WASHINGTON (Reuters) - Energy Secretary Steven Chu came under fire from Democrats and Republicans on Wednesday for his department's plan to seek a sharp rise in funding for clean-energy projects while paring research on fossil fuels.

Chu told a congressional committee that a nearly 12 percent increase in the Energy Department's new budget was necessary to make the United States competitive against other countries, create thousands of U.S. jobs and enhance national security.

"We must rev up the great American innovation machine to win the clean-energy race and secure our future prosperity," Chu said at a Senate Energy and Natural Resources Committee hearing on the department's proposed $29.5 billion budget for the 2012 spending year that begins on October 1.

But Republicans on the panel said while they also like clean-energy technology, it should not come at the expense of traditional energy sources such as oil, and the department must live within budget constraints facing the federal government.

"We need to draw a distinction between the programs we want to fund and the programs we need to fund -- and I'm not entirely convinced this budget request will move us in that direction," said Senator Lisa Murkowski, the top Republican on the panel.

Compared to 2010 levels, spending in the department's 2012 budget would increase by 61 percent for wind energy, 88 percent for solar energy and 136 percent for geothermal technology. Meanwhile, fossil fuels research would be cut 31 percent.

"These numbers are not going to be available to you," said Republican Senator Dan Coats. "We're looking at a budget that is probably not going to be realized. It's likely you'll be called on to do more with less."

Murkowski noted the department still had billions of dollars from the 2009 stimulus act that remained unspent.

The department's website shows that more than $21 billion, or 65 percent, of its stimulus funding has yet to be used, according to Murkowski. "DOE has also reported one of the slowest spendouts of any federal agency," she said.

Democrat Jeff Bingaman, who heads the Senate energy committee, said the department's budget request represented a significant investment in America's ability to compete in global clean-energy markets, where China is gaining market share.

However, Bingaman joined Republicans in criticizing proposed cuts in the department's funding for research on oil and other fossil fuels.

"While I strongly believe in the clean-energy objectives of the administration and this budget request, I believe that fossil-energy sources can be made much cleaner by the application of appropriate R&D, and that should also be a priority," Bingaman said.

The administration also wants to repeal $3.6 billion in yearly tax breaks and other subsidies for oil, natural gas and coal companies.

Both Bingaman and Murkowski were critical of the department's plans to sell $500 million worth of oil from the U.S. Strategic Petroleum Reserve.

Chu explained the department had to repair one of the many underground salt caverns that hold the 727 million barrels of emergency oil. The oil from that deteriorating cavern has to be drained and sold, he said.

The oil that would be sold, equal to about 5.8 million barrels at current U.S. prices, is less than the amount of crude the U.S. imports in one day.

Image: REUTERS/Herwig Prammer