The President released the FY 2008 Budget Request to Congress on Monday, February 5, 2007. The FY 2008 total coal program budget request is $426.5 million, up by almost $60 million over FY 2006 enacted levels. Of this amount, $108 million is for FutureGen, $73 million is for the Clean Coal Power Initiative (CCPI), and $245.5 million is for the core R&D program (down by approximately $57 million from FY 2006).

While the coal budget appears robust, a good portion of the funding for FY 2008 is derived from previously appropriated clean coal funds. Of the $73 million requested for the CCPI program, $58 million is available from an old clean coal project that was recently canceled. Therefore, only $15 million can be considered "new" funding for the CCPI program. The $108 million requested for FutureGen will be funded out of previously appropriated funds for the clean coal technology program. These funds, a total of $257 million, were appropriated in prior years but are no longer required for clean coal projects. As a result, Congress has "deferred" these funds and by deferral they technically remain available for use in the clean coal program. The Administration’s budget seeks to "rescind" the remaining $149 million of these previously appropriated CCT funds. CURC^SM objects to the rescission of these funds.

Particular areas of concern in the core R&D program include the Innovations for Existing Plants (IEP) program, which was zeroed out in the FY 2008 budget request. This program is important for demonstrating mercury control technologies, particularly on Western coals. No funding for the IEP program in FY 2008 would prevent the conclusion of ongoing mercury control technology demonstrations and the initiation of new mercury demonstrations using Western coals.

The $10 million budget requested for the Fuels program, directed towards hydrogen development, is approximately $18 million less than the enacted FY 2006 level. This program is always restored by Congress, and it is likely Congress will restore some or all of the $18 million difference in funding between prior years and the FY 2008 request. Budget constraints for the overall fossil energy program will put pressure on finding ways to fund this program as well as the other coal programs. The Advanced Research program is significantly less in the FY 2008 budget simply because the program housed approximately $30 million in earmarks in the FY 2006 enacted bill. The IGCC program also faces a decrease of $4 million in the FY 2008 budget. Again this year, there is no funding for an advanced combustion program.

The Sequestration program has an increase in the FY 2008 budget in order to initiate Phase III of the regional carbon sequestration partnerships. The funding increase, however, will allow for a smaller number of large scale sequestration demonstrations planned for Phase III of the partnerships, and may not be enough to close out Phase II of the partnerships (we are still analyzing these impacts). The CURC^SM technical subcommittee will consider whether funding for this program is sufficient to cover CO2 capture activities as well as the ongoing sequestration program activities.

When considered together with the FY 2008 budget request, there may be about $230 million in available funds for a 3^rd CCPI solicitation. This amount of funds may not be enough to conduct another solicitation (DOE has previously stated that between $250 to $300 million is required to conduct a solicitation.) It is possible that DOE may have additional funds prior to the end of the year from another canceled project that would provide enough funding to initiate a 3rd solicitation, but it is unclear whether or not DOE will move forward with a solicitation in FY 2008.

LOAN GUARANTEE PROGRAM

With respect to the DOE loan guarantee program authorized in EPAct 2005, the FY 2008 budget requests funding for the DOE loan guarantee office in the amount of $8.4 million. The budget request also sets a cap on federal loan guarantee commitments of $9 billion. Of this amount, $4 billion is available for central power generation facilities, including nuclear facilities and "carbon sequestration optimized" coal facilities; $4 billion is available for biofuels and clean transportation fuels; and $1 billion is available for electric transmission and renewable energy projects.

For more information about FY 2008 Energy & Water appropriations, please contact CURC^SM at (202)298-1850.