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Research and Development: DOE Could Enhance the Project Selection Process for Government Oil and Natural Gas Research

GAO-09-186 Published: Dec 29, 2008. Publicly Released: Jan 08, 2009.
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Highlights

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.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Energy To better ensure that DOE selects oil and natural gas R&D projects that industry is unlikely to pursue, the Secretary of Energy should direct the Assistant Secretary for Fossil Energy to include in DOE's project selection process a formal assessment of the likelihood that the R&D would not have occurred without federal funding.
Closed – Implemented
DOE agreed with GAO's finding and as of March 12, 2009 has taken steps to adopt the recommendation in full. The following actions were initiated for RD&D Funding Opportunity Announcements (FOA) that the Oil and Natural Gas Program plans to issue in FY 2009 and in all future announcements. DOE incorporated language into procurement strategy planning documents that add an evaluation criterion to FOAs that support a formal assessment of whether a given project will likely be conducted in the near term by industry if Federal funds were not being provided. DOE will also require that FOA offerors specifically address in their applications whether the private sector would undertake the project being proposed in the near term in the absence of Federal funding. The applicants assertions will independently corroborate Department efforts to understand the current state-of-the-art for a given technology area.

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ConservationCrude oilEnergy developmentEnergy industryEnergy researchEvaluation criteriaFederal fundsFuel researchGas resourcesIndependent research and developmentNatural gasOil drillingOil resourcesPetroleum industryProgram evaluationProgram managementResearch and developmentResearch and development costsResearch programsTechnologyCost estimatesPolicies and procedures