By Johnathan Rickman
Citing severe stock market malaise, the Energy Department has informed Congress that it faces a pension funding shortfall of nearly $1 billion in next fiscal year and that it may have to slash nuclear weapons and cleanup programs or staff to make up the deficit unless the Obama administration provides more money for that purpose.
In a letter to the White House Office of Management and Budget (OMB) last month, leaders of the Senate Appropriations Committee’s energy and water subcommittee requested OMB provide “adequate resources” to cover the pension shortfall.
However, an aide to Sen. Robert Bennett (R-Utah), the ranking member of the subcommittee, told sister publication The Energy Daily Tuesday that it appears OMB has so far only agreed to cover $240 million of the shortfall for the department, leaving DoE to cover the rest from existing program funding.
The problem is worst in the environmental cleanup program, and the Bennett aide said more than $400 million in cleanup funding will have to be reallocated to even begin addressing the pension shortfall as required under several federal laws.
The towering pension problem was disclosed at a hearing of the Senate energy and water appropriations subcommittee Tuesday, where Energy Secretary Steven Chu was on hand to present DoE’s fiscal year 2010 budget request.
At the hearing, Chu faced tough questions about the pension shortfall and also heard complaints from Subcommittee Chairman Byron Dorgan (D-N.D.) about the agency’s fiscal year 2010 funding requests hydrogen fuel cell technology and carbon capture and storage (CCS).
With regard to DoE’s pension shortfall, Bennett told Chu he recently offered a bipartisan amendment to the fiscal year 2010 budget resolution to help cover the shortfall, and noted that Dorgan supported the effort.
The amendment, which would “establish a deficit-neutral reserve fund to cover the full cost of pension obligations” for DoE contractor employees at the department’s nuclear weapons facilities and environmental cleanup sites, was offered on the Senate floor last month and subsequently adopted and retained in conference, the aide to Bennett said.
In their April 9 letter to OMB Director Peter Orszag, Bennett and Dorgan said they had learned that the National Nuclear Security Administration (NNSA), the semi-autonomous DoE agency that runs the department’s nuclear weapons complex, is currently working to cover a fiscal year 2009 pension shortfall of $160 million and expects to face a pension shortfall in next fiscal year of more than $280 million.
In addition, the senators said they were told that the pension shortfall for DoE’s environmental management program in fiscal year 2010 is expected to approach $700 million– “This is more than 10 percent of the FY ’09 omnibus appropriation for environmental cleanup accounts,” they said.
“Unless the fiscal year 2010 budget request provides adequate resources to cover the pension shortfalls, national security mission and cleanup activities will be compromised,” the senators said. “The staff has also indicated that furloughs and layoffs are likely.”
In that light, Bennett questioned Chu at Tuesday’s hearing about allocation decisions in DoE’s latest budget request, saying the department chose to “apply additional resources to programs that appear to already enjoy some surpluses, but fail[ed] to address chronic pension shortfalls that have been created by poor market performance.
“I understand that these could not be foreseen, but I don’t think it’s acceptable to ignore the estimated $500 million to $600 million shortfall straight across the department, and the impact that that will have” on the department’s overall mission, Bennett said.
Chu said the matter is “of great concern” to the agency, adding that “there was some last-minute scrambling to locate funds” as it prepared its latest budget request. Chu emphasized the stock market’s contribution to the shortfall and said DoE has yet to find a short-term solution to the problem.
However, the disclosure of the pension shortfall follows the huge $38.7 billion windfall provided to DoE under the American Recovery and Reinvestment Act, the massive economic stimulus package approved by Congress earlier this year.
The pension issue may be particularly difficult for Chu to address because he is operating under conflict-of-interest restrictions that bar him from personally dealing with financial matters affecting the three DoE labs managed or co-managed by the University of California (UC). The restrictions stem from his former position as director of DoE’s Lawrence Berkeley National Laboratory, which is operated by UC. The university also co-manages NNSA’s Lawrence Livermore and Los Alamos national laboratories with Bechtel.
In presenting DoE’s fiscal year 2010 budget request of $26.4 billion, Chu emphasized that DoE was using the economic stimulus funds to accelerate basic research in support of advanced energy technologies. In particular, he said DoE plans to spend $280 million next year to launch eight “energy innovation hubs” aimed at commercializing various technologies close to being deployed on a large scale, including those related to solar electricity, advanced batteries and carbon capture and sequestration (CCS).
However, Dorgan said the department’s budget request came up short on a number of fronts, specifically with regard to CCS funding.
“This budget essentially flat funds coal research and development,” Dorgan said, noting the agency sought to direct only $3.4 billion toward development of CCS technologies.
Dorgan questioned how the agency expects to “de-carbonize” coal with a funding stream little changed from last year, and especially in light of President Obama’s stated support for clean coal technology: “I would have expected a substantial increase,” he said.
“I agree with you,” said Chu. However, Chu suggested that absent the economic stimulus funds, the agency was likely to have requested less than the $3.4 billion for CCS given the agency’s broad mission.
Dorgan also hammered Chu over DoE’s decision to significantly scale back funding for hydrogen fuel cell research, saying he was “stunned” that the department “essentially zeroed-out the hydrogen program,” which he said would end about 500 jobs related to some 190 ongoing projects in that area of research.
“This was a tough call,” said Chu.
“Hydrogen for vehicles is not near term,” he said. Noting various technical problems associated with wide-scale hydrogen use in vehicles, Chu said scientists “still have not figured out how to store hydrogen in compact form.”
In contrast, Chu said advanced batteries for electric cars could feasibly be deployed “on a mass scale” within the next 10 to 15 years.