fairly constant since, even though major investments were made in clean coal technology (CCT) demonstrations in the early 1990s.

Table 4–1 shows the funding for each of the four categories of fossil energy programs broken into two distinctly different RD&D time periods, FYs 1978 to 1985 and FYs 1986 to 2000. In the late 1970s and early 1980s, federal funding was concentrated on RD&D related to developing alternatives for petroleum and natural gas. Some of these alternatives evolved into large-scale commercial demonstrations supported by the now-defunct Synthetic Fuels Corporation, but there was also significant funding for magnetohydrodynamic (MHD) electricity generation, industrial fluidized-bed combustion, shale oil, and fuel cells. During the 8-year period, 57 percent of the total funding went to the 22 fossil energy programs analyzed by the committee. Over the next 15 years, only 43 percent of the total funding went to the same programs.

As shown in Figure 4–2, over the 1978 to 2000 study period, 58 percent of the expenditures were for RD&D in coal utilization and conversion. Of this, approximately one-half was spent on building and operating large commercial-sized demonstration plants for direct liquefaction and gasification in the 1978 to 1981 time period. In 1978, the coal conversion and utilization portion of the budget represented 68 percent of the total fossil energy expenditures. However, since then, as funding for direct liquefaction and gasification (which underwent a fundamental refocusing from producing pipeline-quality gas and gas for the industrial sector to integrated gasification gas turbine combined-cycle) declined, this category represented a considerably lower percentage. In 2000, it represented only 30 percent of the overall fossil energy budget for the technology programs analyzed.

The share of DOE fossil energy funds devoted to environmental characterization and control was 4 percent of the total over the study period, partly because the Environmental Protection Agency (EPA) maintained a large program in this area prior to 1985. During the FY 1978 to FY 2000 study period, the share of funding in this program area varied considerably, from 0 percent to 13 percent. The principal factors that influenced annual funding were (1) SO2 and NOx control technology demonstrations conducted under the CCT demonstration program in the early 1990s and (2) mercury characterization and control initiatives in the 1990s.

TABLE 4–1 Fossil Energy Budgets for the 22 Programs Analyzed by the Committee (millions of constant 1999 dollars)

Reported Fossil Energy Budget

FYs 1978–1985

FYs 1986–2000


Oil and gas production




Coal conversion and utilization




Environmental characterization and control




Electricity production









SOURCE: OFE, 2000.

The share of funds for the electricity production programs averaged 24 percent over the study period. Although funding for this program area remained fairly constant from 1982 through 2000, its importance (and priorities within the program) changed dramatically.

Magnetohydrodynamic power generation was the recipient of the majority of funds in this category until 1982 and a significant recipient until the program was terminated in 1994. The fuel cell program, on the other hand, was consistently funded at between $40 million and $50 million per year for most of the study period. The advanced turbine technology program, which began receiving DOE funds in 1992, has been a major recipient of funds since then, averaging $35 million per year. As a result, the electricity production programs now comprise 45 percent of the overall funding provided by the Office of Fossil Energy for the programs analyzed by the committee.

The share of funds devoted to the oil and gas programs over the study period was 14 percent, of which one-third was shale oil R&D early on. However, the percentage of the fossil energy R&D budget allocated to these programs rose steadily, from 12 percent in 1978 to 22 percent in 2000. The increase in the program’s share of funds is due more to declining budgets in other parts of the program than to increases in the oil and gas budgets.

Cost Sharing in the Fossil Energy Program

Since the beginning of the fossil energy RD&D program at DOE, cost sharing was used to (1) leverage federal funds, (2) obtain commitment from industry for RD&D projects, and (3) involve industry in the transfer of technologies to the commercial marketplace. Generally speaking, and with the exception of the large commercial demonstration projects, in the early days of DOE, industrial cost sharing was not deemed critical to program success. In many instances when cost sharing was required, it was loosely defined, allowing industry to use a variety of financial techniques to meet the cost-sharing goals. One common technique was in-kind contributions (e.g., including the value of equipment, buildings, land, and other capital resources originally used for purposes other than RD&D with DOE). Using these techniques, industry was in some cases able to meet the cost-share requirement with no direct expenditure. This resulted in some organizations receiving DOE contracts without being committed to commercializing the technology if successful. Even in the early commercial demonstration projects, cost sharing was often designed so that the initial project costs would be borne by the government (for feasibility studies, design studies, and even initial capital outlays), with industry’s share pro-

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