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NASEO Energy Data & Security Committee

Review of EIA Budget

A Review of the Energy Information
Administration Budget (EIA)
and Data Quality Issues

Prepared by the National Association
of State Energy Officials (NASEO)
Ad Hoc Liaison Group

November 23, 1998

The NASEO/EIA Ad Hoc Liaison Group has been concerned with the reductions in the EIA budget in recent years and how this might affect the collection and publication of data. EIA is to be complemented on its ability to effectively manage these significant reductions while continuing to maintain the collection and ublication of vital energy data. However, the cumulative effects of these reductions appear to now threaten the quality of EIA data. This is also coming at a time when EIA has seen its responsibilities expanded by Congress to analyze emissions trends and is having to respond to new needs as the electric utility industry begins a transformation.

EIA data users continue to be concerned with the EIA's ability to continue to provide the quality, quantity, and analysis of data needed by Congress, state governments, industry, and the public to have a meaningful understanding of rapidly changing energy markets. Four areas have been examined in this paper: (1) a comparison of EIA's budget with other federal statistical agencies; (2) reductions in staffing; (3) examples of data quality issues; and (4) demands for additional work and new activities.

1. An Overview of Budget Cuts

The following table shows EIA's budget has declined by 17 percent since1995, while every other federal statistical agency has seen budget increases. The $14 million decrease in the EIA budget, contrasted against gains of $1 to $48 million for other agencies, does not reflect inflationary effects. During this period Congress has directed EIA to expand its role in monitoring emissions. EIA has also had to review its computer systems to address the year 2000 problem and undertake system changes as needed. Finally, EIA is having to undertake a comprehensive review of its electricity data collection to assure that it adapts its data collection efforts to capture emerging market changes. These new efforts draw funding away from existing program operations.

The average for other federal statistical agencies over the FY 1995 to FY 1999 period was a budget increase of $16 million. On a percentage basis, the increases have average 25 percent over four years. Total inflation over this period was 7 percent (using the GDP as the deflator). After factoring out inflation, the real increase for these agencies is 17 percent. Considering the inflation effect on EIA's budget increases the budget reductions from 17 to 22 percent. If the CPI is used to measure inflation, the effect is 9.2 percent over this period which would result in even larger differences.

These comparisons do on include the Bureau of Census which is gearing up for the 2000 census. Funding for the Bureau of the Census looking at current and periodic programs has grown 735 percent from FY 95 to FY 99. This is a budget increase from $278.1 million in FY 95 to $1,322.9 million in FY 1999.

Budget Levels Federal Statistical Agencies Ranked by % Change
(Million $)

2. Staff Reductions

Budget cuts, retirements and reductions in the allowable number of EIA employees invariably affects the quality of the data. Since 1995 the number of EIA authorized positions (full time equivalent positions) has been reduced by 108 person or 22 percent. The reductions in the Office of Oil and Gas (OOG) have been even larger, 32 percent. EIA needs to maintain adequate levels of experienced personnel because quality control cannot be maintained without knowledgeable industry experts. Shortages in personnel directly impact the amount of analytical and quality assurance work that EIA can produce.

Staffing Levels and Reductions
(# of Full Time Equivalent Position)

3. Quality of Data

The most worrisome impact of these budget and personnel losses is the ability of the EIA to maintain quality assurance programs. For example, the user community has questioned recent figures published by the Office of Oil and Gas (OOG). This is not surprising, since this office has taken disproportionate budget cuts. As shown in the Table below the Office of Oil and Gas has seen a 34 percent cut in its budget compared to the 16.6 percent cut for EIA as a whole.

A Comparison of EIA's and the Office of Oil and Gas' Budgets
(Million $)

Some examples of the questions raised by EIA's data users include:

• Last year EIA implemented a new system for collecting data on annual natural gas reserves and production information. The data sample was reduced dramatically. The new sampling procedure was implemented to save time and money and was thoroughly tested by EIA to guarantee that the change in sampling would not influence the year-end reserves and production results. EIA explained that the percent margin of error compared with the old sample was less than l percent. However1997, year-end production data raised serious questions. Analysts in the industry expected a flat production curve over the previous year. Instead, domestic production jumped 5 percent, a huge increase for one year. While there is no way to tell if the estimated increase resulted from the new sampling methodology, many consider it likely.
• Analysts in the natural gas community have observed that recent EIA data on production, supply, and disposition, in general, do not match company analysts' estimate as production capability, storage distribution and consumption, particularly during the first quarter of 1998.
• In the March 1998 Issues of the EIA Natural Gas Monthly, errors in its drilling activity estimates series were corrected and users were advised that, "the drilling activity data which were published or otherwise distributed by EIA prior to February 1998 are substantially in error."
• Analysts raised concerns over possible errors in the amount of industrial consumption reported by EIA for the early months of 1998. EIA found the error which it attributed to sample consolidations and their effect on reporting. The data was revised and reissued.
• The July 28, 1998, edition of THE OIL DAILY carried an article on the front page, "EIA Admits Mistake in Gas Demand Figure." David Costello of EIA said, "There is a disconnect between what we think is going on in the gas marketplace, and what is actually going on with the numbers."
• Similarly, the August 3, 1998, edition of THE OIL DAILY has a front page article, "Industry Mulls Gasoline Demand Mystery."
• The August 20, 1998, edition of THE OIL DAILY reported "API Admits Being Mystified by Lower Gasoline Demand Figures." API, which bases some of its monthly data on EIA's Petroleum Supply Monthly, suggests that "comparison with independent data sources suggest that recent gasoline deliveries' data may be underestimated in the "Petroleum Supply Monthly."

The budget and staffing cutbacks have reduced quality assurance, analysis and development projects. Continued reductions have constrained the ability to insure quality control. Without additional funds, some state level products may have to be cut.

Prior to budget cuts in Fiscal Year 1996 and the retirement of key staff, the expertise of EIA contractors and government staff could sustain ongoing industry analysis, quality assurance, and the sample frame's maintenance program. The loss of funds and staff since 1995 has resulted in data integrity problems, symptomatic of the need for expanded capability and intensive quality assurance efforts. The survey sample for crude oil import data offers a case in point. There has been no valid source to update these samples since 1992. The EIA's petroleum supply development funding has dropped more than 60 percent since Fiscal Year1995. The system maintenance accounts dropped 23 percent between 1995 and 1997. Similarly, the Petroleum Marketing development activities, including statistical support, dropped 58 percent since Fiscal Year 1995. These reductions reduced the ability to implement other measures, such as sample size changes, graphical validation support, improved validation systems, and frame development efficiencies. It's quality assurance and analysis budgets dropped 25 percent and it has suspended activities and studies once routinely undertaken to ensure quality of the data.

With the restructuring of the natural gas industry, natural gas data systems have reduced their coverage, timeliness and quality. (The office has lost five staff, many of them senior, and the budgets have been cut 15 to 31 percent.)

4. Changes in Electric Markets and New Responsibilities

The Energy Information Administration has the additional challenge of expanding data collection functions in electricity markets at a time when states are moving forward with electric restructuring in a piecemeal fashion. Markets have evolved rapidly; utilities, once highly regulated, now balk at providing the same quantity of information as they did in the past. EIA must also deal with unregulated companies moving into the market, while responding to requests for market analysis. The user community remains highly concerned about EIA's ability to continue providing key market information at the state-level on electricity price, by sector, as well as key information on generation capability. It anticipates EIA's need for additional funding in order to address the needs of a changing market, in a timely fashion. This appears to be another area where the Administration, Congress, and the public expect EIA to expand its data collection and analytical capability. Funding for the design and reporting of new data series, and development and analytical work will continue to draw funds needed for quality assurance.

It should be noted that during this period Congress also has directed EIA to expand its role in monitoring emissions. This effort will increase contract funding for statistical services needed to provide technical services to other agencies. Assistance will be needed in estimating corporate and organizational carbon emissions, calculating emission reductions, developing international energy analysis. Long term modeling is also required to assess impacts on trading partners, examine the economics of emissions trading options, and to assess advanced technologies.

The additional demand on EIA to address how year 2000 problem might effect its computer systems also redirects resources from existing programs. The cost of any system changes will further compound this financial transfer. These and other expenses adversely effect the resources available to EIA to carry out its primary mission to collect and disseminate energy data.

Conclusion

The EIA has stood out as an example of the ability of government to streamline and downsize, but the severity of prior budget cuts and personnel losses now jeopardizes the quality of EIA information. With energy markets growing ever more complex and volatile, EIA's ability to stay on top of those changes is compromised by the lack of adequate resources for quality assurance, development, analysis and even operation and maintenance. An unprecedented number of data users have publicly questioned EIA's published statistics in the last year, raising concerns in the minds of many about EIA's commitment to maintaining the quality of its data and analysis. It is essential that EIA's budget be increased at least by $5 million in FY 2000 to tackle the backlog of improvements needed to preserve EIA's reputation as a quality provider of energy information and analyses. This view is consistent with previous recommendations made by the NASEO/EIA Liaison Group, which has supported $5 million in additional funding for EIA.

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