Two years after Congress overhauled the1996 law privatizing helium production they are considering the need for additional legislation to assure fair competition

The Untidy History of Federal Involvement in Helium

Published
American Association of Petroleum Geologists (AAPG)

Just two years after Congress passed legislation to overhaul the privatization of helium production, Congress is investigating whether additional legislation is needed to assure fair competition in the sale and refining of helium.

We should be concerned about an adequate and reasonably priced supply because Helium is an integral part of modern technology. Helium is necessary to cool the magnets that are integral to Magnetic Resonance Imaging (MRI), to manufacture silicon wafers and fiber optic cable, to operate particle accelerators, and for other research that requires ultra-cold temperatures. Oh, and for party balloons and the blimps that float over sporting events.

Helium is generated as uranium decays and is extracted from natural gas deposits enriched in helium from underlying, uranium-rich granitic rocks. In the United States, the Cliffside field northwest of Amarillo, Texas, was the original source, and is also the storage reservoir for the National Helium Reserve. The Hugoton gas field of the Texas and Oklahoma panhandles and southwest Kansas, with helium concentrations around 0.2 percent has historically been the main contributor to the National Helium Reserve. The government established the reserve in 1925 to assure access to a supply of the gas for use in military blimps and dirigibles. The gas from the reserve has long been available to private refiners and sellers, and from them to the general public.

In 1996, faced with an expensive and little needed facility, Congress passed the Helium Privatization Act to sell down the gas supply and close the facility that is operated by the Bureau of Land Management (BLM). The legislated price turned out to be much below the market rate, leading to over consumption and a lack of commercial interest in helium production.

The Helium Stewardship Act of 2013 was intended to assure that helium was sold at fair market prices, while stimulating the growth of a private helium production industry so that the reserve could be closed. The law also expected that refiners would enter into tolling agreements to process helium purchased by non-refiners, increasing competition in the helium market.

In 2014, in the first auction under the legislation, the government received a price about double of prior sales. However, only two refiners won all the gas. In the past non-refiners could purchase about 10 percent of the helium through annual, non-allocated sales, but BLM evidently interpreted the 2013 law as ending non-allocated sales. Non-refiners complain that the auction process was unfair and that the refiners have not negotiated in good faith to give tolling agreements for processing gas owned by non-refiners.

At a July 8 hearing , the House Natural Resources Committee, Energy and Mineral Resources Subcommittee explored the problems with the 2014 helium auction. Non-refiners’ complaints about auctions and tolling agreement problems were generally substantiated by a report by the Government Accountability Office that was explained by a hearing witness.

Mr. Tim Spisak, Senior Advisor for Minerals and Realty Management at the BLM explained BLM’s plans to reestablish a non-allocated sale in addition to the auction, in order to assure that non-refiners can purchase helium. He also observed that the disagreements between refiners and non-refiners are to be expected as part of the competitive process and are being resolved.

Witnesses representing refiners and non-refiners explained their opposing views of the fairness of the auction process and tolling agreements.

Finally, Dr. William Halperin, a Northwestern University physics professor, testified about the value of maintaining the federal repository. He pointed out that helium has become more difficult to obtain and more expensive over the past few years as the role of the federal repository in the helium market has declined. These impacts have forced staff and research reductions. At the same time, researchers are moving to enhance their supply and reduce costs by increasing helium recycling and partnering with the American Chemical Society and the Defense Logistics Agency to negotiate lower prices.

By the numbers (from U.S. Geological Survey January 2015 mineral commodity summary):

  • U.S. refined helium production was 103 million cubic meters in 2014, almost 60 percent of world production of 175 million cubic meters. About 2/3 of U.S. production was exported.
  • The 2014 domestic consumption of helium was 34 million cubic meters (1.2 billion cubic feet).
  • Qatar and Algeria are the other large producers, producing 40 and 25 million cubic meters, respectively.
  • Russia has perhaps the fourth-largest reserves but is currently producing only small quantities – 5 million cubic meters in 2014. It is expected to increase production in the near future.
  • New U.S. helium production started in Wyoming in 2014 and should start in southwest Colorado in 2015. Because of this commercial development, the government’s helium production has decreased by 50 percent over the past two years.

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