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GAO Calls for DOE to be 'More Rigorous' in Oil, Gas R&D

The Government Accountability Office (GAO) has expressed concern that the Department of Energy (DOE) may be conducting research and development (R&D) in oil and natural gas that the industry itself should be funding, without government help.

"We found that DOE neither formally assesses the likelihood that [the oil and gas] industry would have conducted the R&D without federal funding, nor does it explicitly include such an evaluation in its screening criteria" for R&D projects, said the GAO, the investigative arm of Congress, in its report, which was requested by Sen. Byron Dorgan (D-ND).

In its review of DOE's oil and gas R&D budget, the Office of Management and Budget also has challenged DOE to better justify the need for government research, according to GAO.

"We found that several of DOE's projects addressing challenges in advanced drilling and improved recovery of oil and gas were similar to activities conducted by industry. We are recommending that DOE include in its project selection process a formal assessment of the likelihood that the R&D would not have occurred without federal funding," said the agency in the 37-page report, which was released Thursday.

A "more formal and rigorous assessment" of its oil and gas R&D would ensure that the DOE selects projects that the oil and gas industry is unlikely to pursue, the GAO said.

"DOE officials continue to believe that DOE's oil and gas R&D activities only minimally duplicate industry's R&D activities because of their extensive interaction with the industry. Nonetheless, in our examination of DOE's current projects, we found instances where some -- particularly near-term R&D on advanced drilling and improved recovery of oil and gas -- are similar to industry's R&D activities. As a result, some of DOE's oil and gas R&D might include activities that industry would conduct without federal funding."

The domestic oil and gas industry is estimated to have spent at least $20 billion on R&D activities between 1997 and 2006, focusing mostly on near-term production challenges, such as extracting oil and gas from difficult environments (Arctic and very deep waters), according to the GAO. In contrast, the DOE has spent about $1 billion on oil and gas R&D during the same period, zeroing in on near- and long-term challenges (methane hydrates).

During the nine-year period DOE's oil and gas R&D appropriations declined by more than 60% -- from about $162 million in 1997 to about $63 million in 2006, the GAO said. The department, however, received an additional $161 million in its 2007 and 2008 appropriations for oil and gas R&D.

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