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Oil industry disputes proposed budget trim

Plan would kill $50 million in federal R&D funding

From Scott Spoerry
CNN

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WASHINGTON (CNN) -- Oil drilling companies are upset that the Bush administration has proposed killing funding for oil and natural gas exploration research and development programs at the Department of Energy, an industry lobbyist said Monday.

The proposed cuts were included in the $2.77 trillion budget for the 2007 fiscal year that President Bush presented to Congress on Monday.

The proposed 2007 budget would cut about $61 million from the Energy Department's budget. It proposes eliminating a $50 million-per-year research-and-development program that was authorized in the sweeping Energy Policy Act of 2005, which Bush signed in August.

"Industry has the incentives and resources to do such R&D on its own," said a written statement from the White House Office of Management and Budget.

Additionally, the president has called for more funding toward developing alternative energy sources such as nuclear, solar and cleaner coal technology.

But Mike Linn, chairman of the Independent Petroleum Association of America, counters, "It doesn't make sense to have an Energy Department that doesn't have a portion of its mission directed to America's largest energy resources."

The IPAA, which represents companies that drill most of the oil and gas wells in the United States, said the Bush administration's focus on aiming research dollars toward alternative and cleaner fuels is misguided.

Moreover, Linn said most of the exploration and research money distributed by the department has gone to small, lean exploration companies, not the large integrated oil companies that have been reporting record profits.

Last week, Exxon Mobil Corp., the nation's largest oil company, reported U.S.-record profits for the quarter of $10.7 billion, as well as for the year ($36.1 billion).

The 2007 budget, with a projected deficit of at least $354 billion, would increase spending for the military and homeland security, and hold back money for Medicare and other nondefense programs. (Full story)

The budget proposal also calls for opening Alaska's Arctic National Wildlife Refuge to oil drilling, which Congress has previously rejected.

In his State of the Union address last week, Bush also proposed increased funding for research into ethanol fuels to power vehicles. Ethanol is a cleaner-burning fuel that can be derived from crops such as corn or sugarcane.

"Our goal is to make this new kind of ethanol practical and competitive within six years," he said.

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