U.S. budget cuts hit energy fact-finding arm
Funding cuts to curtail data collection; energy leaders warn of greater volatility
Data moves just about everything in the energy sector. Oil reservoirs are defined by it. Speculators manipulate it. And policy-makers draw on it to draft legislation and regulations. So it comes as no surprise that the response to a decision by the United States government to cut the budget of its energy fact-finding arm, the Energy Information Administration, has met with opposition from a diverse group of market watchers, from former legislators up to IHS CERA chairman Daniel Yergin.
The 2011 budget is set at $95.4 million, roughly 14 per cent less than the previous fiscal year. The lower funding level “will require significant cuts” in data, analysis and forecasting, Richard Newell, the agency’s administrator, tells Financial Times commodities editor Javier Blas. News of the planned cuts, a reduction of $15.2 million, was first announced at the end of April. I raise the issue here out of pure self-interest. Along with policy-makers, energy writers and news editors just about everywhere, I draw on the EIA frequently for insight and analysis. For those who haven’t seen it, here’s a list of services and publications affected by the cuts, which I’ve copied below:
Oil and Natural Gas Information
- Do not prepare or publish 2011 edition of the annual data release on U.S. proved oil and natural gas reserves.
- Curtail efforts to understand linkages between physical energy markets and financial trading.
- Suspend analysis and reporting on the market impacts of planned refinery outages.
- Curtail collection and dissemination of monthly state-level data on wholesale petroleum product prices, including gasoline, diesel, heating oil, propane, residual fuel oil, and kerosene. Also, terminate the preparation and publication of the annual petroleum marketing data report and the fuel oil and kerosene sales report.
- Suspend auditing of data submitted by major oil and natural gas companies and reporting on their 2010 financial performance through EIA’s Financial Reporting System.
- Reduce collection of data from natural gas marketing companies.
- Cancel the planned increase in resources to be applied to petroleum data quality issues.
- Reduce data collection from smaller entities across a range of EIA oil and natural gas surveys.
Electricity, Renewables, and Coal Information
- Reduce data on electricity exports and imports.
- Terminate annual data collection and report on geothermal space heating (heat pump) systems.
- Terminate annual data collection and report on solar thermal systems.
- Reduce data collection from smaller entities across a range of EIA electricity and coal surveys.
Consumption, Efficiency, and International Energy Information
- Suspend work on EIA’s 2011 Commercial Buildings Energy Consumption Survey (CBECS), the Nation’s only source of statistical data for energy consumption and related characteristics of commercial buildings.
- Terminate updates to EIA’s International Energy Statistics.
Energy Analysis Capacity
- Halt preparation of the 2012 edition of EIA’s International Energy Outlook.
- Suspend further upgrades to the National Energy Modeling System (NEMS). NEMS is the country’s preeminent tool for developing projections of U.S. energy production, consumption, prices, and technologies and its results are widely used by policymakers, industry, and others in making energy-related decisions. A multiyear project to replace aging NEMS components will be halted.
- Eliminate annual published inventory of Emissions of Greenhouse Gases in the United States.
- Limit responses to requests from policymakers for special analyses.
More than any other change, it is the suspension of the agency’s International Energy Outlook that stings. Many have pointed out that understanding volatility in oil markets requires more, not less, transparency. In their open letter to Congress, former U.S. Department of Energy chiefs Spencer Abraham, Samuel Bodman and Bill Richardson worry the cuts will “exacerbate market uncertainty” that has gripped traders and energy leaders of late:
It is universally acknowledged that the reduction of price volatility requires enhanced transparency. Decreasing investment by our government in information and transparency sends the wrong signals to other governments whose lagging efforts to improve data and transparency have unwanted consequences for consumers in the U.S. and elsewhere in the world.
The argument calls to mind an opinion Robert Skinner, a senior vice-president at Statoil Canada Ltd., voiced at this year’s World Heavy Oil Congress in Edmonton. He was referring to environmental monitoring in the oil sands, but I think the comment applies equally to the EIA budget cuts. “It’s always struck me as odd that we have these huge industries and we somehow lapse on the monitoring side,” the veteran geologist told a lunchtime audience. “You have to measure stuff in order to understand it.”
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