieu of a tax credit. This 
Treasury program provided almost $20 billion in outlays from fiscal 
year 2009 through 2013, as shown in figure 26, of which about $13 
billion were related to wind energy projects, and about $4 billion 
were associated with solar energy projects. This program, which is 
still available in some cases, applies to projects placed in service 
during 2009, 2010, or 2011, or afterward if construction began on the 
property during the specific years and the property is placed in 
service by a credit termination date (e.g., January 1, 2017 for 
certain energy property). 

Figure 26: Revenue Losses and Outlays Associated with the Production 
Tax Credit, Investment Tax Credit, and Section 1603 Program, Fiscal 
Year 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Dollars (in billions): 

Year: 2000; 
Section 1603 program (outlays): $0.04. 

Year: 2001; 
Section 1603 program (outlays): $0.06. 

Year: 2002; 
Section 1603 program (outlays): $0.1. 

Year: 2003; 
Section 1603 program (outlays): $0.28. 

Year: 2004; 
Section 1603 program (outlays): $0.33. 

Year: 2005; 
Section 1603 program (outlays): $0.24. 

Year: 2006; 
Section 1603 program (outlays): $0.51; 
Investment tax credit (revenue loss): $0.08. 

Year: 2007; 
Section 1603 program (outlays): $0.41; 
Investment tax credit (revenue loss): $0.08. 

Year: 2008; 
Section 1603 program (outlays): $0.92; 
Investment tax credit (revenue loss): $0.05. 

Year: 2009; 
Section 1603 program (outlays): $0.43; 
Investment tax credit (revenue loss): $0.27; 
Production tax credit (revenue loss): $1.05. 

Year: 2010; 
Section 1603 program (outlays): $1.54; 
Investment tax credit (revenue loss): $0.13; 
Production tax credit (revenue loss): $4.21. 

Year: 2011; 
Section 1603 program (outlays): $1.56; 
Investment tax credit (revenue loss): $0.7; 
Production tax credit (revenue loss): $3.9. 

Year: 2012; 
Section 1603 program (outlays): $1.5; 
Investment tax credit (revenue loss): $1.04; 
Production tax credit (revenue loss): $5.08. 

Year: 2013; 
Section 1603 program (outlays): $1.67; 
Investment tax credit (revenue loss): $1.95; 
Production tax credit (revenue loss): $5.4. 

Sources: GAO analysis of Office of Management and Budget and Treasury 
data. GAO-14-836. 

Note: Data are not adjusted for inflation. 

[End of figure] 

In addition to these tax credits, the studies and reports we reviewed 
indicated that the federal government provided incentives for the 
production and consumption of wind and solar energy in other important 
ways, including through the following activities: 

* Requirements for purchasing electricity. Under EPAct, federal 
agencies' consumption of electricity from renewable sources has 
generally been required--to the extent economically feasible and 
technologically practicable--to meet or exceed 5 percent of total 
consumption in fiscal years 2010 through 2012, and 7.5 percent in 
fiscal year 2013 and thereafter.[Footnote 114] According to DOE's most 
recent data, federal agencies spent about $57 million in electricity 
purchases from renewable sources in fiscal year 2012. 

* Loan guarantees. DOE's Title 17 Innovative Technology Loan Guarantee 
Program included a temporary program for the rapid deployment of 
renewable energy projects, among other things. As shown in table 4, 
DOE guaranteed 23 loans totaling more than $14 billion for wind and 
solar energy projects. Most of these loans (15 of 23) and most of the 
amount guaranteed went to projects to produce and sell electricity 
generated from solar energy. There have been two defaults on 
guaranteed loans, both for projects involving the manufacture of solar 
energy equipment. However, most of the long-term total estimated cost 
to the government is associated with solar generation projects. 
[Footnote 115] The authority to enter into loan guarantees under DOE's 
temporary program expired on September 30, 2011. 

Table 4: DOE's Title 17 Innovative Technology Loan Guarantee Program 
Targeting Solar and Wind Energy, Fiscal Year 2000-2013: 

Solar generation; 
Number of loan guarantees and loans[A]: 15; 
Amount of loan guarantees and loans[B]: $11.62 billion; 
Number of defaults: 0; 
Estimated cost to the government[C]: $1.03 billion. 

Solar manufacturing; 
Number of loan guarantees and loans[A]: 4; 
Amount of loan guarantees and loans[B]: $1.23 billion; 
Number of defaults: 2; 
Estimated cost to the government[C]: $0.62 billion. 

Wind generation; 
Number of loan guarantees and loans[A]: 4; 
Amount of loan guarantees and loans[B]: $1.70 billion; 
Number of defaults: 0; 
Estimated cost to the government[C]: $0.04 billion. 

Total; 
Number of loan guarantees and loans[A]: 23; 
Amount of loan guarantees and loans[B]: $14.55 billion; 
Number of defaults: 2; 
Estimated cost to the government[C]: $1.69 billion. 

Sources: GAO analysis of DOE and Office of Management and Budget data. 
GAO-14-836. 

[A] The number of guarantees and loans refers to all guarantees and 
loans that were issued, including three that were withdrawn or 
deobligated before any funds were drawn on the loans. 

[B] The loan guarantee and loan amounts are the amounts at closing 
that appear in DOE's accounting system. They include the full amount 
of the loans partially guaranteed through the Financial Institution 
Partnership Program and do not include capitalized interest. 

[C] These costs are current estimates of the credit subsidy costs of 
disbursed amounts as reported in the President's fiscal year 2015 
budget. Credit subsidy costs represent the government's estimated net 
long-term cost of extending or guaranteeing credit, in present value 
terms, over the entire period the loans are outstanding (not including 
administrative costs). 

[End of table] 

As a result of required federal purchases of electricity from 
renewable sources, the federal government provided incentives to 
produce wind and solar energy. In addition, through the loan guarantee 
program described above, the federal government assumed risks of 
defaults on loans to firms engaged in developing wind and solar energy 
projects. These federal actions had the potential to lower the costs 
for some of these projects. Such lower costs could have led to certain 
projects being financed that otherwise may not have been developed. 

Along with federal activities, the studies and reports we reviewed 
indicated that technological advances played a role in influencing 
increases in production and consumption of wind and solar energy. For 
example, according to DOE's National Renewable Energy Laboratory 
(NREL), wind turbine manufacturers increased turbine performance by 
steadily increasing the turbine height and rotor diameter of their 
turbines from 2000 through 2010. In addition, the average capacity of 
wind turbines installed in the United States has more than doubled 
since 2000--increasing from 0.88 megawatts in 2000 to 1.95 megawatts 
in 2012, according to NREL. Regarding solar technology, technological 
innovation--along with improved manufacturing processes and growing 
markets--resulted in declining costs associated with the manufacture 
of photovoltaic technologies, according to a 2012 DOE study.[Footnote 
116] 

[End of section] 

Appendix VI: Federal Tax Expenditures, Outlays, and Loan Guarantees 
Related to Renewable Energy: 

Table 5 provides descriptions of the three federal tax expenditures we 
identified in appendix V as targeting or related to ethanol, wind 
energy, and solar energy, as well as four additional federal tax 
expenditures we identified as more broadly targeting or related to 
renewable energy. The table also provides information from the 
Department of the Treasury (Treasury) on tax expenditures that will or 
have expired, in full or in part, due to an expiration of legislative 
authority or some other expiration under the law as of the fall of 
2014, as well as on tax expenditures that currently have no 
expiration. In addition, the table provides information on revenue 
loss estimates from Treasury (unless otherwise specified). 

Table 5: Seven Federal Tax Expenditures Targeting or Related to 
Renewable Energy, Fiscal Year 2000-2013: 

Name: Alcohol fuel credits (including related excise tax credit); 
Description: The tax code provides three income tax credits for 
alcohol-based motor fuels: the alcohol mixture credit (or blender's 
credit), the pure alcohol fuel credit, and the small ethanol producer 
credit. The alcohol mixture credit is 45¢ per gallon of ethanol of at 
least 190 proof and is available to the blender (e.g., the refiner, 
wholesale distributor, or marketer). The alcohol mixture credit is 
typically claimed as an instant excise tax credit (referred to as the 
volumetric ethanol excise tax credit). The pure alcohol fuel credit is 
45¢ per gallon of ethanol of at least 190 proof and can only be 
claimed by the consumer or retail seller. For small ethanol producers, 
the law also provides for a production tax credit in the amount of 10¢ 
per gallon of ethanol produced and sold for use as a transportation 
fuel. This credit is limited to the first 15 million gallons of annual 
alcohol production for each small producer, defined as one with an 
annual production capacity of fewer than 60 million gallons. This is 
in addition to any blender's tax credit claimed on the same fuel. In 
addition, the tax code provides an income tax credit for cellulosic 
biofuels. The amount of the credit is $1.01 per gallon. In the case of 
cellulosic biofuel that is alcohol, the credit amount is reduced; 
Expiration information: Most of these provisions expired as of 
December 31, 2011; 
the tax credit for cellulosic biofuels expired as of December 31, 2013; 
Estimated revenue losses: $39.28 billion. 

Name: Production tax credit (also called energy production credit)[A]; 
Description: Taxpayers producing energy from a qualified renewable 
energy source may qualify for a tax credit on a per-kilowatt-hour 
basis. Qualified energy sources include wind, solar energy, geothermal 
energy, closed-loop and open-loop biomass, small irrigation power, 
municipal solid waste, qualified hydropower production, and marine and 
hydrokinetic renewable energy sources. The credit amount in 2012 was 
2.2 cents per kilowatt-hour for wind, solar, closed-loop biomass, and 
geothermal energy sources and 1.1 cents per kilowatt-hour for other 
energy sources. The credit amount is based on the 1993 value of 1.5 
cents per kilowatt-hour, which is adjusted annually for inflation. 
This credit is generally available for 10 years, beginning on the date 
when the facility is placed in service. For facilities placed in 
service during 2009, 2010, and 2011, taxpayers could claim an 
investment tax credit or Section 1603 cash payment in lieu of 
receiving the production tax credit; 
Expiration information: Construction must have begun before January 1, 
2014; 
Estimated revenue losses: $9.59 billion. 

Name: Biodiesel and small agri-biodiesel producer tax credits 
(including related excise tax credit); 
Description: The tax code provides three income tax credits for 
biodiesel: the biodiesel fuel mixtures credit (i.e., blends of 
biodiesel and petroleum diesel); the unblended (pure) biodiesel 
credit, which is either used or sold at retail by the taxpayer; 
and the small biodiesel producer credit. These tax credits are $1.00 
per gallon of biodiesel, including agri-biodiesel (i.e., biodiesel 
made from virgin oils) and renewable biodiesel. The mixtures tax 
credit may be claimed as an instant excise tax credit against the 24.4 
cents per gallon tax on diesel blends. In addition, the tax code 
provides an income tax credit of 10 cents per gallon for the first 15 
million gallons of agri-biodiesel produced by small agri-biodiesel 
producers each year. Small agri-biodiesel producers are defined as 
those with a production capacity less than 60 million gallons per 
year. This credit can be taken in addition to the $1.00 per gallon 
income or excise tax credit on the sale of the agri-biodiesel produced 
by small producers; 
Expiration information: These provisions expired as of December 31, 
2013; 
Estimated revenue losses: $5.84 billion. 

Name: Investment tax credit (also called energy investment credit)[B]; 
Description: The tax code provides an income tax credit for business 
investments in solar, fuel cells, small wind turbines, geothermal 
systems, microturbines, and combined heat and power. Solar, fuel cell, 
and small wind turbine investments qualify for a 30 percent credit. 
(The credit for fuel cells is limited to $1,500 per 0.5 kilowatt of 
capacity.) The tax credit for investments in geothermal systems, 
microturbines, and combined heat and power is 10 percent. (The credit 
for microturbines is limited to $200 per kilowatt of capacity.) 
Provisions enacted as part of the American Recovery and Reinvestment 
Act of 2009 (Recovery Act) allow (1) taxpayers to elect to claim this 
credit for property that otherwise would have qualified for the 
production tax credit and (2) taxpayers eligible for this credit to 
receive a Section 1603 payment from the Treasury in lieu of tax 
credits; 
Expiration information: In general, this provision will expire on 
December 31, 2016; 
however, the credit for solar investments will decrease to 10 percent, 
and the credit for geothermal investments will remain at 10 percent; 
Estimated revenue losses: $4.30 billion. 

Name: Accelerated depreciation recovery periods for specific energy 
property: renewable energy[C]; 
Description: A taxpayer is allowed to recover, through annual 
depreciation deductions, the cost of certain property used in a trade 
or business or for the production of income. The tax code provides a 5-
year recovery period for certain renewable energy equipment, including 
solar, wind, geothermal, fuel cell, combined heat and power, and 
microturbine property. Renewable energy generation property that is 
part of a "small electric power facility" and certain biomass property 
are also recovered over 5 years. However, the Economic Stimulus Act of 
2008 included a 50 percent first-year bonus depreciation provision for 
a wide range of eligible properties including renewable energy 
systems. This provision was extended by the Recovery Act, and by the 
Creating Small Business Jobs Act of 2010. Bonus depreciation was 
further extended through 2012 by the Tax Relief, Unemployment 
Insurance Reauthorization, and Job Creation Act of 2010, with a 100 
percent deduction allowed for property acquired after September 8, 
2010, and before January 1, 2012. The American Taxpayer Relief Act of 
2012 extended 50 percent expensing for qualifying property purchased 
and placed in service before January 1, 2014. The 50 percent bonus 
depreciation narrowed any tax differences between eligible assets 
based on cost recovery provisions, and the 100 percent bonus 
depreciation eliminated those differences altogether under the 
provision for allowing a full write-off of asset acquisition costs; 
Expiration information: Property had to be placed in service by 
January 1, 2014 (or January 1, 2015 for certain other assets) to 
quality for bonus depreciation. The 5-year recovery period for certain 
solar equipment will expire on December 31, 2016; 
Estimated revenue losses: $1.70 billion[D]. 

Name: Advanced energy property credit[E]; 
Description: The Recovery Act established a 30 percent tax credit for 
qualified investments in advanced energy property. Advanced energy 
projects that may qualify for the tax credit include those that 
reequip, expand, or establish eligible manufacturing facilities. 
Facilities that produce the following types of property may qualify: 
(1) property designed to produce energy using a renewable resource 
(i.e., solar, wind, geothermal), (2) fuel cells, microturbines, or 
energy storage systems for use with electric or hybrid-electric 
vehicles, (3) advanced transmission technologies that support 
renewable generation (including storage), (4) carbon capture and 
sequestration property, (5) property designed to refine or blend 
renewable fuels, (6) energy conservation technologies (i.e., energy-
saving lighting or smart grid technologies), (7) plug-in electric 
vehicles and components, and (8) other advanced energy property 
designed to reduce greenhouse gas emissions. A total of $2.3 billion 
was allocated for advanced energy property investment tax credits. The 
tax credits were competitively awarded by the Department of Energy 
(DOE) and Treasury. Taxpayers receiving this credit cannot also claim 
the investment tax credit; 
Expiration information: No expiration under current law (other than 
the credit allocation limit); 
Estimated revenue losses: $1.40 billion. 

Name: Credit for holding clean renewable energy bonds; 
Description: New clean renewable energy bonds help tax-exempt entities 
finance capital expenditures for new facilities that produce 
electricity from renewable sources. Bond holders receive tax credits 
at 70 percent of the tax credit interest rate, in lieu of interest 
payments. These bonds may be issued by a public power provider, a 
cooperative electric company, a governmental body, a clean renewable 
energy bond lender or a not-for-profit electric utility that has 
received a loan or loan guarantee under the Rural Electrification Act. 
Treasury publicly solicited applications for an initial volume cap, 
set by Congress at $800 million, and awarded allocations based on 
criteria and applications received. An additional $1.6 billion in new 
clean renewable energy bond authorization was provided under the 
Recovery Act. In March 2010, provisions included in the Hiring 
Incentives to Restore Employment Act allowed issuers of clean 
renewable energy bonds (and other qualified tax-credit bonds) to 
receive a direct payment from the Treasury instead of providing tax 
credits to bondholders; 
Expiration information: No expiration under current law; 
Estimated revenue losses: $0.43 billion. 

Sources: GAO analysis of Treasury, Joint Committee on Taxation, and 
Congressional Research Service information. GAO-14-836. 

Note: Revenue losses reflect Treasury estimates from the President's 
budget unless otherwise specified. Revenue loss estimates do not 
incorporate any behavioral responses and thus do not reflect the exact 
amount of revenue that would be gained if a specific tax expenditure 
was repealed. In addition, while sufficiently reliable as a gauge of 
general magnitude, summing individual tax expenditures' revenue loss 
estimates does not take into account interactions between individual 
provisions. 

[A] The production tax credit includes revenue losses from the new 
technology credit. 

[B] The investment tax credit may include revenue losses associated 
with combined heat and power, fuel cells, and microturbines. 

[C] The accelerated depreciation recovery periods for specific energy 
property: renewable energy may include revenue losses associated with 
combined heat and power and microturbines. The Joint Committee on 
Taxation generally classifies as tax expenditures cost recovery 
allowances that are more favorable than those provided under the 
alternative depreciation system (Internal Revenue Code Section 
168(g)), which provides for straight-line recovery over tax lives that 
are longer than those permitted under the accelerated system. 
Accelerated depreciation, in effect, reduces the cost of acquiring 
energy properties by allowing businesses to deduct larger amounts from 
their taxable income sooner than they would be able to do under 
straight-line depreciation. Reducing tax liability earlier provides a 
benefit to the taxpayer because of the time value of money--having a 
lower tax payment today is worth more to the taxpayer than having the 
lower payment in the future. 

[D] The revenue loss estimate is reported by the Joint Committee on 
Taxation only. 

[E] The advanced energy property credit may include revenue losses 
associated with fuel cells, microturbines, or energy storage systems 
for use with electric or hybrid-electric vehicles. 

[End of table] 

Table 6 provides a description of the federal program we identified in 
appendix V as targeting or related to wind and solar energy, as well 
as two additional federal programs we identified as more broadly 
targeting or related to renewable energy. The table also provides 
information reported by the Office of Management and Budget (OMB) on 
outlays. 

Table 6: Three Federal Programs with Outlays Targeting or Related to 
Renewable Energy, Fiscal Year 2000-2013: 

Name: Payments for specified energy property in lieu of tax credits, 
Department of the Treasury; 
Description: Section 1603 of the Recovery Act, as amended, established 
a program to provide payments to eligible applicants who place 
specified energy property (related to renewable energy, among other 
things) in service for use in a trade or business. Applicants could 
take the payment in lieu of either a production or investment tax 
credit. These payments provide an incentive for investment in property 
for electricity production, particularly those applicants without 
sufficient tax liability to utilize a nonrefundable tax credit. The 
program provided payments for eligible energy projects placed in 
service during 2009, 2010, or 2011, or after 2011 if construction 
began on the property during 2009, 2010, or 2011 and the property is 
placed in service by a certain date known as the credit termination 
date (e.g., Jan. 1, 2017 for certain energy property); 
Outlays: $19.65 billion[A]. 

Name: Bioenergy for Advanced Biofuels program and Repowering 
Assistance program, U.S. Department of Agriculture; 
Description: The Bioenergy for Advanced Biofuels program, authorized 
under the Food, Conservation, and Energy Act of 2008, provides 
payments to eligible producers to support and ensure an expanding 
production of advanced biofuels, which are defined as fuel derived 
from renewable biomass other than corn kernel starch. The amount of 
each payment depends on the number of producers participating in the 
program, the amount of advanced biofuels being produced, and the 
amount of funds available. The Repowering Assistance program, 
authorized under the Food, Conservation, and Energy Act of 2008, 
provides payments to biorefineries to replace fossil fuels with 
renewable biomass as a means to produce heat and power. To be 
eligible, the biorefineries must be located in a rural area and must 
have been in existence as of June 18, 2008. Payments are available for 
periods of up to 3 years; 
Outlays: $0.24 billion. 

Name: Payment in lieu of tax credit for holders of clean renewable 
energy bonds, Department of the Treasury; 
Description: Issuers of clean renewable energy bonds can choose to 
receive a direct payment from the federal government in lieu of the 
tax credit for bondholders; 
Outlays: $0.06 billion. 

Sources: GAO analysis of Office of Management and Budget, Energy 
Information Administration, and Congressional Research Service 
documentation. GAO-14-836. 

[A] Section 1603 payments include payments associated with combined 
heat and power, fuel cells, microturbines, and other energy 
technologies. 

[End of table] 

Table 7 provides a description of the federal loan guarantee program 
we identified in appendix V as targeting or related to wind and solar 
energy, as well as an additional federal loan guarantee program we 
identified as more broadly targeting or related to renewable energy. 
The table also provides information on disbursements and estimated 
costs reported by OMB and provided by DOE. 

Table 7: Two Federal Loan Guarantee Programs Targeting or Related to 
Renewable Energy, Fiscal Year 2000-2013: 

Name: Title 17 Innovative Technology Loan Guarantee Program, DOE; 
Description: This program, originally authorized by Section 1703 of 
the Energy Policy Act of 2005, was amended by Section 406 of the 
Recovery Act to establish a temporary program for the rapid deployment 
of renewable energy and electric power transmission projects, as well 
as leading-edge biofuels projects; 
Disbursements: $15.33 billion[B]; 
Estimated costs[A]: $1.72 billion[C]. 

Name: Biorefinery Assistance Program, U.S. Department of Agriculture; 
Description: This program, authorized under the Food, Conservation, 
and Energy Act of 2008, assists in the development of new and emerging 
technologies for producing advanced biofuels through loan guarantees 
to fund the development, construction, and retrofitting of commercial-
scale biorefineries using an eligible technology. Eligible 
technologies include those that are being adopted or have been 
demonstrated to have the potential for application in a commercial-
scale biorefinery that produces an advanced biofuel. The maximum 
available loan guarantee under the program is $250 million; 
Disbursements: $0.22 billion; 
Estimated costs[A]: $0.04 billion. 

Sources: GAO analysis of Office of Management and Budget, Department 
of Energy, and Energy Information Administration documentation. 
GAO-14-836. 

[A] These costs are current estimates of the credit subsidy costs of 
disbursed amounts. Credit subsidy costs represent the government's 
estimated net long-term cost of extending or guaranteeing credit, in 
present value terms, over the entire period the loans are outstanding 
(not including administrative costs). 

[B] Refers to the loan amounts at closing that appear in DOE's 
accounting system. They include the full amount of the loans partially 
guaranteed through the Financial Institution Partnership Program and 
do not include capitalized interest. 

[C] The Title 17 Innovative Technology Loan Guarantee Program also 
provided $33 million in credit subsidy costs from fiscal year 2000 
through fiscal year 2013 related to other areas such as energy 
efficiency and electric power transmission projects. These costs are 
not reflected in this table. 

[End of table] 

[End of section] 

Appendix VII: Information on Other Federal Activities Related to 
Aspects of U.S. Energy Production and Consumption: 

This appendix provides more detailed information on other federal 
activities that were not targeted specifically at fossil, nuclear, or 
renewable energy production and consumption but may have influenced 
aspects of U.S. energy production and consumption from 2000 through 
2013. It also provides information on federal energy-related research 
and development (R&D). 

Federal Activities Not Targeted at a Specific Energy Source: 

The studies and reports we reviewed indicated that a number of federal 
activities may have influenced U.S. energy production and consumption 
from 2000 through 2013 but were not targeted at a specific energy 
source. These activities included setting standards and requirements 
for energy efficiency, selling electricity, providing loans and loan 
guarantees related to energy efficiency, making outlays for energy 
consumption and energy efficiency, and forgoing revenues through tax 
expenditures for electricity transmission and energy efficiency, among 
other things. 

Setting Standards and Requirements: 

The federal government established or strengthened a number of 
standards and requirements generally related to energy production and 
consumption from 2000 through 2013. For example, since the 1970s, the 
federal government has regulated vehicle fuel economy through 
corporate average fuel economy (CAFE) standards, which originally 
required manufacturers to meet a single fleetwide standard for all 
cars and either a single standard or class standards for light trucks. 
[Footnote 117] The Energy Independence and Security Act of 2007 (EISA) 
instituted several changes to CAFE standards in 2007, such as moving 
from a single fleet standard to an attribute-based standard.[Footnote 
118] In 2009, the U.S. administration announced a new policy to 
increase vehicle fuel economy by strengthening CAFE standards and 
aligning them with the first greenhouse gas emissions standards for 
vehicles, which would be administered by the Environmental Protection 
Agency (EPA).[Footnote 119] The Department of Transportation and EPA 
established a national program for these two sets of standards by 
issuing coordinated regulations covering vehicle model years 2012 to 
2025 in May 2010 and October 2012.[Footnote 120] Vehicle manufacturers 
will have to meet more stringent fuel economy standards, which are 
projected to be equivalent to over 50 miles per gallon by 2025. 
[Footnote 121] 

In addition, since the 1970s, the federal government has established 
minimum efficiency standards requiring that certain products, such as 
residential appliances, commercial equipment, and lighting products, 
meet specified energy efficiency standards before they can be sold in 
the United States.[Footnote 122] The Energy Policy and Conservation 
Act of 1975 required the Department of Energy (DOE) to set minimum 
energy-efficiency standards for manufacturers of specified categories 
of consumer products such as refrigerators, dishwashers, furnaces, and 
hot water heaters.[Footnote 123] The statute was later amended (e.g., 
by the Energy Policy Act of 2005 [EPAct] and EISA) to include 
additional categories of consumer products. Manufacturers' compliance 
with the standards is mandatory. The statute further requires DOE to 
set and periodically review and revise standards for these product 
categories to achieve the maximum level of energy efficiency that is 
technically feasible and economically justified. 

The federal standards for vehicle fuel economy and for energy 
efficiency standards in products provided disincentives for overall 
energy production and consumption. Specifically, as we concluded in 
August 2007, the CAFE program reduced oil consumption by cars and 
light trucks from what it would have otherwise been, and the evidence 
suggested that increasing CAFE standards would save additional oil in 
the future.[Footnote 124] In addition, as we found in March 2013, DOE 
estimated that, from the inception of the federal minimum efficiency 
standards program in 1975 through 2005, consumer benefits from these 
standards amounted to about $64 billion.[Footnote 125] DOE projected 
that the standards will save consumers $241 billion by 2030 and $269 
billion by 2045. 

Directly Providing Goods and Services: 

The federal government directly provided goods and services generally 
related to energy production and consumption from 2000 through 2013. 
For example, the federal government is the largest owner of 
electricity-generating capacity in the country and owns significant 
electricity transmission assets. Development of these resources was 
initially pursued as part of efforts to provide electricity to rural 
areas, control flooding, and provide irrigation. Five federal 
utilities--four power marketing administrations and the Tennessee 
Valley Authority (TVA)--provide electricity and transmission services 
to customers in their regions.[Footnote 126] The power marketing 
administrations sell power produced primarily at federal hydroelectric 
dams and projects that are owned and operated by the Department of the 
Interior's Bureau of Reclamation, the U.S. Army Corps of Engineers, or 
the International Boundary and Water Commission. TVA markets 
electricity produced at its own fossil, nuclear, and hydroelectric 
energy facilities. 

In October 2011, we reported on several features of TVA's operations 
as a federally owned electric utility that provided incentives for 
energy production and consumption in its power service area--covering 
about 80,000 square miles in the southeastern United States, including 
almost all of Tennessee and parts of Mississippi, Kentucky, Alabama, 
Georgia, North Carolina, and Virginia, with a population of more than 
nine million people.[Footnote 127] In fiscal year 2010, TVA sold more 
than 173 million megawatt-hours of electricity to customers. To meet 
this customer demand, TVA generates electricity at 11 coal-fired 
plants, 11 natural gas-fired plants, 3 nuclear plants, and 29 
hydroelectric dams, among other things. Under the TVA Act of 1933, as 
amended, TVA has not been subject to many of the regulatory oversight 
requirements that commercial utilities must satisfy.[Footnote 128] TVA 
is also exempt from paying federal and state taxes and can borrow 
funds for investment in its power system at very competitive interest 
rates as a result of its triple-A credit rating--which, as we have 
found, is based partly on its status as a federal entity.[Footnote 
129] Additionally, unlike many utilities, TVA charges rates for its 
electric power that are not subject to review and approval by state 
public utility commissions. However, in setting TVA's rates, TVA's 
Board must comply with the primary objectives of the TVA Act, 
including the objective that power shall be sold at rates as low as 
are feasible. 

Assuming Risk: 

Through loan and loan guarantee programs, the federal government 
assumed risks generally related to energy production and consumption 
from 2000 through 2013. Specifically, we identified three federal 
programs that provided loans and loan guarantees targeting energy 
efficiency and other activities from fiscal year 2000 through 2013. 
These programs are described below: 

* Direct and Guaranteed Electric Loan Program. This U.S. Department of 
Agriculture (USDA) program, authorized under the Rural Electrification 
Act of 1936, provides loans and loan guarantees to establish and 
improve electric service in rural areas, and to assist electric 
borrowers in implementing demand side management, energy efficiency 
and conservation programs, and on-grid and off-grid renewable energy 
systems. These loans and loan guarantees provide financing under 
favorable terms to eligible nonprofit utility organizations, such as 
electric co-ops and public utility districts, as well as to for-profit 
entities. According to USDA, the program supports approximately 700 
electric system borrowers in 46 states. This program disbursed about 
$45 billion in loans from fiscal year 2000 through 2013 with a total 
cost of about $0.7 billion.[Footnote 130] To the extent that some of 
these loans supported energy efficiency and conservation programs, 
this program provided a disincentive for energy production and 
consumption. However, because some loans may have supported renewable 
energy systems, this program also provided incentives for energy 
production and consumption. 

* Advanced Technology Vehicles Manufacturing loan program. This DOE 
program, authorized under EISA, provides loans to support development 
of advanced technology vehicles and associated components in the 
United States that would increase the fuel economy of U.S. passenger 
vehicles. EISA authorized DOE to make $25 billion in loans under this 
program. As we reported in March 2013, DOE has used the program to 
make five loans worth $8.4 billion.[Footnote 131] Two of the loans in 
this program defaulted, and one has been paid back in full. The 
current estimated cost of the loans is about $0.3 billion.[Footnote 
132] Because these loans supported improvements in the fuel economy of 
passenger vehicles, this program provided disincentives for energy 
production and consumption. 

* Green Retrofit Program for Multifamily Housing. This Department of 
Housing and Urban Development program, established by the American 
Recovery and Reinvestment Act of 2009 (Recovery Act), funds energy and 
green retrofits to selected affordable multifamily properties through 
grants and loans. Eligible projects include the installation of 
efficient heating and cooling systems and appliances, and the upgrade 
of units to reduce water usage, increase indoor air quality, and 
provide other various environmental benefits. This program disbursed 
about $83 million in loans from fiscal year 2000 through 2013 with a 
total cost of about $66 million.[Footnote 133] 

In addition, we identified other federal loan programs generally 
related to energy production and consumption, but for which we were 
unable to identify data on the level of federal support. For example, 
the Farm Security and Rural Investment Act of 2002, as amended, 
established the Rural Energy for America Program within USDA to 
provide loan guarantees to agricultural producers and small businesses 
in rural areas to assist with purchasing and installing energy 
efficiency improvements and renewable energy systems.[Footnote 134] 
Costs associated with loans from this program totaled about $17 
million from fiscal year 2000 through 2013; however, USDA did not 
report costs specifically related to energy efficiency separately from 
costs related to renewable energy. 

Providing Funds: 

The federal government provided funds generally related to energy 
production and consumption from 2000 through 2013. Specifically, we 
identified five federal programs and activities with almost $51 
billion in outlays from fiscal year 2000 through 2013. Of these total 
outlays, about $40 billion were associated with the Department of 
Health and Human Services' Low Income Home Energy Assistance Program, 
which provides funds to low-income households to help cover home 
heating and cooling costs. As shown in figure 27, outlays associated 
with this program generally increased from fiscal year 2000 through 
2010, then decreased through fiscal year 2013. Specifically, program 
outlays rose from $1.5 billion in fiscal year 2000 to $4.6 billion in 
fiscal year 2010 before decreasing to $3.5 billion in fiscal year 
2013. Because this program made outlays to low-income households to 
purchase energy, it provided an incentive for energy production and 
consumption. However, this spending cannot easily be attributed to 
specific energy sources or fuel types because funds supporting energy 
purchases in different regions would encourage consumption of 
different mixes of these fuels, reflecting regional differences in how 
energy is produced. 

Figure 27: Federal Outlays Generally Related to Energy Production and 
Consumption, Fiscal Year 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000; 
Low Income Home Energy Assistance Program: $1.5 billion; 
Agency energy efficiency projects: $0.12. 

Year: 2001; 
Low Income Home Energy Assistance Program: $2.16 billion; 
Agency energy efficiency projects: $0.11. 

Year: 2002; 
Low Income Home Energy Assistance Program: $1.77 billion; 
Agency energy efficiency projects: $0.12. 

Year: 2003; 
Low Income Home Energy Assistance Program: $2.03 billion; 
Agency energy efficiency projects: $0.17. 

Year: 2004; 
Low Income Home Energy Assistance Program: $1.89 billion; 
Agency energy efficiency projects: $0.17 billion. 

Year: 2005; 
Low Income Home Energy Assistance Program: $2.1 billion; 
Agency energy efficiency projects: $0.29 billion. 

Year: 2006; 
Low Income Home Energy Assistance Program: $2.64 billion; 
Agency energy efficiency projects: $0.28 billion. 

Year: 2007; 
Low Income Home Energy Assistance Program: $2.5 billion; 
Agency energy efficiency projects: $0.34 billion. 

Year: 2008; 
Low Income Home Energy Assistance Program: $2.66 billion; 
Agency energy efficiency projects: $0.47 billion. 

Year: 2009; 
Low Income Home Energy Assistance Program: $4.53 billion; 
Agency energy efficiency projects: $1.08 billion. 

Year: 2010; 
Low Income Home Energy Assistance Program: $4.6 billion; 
Agency energy efficiency projects: $3.54 billion; 
Other: $0.07 billion. 

Year: 2011; 
Low Income Home Energy Assistance Program: $4.42 billion; 
Agency energy efficiency projects: $2.57 billion; 
Other: $0.16 billion. 

Year: 2012; 
Low Income Home Energy Assistance Program: $3.82 billion; 
Agency energy efficiency projects: $1.08 billion; 
Other: $0.06 billion. 

Year: 2013; 
Low Income Home Energy Assistance Program: $3.53 billion; 
Other: $0.05 billion. 

Sources: GAO analysis of Office of Management and Budget and DOE data. 
GAO-14-836. 

Note: Data on agency energy efficiency projects were available only 
for fiscal years 2000 through 2012. Other includes outlays made by the 
Department of Housing and Urban Development, Department of the 
Treasury, and Department of Transportation. Data are not adjusted for 
inflation. 

[End of figure] 

Table 8 provides a description of these five federal programs and 
activities, as well as providing information reported by the Office of 
Management and Budget (OMB) and provided by DOE on outlays. 

Table 8: Five Federal Programs and Activities with Outlays Generally 
Related to Energy Production and Consumption, Fiscal Year 2000-2013: 

Name: Low Income Home Energy Assistance Program, Department of Health 
and Human Services; 
Description: This program was established as a block grant program in 
1981 for the purpose of subsidizing heating and cooling costs for low-
income households. These grants are provided to states, territories 
and tribes who are then free to administer the program within the 
requirements of federal law. In general, federal requirements set 
eligibility at 150 percent of the federal poverty level or 60 percent 
of the state's median income. Other federal rules include coordination 
with DOE's Weatherization Assistance program, annual audits, and 
outreach activities. Heating and/or cooling assistance funds may be 
paid directly to eligible households or to retail energy suppliers in 
the form of cash or vouchers, but in practice the majority of funds 
are paid directly to the energy providers; 
Outlays: $40.14 billion. 

Name: Federal agency energy efficiency projects[A]; 
Description: Under legislative mandates and executive orders such as 
the Energy Policy Act of 2005, Energy Independence and Security Act of 
2007, and Executive Order 13423, federal agencies are required to 
improve the energy efficiency of their buildings. Federal agencies 
that own or control buildings are required to annually report the 
energy consumption in these buildings to DOE. DOE collects data from 
30 federal agencies, including the Department of Defense, on outlays 
related to energy efficiency projects, among other things; 
Outlays: $10.34 billion[B]. 

Name: Green Retrofit Program for Multifamily Housing, Department of 
Housing and Urban Development; 
Description: Established by the Recovery Act, this program funds 
energy and green retrofits to selected affordable multifamily 
properties through grants and loans. Eligible projects include the 
installation of efficient heating and cooling systems and appliances, 
and the upgrade of units to reduce water usage, increase indoor air 
quality, and provide other various environmental benefits; 
Outlays: $0.24 billion. 

Name: Payment in lieu of tax credit for holders of qualified energy 
conservation bonds, Department of the Treasury; 
Description: Issuers of qualified energy conservation bonds can choose 
to receive a direct payment from the federal government in lieu of tax 
credit for bondholders; 
Outlays: $0.06 billion. 

Name: Transit Investments for Greenhouse Gas and Energy Reduction 
Program, Department of Transportation; 
Description: This program provides direct funding to public transit 
agencies for capital investments that assist in reducing the energy 
consumption or greenhouse gas emissions of public transportation 
systems. Initiated under the Recovery Act, the program funds capital 
investments such as energy systems incorporating wind, solar, and 
geothermal. The program was continued in fiscal years 2010 and 2011. 
In addition to funding capital investments, the department, through an 
interagency agreement with DOE's National Renewable Energy Laboratory, 
is evaluating the overall program, which will include collecting data 
on projects funded under the program and validating greenhouse gas and 
energy savings claims made in project proposals; 
Outlays: $0.04 billion. 

Sources: GAO analysis of Office of Management and Budget and DOE data 
and documentation. GAO-14-836. 

[A] Federal agencies are also required to improve the energy 
efficiency of their vehicle fleets, such as by ensuring that most of 
their vehicle purchases are for alternative fuel vehicles (e.g., 
electric vehicles and plug-in hybrids). However, we were unable to 
obtain data on an annual basis related to purchases of energy-
efficient vehicles. 

[B] DOE data on outlays for agency energy efficiency projects were not 
available for fiscal year 2013; data are for fiscal years 2000 through 
2012. 

[End of table] 

We also identified other outlays that generally related to energy 
production and consumption, but for which we were unable to identify 
data on the level of federal support. For example, USDA's High Energy 
Cost Grants program, authorized under the Rural Electrification Act of 
1936, provides grants for energy generation, transmission, and 
distribution facilities serving rural communities with annual average 
home energy costs that exceed 275 percent of the national average. 
Applicants may receive grants for on-grid and off-grid renewable 
energy systems, as well as energy conservation and efficiency 
projects. This program provided $202 million in outlays from fiscal 
year 2000 through fiscal year 2013; however, USDA did not report on 
program outlays specifically related to electricity and energy 
efficiency separately from outlays related to renewable energy. In 
general, this program provided incentives for energy production and 
consumption through its support for energy generation and transmission 
to rural communities, while providing disincentives for energy 
consumption through energy conservation and efficiency projects. 

Forgoing Revenue: 

The federal government may have influenced general aspects of energy 
production and consumption from 2000 through 2013 through the tax 
code. Specifically, we identified 13 tax expenditures that resulted in 
more than $65 billion in federal revenue losses from fiscal year 2000 
through fiscal year 2013. As shown in figure 28, most of these revenue 
losses ($42 billion or 64 percent) were associated with a tax 
expenditure excluding employer-paid transportation benefits from 
taxation, including a number of benefits related to parking, transit 
passes, and vanpool transportation, among other things. This tax 
expenditure provided an incentive for the production and consumption 
of transportation fuels by reducing costs associated with parking. 
However, it also provided a disincentive for production and 
consumption of transportation fuels by reducing costs associated with 
the use of public transportation, which may rely on electricity or 
other forms of energy. 

Figure 28: Federal Revenue Losses Associated with Tax Expenditures 
Generally Related to Energy Production and Consumption, Fiscal Year 
2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000; 
Transportation benefits: $2.07 billion; 
Other: $$0.24 billion. 

Year: 2001; 
Transportation benefits: $2.2 billion; 
Other: $$0.21 billion. 

Year: 2002; 
Transportation benefits: $2.32 billion; 
Other: $$0.26 billion. 

Year: 2003; 
Transportation benefits: $2.45 billion; 
Other: $$0.24 billion. 

Year: 2004; 
Transportation benefits: $2.88 billion; 
Other: $$0.27 billion. 

Year: 2005; 
Transportation benefits: $3.07 billion; 
Other: $$0.72 billion. 

Year: 2006; 
Transportation benefits: $3.3 billion; 
Other: $$1.43 billion. 

Year: 2007; 
Transportation benefits: $3.25 billion; 
Other: $$1.7 billion. 

Year: 2008; 
Transportation benefits: $3.4 billion; 
Other: $$0.94 billion. 

Year: 2009; 
Transportation benefits: $3.5 billion; 
Other: $$1.27 billion. 

Year: 2010; 
Transportation benefits: $3.55 billion; 
Other: $$4.18 billion. 

Year: 2011; 
Transportation benefits: $3.62 billion; 
Other: $$6.28 billion. 

Year: 2012; 
Transportation benefits: $3.23 billion; 
Other: $$2.68 billion. 

Year: 2013; 
Transportation benefits: $3.29 billion; 
Other: $$2.89 billion. 

Note: Other includes revenue losses associated with 12 tax 
expenditures we identified as generally related to energy production 
and consumption. Data are not adjusted for inflation. 

[End of figure] 

Table 9 provides descriptions of these 13 federal tax expenditures. It 
also provides information from the Department of the Treasury 
(Treasury) on tax expenditures that will or have expired, in full or 
in part, due to an expiration of legislative authority or some other 
expiration under the law as of the summer of 2014, as well as on tax 
expenditures that currently have no expiration. In addition, the table 
provides information from Treasury on revenue loss estimates (unless 
otherwise specified). 

Table 9: 13 Federal Tax Expenditures Generally Related to Energy 
Production and Consumption, Fiscal Year 2000-2013: 

Name: Exclusion of employer-paid transportation benefits (parking, 
vanpools, and transit passes); 
Description: Some transportation benefits employers provide employees 
are tax exempt within certain limits. Qualified transportation 
benefits may include parking, vanpool transportation, and transit 
passes, among other things. The value of transit passes or parking 
costs provided directly by the employer can be excluded from 
employees' income, subject to a monthly limit. Transportation provided 
by employers (as opposed to transportation benefits paid for by 
employers) is also subject to a qualified tax exclusion. A limit 
applies to the total of parking, vanpool costs, and transit passes; 
Expiration information: No expiration under current law; 
Estimated revenue losses: $42.13 billion[A] ($35.82 billion for 
parking expenses and $6.31 billion for transit passes). 

Name: Credit for energy efficiency improvements to existing homes; 
Description: In 2011, a 10 percent credit was available for the 
purchase of qualified residential energy efficiency property to 
encourage homeowners to make their homes more energy efficient. The 
maximum credit amount was $500, with additional credit limits for 
specific property. The $500 cap is a lifetime maximum. This credit 
replaced a 30 percent credit, up to $1,500, that was available during 
2009 and 2010. Qualifying energy efficiency improvements include 
certain improvements to a building's envelope; heating, cooling, and 
water-heating equipment; and other energy efficiency property; 
Expiration information: This provision expired on December 31, 2013; 
Estimated revenue losses: $10.36 billion. 

Name: Credit for residential energy efficient property; 
Description: A 30 percent tax credit is available for the purchase of 
residential solar electric property, certain solar water heating 
property (used for purposes other than heating swimming pools or hot 
tubs), geothermal heat pumps, small wind energy property, and fuel 
cell power plants. For fuel cell property, the credit is limited to 
$500 per half kilowatt of capacity. Otherwise, there is no maximum 
credit amount. To qualify for the tax credit, eligible property must 
be installed in the United States in a dwelling used as a residence by 
the taxpayer. For fuel cell power plants to qualify, they must be 
installed in connection with the taxpayer's principal residence; 
Expiration information: This provision will expire on December 31, 
2016; 
Estimated revenue losses: $3.08 billion. 

Name: Exclusion of utility conservation subsidies; 
Description: In general, this provision allows a customer to exclude 
from their gross income the value of any subsidy provided (directly or 
indirectly) by a public utility for the purchase or installation of 
any energy conservation measure. An energy conservation measure is any 
installation or modification primarily designed to reduce consumption 
of electricity or natural gas or to improve the management of energy 
demand with respect to a dwelling unit. To the extent that an energy 
conservation expenditure qualifies for this exclusion, the taxpayer 
cannot claim any other tax benefits on the same expenditure; 
Expiration information: No expiration under current law; 
Estimated revenue losses: $2.04 billion. 

Name: Tax credits for clean-fuel burning vehicles and refueling 
property; 
Description: The tax code provides tax credits for a number of 
vehicles, including alternative fuel vehicles (i.e., vehicles that run 
on fuels such as compressed natural gas, liquefied natural gas, 
liquefied petroleum gas, and hydrogen, among other things); 
fuel cell vehicles; plug-in electric-drive motor vehicles; and two-and 
three-wheeled plug-in electric vehicles. Tax credits are also 
available for property used to refuel clean-fuel burning vehicles. A 
clean fuel refers to any fuel at least 85 percent of the volume of 
which consists of ethanol or methanol, natural gas, compressed natural 
gas, liquefied natural gas, liquefied petroleum gas, and hydrogen, 
among other things; 
Expiration information: Expiration dates are as follows: 
* Qualified heavy hybrid vehicles: 12/31/2009; 
* Fuel cell motor vehicle: 12/31/2014; 
* Advanced lean burn, qualified hybrid, and qualified alternative fuel 
motor vehicles: 12/31/2010; 
* Plug-in conversion credit: 12/31/2011; 
* 2-or 3-wheeled plug-in electric vehicles, and qualified refueling 
property: 12/31/2013; 
The tax code still provides a credit for plug-in electric vehicles, 
which is based on total manufacturing production and has no expiration 
date; 
Estimated revenue losses: $1.77 billion. 

Name: Special rule to implement electric transmission restructuring; 
Description: The tax code permits taxpayers to elect to recognize any 
capital gain from the sale of qualifying electricity transmission 
property to an independent transmission company, pursuant to a Federal 
Energy Regulatory Commission restructuring policy, evenly over 8 years 
beginning with the year of the sale. The sale proceeds must be 
reinvested in other electricity assets within 4 years. Generally, any 
gain realized from a sale or disposition of a capital asset is 
recognized in the tax year in which the gain was realized, unless 
there is a specific exemption or deferral--a taxpayer selling property 
recognizes any profits for tax purposes in the year of the sale. The 
recognition of gain over 8 years, rather than in the year of sale, is 
a deferral, rather than a complete forgiveness, of tax liability--it 
is a delay in the recognition of income, hence in the payment of tax; 
Expiration information: This provision expired on December 31, 2013; 
Estimated revenue losses: $1.68 billion. 

Name: Credit for energy efficient appliances; 
Description: The tax code provides a tax credit for qualified 
production (manufacture) of certain energy-efficient dishwashers, 
clothes washers, and refrigerators to encourage production of 
appliances that exceed the minimum federal energy-efficiency 
standards. For example, for dishwashers manufactured in 2011, the per 
unit credit is as follows: $25 for models that use no more than 307 
kilowatt-hours per year and 5.0 gallons per cycle; $50 for models that 
use no more than 295 kilowatt-hours per year and 4.25 gallons per 
cycle; and $75 for models that use no more than 280 kilowatt-hours per 
year and 4 gallons per cycle. Each manufacturer is only eligible for 
credits for domestic production of energy-efficient units in excess of 
average production over the past 2 years; 
Expiration information: This provision expired on December 31, 2013; 
Estimated revenue losses: $1.24 billion. 

Name: Accelerated depreciation recovery periods for specific energy 
property: electric transmission and smart electric distribution 
property[B]; 
Description: A taxpayer is allowed to recover, through annual 
depreciation deductions, the cost of certain property used in a trade 
or business or for the production of income. The tax code provides a 
15-year recovery period for certain electric transmission property 
originally placed in service after April 11, 2005. The tax code also 
provides a 10-year recovery period for qualified smart meter or 
qualified smart electric grid system (essentially energy monitoring 
and management devices); 
Expiration information: No expiration under current law; 
Estimated revenue losses: $1.10 billion[C]. 

Name: Allowance of deduction for certain energy efficient commercial 
building property; 
Description: The tax code provides a formula-based tax deduction for 
all or part of the cost of energy-efficient commercial building 
property (i.e., certain major energy-savings improvements made to 
domestic commercial buildings) placed in service after December 31, 
2005, and before January 1, 2014. The maximum cost of energy-efficient 
commercial building property that may be deducted in any tax year is 
limited to the product of $1.80 and the square footage of the 
building, over deductions claimed for energy efficient commercial 
building property in any prior tax years. In other words, the 
deduction is the lesser of: (1) the cost of the energy efficient 
commercial building property placed in service during the tax year or 
(2) the product of $1.80 and the square footage of the building, 
reduced by all deductions claimed with respect to the building in any 
prior tax years; 
Expiration information: This provision expired on December 31, 2013; 
Estimated revenue losses: $0.78 billion. 

Name: Exclusion of interest on energy facility bonds; 
Description: Interest income on state and local bonds used to finance 
the construction of certain private energy facilities is tax exempt. 
These energy facility bonds are classified as private-activity bonds, 
rather than as governmental bonds, because a substantial portion of 
their benefits accrues to individuals or business rather than to the 
general public. This exemption helps support the financing of projects 
by local electric utilities because bond purchasers are willing to 
accept lower before-tax rates of interest than on taxable securities, 
and these low interest rates enable issuers to provide the services of 
local energy facilities at lower cost, benefiting end users; 
Expiration information: No expiration under current law; 
Estimated revenue losses: $0.73 billion. 

Name: Credit for construction of new energy efficient homes; 
Description: This tax credit provides eligible contractors building 
energy-efficient new homes with a tax credit of up to $2,000 and 
eligible manufacturers of manufactured energy-efficient homes with a 
tax credit of up to $1,000 to encourage the installation of energy-
efficient technologies in new homes. Certified energy-efficient new 
homes qualifying for the tax credit have an annual heating and cooling 
energy consumption that is at least 50 percent below that of a 
comparable dwelling unit, among other things; 
Expiration information: This provision expired on December 31, 2013; 
Estimated revenue losses: $0.38 billion. 

Name: Five-year carryback period for certain net operating losses of 
electric utility companies; 
Description: A net operating loss is generally the amount by which a 
taxpayer's allowable deductions exceed the taxpayer's gross income. A 
carryback of such a loss generally results in the refund of federal 
income tax for the carryback year. A carryover of a loss reduces 
federal income tax for the carryover year. In general, a loss may be 
carried back 2 years and carried over 20 years to offset taxable 
income in such years. The tax code provides an election for certain 
electric utility companies to extend the carryback period to 5 years 
for a portion of losses arising in 2003, 2004, and 2005 ("loss years"); 
Expiration information: Utilities had to make their election during 
any taxable year ending after December 31, 2005, and before January 1, 
2009; 
Estimated revenue losses: $0.10 billion[C]. 

Name: Credit for holding qualified energy conservation bonds; 
Description: Qualified energy conservation bonds provide an 
opportunity for tax-exempt entities to issue bonds for which 
bondholders can receive an income tax credit in lieu of interest 
payments from the issuers of the bonds. These bonds can be issued to 
help finance projects that produce or conserve electricity, including 
capital expenditures incurred for rural development involving the 
production of electricity from renewable energy resources, as well as 
qualified facilities. Qualified energy conservation bonds can be used 
for a broad array of purposes, including expenditures for certain 
research facilities, grants, and demonstration projects. Similar to 
the new clean renewable energy bonds, the tax credit rate for 
qualified energy conservation bonds is 70 percent of the tax credit 
interest rate. Congress established an initial volume cap of $800 
million in bonds that could be issued. The cap was raised to $3.2 
billion under the Recovery Act. The Internal Revenue Service allocated 
the authority to issue the bonds to U.S. states and territories 
according to a population-based formula, and the states and 
territories further allocated the bond issuance authority for 
individual projects. For bonds issued after March 18, 2010, issuers 
can elect to receive a direct payment rather than allowing bond 
purchasers to claim tax credits; 
Expiration information: No expiration under current law; 
Estimated revenue losses: $0.05 billion. 

Sources: GAO analysis of Treasury, Joint Committee on Taxation, and 
Congressional Research Service information. GAO-14-836. 

Note: Revenue losses reflect Treasury estimates from the President's 
budget unless otherwise specified. Revenue loss estimates do not 
incorporate any behavioral responses and thus do not reflect the exact 
amount of revenue that would be gained if a specific tax expenditure 
were repealed. In addition, while sufficiently reliable as a gauge of 
general magnitude, summing individual tax expenditures' revenue loss 
estimates does not take into account interactions between individual 
provisions. 

[A] The estimate for the exclusion of employer-paid and employer-
provided transportation benefits does not include revenue losses 
associated with employer-provided parking facilities. 

[B] The Joint Committee on Taxation generally classifies as tax 
expenditures cost recovery allowances that are more favorable than 
those provided under the alternative depreciation system (Internal 
Revenue Code Section 168(g)), which provides for straight-line 
recovery over tax lives that are longer than those permitted under the 
accelerated system. Accelerated depreciation, in effect, reduces the 
cost of acquiring energy properties by allowing businesses to deduct 
larger amounts from their taxable income sooner than they would be 
able to do under straight-line depreciation. Reducing tax liability 
earlier provides a benefit to the taxpayer because of the time value 
of money--having a lower tax payment today is worth more to the 
taxpayer than having the lower payment in the future. 

[C] The revenue loss estimate is reported by the Joint Committee on 
Taxation only. 

[End of table] 

In addition, we identified other provisions of the tax code that are 
generally related to energy production and consumption, but for which 
data on the level of federal support were not readily available. For 
example, tax-exempt municipal bonds allow publicly-owned utilities to 
obtain lower interest rates than those available from either private 
borrowers or the U.S. Treasury. Lower interest rates reduce borrowing 
costs for such utilities and provide incentives for producing 
electricity. While tax-exempt municipal bonds are used by energy 
industries such as electric utilities, the group of eligible borrowers 
also includes water utilities, telecommunication facilities, waste 
treatment plants, and other publicly-owned entities. OMB and the Joint 
Committee on Taxation did not provide estimates of annual revenue 
losses related to electric utilities for fiscal year 2000 through 2013 
for this provision. Consequently, we cannot report the amount of 
forgone revenue related to this provision. 

Federal R&D Related to Specific Energy Sources: 

We identified four federal programs that made more than $20 billion in 
outlays for R&D related to fossil, nuclear, and renewable energy from 
fiscal year 2000 through fiscal year 2013.[Footnote 135] The vast 
majority of these outlays were made by three DOE program offices--the 
Office of Fossil Energy, Office of Nuclear Energy, and Office of 
Energy Efficiency and Renewable Energy. As shown in figure 29, federal 
outlays related to R&D for fossil, nuclear, and renewable energy 
generally increased from fiscal year 2000 to 2013, although some 
variation occurred. Specifically, federal outlays for R&D related to 
fossil energy increased from about $412 million in fiscal year 2000 to 
about $1 billion in fiscal year 2012 and $0.9 billion in 2013. Outlays 
for R&D related to nuclear energy increased over the time period to 
almost $1 billion in fiscal year 2009, and then decreased through 
fiscal year 2013. In addition, outlays for R&D related to renewable 
energy increased to about $1.3 billion in fiscal year 2012 and just 
over $1 billion in 2013. According to the Energy Information 
Administration (EIA), new or expanded programs associated with the 
Recovery Act had a significant impact on energy-related R&D spending. 
[Footnote 136] 

Figure 29: Federal Outlays for R&D Related to Specific Energy Sources, 
Fiscal Year 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000; 
Fossil energy: $0.412 billion; 
Nuclear energy: $0.133 billion; 
Renewable energy: $0.144 billion. 

Year: 2001; 
Fossil energy: $0.482 billion; 
Nuclear energy: $0.123 billion; 
Renewable energy: $0.19 billion. 

Year: 2002; 
Fossil energy: $0.458 billion; 
Nuclear energy: $0.118 billion; 
Renewable energy: $0.178 billion. 

Year: 2003; 
Fossil energy: $0.511 billion; 
Nuclear energy: $0.105 billion; 
Renewable energy: $0.173 billion. 

Year: 2004; 
Fossil energy: $0.5 billion; 
Nuclear energy: $0.127 billion; 
Renewable energy: $0.165 billion. 

Year: 2005; 
Fossil energy: $0.505 billion; 
Nuclear energy: $0.205 billion; 
Renewable energy: $0.196 billion. 

Year: 2006; 
Fossil energy: $0.504 billion; 
Nuclear energy: $0.186 billion; 
Renewable energy: $0.313 billion. 

Year: 2007; 
Fossil energy: $0.535 billion; 
Nuclear energy: $0.242 billion; 
Renewable energy: $0.469 billion. 

Year: 2008; 
Fossil energy: $0.524 billion; 
Nuclear energy: $0.542 billion; 
Renewable energy: $0.515 billion. 

Year: 2009; 
Fossil energy: $0.549 billion; 
Nuclear energy: $0.921 billion; 
Renewable energy: $0.812 billion. 

Year: 2010; 
Fossil energy: $0.706 billion; 
Nuclear energy: $0.838 billion; 
Renewable energy: $1.203 billion. 

Year: 2011; 
Fossil energy: $1.018 billion; 
Nuclear energy: $0.755 billion; 
Renewable energy: $1.157 billion. 

Year: 2012; 
Fossil energy: $1.047 billion; 
Nuclear energy: $0.744 billion; 
Renewable energy: $1.322 billion. 

Year: 2013; 
Fossil energy: $0.895 billion; 
Nuclear energy: $0.676 billion; 
Renewable energy: $1.026 billion. 

Source: GAO analysis of Office of Management and Budget data. 
GAO-14-836. 

Note: Some of these outlays may not be related to R&D activities. 
Fossil energy Includes outlays in DOE's Clean Coal Technology and 
Fossil Energy Research and Development accounts. Nuclear energy 
includes outlays in DOE's Nuclear Energy account and outlays in the 
Energy Supply and Conservation account based on obligated amounts. 
Renewable energy includes outlays in the Biomass Research and 
Development account, DOE's Energy Efficiency and Renewable Energy 
account related to energy supply, and outlays in the Energy Supply and 
Conservation account based on obligated amounts. Data are not adjusted 
for inflation. 

[End of figure] 

Table 10 provides a description of these four federal R&D programs and 
activities; it also provides information reported by OMB and provided 
by DOE on outlays. 

Table 10: Four Federal Programs with Outlays for R&D Related to 
Specific Energy Sources, Fiscal Year 2000-2013: 

Name: Fossil fuel activities, DOE; 
Description: The Office of Fossil Energy funds R&D and other programs 
for the reliable, efficient, affordable, and environmentally sound use 
of fossil fuels, including efforts related to advanced carbon capture 
and storage for coal-fueled electricity generation. DOE received $3.4 
billion from the Recovery Act for fossil fuel R&D; 
Outlays: $8.65 billion[A]. 

Name: Renewable energy activities, DOE; 
Description: The Office of Energy Efficiency and Renewable Energy have 
funded R&D and other programs to encourage the development and use of 
renewable energy, including efforts related to biomass systems, 
geothermal technologies, hydrogen and fuel cell technologies, solar 
energy technologies, water power, and wind energy; 
Outlays: $7.74 billion[B]. 

Name: Nuclear energy activities, DOE; 
Description: The Office of Nuclear Energy has funded R&D and other 
programs related to civilian nuclear energy programs, energy 
technologies, including generation, safety, waste storage and 
management, and security technologies, to help meet energy security, 
proliferation resistance, and climate goals; 
Outlays: $5.71 billion[C]. 

Name: Biomass Research and Development, Department of Agriculture; 
Description: This program is a joint effort between USDA and DOE to 
competitively award grants, contracts, and financial assistance to 
eligible entities to carry out research and development or 
demonstrations of biofuels and bio-based products and production 
techniques. Its objectives are to: (1) develop technologies and 
processes to produce biofuels at prices competitive with fossil fuels, 
(2) develop high-value bio-based products that can substitute for 
petroleum-based products, and (3) develop economically and 
environmentally sustainable domestic sources of renewable biomass for 
conversion to biofuels, bioenergy, and biobased products; 
Outlays: $0.12 billion. 

Source: GAO analysis of Office of Management and Budget documentation. 
GAO-14-836. 

Note: Some of these outlays may not be related to R&D activities. Data 
are not adjusted for inflation. 

[A] Includes outlays in the Clean Coal Technology and Fossil Energy 
Research and Development accounts. Of this amount, $3.4 billion was 
appropriated in the Recovery Act in fiscal year 2009. Some of these 
outlays may not be related to R&D activities. 

[B] Includes outlays in DOE's Energy Efficiency and Renewable Energy 
account related to energy supply, and outlays in the Energy Supply and 
Conservation account based on obligated amounts. 

[C] Includes outlays in DOE's Nuclear Energy account and outlays in 
the Energy Supply and Conservation account based on obligated amounts. 

[End of table] 

These outlays provided funding for a variety of energy-specific R&D at 
federally owned laboratories, as illustrated in the following examples: 

* Researchers at DOE's National Energy Technology Laboratory conducted 
R&D to resolve the environmental, supply, and reliability constraints 
of producing and using fossil resources. One area of R&D involved 
combustion science, which provides the basis for a new generation of 
advanced fossil fuel conversion technologies to meet future demands 
for efficient, clean, and cost-effective energy production. Combustion 
science researchers at the laboratory conducted exploratory and 
applied research in the areas of combustion science technology, and 
dynamics of engines and other energy conversion devices. This research 
included modeling, simulation, and laboratory-scale studies of 
advanced combustion turbines, among other things. 

* Researchers at DOE's Idaho National Laboratory conducted R&D on 
advanced nuclear reactor designs, including the Next Generation 
Nuclear Power Plant project, which are intended to offer safety and 
other improvements over the current generation of nuclear power 
plants. EPAct formally established the Next Generation Nuclear Plant 
as a DOE project and designated the Idaho National Laboratory as the 
lead laboratory and construction site for the plant and directs the 
laboratory to carry out cost-shared R&D, design, and construction 
activities with industrial partners. 

* Researchers at DOE's National Renewable Energy Laboratory (NREL) 
conducted R&D that led to technological advances for wind and solar 
energy technologies. For example, laboratory researchers collaborated 
with wind turbine manufacturers to develop variable-speed turbines to 
take advantage of lower wind conditions. This innovation allowed a 
turbine manufacturer to develop and refine its 1.5-megawatt turbines. 
In addition, laboratory researchers collaborated with solar cell 
manufacturers to refine their manufacturing techniques before going 
into full production. This collaboration helped a company to become 
the world's largest manufacturer of thin-film solar modules. 

Federal R&D Generally Related to Energy Production and Consumption: 

We identified four DOE programs that provided funding for R&D that 
were not linked to a specific energy source but related to more 
general aspects of energy production and consumption.[Footnote 137] 
These programs made about $47 billion in outlays from fiscal year 2000 
through 2013 for R&D related to basic energy sciences, energy 
efficiency and energy conservation, and electricity grid reliability, 
among other things.[Footnote 138] As shown in figure 30, federal 
outlays for these programs generally increased from fiscal year 2000 
to fiscal year 2013, although some variation occurred. Specifically, 
federal outlays for R&D related to energy efficiency and conservation 
increased from about $670 million in fiscal year 2000 to over $6 
billion in fiscal year 2011 and declining to about $2.0 billion in 
fiscal year 2013. Outlays for R&D related to basic energy science--
funded by DOE's Office of Science--increased from more than $700 
million in fiscal year 2000 to about $1.5 billion in fiscal year 2013. 
In addition, outlays for R&D related to other activities, such as 
electricity delivery and energy reliability, increased from about $10 
million in fiscal year 2003 to about $1.6 billion in fiscal years 
2011, before declining to about $1.1 billion in fiscal year 2013. As 
mentioned above, according to EIA, new or expanded programs associated 
with the Recovery Act had a significant impact on energy-related R&D 
spending. 

Figure 30: Federal Outlays for R&D Generally Related to Energy 
Production and Consumption, Fiscal Year 2000-2013: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000; 
Energy efficiency and conservation: $0.666 billion; 
Basic energy sciences: $0.747 billion. 

Year: 2001; 
Energy efficiency and conservation: $0.76 billion; 
Basic energy sciences: $0.883 billion. 

Year: 2002; 
Energy efficiency and conservation: $0.878 billion; 
Basic energy sciences: $0.955 billion. 

Year: 2003; 
Energy efficiency and conservation: $0.897 billion; 
Basic energy sciences: $0.998 billion; 
Other: $0.011 billion. 

Year: 2004; 
Energy efficiency and conservation: $0.926 billion; 
Basic energy sciences: $0.936 billion; 
Other: $0.02 billion. 

Year: 2005; 
Energy efficiency and conservation: $0.883 billion; 
Basic energy sciences: $1.04 billion; 
Other: $0.011 billion. 

Year: 2006; 
Energy efficiency and conservation: $0.747 billion; 
Basic energy sciences: $1.101 billion; 
Other: $0.003 billion. 

Year: 2007; 
Energy efficiency and conservation: $0.58 billion; 
Basic energy sciences: $1.176 billion; 
Other: $0.008 billion. 

Year: 2008; 
Energy efficiency and conservation: $0.409 billion; 
Basic energy sciences: $1.184 billion; 
Other: $0.051 billion. 

Year: 2009; 
Energy efficiency and conservation: $0.973 billion; 
Basic energy sciences: $1.243 billion; 
Other: $0.107 billion. 

Year: 2010; 
Energy efficiency and conservation: $4.226 billion; 
Basic energy sciences: $1.418 billion; 
Other: $0.625 billion. 

Year: 2011; 
Energy efficiency and conservation: $6.378 billion; 
Basic energy sciences: $1.578 billion; 
Other: $1.632 billion. 

Year: 2012; 
Energy efficiency and conservation: $5.198 billion; 
Basic energy sciences: $1.557 billion; 
Other: $1.586 billion. 

Year: 2013; 
Energy efficiency and conservation: $2 billion; 
Basic energy sciences: $1.523 billion; 
Other: $1.107 billion. 

Source: GAO analysis of Office of Management and Budget data. 
GAO-14-836. 

Note: Other includes outlays associated with DOE's Electricity 
Delivery and Energy Reliability account and Advanced Research Projects 
Agency-Energy related accounts. Some of these outlays may not be 
related to R&D activities. Data are not adjusted for inflation. 

[End of figure] 

Table 11 provides a description of these four federal R&D programs and 
activities; it also provides information reported by OMB on outlays. 

Table 11: Four Federal Programs with Outlays for R&D Generally Related 
to Energy Production and Consumption, Fiscal Year 2000-2013: 

Name: Energy efficiency and conservation, DOE; 
Description: The Office of Energy Efficiency and Renewable Energy has 
funded R&D and other activities for developing and deploying 
innovative technologies for increasing energy conservation and 
improving energy efficiency related to vehicle technologies, building 
technologies, and energy-intensive manufacturing methods, among other 
things; 
Outlays: $25.52 billion[A]. 

Name: Basic energy sciences, DOE; 
Description: The Office of Science has been the nation's single 
largest funding source for basic research in energy sciences and 
supports fundamental research to understand and ultimately control 
matter and energy at the atomic, molecular, and electronic scales in 
order to provide the foundations for new energy technologies; 
Outlays: $16.34 billion[B]. 

Name: Electricity, DOE; 
Description: The Office of Electricity Delivery and Energy Reliability 
has funded R&D and other activities for developing and deploying 
innovative technologies that improve electric grid reliability, 
efficiency, flexibility, functionality, and security, among other 
things; 
Outlays: $4.65 billion. 

Name: Advanced research projects, DOE; 
Description: The America Creating Opportunities to Meaningfully 
Promote Excellence in Technology, Education, and Science Act of 2007 
established the Advanced Research Projects Agency-Energy program 
within DOE to overcome the long-term and high-risk technological 
barriers in the development of energy technologies.[C] As specified in 
statute, the program's goals are to enhance U.S. economic and energy 
security through the development of certain energy technologies and to 
ensure that the United States maintains a technological lead in 
developing and deploying advanced energy technologies; 
Outlays: $0.52 billion. 

Source: GAO analysis of Office of Management and Budget documentation. 
GAO-14-836. 

Note: Some of these outlays may not be related to R&D activities. Data 
are not adjusted for inflation. 

[A] Includes outlays in DOE's Energy Efficiency and Renewable Energy, 
Energy Conservation, and Energy Supply and Conservation accounts under 
the energy conservation budget subfunction. 

[B] Based on outlays from DOE's Science account apportioned using 
obligated amounts for basic energy sciences. 

[C] Pub. L. No. 110-69, § 5012 (2007). 

[End of table] 

These outlays provided funding for a variety of R&D programs at 
federally owned laboratories and by nongovernmental entities. For 
example, researchers at NREL developed a new smart occupancy sensor in 
2013 to control lighting and reduce energy costs that could lead to 
significant energy savings in commercial buildings. In addition, as we 
found in January 2012, since first receiving an appropriation in the 
Recovery Act, the Advanced Research Projects Agency-Energy program 
awarded more than $500 million to universities, public and private 
companies, and national laboratories to fund 181 projects that attempt 
to make transformational advances to a variety of energy technologies 
related to energy efficiency and renewable fuels, among other things. 
[Footnote 139] 

[End of section] 

Appendix VIII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Frank Rusco, (202) 512-3841 or ruscof@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Chris Murray (Assistant 
Director), Quindi Franco, Jason Holliday, and David Messman made key 
contributions to this report. Also contributing to this report were 
Nicole Dery, Cindy Gilbert, Carol Henn, Jon Ludwigson, Cynthia Norris, 
MaryLynn Sergent, Anne Stevens, and Barbara Timmerman. 

[End of section] 

Related GAO Products: 

Fossil Energy: 

Oil and Gas Transportation: Department of Transportation Is Taking 
Actions to Address Rail Safety, but Additional Actions Are Needed to 
Improve Pipeline Safety. [hyperlink, 
http://www.gao.gov/products/GAO-14-667]. Washington, D.C.: August 21, 
2014. 

Petroleum Refining: Industry's Outlook Depends on Market Changes and 
Key Environmental Regulations. [hyperlink, 
http://www.gao.gov/products/GAO-14-249]. Washington, D.C.: March 14, 
2014. 

Coal Leasing: BLM Could Enhance Appraisal Process, More Explicitly 
Consider Coal Exports, and Provide More Public Information. 
[hyperlink, http://www.gao.gov/products/GAO-14-140]. Washington, D.C.: 
December 18, 2013. 

Oil and Gas Resources: Actions Needed for Interior to Better Ensure a 
Fair Return. [hyperlink, http://www.gao.gov/products/GAO-14-50]. 
Washington, D.C.: December 6, 2013. 

Oil and Gas Development: BLM Needs Better Data to Track Permit 
Processing Times and Prioritize Inspections. [hyperlink, 
http://www.gao.gov/products/GAO-13-572]. Washington, D.C.: August 23, 
2013. 

Pipeline Permitting: Interstate and Intrastate Natural Gas Permitting 
Processes Include Multiple Steps, and Time Frames Vary. [hyperlink, 
http://www.gao.gov/products/GAO-13-221]. Washington, D.C.: February 
15, 2013. 

Mineral Resources: Mineral Volume, Value, and Revenue. [hyperlink, 
http://www.gao.gov/products/GAO-13-45R]. Washington, D.C.: November 
15, 2012. 

Electricity: Significant Changes Are Expected in Coal-Fueled 
Generation, but Coal is Likely to Remain a Key Fuel Source. 
[hyperlink, http://www.gao.gov/products/GAO-13-72]. Washington, D.C.: 
October 29, 2012. 

Oil and Gas: Information on Shale Resources, Development, and 
Environmental and Public Health Risks. [hyperlink, 
http://www.gao.gov/products/GAO-12-732]. Washington, D.C.: September 
5, 2012. 

Oil and Gas Management: Interior's Reorganization Complete, but 
Challenges Remain in Implementing New Requirements. [hyperlink, 
http://www.gao.gov/products/GAO-12-423]. Washington, D.C.: July 30, 
2012. 

EPA Regulations and Electricity: Better Monitoring by Agencies Could 
Strengthen Efforts to Address Potential Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-12-635]. Washington, D.C.: July 7, 
2012. 

Oil and Gas: Interior Has Strengthened Its Oversight of Subsea Well 
Containment, but Should Improve Its Documentation. [hyperlink, 
http://www.gao.gov/products/GAO-12-244]. Washington, D.C.: February 
29, 2012. 

Energy-Water Nexus: Information on the Quantity, Quality, and 
Management of Water Produced during Oil and Gas Production. 
[hyperlink, http://www.gao.gov/products/GAO-12-156]. Washington, D.C.: 
January 9, 2012. 

Deepwater Horizon Oil Spill: Actions Needed to Reduce Evolving but 
Uncertain Federal Financial Risks. [hyperlink, 
http://www.gao.gov/products/GAO-12-86]. Washington, D.C.: October 24, 
2011. 

Oil and Gas Bonds: BLM Needs a Comprehensive Strategy to Better Manage 
Potential Oil and Gas Well Liability. [hyperlink, 
http://www.gao.gov/products/GAO-11-292]. Washington, D.C.: February 
25, 2011. 

Energy-Water Nexus: A Better and Coordinated Understanding of Water 
Resources Could Help Mitigate the Impacts of Potential Oil Shale 
Development. [hyperlink, http://www.gao.gov/products/GAO-11-35]. 
Washington, D.C.: October 29, 2010. 

Federal Oil and Gas Leases: Opportunities Exist to Capture Vented and 
Flared Natural Gas, Which Would Increase Royalty Payments and Reduce 
Greenhouse Gases. [hyperlink, http://www.gao.gov/products/GAO-11-34]. 
Washington, D.C.: October 29, 2010. 

Coal Power Plants: Opportunities Exist for DOE to Provide Better 
Information on the Maturity of Key Technologies to Reduce Carbon 
Dioxide Emissions. [hyperlink, http://www.gao.gov/products/GAO-10-
675]. Washington, D.C.: June 16, 2010. 

Oil and Gas Management: Interior's Oil and Gas Production Verification 
Efforts Do Not Provide Reasonable Assurance of Accurate Measurement of 
Production Volumes. [hyperlink, 
http://www.gao.gov/products/GAO-10-313]. Washington, D.C.: March 15, 
2010. 

Nuclear Energy: 

Nuclear Power: Analysis of Regional Differences and Improved Access to 
Information Could Strengthen NRC Oversight. [hyperlink, 
http://www.gao.gov/products/GAO-13-743]. Washington, D.C.: September 
27, 2013. 

Commercial Spent Nuclear Fuel: Observations on the Key Attributes and 
Challenges of Storage and Disposal Options. [hyperlink, 
http://www.gao.gov/products/GAO-13-532T]. Washington, D.C.: April 11, 
2013. 

Emergency Preparedness: NRC Needs to Better Understand Likely Public 
Response to Radiological Incidents at Nuclear Power Plants. 
[hyperlink, http://www.gao.gov/products/GAO-13-243]. Washington, D.C.: 
March 11, 2013. 

Spent Nuclear Fuel: Accumulating Quantities at Commercial Reactors 
Present Storage and Other Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-12-797]. Washington, D.C.: August 15, 
2012. 

Nuclear Regulation: NRC's Oversight of Nuclear Power Reactors' 
Decommissioning Funds Could Be Further Strengthened. [hyperlink, 
http://www.gao.gov/products/GAO-12-258]. Washington, D.C.: April 5, 
2012. 

Nuclear Fuel Cycle Options: DOE Needs to Enhance Planning for 
Technology Assessment and Collaboration with Industry and Other 
Countries. [hyperlink, http://www.gao.gov/products/GAO-12-70]. 
Washington, D.C.: October 17, 2011. 

Commercial Nuclear Waste: Effects of a Termination of the Yucca 
Mountain Repository Program and Lessons Learned. [hyperlink, 
http://www.gao.gov/products/GAO-11-229]. Washington, D.C.: April 8, 
2011. 

Renewable Energy: 

Wind Energy: Additional Actions Could Help Ensure Effective Use of 
Federal Financial Support. [hyperlink, 
http://www.gao.gov/products/GAO-13-136]. Washington, D.C.: March 11, 
2013. 

Renewable Energy: Agencies Have Taken Steps Aimed at Improving the 
Permitting Process for Development on Federal Lands. [hyperlink, 
http://www.gao.gov/products/GAO-13-189]. Washington, D.C.: January 18, 
2013. 

Solar Energy: Federal Initiatives Overlap but Take Measures to Avoid 
Duplication. [hyperlink, http://www.gao.gov/products/GAO-12-843]. 
Washington, D.C.: August 30, 2012. 

Renewable Energy Project Financing: Improved Guidance and Information 
Sharing Needed for DOD Project-Level Officials. [hyperlink, 
http://www.gao.gov/products/GAO-12-401]. Washington, D.C.: April 4, 
2012. 

Renewable Energy: Federal Agencies Implement Hundreds of Initiatives. 
[hyperlink, http://www.gao.gov/products/GAO-12-260]. Washington, D.C.: 
February 27, 2012. 

Biofuels: Challenges to the Transportation, Sale, and Use of 
Intermediate Ethanol Blends. [hyperlink, 
http://www.gao.gov/products/GAO-11-513]. Washington, D.C.: June 3, 
2011. 

Defense Infrastructure: Department of Defense Renewable Energy 
Initiatives. [hyperlink, http://www.gao.gov/products/GAO-10-681R]. 
Washington, D.C.: April 26, 2010. 

Defense Infrastructure: DOD Needs to Take Actions to Address 
Challenges in Meeting Federal Renewable Energy Goals. [hyperlink, 
http://www.gao.gov/products/GAO-10-104]. Washington, D.C.: December 
18, 2009. 

Other Aspects of Energy Production and Consumption: 

DOE Loan Programs: DOE Should Fully Develop Its Loan Monitoring 
Function and Evaluate Its Effectiveness. [hyperlink, 
http://www.gao.gov/products/GAO-14-367]. Washington, D.C.: May 1, 2014. 

National Laboratories: DOE Needs to Improve Oversight of Work 
Performed for Non-DOE Entities. [hyperlink, 
http://www.gao.gov/products/GAO-14-78]. Washington, D.C.: October 25, 
2013. 

Energy Efficiency: Better Coordination among Federal Programs Needed 
to Allocate Testing Resources. [hyperlink, 
http://www.gao.gov/products/GAO-13-135]. Washington, D.C.: March 28, 
2013. 

Department of Energy: Status of Loan Programs. [hyperlink, 
http://www.gao.gov/products/GAO-13-331R]. Washington, D.C.: March 15, 
2013. 

Tax Expenditures: Background and Evaluation Criteria and Questions. 
[hyperlink, http://www.gao.gov/products/GAO-13-167SP]. Washington, 
D.C.: November 29, 2012. 

Batteries and Energy Storage: Federal Initiatives Supported Similar 
Technologies and Goals but Had Key Differences. [hyperlink, 
http://www.gao.gov/products/GAO-12-842]. Washington, D.C.: August 30, 
2012. 

Home Energy Assistance for Low-Income Occupants of Manufactured Homes. 
[hyperlink, http://www.gao.gov/products/GAO-12-848R]. Washington, 
D.C.: August 24, 2012. 

Energy Conservation and Climate Change: Factors to Consider in the 
Design of the Nonbusiness Energy Property Credit. [hyperlink, 
http://www.gao.gov/products/GAO-12-318]. Washington, D.C.: April 2, 
2012. 

DOE Loan Guarantees: Further Actions Are Needed to Improve Tracking 
and Review of Applications. [hyperlink, 
http://www.gao.gov/products/GAO-12-157]. Washington, D.C.: March 12, 
2012. 

Energy: The Department of Energy's Office of Science Uses a 
Multilayered Process for Prioritizing Research. [hyperlink, 
http://www.gao.gov/products/GAO-12-410R]. Washington, D.C.: February 
24, 2012. 

Department of Energy: Advanced Research Projects Agency-Energy Could 
Benefit from Information on Applicants' Prior Funding. [hyperlink, 
http://www.gao.gov/products/GAO-12-112]. Washington, D.C.: January 13, 
2012. 

Green Building: Federal Initiatives for the Nonfederal Sector Could 
Benefit from More Interagency Collaboration. [hyperlink, 
http://www.gao.gov/products/GAO-12-79]. Washington, D.C.: November 2, 
2011. 

Tennessee Valley Authority: Full Consideration of Energy Efficiency 
and Better Capital Expenditures Planning Are Needed. [hyperlink, 
http://www.gao.gov/products/GAO-12-107]. Washington, D.C.: October 31, 
2011. 

Recovery Act: Energy Efficiency and Conservation Block Grant 
Recipients Face Challenges Meeting Legislative and Program Goals and 
Requirements. [hyperlink, http://www.gao.gov/products/GAO-11-379]. 
Washington, D.C.: April 7, 2011. 

Department of Energy: Advanced Technology Vehicle Loan Program 
Implementation Is Under Way, but Enhanced Technical Oversight and 
Performance Measures Are Needed. [hyperlink, 
http://www.gao.gov/products/GAO-11-145]. Washington, D.C.: February 
28, 2011. 

Electricity Grid Modernization: Progress Being Made on Cybersecurity 
Guidelines, but Key Challenges Remain to be Addressed. [hyperlink, 
http://www.gao.gov/products/GAO-11-117]. Washington, D.C.: January 12, 
2011. 

Department of Energy: Further Actions Are Needed to Improve DOE's 
Ability to Evaluate and Implement the Loan Guarantee Program. 
[hyperlink, http://www.gao.gov/products/GAO-10-627]. Washington, D.C.: 
July 12, 2010. 

Low-Income Home Energy Assistance Program: Greater Fraud Prevention 
Controls Are Needed. [hyperlink, 
http://www.gao.gov/products/GAO-10-621]. Washington, D.C.: June 18, 
2010. 

Federal Energy Management: GSA's Recovery Act Program Is on Track, but 
Opportunities Exist to Improve Transparency, Performance Criteria, and 
Risk Management. [hyperlink, http://www.gao.gov/products/GAO-10-630]. 
Washington, D.C.: June 16, 2010. 

Vehicle Fuel Economy: NHTSA and EPA's Partnership for Setting Fuel 
Economy and Greenhouse Gas Emissions Standards Improved Analysis and 
Should Be Maintained. [hyperlink, 
http://www.gao.gov/products/GAO-10-336]. Washington, D.C.: February 
25, 2010. 

[End of section] 

Footnotes: 

[1] See CRS, Energy Tax Policy: Historical Perspectives on and Current 
Status of Energy Tax Expenditures (Washington, D.C.: May 2, 2011) and 
Tax-Favored Financing for Renewable Energy Resources and Energy 
Efficiency (Washington, D.C.: Jan. 10, 2011). 

[2] In this report, we use the terms "activity," "support," or 
"intervention" to refer to a broad range of federal activities that 
may provide a benefit or preference for a particular activity, 
product, or outcome. The scope of these terms is intentionally broader 
than that normally associated with the term "subsidy." 

[3] Pub. L. No. 109-58 (Aug. 8, 2005); Pub. L. No. 110-140 (Dec. 19, 
2007); and Pub. L. No. 111-5 (Feb. 17, 2009). 

[4] EIA is the statistical agency within DOE that collects, analyzes, 
and disseminates independent information on energy issues. CRS 
provides information, research, and reference material to assist 
committees and members of Congress in their legislative and 
representative functions. CBO assists Congress in carrying out the 
budget process established by the Congressional Budget Act of 1974. 
Examples of relevant reports include: EIA, Direct Federal Financial 
Interventions and Subsidies in Energy in Fiscal Year 2010 (Washington, 
D.C.: July 2011); CRS, Energy Tax Incentives: Measuring Value Across 
Different Types of Energy Resources (Washington, D.C.: Sept. 18, 
2012); and CBO, Federal Financial Support for the Development and 
Production of Fuels and Energy Technologies (Washington, D.C.: March 
2012). 

[5] Crude oil is refined into petroleum products, which include 
gasoline, diesel, jet fuel, heating oil, and other products. 

[6] These categories are based on EIA's methodology for reporting data 
on renewable energy sources. 

[7] Btus are used to measure and compare the energy content of 
different energy sources. A Btu can be defined as the quantity of heat 
required to raise the temperature of one pound of water by one degree 
Fahrenheit. One quadrillion is equal to one thousand trillion. In 
physical terms, one quadrillion Btus is equivalent to the energy 
contained in 172 million barrels of crude oil, which is about how much 
petroleum the United States consumes in 9 days. 

[8] Imported energy refers to net imports, or the amount of energy 
imported minus the amount exported. EIA updates historical energy data 
periodically. We used EIA data from the spring of 2014; in some cases, 
the data we collected for this report may not match revised EIA data. 

[9] According to EIA officials, while it is possible to capture some 
of this waste energy, there are theoretical limits to this capture, 
and it is capital intensive, which adds to an already capital 
intensive generation facility. Given when these plants were built, 
they would not be considered "inefficient" in an economic sense. 

[10] In addition to conversion losses, other losses include power 
plant use of electricity, as well as transmission and distribution of 
electricity from power plants to end-use consumers (also called "line 
losses"). See EIA, Monthly Energy Review (Washington, D.C.: November 
2013). 

[11] Components of gross domestic product include personal consumption 
expenditures, gross private domestic investment, net exports of goods 
and services, and government consumption expenditures and gross 
investment. 

[12] For these units, dollars refer to a dollar value adjusted to 
remove the effects of inflation by dividing the nominal value (also 
called the current dollar value) by the appropriate price index (2009 
in this case). 

[13] According to USDA officials, changes in consumer behavior and 
demographic trends may have also affected energy consumption. 

[14] International Energy Agency, The Impact of the Financial and 
Economic Crisis on Global Energy Investment: IEA Background Paper for 
the G8 Energy Ministers' Meeting: 24-25 May 2009. 

[15] In this context, the term "regulation" refers to rules governing 
private activities rather than those governing internal agency 
operations. 

[16] Pub. L. No. 83-703, 68 Stat. 919, 42 U.S.C. § 2011 et seq. 

[17] Clean Air Act Amendments of 1970, Pub. L. No. 91-604, 84 
Stat.1676 (1970) (codified as amended at 42 U.S.C. §§ 7401-7671q 
(2011) (commonly referred to as the Clean Air Act). 

[18] See appendix II for a more information on federal sources of data 
for energy-related outlays. 

[19] Other types of taxes include social insurance taxes (employee and 
employer contributions for Social Security, Medicare, and unemployment 
compensation); and estate and gift taxes. Excise taxes are generally 
collected by businesses, which remit payments to the government on a 
quarterly basis, on selected items such as gasoline, alcoholic 
beverages, and airline tickets. 

[20] The outer continental shelf consists of submerged federal lands, 
generally extending seaward between 3 and 200 nautical miles off the 
coastline. EIA estimated that 28 percent of all fossil energy produced 
in the United States in 2012 was obtained on federal lands (including 
submerged lands in the outer continental shelf). 

[21] The concept of tax expenditures extends beyond the income tax. 
Tax expenditures also exist for other types of taxes, such as excise 
and payroll taxes. 

[22] See appendix II for a more information on federal sources of data 
for energy-related tax expenditures. 

[23] Pub. L. No. 93-344, § 3, 88 Stat. 297, 299 (July 12, 1974), 
codified at 2 U.S.C. § 622(3). 

[24] The ultimate cost of tax expenditures in forgone revenues is hard 
to quantify because it is up to individuals and corporations to claim 
benefits from the provisions of the tax code that apply to them. As a 
result, the level of forgone federal revenues from tax expenditures 
can only be estimated. In addition, revenue loss estimates do not 
represent the amount of revenue that would be gained if a particular 
tax provision were repealed, since repeal of the tax provision would 
probably change taxpayer behavior in some way that would affect 
revenue. 

[25] Pub. L. No. 104-58, § 304, 109 Stat. 563, 565 (Nov. 28, 1995). 

[26] For purposes of this report, we included activities related to 
technology demonstration as part of R&D and excluded activities 
related to commercialization and deployment. Commercialization 
includes efforts to transition technologies to commercial applications 
by bridging the gap between research and demonstration activities and 
venture capital funding and marketing activities. Deployment includes 
efforts that facilitate or achieve widespread use of technologies in 
the commercial market. 

[27] For more information, see GAO, National Laboratories: DOE Needs 
to Improve Oversight of Work Performed for Non-DOE Entities, 
[hyperlink, http://www.gao.gov/products/GAO-14-78] (Washington, D.C.: 
Oct. 25, 2013). 

[28] GAO, Renewable Energy: Federal Agencies Implement Hundreds of 
Initiatives, [hyperlink, http://www.gao.gov/products/GAO-12-260] 
(Washington, D.C.: Feb. 27, 2012). 

[29] GAO, Batteries and Energy Storage: Federal Initiatives Supported 
Similar Technologies and Goals but Had Key Differences, [hyperlink, 
http://www.gao.gov/products/GAO-12-842] (Washington, D.C.: Aug. 30, 
2012). 

[30] Natural gas and crude oil are found in a variety of geological 
formations. Conventional natural gas and crude oil are found in deep, 
porous rock or reservoirs and can flow under natural pressure to the 
surface after drilling. In contrast, the low permeability of some 
formations, including shale, means that natural gas and crude oil 
trapped in the formation cannot move easily within the rock. Tight 
formations refer to low permeability formations that include shale as 
well as sandstones and carbonates. 

[31] Liquefied natural gas is natural gas that has been cooled to -260 
degrees Fahrenheit. This cooling shrinks the volume of the natural gas 
by over 600 times, allowing greater quantities of natural gas to be 
shipped in specially built vessels. 

[32] Tax expenditures are reductions in a taxpayer's tax liability as 
a result of special exemptions and exclusions from taxations, 
deductions, credits, deferrals of tax liability, or preferential tax 
rates. 

[33] Specifically, we used the most recent tax expenditure estimates 
developed by Treasury and reported by OMB in the Federal Budget for 
fiscal years 2002 to 2015 and JCT estimates reported in its Estimates 
of Federal Tax Expenditures reports for fiscal years 2000-2012. For 
fiscal year 2013, we used estimates from the 2012 JCT report, which 
reflect the provisions in federal tax law enacted through January 2, 
2013. 

[34] GAO, Renewable Energy: Federal Agencies Implement Hundreds of 
Initiatives, [hyperlink, http://www.gao.gov/products/GAO-12-260] 
(Washington, D.C.: Feb. 27, 2012). 

[35] In this report, we use the term "revenue loss" to mean forgone 
revenue, or revenue that would have accrued to the federal government 
had the tax expenditure or other incentive not been provided for in 
the law. 

[36] Treasury and JCT report estimates only for income tax 
expenditures and do not report estimates for tax provisions that 
result in forgone excise tax only. Treasury and JCT use different (1) 
income tax baselines, (2) de minimis amounts (which is the minimum 
revenue loss threshold for Treasury and JCT to report a tax 
expenditure), and (3) economic and technical assumptions. For more 
information on how Treasury and JCT estimate revenue loss, see 
appendix III in GAO, Government Performance and Accountability: Tax 
Expenditures Represent a Substantial Federal Commitment and Need to Be 
Reexamined, [hyperlink, http://www.gao.gov/products/GAO-05-690] 
(Washington, D.C.: Sept. 23, 2005). 

[37] In 2013, the United States imported about 2.8 trillion cubic feet 
of natural gas from Canada and exported about 0.9 trillion cubic feet 
of natural gas to Canada and 0.7 trillion cubic feet to Mexico. 

[38] GAO, Energy-Water Nexus: Information on the Quantity, Quality, 
and Management of Water Produced during Oil and Gas Production, 
[hyperlink, http://www.gao.gov/products/GAO-12-156] (Washington, D.C.: 
Jan. 9, 2012). See also GAO, Oil and Gas: Information on Shale 
Resources, Development, and Environmental and Public Health Risks, 
[hyperlink, http://www.gao.gov/products/GAO-12-732] (Washington, D.C.: 
Sept. 5, 2012). 

[39] CRS, Natural Gas in the U.S. Economy: Opportunities for Growth 
(Washington, D.C.: Nov. 6, 2012). 

[40] CRS, Natural Gas in the U.S. Economy: Opportunities for Growth. 

[41] A spot market for natural gas is a market in which natural gas is 
bought and sold for immediate or very near-term delivery, usually for 
a period of 30 days or less. A spot market is more likely to develop 
at a location with numerous pipeline interconnections, thus allowing 
for a large number of buyers and sellers. 

[42] CRS, Natural Gas in the U.S. Economy: Opportunities for Growth. 

[43] Most major importers of liquefied natural gas are non-free-trade-
agreement countries. DOE is responsible for approving the export of 
liquefied natural gas as a commodity. Before approving applications to 
export liquefied natural gas to countries without free trade 
agreements, DOE must determine that the exports are consistent with 
the public interest. 

[44] The Federal Energy Regulatory Commission is responsible for 
authorizing the construction and operation of facilities that can 
liquefy and export natural gas, and as of July 2014, had approved 
three liquefied natural gas export terminals. In the latter half of 
the 2000s, companies constructed numerous liquefied natural gas import 
facilities in the United States, and many of the proposed export 
facilities will be constructed at the site of these import facilities. 
GAO recently reported on DOE's process for reviewing export 
applications and the Federal Energy Regulatory Commission's process 
for reviewing export facility applications. See GAO, Natural Gas: 
Federal Approval Process for Liquefied Natural Gas Exports, 
[hyperlink, http://www.gao.gov/products/GAO-14-762] (Washington, D.C.: 
Sept. 26, 2014). 

[45] EIA, Annual Energy Outlook 2013 (Washington, D.C.: April 2013). 

[46] A refinery's capacity refers to the maximum amount of crude oil 
designed to flow into the distillation unit of a refinery, also known 
as the crude unit. 

[47] We reported in 2014 on several other factors that may have also 
contributed to increasing petroleum product exports, including 
increases in U.S. production of crude oil and natural gas that have 
lowered costs and provided a competitive advantage to U.S. refiners. 
See Petroleum Refining: Industry's Outlook Depends on Market Changes 
and Key Environmental Regulations, [hyperlink, 
http://www.gao.gov/products/GAO-14-249] (Washington, D.C.: Mar. 14, 
2014). 

[48] [hyperlink, http://www.gao.gov/products/GAO-14-249]. Oil and 
natural gas are often found together in the same reservoir. The 
natural gas produced from oil wells is generally classified as 
"associated-dissolved," meaning that it is associated with or 
dissolved in crude oil. In areas where the primary purpose of drilling 
is to produce oil, operators may flare associated natural gas because 
no local market exists for the gas and transporting to a market may 
not be economically feasible. In September 2012, we found that flaring 
poses a risk to air quality because it emits carbon dioxide, a 
greenhouse gas linked to climate change. For more information, see 
[hyperlink, http://www.gao.gov/products/GAO-12-732]. 

[49] West Texas Intermediate refers to a crude oil stream produced in 
Texas and southern Oklahoma that serves as a reference for pricing a 
number of other crude streams. Brent refers to a blended crude stream 
produced in the North Sea region that serves as a reference for 
pricing a number of other crude streams. A crude oil stream refers to 
crude oil produced in a particular field or a collection of crude oils 
with similar qualities from fields in close proximity. 

[50] EIA, Short-Term Energy Outlook Supplement: Brent Crude Oil Spot 
Price Forecast (Washington, D.C.: July 10, 2012). 

[51] Crude oil pipelines connect several large refining centers to 
crude oil sources, and petroleum product pipelines connect these 
refineries to population centers all over the country. According to 
EIA, because of these pipeline constraints, oil producers in the 
midcontinental United States had to move additional volumes by truck 
or rail. We recently found that expansions in U.S. infrastructure for 
oil and gas transportation have not kept pace with increased domestic 
oil and gas production. See GAO, Oil and Gas Transportation: 
Department of Transportation Is Taking Actions to Address Rail Safety, 
but Additional Actions Are Needed to Improve Pipeline Safety, 
[hyperlink, http://www.gao.gov/products/GAO-14-667] (Washington, D.C.: 
Aug. 21, 2014). 

[52] EIA, Today in Energy: U.S. Crude Oil Production Growth 
Contributes to Global Oil Price Stability in 2013 (Washington, D.C.: 
Jan. 9, 2014). 

[53] EIA, Energy in Brief: What Is the Role of Coal in the United 
States? (Washington, D.C.: Aug. 16, 2013). 

[54] A short ton is 2,000 pounds. 

[55] A kilowatt-hour is a unit of work or energy equal to 1 kilowatt 
(or 1,000 watts) of power expended for 1 hour. 

[56] EIA, Energy in Brief: What Is the Role of Coal in the United 
States? 

[57] See GAO, Electricity: Significant Changes Are Expected in Coal-
Fueled Generation, but Coal Is Likely to Remain a Key Fuel Source, 
[hyperlink, http://www.gao.gov/products/GAO-13-72] (Washington, D.C.: 
Oct. 29, 2012). 

[58] For more information, see GAO, EPA Regulations and Electricity: 
Update on Agencies' Monitoring Efforts and Coal-Fueled Generating Unit 
Retirements, [hyperlink, http://www.gao.gov/products/GAO-14-672] 
(Washington, D.C.: Aug. 15, 2014). 

[59] EIA, Today in Energy: Subbituminous and Bituminous Coal Dominate 
U.S. Coal Production (Washington, D.C.: Aug. 16, 2011). Other types 
include lignite and anthracite, both of which comprise a small 
percentage of total U.S. production. 

[60] See EIA, Annual Energy Outlook: 2010 (Washington, D.C.: May 11, 
2010); and Today in Energy: Cost of Transporting Coal to Power Plants 
Rose Almost 50% in Decade (Washington, D.C.: Nov. 19, 2012). 

[61] Clean Air Act Amendments of 1970, Pub. L. No. 91-604, 84 
Stat.1676 (1970) (codified as amended at 42 U.S.C. §§ 7401-7671q 
(2011) (commonly referred to as the Clean Air Act). 

[62] EPA has set national ambient air quality standards for six 
pollutants, termed "criteria" pollutants: carbon monoxide, lead, 
nitrogen oxides, ozone, particulate matter, and sulfur oxides. 

[63] GAO, Air Pollution: EPA Needs Better Information on New Source 
Review Permits, [hyperlink, http://www.gao.gov/products/GAO-12-590] 
(Washington, D.C.: June 22, 2012). 

[64] Pub. L. No. 101-380, 104 Stat. 484 (1990). 

[65] The federal government maintains other trust funds to hold funds 
for a specific purpose that may be related to the production and 
consumption of fossil energy. For example, the Leaking Underground 
Storage Tank Trust Fund provides funding to clean up leaks of 
petroleum and other substances from underground storage tanks. (26 
U.S.C. § 9508). 

[66] The barrel tax expired in December 1994 and was reinstituted at 5 
cents per barrel in April 2006 as mandated by the Energy Policy Act of 
2005 (Pub. L. No. 109-58, §1361, 119 Stat. 594, 1058 (2005)). The 
Energy Improvement and Extension Act of 2008 (Pub. L. No. 110-343, § 
405, 122 Stat. 3765, 3860 codified as amended at 26 U.S.C. § 4611 
(c)(2)(B)) increased the tax to 8 cents per barrel (and 9 cents per 
barrel in 2017) and provided that the fund's barrel tax shall expire 
after December 31, 2017. 

[67] Energy Policy and Conservation Act, Pub. L. No. 94-163, §161, 89 
Stat. 888-889 (1975), codified as amended at 42 U.S.C. § 6241. The 
statute provides for a drawdown of the reserve upon a finding by the 
President that there is a "severe energy supply interruption" as well 
as an event that is, or is likely to become, an energy supply shortage 
"of significant scope or duration." 42 U.S.C. § 6241(d), (h). 

[68] The Strategic Petroleum Reserve also received crude oil through 
the royalty-in-kind transfer program established by the Department of 
the Interior. The program applied to crude oil that was produced from 
federal leases in the Gulf of Mexico and was transferred to the U.S. 
government in lieu of cash royalty payments. According to Department 
of the Interior data, the value of the forgone royalty receipts 
totaled about $6.5 billion from fiscal years 2000 through 2009 when 
the program was terminated. 

[69] This tax generated about $2.8 billion for the fund from 2000 
through 2012, the most recent data reported by the Internal Revenue 
Service. The tax is scheduled to expire to expire in 2017, putting the 
federal government's longer-term ability to provide financial support 
in response to oil spills at risk, as we found in October 2011. See 
GAO, Deepwater Horizon Oil Spill: Actions Needed to Reduce Evolving 
but Uncertain Federal Financial Risks, [hyperlink, 
http://www.gao.gov/products/GAO-12-86] (Washington, D.C.: Oct. 24, 
2011). 

[70] GAO, Strategic Petroleum Reserve: Available Oil Can Provide 
Significant Benefits, but Many Factors Should Influence Future 
Decisions about Fill, Use, and Expansion, [hyperlink, 
http://www.gao.gov/products/GAO-06-872] (Washington, D.C.: Aug. 24, 
2006). 

[71] Data for excise taxes collected in 2012 are the most recent data 
available from the Internal Revenue Service. These data comprise 
revenues from taxes on a variety of motor fuels, including gasoline, 
diesel, kerosene, aviation-grade kerosene, liquefied natural gas, 
liquefied fuel derived from coal, liquefied hydrogen, compressed 
natural gas, liquid petroleum gas, and others. 

[72] Of the 18.4 cent per gallon tax, 0.1 cents is dedicated to the 
Leaking Underground Storage Tank Trust Fund; the remainder is 
dedicated to the Highway Trust Fund. 

[73] Revenues consist of royalties, rents, bonuses, and other revenues 
that mineral royalty payers report to the Department of the Interior. 
According to Interior documentation, comparable data were not 
available for 2000 through 2002; as a result, we are unable to report 
data on royalty and other payments for those years. 

[74] The table also provides information from Treasury on tax 
provisions that will or have expired, in full or in part, due to an 
expiration of legislative authority or some other expiration under the 
law as of the fall of 2014. 

[75] These estimated revenue losses include those from royalty relief 
for lease sales from 1996 through 2000 as mandated by the Outer 
Continental Shelf Deep Water Royalty Relief Act and reflect forgone 
revenues in the calendar year in which the sale of product took place. 

[76] Compared with other countries within the Organization for 
Economic Cooperation and Development, the United States has one of the 
lowest excise tax rates for motor fuels. 

[77] GAO, Oil and Gas Royalties: The Federal System for Collecting Oil 
and Gas Revenues Needs Comprehensive Reassessment, [hyperlink, 
http://www.gao.gov/products/GAO-08-691] (Washington, D.C.: Sept. 3, 
2008). 

[78] A megawatt-hour is a unit of work or energy equal to 1 megawatt 
(or one million watts of power) expended for 1 hour. One megawatt 
provides enough electricity to power about 750 homes. 

[79] NRG, News Release: NRG Energy, Inc. Provides Greater Clarity on 
the South Texas Nuclear Development Project (STP 3&4), Apr. 19, 2011. 

[80] The task force concluded that a sequence of events similar to 
that at Fukushima was unlikely to occur in the United States and that 
the continued operation of the nation's commercial nuclear reactors 
did not pose an imminent risk to public health and safety. 

[81] Although DOE was required to take custody of spent nuclear fuel 
from commercial nuclear reactor operators for disposal at the 
repository beginning in January 1998, DOE was unable to begin 
receiving waste by that time because of a series of delays due to, 
among other reasons, state and local opposition to the construction of 
a permanent nuclear waste repository in Nevada and technical 
complexities. 

[82] GAO, Spent Nuclear Fuel: Accumulating Quantities at Commercial 
Reactors Present Storage and Other Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-12-797] (Washington, D.C.: Aug. 15, 
2012). 

[83] NRC's Commission has five members who are responsible for 
formulating policies and regulations governing safety and security of 
nuclear reactors and materials, issuing orders to licensees, and 
adjudicating legal matters brought before it. 

[84] In August 2013, the U.S. Court of Appeals for the District of 
Columbia Circuit directed NRC to resume the licensing process for 
DOE's Yucca Mountain repository application. In re Aiken County, 725 
F.3d 255 (D.C. Cir. 2013), reh'g en banc denied (Oct.28, 2013). In 
response to the court's ruling, NRC directed its staff to complete and 
issue the safety evaluation report associated with DOE's license 
application. 

[85] Pub. L. No. 85-256, § 4, 71 Stat. 576, 576-79 (codified as 
amended at 42 U.S.C. § 2210). 

[86] The insurance coverage has two layers: The owner of a nuclear 
plant is required to purchase primary insurance covering liability up 
to $375 million. In the event of an accident, liability for damages 
assessed at between $375 million and $13 billion would then be shared 
among the owners of all U.S. nuclear plants, who would pay a 
"retroactive premium." 

[87] Pub. L. No. 109-58, § 1703, 119 Stat. 660, 1120 (2005) codified 
as amended at 42 U.S.C. §16513. 

[88] DOE issued about $6.2 billion of these loan guarantees in 
February 2014. For more information, see GAO, DOE Loan Programs: DOE 
Should Fully Develop Its Loan Monitoring Function and Evaluate Its 
Effectiveness, [hyperlink, http://www.gao.gov/products/GAO-14-367] 
(Washington, D.C.: May 1, 2014). 

[89] CBO, Nuclear Power's Role in Generating Electricity (Washington, 
D.C.; May 2008). 

[90] These estimates are from the Joint Committee on Taxation. We 
identified an additional tax expenditure related to nuclear energy--
the advanced nuclear power production credit. However, there were no 
revenue losses associated with this tax expenditure from fiscal year 
2000 through 2013, according to the Office of Management and Budget. 

[91] The special decommissioning funds were first established by the 
Deficit Reduction Act of 1984, but the funds' investment earnings were 
initially subject to tax at the highest corporate tax rate (46 percent 
at the time). Subsequent amendments to the provision have reduced the 
tax rate to 20 percent. 

[92] According to EIA, production equals consumption for all renewable 
energy sources except biofuels. 

[93] According to EIA, over 99 percent of ethanol used in the United 
States is consumed as E10, a blend of 10 percent ethanol and 90 
percent gasoline by volume. A small amount of ethanol is sold in high 
blends, such as E15 (a blend of 15 percent ethanol and 85 percent 
gasoline by volume) and E85 (a blend of 51 to 83 percent ethanol by 
volume and gasoline). 

[94] In recent years, the United States also increased imports of 
ethanol from Brazil to meet renewable fuel requirements for advanced 
biofuels. Brazilian ethanol is made from sugarcane and qualifies as an 
advanced biofuel, while domestic ethanol produced from corn does not. 

[95] The 45-cents-per-gallon tax credit is also referred to as the 
volumetric ethanol excise tax credit. The federal government also 
provided tax credits (and a related excise tax credit) for biodiesel. 
See appendix VI for more information on the alcohol fuel credits and 
biodiesel credits. 

[96] The alcohol fuel credits generally expired in 2011, but some 
taxpayers were still able to claim the credit in 2012 and 2013 due in 
part to the timing and method of taxpayer filing and Internal Revenue 
Service processing, according to Treasury officials. 

[97] Pub. L. No. 109-58, § 1501, 119 Stat. 660, 1067 (2005). States 
have also played a role in influencing the increased production and 
consumption of ethanol. According to the American Coalition for 
Ethanol, 10 states have enacted standards that require the use of 
ethanol-blended fuel, while 22 states have established some type of 
incentive for ethanol producers. 

[98] Pub. L. No. 110-140, § 201, 121 Stat. 1492, 1519 (2007). 

[99] GAO, Biofuels: Potential Effects and Challenges of Required 
Increases in Production and Use, [hyperlink, 
http://www.gao.gov/products/GAO-09-446] (Washington, D.C.: Aug. 25, 
2009). 

[100] See also GAO, Opportunities to Reduce Potential Duplication in 
Government Programs, Save Tax Dollars, and Enhance Revenue, 
[hyperlink, http://www.gao.gov/products/GAO-11-318SP] (Washington, 
D.C.: Mar. 1, 2011). 

[101] The cellulosic biofuel credit--part of the alcohol fuel credits-
-was extended through December 31, 2013. 

[102] Section 701 of the Energy Policy Act of 2005, (42 U.S.C. § 
6374(a)(3)(E)), provides for a waiver to this requirement if in a 
particular geographic area alternative fuel is not reasonably 
available or the cost of the alternative fuel is unreasonably more 
expensive compared to gasoline. 

[103] Pub. L. No. 110-140, § 142, 121 Stat. 1492, 1518 (2007). 

[104] The excise tax is on "gasohol," which is a blend of finished 
motor gasoline containing alcohol (generally ethanol but sometimes 
methanol) at a concentration between 5.7 percent and 10 percent by 
volume. 

[105] Lihong McPhail and Xiaodong Du, "Ethanol Strengthens the Link 
between Agriculture and Energy Markets," in USDA Economic Research 
Service, Amber Waves, June 5, 2012. 

[106] DOE, 2012 Wind Technologies Market Report (Washington, D.C.: 
August 2013). 

[107] GTM Research and Solar Energy Industries Association, U.S. Solar 
Market Insight Report: 2012 Year in Review: Executive Summary (2013). 

[108] EIA, Annual Energy Outlook 2014: State Renewable Energy 
Requirements and Goals: Update through 2013 (Washington, D.C.: Apr. 
30, 2014). 

[109] CRS, U.S. Renewable Electricity: How Does the Production Tax 
Credit (PTC) Impact Wind Markets? (Washington, D.C.: Oct. 10, 2012). 

[110] The production tax credit expired on July 31, 1999; Dec. 31, 
2001; and Dec. 31, 2003. It was also scheduled to expire on Dec. 31, 
2012; however, the American Taxpayer Relief Act of 2012 extended the 
credit for wind projects that began construction before Jan. 1, 2014. 

[111] GAO, Wind Energy: Additional Actions Could Help Ensure Effective 
Use of Federal Financial Support, [hyperlink, 
http://www.gao.gov/products/GAO-13-136] (Washington, D.C.: Mar. 11, 
2013). 

[112] The investment tax credit also provides a tax credit for 
geothermal systems, fuel cells, microturbines, and combined heat and 
power. 

[113] Treasury rounds all yearly estimates to the nearest $10 million 
and excludes tax expenditures with estimates that round to zero in 
each of the 7 years that it reports tax expenditure estimates. 

[114] EPAct also required installation of 20,000 solar energy systems 
in federal buildings by 2010. 

[115] These estimated costs are credit subsidy costs, which represent 
the government's estimated net long-term cost of extending or 
guaranteeing credit, in present value terms, over the entire period 
the loans are outstanding (not including administrative costs). 

[116] DOE, SunShot Vision Study (Washington, D.C.: February 2012). 

[117] The Energy Policy and Conservation Act, Pub. L. No. 94-163, 89 
Stat. 871 (Dec. 22, 1975), established CAFE standards beginning in 
1978 (for passenger cars). 

[118] Pub. L. No. 110-140, 121 Stat. 1492 (Dec. 19, 2007). An 
attribute-based standard is based on a vehicle's "footprint," or the 
size of its wheelbase multiplied by its average track width. 

[119] When vehicles burn gasoline and other fossil fuels, they emit 
greenhouse gases such as carbon dioxide, methane, nitrous oxide, and 
hydrofluorcarbons, according to EPA. EPA has established standards for 
the amount of greenhouse gases that can be emitted from vehicles. 

[120] 75 Fed. Reg. 25324 (May 7, 2010); and 77 Fed. Reg. 62624 (Oct. 
15, 2012). 

[121] Specifically, EPA is establishing standards that are projected 
to require, on an average industry fleetwide basis, 163 grams/mile of 
carbon dioxide in model year 2025 vehicles, which is equivalent to 
54.5 miles per gallon if this level were achieved solely through 
improvements in fuel efficiency. 

[122] State governments also played an important role in encouraging 
efforts to use energy more efficiently. According to the American 
Council for an Energy-Efficient Economy, as of April 2014, 25 states 
had fully funded policies in place that establish specific energy 
savings targets that utilities or nonutility program administrators 
must meet through customer energy efficiency programs. 

[123] Pub. L. No. 94-163, 89 Stat. 871, 917-932 (Dec. 22, 1975), 
(codified as amended at 42 U.S.C. §§ 6291-6309). 

[124] GAO, Vehicle Fuel Economy: Reforming Fuel Economy Standards 
Could Help Reduce Oil Consumption by Cars and Light Trucks, and Other 
Options Could Complement These Standards, [hyperlink, 
http://www.gao.gov/products/GAO-07-921] (Washington, D.C.: Aug. 2, 
2007). 

[125] GAO, Energy Efficiency: Better Coordination among Federal 
Programs Needed to Allocate Testing Resources, [hyperlink, 
http://www.gao.gov/products/GAO-13-135] (Washington, D.C.: Mar. 28, 
2013). 

[126] The power marketing administrations are the Bonneville Power 
Administration, Southeastern Power Administration, Southwestern Power 
Administration, and Western Area Power Administration. TVA is a wholly-
owned government corporation. 

[127] GAO, Tennessee Valley Authority: Full Consideration of Energy 
Efficiency and Better Capital Expenditures Planning Are Needed, 
[hyperlink, http://www.gao.gov/products/GAO-12-107] (Washington, D.C.: 
Oct. 31, 2011). 

[128] As an electric utility, TVA is subject to certain aspects of 
Federal Energy Regulatory Commission jurisdiction, as well as to other 
regulatory bodies and agencies including the Nuclear Regulatory 
Commission and EPA. 

[129] While TVA does not pay federal and state taxes, it does make 
payments-in-lieu-of-taxes to state and local governments. 

[130] These costs are current estimates of the credit subsidy costs of 
disbursed amounts. Credit subsidy costs represent the government's 
estimated net long-term cost of extending or guaranteeing credit, in 
present value terms, over the entire period the loans are outstanding 
(not including administrative costs). 

[131] GAO, Department of Energy: Status of Loan Programs, [hyperlink, 
http://www.gao.gov/products/GAO-13-331R] (Washington, D.C.: Mar. 15, 
2013). 

[132] These costs are current estimates of the credit subsidy costs of 
disbursed amounts. 

[133] These costs are current estimates of the credit subsidy costs of 
disbursed amounts. 

[134] This program was formerly called the Renewable Energy Systems 
and Energy Efficiency Improvements Program. 

[135] Some outlays associated with these programs may not be related 
to R&D. Other federal agencies may have provided outlays related to 
R&D for specific energy sources during this time period; however, data 
associated with these outlays were not readily available. 

[136] EIA, Direct Federal Financial Interventions and Subsidies in 
Energy in Fiscal Year 2010 (Washington, D.C.: July 2011). 

[137] Other federal agencies may have provided outlays for R&D 
generally related to energy production and consumption during this 
time period; however, data associated with these outlays were not 
readily available. 

[138] Some outlays associated with these programs may not be related 
to R&D. 

[139] GAO, Department of Energy: Advanced Research Projects Agency-
Energy Could Benefit from Information on Applicants' Prior Funding, 
[hyperlink, http://www.gao.gov/products/GAO-12-112] (Washington, D.C.: 
Jan. 13, 2012). 

[End of section] 

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