Is the Energy Department ready to reboot the country?

The Energy Department figures prominently in the recently enacted $789 billion economic stimulus package meant to help the ailing U.S. economy. Specifically, Congress has provided Energy with $38.3 billion for the next two years adding about 75 percent to Energy’s annual budgets. It has also increased the agency’s authority to grant or guarantee $132 billion in energy loans from the federal government. Energy’s “modest” goals, as laid out in its recent strategic plan for the stimulus package: “Create millions of new green jobs and lay the foundation for the future” of the country.

These are high expectations for an agency that has been a non-player in the country’s energy policy for most of its existence. Energy was created in 1977 by President Jimmy Carter to reset the U.S. energy agenda in response to the oil disruptions and embargo. This effort, however, was short-lived.

When President Ronald Reagan took office in 1981, one of his first goals was to abolish Energy and eliminate the government’s role in the energy sector. But he was unable to kill the department because neither he nor his supporters could figure out what to do with the country’s sprawling nuclear weapons complex, a key part of Energy’s mandate. Ever since, nuclear weapon stewardship has dominated the department’s agenda.

But now, just a couple of months into his administration, President Barack Obama is poised to make a major investment into Energy. In terms of direct spending, energy conservation gets the most money with $8.5 billion, followed by $6 billion for cleanup of polluted nuclear sites, $5.6 billion for renewable energy, $4.5 billion for electricity transmission, $3.2 billion for fossil energy, and $2.7 billion for alternative fuel vehicles. An additional $6 billion is being set aside to cover government costs (including financial risk expenses) on $60 billion in loan guarantees for renewable energy and electrical grid improvements. An additional $2 billion is being provided for Energy’s Science Program–$400 million of which is to be used to establish a new Advanced Research Projects Agency within the department, at Energy Secretary Steven Chu’s request no less.

Most of Energy’s stimulus spending will be in the form of grants and contracts–the administration of which will be a major challenge for an understaffed and neglected federal workforce. Years of outsourcing and staff cuts have left Energy ill-prepared to handle the onslaught of work and responsibility these programs will require. Recognizing this, Congress has urged the department to hire more federal workers.

Days after the stimulus package was passed, Chu was called to task by Sen. Jeff Bingaman, chair of the Senate Energy and Natural Resources Committee, because of the department’s slow pace in getting its burgeoning loan-guarantee programs off the ground. In response, Chu announced reforms designed to kick-start the program. And last Friday, he issued Energy’s first loan guarantee for construction of a solar manufacturing plant in California. Other projects, however, such as nuclear plants and auto manufacturing will have to go through a multiyear process due to congressional and regulatory requirements.

Despite the pressure to move quickly, there’s good reason to be thorough. According to the Government Accountability Office (GAO), recipients of the loan guarantees have a 50 percent chance of defaulting–leaving taxpayers holding the bag. Mindful of these risks, the Office of Management and Budget (OMB) issued a stimulus spending requirement for Energy to have a “sufficient and adequately trained workforce to responsibly evaluate, award, and monitor loans and loan guarantees.” Yet, nearly simultaneously, Energy’s inspector general reported that the loan-guarantee office wasn’t adequately staffed to perform even minimal due diligence.

More largely, since 1990, Energy has remained prominent on the GAO’s list of high-risk federal agencies vulnerable to waste, fraud, and abuse. For example, in 2007, GAO reported that the department “performed little or no review” of its contractors’ monthly invoices over a two-year period during the construction of a large waste processing plant at the Hanford site in Washington State. The total cost of this project has skyrocketed from $42 billion to nearly $70 billion and is several years behind schedule.

At the same time, Chu must contend with a budget structure in which maintaining nuclear weapons and cleaning up nuclear sites have dominated for decades. Even with additional stimulus money, spending for bombs and cleanup will still exceed those for actual energy-related functions. Spending for the weapons complex is currently comparable to that during the height of the nuclear arms race in the 1950s. The big difference now–half of that money is spent dealing with the Cold War’s environmental legacy. Last year alone, Hanford received $2 billion for cleanup, nearly twice as much as the entire EPA Superfund program. But this is proving to be not enough, prompting Washington State to sue Energy to pick up the pace of processing the radioactive detritus that threatens the nearby Columbia River.

Thus, the most important step in transforming Energy is to free the department from its mission to maintain nuclear warheads and the country’s Cold War nuclear infrastructure. This structural impediment isn’t lost on the White House either. In January, it launched an interagency review with the goal of transferring the country’s nuclear weapon programs from Energy to the Pentagon. Currently OMB is reviewing how best to transfer the bomb program out of Energy. Its report is due in September.

In the meantime, efforts to bolster the Office of Energy Efficiency and Renewable Energy should be given a high priority since it will be responsible for more than one-half of the department’s stimulus spending. One suggestion would be to have the office focus on energy conservation programs (such as home weatherization) that are an effective way to stimulate rapid job growth.

It’s clear that the role of science in solving the country’s energy problems will take center stage with Secretary Chu, a Nobel laureate, at the helm. Plus, as the former director of Lawrence Berkeley National Laboratory, he’s familiar with the tensions within Energy’s Science Program, which involve large, traditional physics projects and more recent additions such as biological and environmental research. The hope is that new initiatives such as the department’s Advanced Research Projects Agency will provide him with the opportunity to transcend the department’s entrenched interests and help encourage scientific breakthroughs that can help the country.