Research and Development: DOE Could Enhance the Project Selection Process for Government Oil and Natural Gas Research Page: 2 of 37
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GAO
Accountability. Integrity. Reliability
Highlights
Highlights of GAO-09-186, a report to the
Chairman, Subcommittee on Energy and
Water Development, Committee on
Appropriations, U.S. Senate
Why GAO Did This Study
Although competitive oil and
natural gas markets generally
provide incentives for companies
to invest in research and
development (R&D), some industry
experts believe these companies
may underinvest in certain areas.
A recent GAO report noted
important criteria for the
Department of Energy (DOE) to
consider in evaluating its oil and
natural gas R&D efforts-including
the likelihood that industry would
perform the research without
federal funding. The Office of
Management and Budget has raised
similar concerns. In this context,
GAO was asked to review (1) how
much U.S. industry has invested in
oil and natural gas R&D over the
last 10 years, and the current focus
of these activities; (2) how DOE's
oil and natural gas R&D funding
and activities compare with
industry's; and (3) to what extent
DOE ensures that its oil and natural
gas R&D would not occur without
federal funding. GAO reviewed
DOE and U.S. industry data for oil
and natural gas R&D spending, and
interviewed DOE officials and
representatives from various
segments of the industry.
To better ensure that DOE selects
oil and gas R&D projects that
industry is unlikely to pursue, GAO
recommends DOE's project
selection process include a formal
assessment of the likelihood that
the R&D would not have occurred
without federal funding. DOE
provided only technical comments
which we incorporated as
appropriate.
To view the full product, including the scope
and methodology, click on GAO-09-186.
For more information, contact Mark E.
Gaffigan (202) 512-3841 or
gaffiganm @ gao.gov.RESEARCH AND DEVELOPMENT
DOE Could Enhance the Project Selection Process for
Government Oil and Natural Gas Research
What GAO Found
From 1997 through 2006, the U.S. oil and natural gas industry spent at least
$20 billion on R&D, and currently focuses mostly on near-term (within about
the next 2 years) production challenges. The nature of R&D varies by type of
company. For example, major oil companies tend to have in-house R&D
facilities, and though most of their projects are designed to meet near-term
needs, they also conduct some longer-term research. Similarly, service
companies, which specialize in providing technologies to facilitate exploration
and production, focus their R&D primarily on their clients' immediate needs,
but also conduct some longer-term research. In contrast, larger independent
companies generally do not conduct in-house R&D; instead, they may buy new
technologies from other companies and adapt them to meet their needs, and
also may participate in research partnerships. Smaller independent companies
do not generally conduct R&D, but some obtain or become aware of
technology from other companies, trade publications, or professional
associations.
From 1997 through 2006, DOE's total funding for oil and natural gas R&D
totaled significantly less than industry's-about $1 billion versus at least $20
billion-and, in contrast to industry's focus on near-term challenges, DOE's
R&D focuses on both near- and longer-term challenges. Some examples of
DOE's projects that have had a near-term focus include projects that develop
more advanced drilling and imaging tools, and enhance oil recovery. An
example of a DOE project that has had a longer-term, high-risk focus is
evaluating the potential use of methane hydrates, which are molecules of
methane trapped inside a lattice of ice, as a future energy source-an area
that industry officials said was generally beyond their time horizon for R&D.
DOE keeps abreast of industry R&D activities and uses a project selection
process to ensure that its efforts support industry R&D; however, DOE does
not formally assess whether industry would undertake this R&D without
federal funding. Based on its awareness of industry needs gathered from its
interactions with industry, DOE develops research priorities that drive its
project solicitations. Individual oil and natural gas projects are screened to
ensure that the applicant (1) explains the significance of the problem the
proposal addresses, (2) demonstrates understanding of the current technology
and information gaps, and (3) considers the likelihood that the project will
advance the current state of technology. While these efforts help to ensure
that DOE is informed about industry activities, DOE does not formally
assesses the likelihood that industry would have conducted the R&D without
federal funding, nor does it explicitly include such an evaluation in its
screening criteria. For instance, GAO found that several of DOE's projects
addressing challenges in advanced drilling and improved recovery of oil and
natural gas were similar to activities conducted by industry. In this regard, in
its review of DOE's oil and natural gas R&D budget, the Office of Management
and Budget has challenged DOE to better justify the need for certain
government research. By making a more formal evaluation in its screening
process, DOE could better demonstrate that it selects projects that industry is
unlikely to pursue.
United States Government Accountability Office
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United States. Government Accountability Office. Research and Development: DOE Could Enhance the Project Selection Process for Government Oil and Natural Gas Research, report, December 29, 2008; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc298413/m1/2/: accessed March 28, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.