[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





                            UP IN THE AIR:
                        THE BLM'S DISAPPEARING
                            HELIUM PROGRAM

=======================================================================

                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                         Thursday, May 13, 2010

                               __________

                           Serial No. 111-52

                               __________

       Printed for the use of the Committee on Natural Resources



  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
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                     COMMITTEE ON NATURAL RESOURCES

              NICK J. RAHALL, II, West Virginia, Chairman
          DOC HASTINGS, Washington, Ranking Republican Member

Dale E. Kildee, Michigan             Don Young, Alaska
Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            John J. Duncan, Jr., Tennessee
Frank Pallone, Jr., New Jersey       Jeff Flake, Arizona
Grace F. Napolitano, California      Henry E. Brown, Jr., South 
Rush D. Holt, New Jersey                 Carolina
Raul M. Grijalva, Arizona            Cathy McMorris Rodgers, Washington
Madeleine Z. Bordallo, Guam          Louie Gohmert, Texas
Jim Costa, California                Rob Bishop, Utah
Dan Boren, Oklahoma                  Bill Shuster, Pennsylvania
Gregorio Sablan, Northern Marianas   Doug Lamborn, Colorado
Martin T. Heinrich, New Mexico       Adrian Smith, Nebraska
Ben Ray Lujan, New Mexico            Robert J. Wittman, Virginia
George Miller, California            Paul C. Broun, Georgia
Edward J. Markey, Massachusetts      John Fleming, Louisiana
Peter A. DeFazio, Oregon             Mike Coffman, Colorado
Maurice D. Hinchey, New York         Jason Chaffetz, Utah
Donna M. Christensen, Virgin         Cynthia M. Lummis, Wyoming
    Islands                          Tom McClintock, California
Diana DeGette, Colorado              Bill Cassidy, Louisiana
Ron Kind, Wisconsin
Lois Capps, California
Jay Inslee, Washington
Joe Baca, California
Stephanie Herseth Sandlin, South 
    Dakota
John P. Sarbanes, Maryland
Carol Shea-Porter, New Hampshire
Niki Tsongas, Massachusetts
Frank Kratovil, Jr., Maryland
Pedro R. Pierluisi, Puerto Rico

                     James H. Zoia, Chief of Staff
                       Rick Healy, Chief Counsel
                 Todd Young, Republican Chief of Staff
                 Lisa Pittman, Republican Chief Counsel
                                 ------                                


              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    JIM COSTA, California, Chairman
           DOUG LAMBORN, Colorado, Ranking Republican Member

Eni F.H. Faleomavaega, American      Don Young, Alaska
    Samoa                            Louie Gohmert, Texas
Rush D. Holt, New Jersey             John Fleming, Louisiana
Dan Boren, Oklahoma                  Jason Chaffetz, Utah
Gregorio Sablan, Northern Marianas   Cynthia M. Lummis, Wyoming
Martin T. Heinrich, New Mexico       Doc Hastings, Washington, ex 
Edward J. Markey, Massachusetts          officio
Maurice D. Hinchey, New York
John P. Sarbanes, Maryland
Niki Tsongas, Massachusetts
Nick J. Rahall, II, West Virginia, 
    ex officio
                                 ------                                








                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Thursday, May 13, 2010...........................     1

Statement of Members:
    Costa, Hon. Jim, a Representative in Congress from the State 
      of California..............................................     2
        Prepared statement of....................................     4
    Lamborn, Hon. Doug, a Representative in Congress from the 
      State of Colorado..........................................     5
        Prepared statement of....................................     6

Statement of Witnesses:
    Burke, Marcilynn, Deputy Director, Bureau of Land Management, 
      U.S. Department of the Interior............................     7
        Prepared statement of....................................     9
        Map of ``Major Gasfields of the U.S.''...................    11
    Groat, Charles G., Ph.D., Chair in Energy and Mineral 
      Resources, Department of Geological Sciences, The 
      University of Texas at Austin, on behalf of the National 
      Research Council of the National Academies.................    37
        Prepared statement of....................................    25
    Mittal, Anu K., Director, Natural Resources and Environment, 
      U.S. Government Accountability Office......................    12
        Prepared statement of....................................    13
    Richardson, Robert C., Ph.D., Vice Provost for Research, 
      Emeritus and Senior Science Advisor to the President and 
      Provost, Cornell University, on behalf of the National 
      Research Council of the National Academies.................    25
        Prepared statement of....................................    25

Additional materials supplied:
    Haynes, Mark, President, Concordia Power, on behalf of the 
      NGNP Alliance, Letter and attachment submitted for the 
      record.....................................................    48
    Map of ``Major Gasfields of the U.S.''.......................    11
                                     


 
    OVERSIGHT HEARING ON ``UP IN THE AIR: BLM'S DISAPPEARING HELIUM 
                               PROGRAM.''

                              ----------                              


                         Thursday, May 13, 2010

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 10:10 a.m. in 
Room 1324, Longworth House Office Building, Hon. Jim Costa 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Costa, Holt, Sarbanes, and 
Lamborn.
    Mr. Costa. The oversight hearing with the Subcommittee on 
Energy and Mineral Resources will now begin. The subject matter 
for this morning's oversight hearing is on the Bureau of Land 
Management's efforts with regard to the disappearing Helium 
Program, and we will get into that in a moment.
    But before I do, let me indicate that this is the 
Subcommittee's first hearing since the tragic accident that 
took place in the Gulf of Mexico, with the loss of lives. 
Certainly I, and I believe members of the Subcommittee, want to 
extend our sympathy and concerns for the families who lost 
their loved ones in that tragic accident. And obviously, the 
impacts of that accident with regard to the environmental spill 
is something that we are all focused on. The Department of the 
Interior, I believe, has sent over 13,000 personnel, together 
with the Coast Guard, Homeland Security, and others who are now 
out on the Gulf in Louisiana and Alabama and the other states, 
trying to assure that we do everything that is humanly possible 
to stop the spill and work in conjunction with the private 
sector, with British Petroleum and the other parties to the 
impacts of this pending horrific spill that is taking place.
    Chairman Rahall and I have spoken a number of times with 
regard to this entire incident. The full Committee will be 
holding hearings later this month, with Secretary Salazar 
reporting to the full Committee. And hopefully by that time, 
the leak will have been, if not completely stopped, 
significantly reduced; and the efforts to do the remedial 
applications so that we can minimize the impact to the 
environment will be taking place.
    In June, it is the intention of the Subcommittee Chair to 
hold at least one hearing, if not a series of hearings, to look 
at the proposal that the Department of the Interior is 
considering with regard to dividing the responsibility of the 
Minerals Management Service as it relates to both the Royalty 
Program and the inspection of these facilities throughout the 
Gulf and other places offshore in American waters. We will do 
our due diligence.
    It is also the desire of this Chairman, in working with the 
full Committee Chairman, to provide an opportunity for members 
of the full Committee and Subcommittee to actually go down and 
visit, and see firsthand what has taken place.
    It is this Chairman's view that going down there now would 
not be helpful to the process. We want them to fix it, and to 
do all the corrective action. We can do our due diligence and 
the appropriate oversight once they have hopefully stopped the 
leak, and they begin to deal with the remedial efforts that 
clearly must be done.
    But at this point, with all the efforts that are taking 
place, I think I would not want our visit to be counter-
productive or get in the way of what needs to be happening 
right now. But we certainly want to provide that opportunity 
for Members at the appropriate time. And I hope that will be 
within the next month.
    So I wanted to put that in perspective because, obviously, 
it is central to the focus and the jurisdiction of this 
Subcommittee. And while we are holding this hearing this 
morning, this had been scheduled a month ago, and I don't want 
anyone to think that simply because we are holding this hearing 
today, that we are not focused on what is a very, very critical 
issue for our country, for this Subcommittee, and for the full 
Committee. And I know Chairman Rahall takes the responsibility 
and the jurisdiction of his full Committee very, very, very 
seriously, and he will be obviously doing everything he can, 
working with all the members of the Subcommittee. He is going 
to be sending out a letter to the members of the Subcommittee 
that basically outlines a course of action for the full 
Committee, and what he would like us to focus on with the 
Subcommittee here soon.
    So I just wanted to put that in perspective because this 
catastrophe is obviously on the news every day, and it is on 
the minds of many Americans who are concerned about the focus 
of our energy policy in this country. And it is the appropriate 
jurisdiction both of this Subcommittee and the full Committee, 
and we intend to fully discharge our responsibilities in those 
areas.
    So with that understood, I will begin my opening statement 
with regard to today's subject matter at hand.

 STATEMENT OF THE HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Mr. Costa. The Federal Helium Program is something that has 
existed for decades, and I think oftentimes people have an 
interesting sense of what the Federal Helium Program may or may 
not be.
    Notwithstanding the challenges, many challenges that we 
face with energy, I think it is important to note that, while 
we may think of helium as something that we put in balloons or 
that used to have an impact on dirigibles decades ago, the 
helium that we are familiar with, a box on the periodic table 
when I was a student, I guess when many of us were students, is 
more than just that party balloon that we may associate with 
it.
    Helium is a very important natural gas. It is contained in 
most natural gas fields in the United States, but not always in 
commercial quantities, as our expert witnesses will tell us.
    Only some natural gas fields have high-enough 
concentrations of helium to make its extraction economically 
attractive to the private sector. Most of those fields, about 
two-thirds of our domestic supply of helium, reside in certain 
localities of our country: North Texas, Oklahoma, and Kansas. 
The rest is located in Wyoming and the Ranking Member's State 
of Colorado, as well as Utah.
    Those who are not aware may be interested that the U.S. 
Government stores significantly what is taxpayer-owned, as well 
as privately owned, helium in a unique natural dome that is 
located just outside of Amarillo, Texas, maintained by the 
American taxpayer, which is, in part, why we are having this 
hearing today.
    So here is the thing. Helium isn't just the gas used for 
party balloons or for deep-sea diving. Helium is, in fact, 
essential to a common medical diagnostic tool, which many of us 
are familiar with, and our families or friends have benefitted 
from, namely MRIs, or magnetic resonance imaging. These MRIs, 
of course, are a common tool that we use in medical diagnostic 
practices for a host of diseases and injuries that we deal 
with.
    Helium is also essential for numerous other applications, 
from optical fibers to space rockets to the next generation of 
nuclear reactors. It is an important natural element, it is an 
important natural gas. And therefore, we think it is important 
that we have this hearing today.
    Our space agency, NASA, needs helium, up to 107 million 
cubic feet a year, to pressurize and purge the engines of the 
space shuttles. The Department of Energy relies on helium in 
its research laboratories to operate super-conductors. In many 
scientific and medical uses, there is absolutely no substitute 
for helium because of its unique properties. It has a low 
boiling point, high thermal conductivity, and inertness. These 
are all things that if I had paid more attention to it as a 
student when I was learning about the table, I would know 
better today. But they are important factors nonetheless, and 
that is why we are holding this hearing.
    We are fortunate that the United States has major helium 
resources, at least 20 percent of the identified resources 
worldwide. We are the number-one producer of helium. Our 
domestic helium assets include the Federal stockpile of helium, 
also known as the Federal Helium Reserve, which contains 
approximately 24 billion cubic feet of helium, enough helium to 
meet our domestic needs for years if we manage it wisely.
    But there are some warnings, and that is why we want to 
have the panel of experts testify this morning. Future 
shortages of affordable helium would be an obstacle for the 
U.S. for advances in medicine, science, and aerospace, as well 
as other critical applications. Which brings us again to what 
we will hope to learn today.
    In 1996, Congress made attempts to privatize and sell the 
helium resources. That circumstance has changed, as the 
National Academy of Sciences' report so clearly illustrates. In 
that National Academy of Sciences' report, it says that we 
should, and will, consider whether a new direction is needed 
for the Federal Helium Program.
    The questions that I will be looking at answers for today 
are whether or not we should continue to sell off the Federal 
Helium Reserve, is that appropriate? If a stockpile should be 
maintained, is that appropriate? And if, in fact, we should 
maintain a stockpile, what is the prudent size of that 
stockpile?
    Also, are the prices and fees for Federal helium and 
storage of private helium appropriate? The price structure, 
some indicate, is impacted because, in fact, we have this 
reserve. Would it change greatly if we no longer had this 
reserve?
    Should the government policies adequately encourage 
conservation of helium? Again, we have this distinguished panel 
of experts, including the Co-Chairs of the National Academy's 
most recent report of the Helium Program, former Director of 
the U.S. Geological Survey, Dr. Charles Groat; Dr. Robert 
Richardson, winner of a Nobel Prize in Physics in 1996. 
Congratulations, Doctor. I know all Americans are proud of that 
achievement, and as certainly I am.
    So we look forward to the testimony. And I will defer to my 
colleague, the Ranking Member of the Subcommittee, the 
gentleman from Colorado, Mr. Doug Lamborn.
    [The prepared statement of Mr. Costa follows:]

            Statement of The Honorable Jim Costa, Chairman, 
              Subcommittee on Energy and Mineral Resources

    Before we begin, let me simply state our sympathy for the families 
who lost loved ones in the Gulf of Mexico disaster.
    I want all of the Members of this Subcommittee and the entire 
Committee on Natural Resources to know that since several hours after 
the explosion, we--Chairman Rahall, and I, and the staff--have been 
monitoring the Joint Command's efforts to contain the oil flow. We pray 
that the worst of the environmental impacts can be averted and we have 
already begun our own investigation into not only the cause of this 
catastrophe, but also the implications it has on our Nation's energy 
policy.
    As you all know, the Committee on Natural Resources has primary 
jurisdiction over offshore drilling. So, while other Committees hold 
hearings into the potential causes of this incident, if--I reiterate 
if--changes are needed in the regulatory regime which governs offshore 
drilling, those changes will emanate from this Committee.
    Meanwhile, we should not ignore our oversight responsibilities in 
other areas, including today's issue--the Federal Helium Program. I 
would note that this hearing was scheduled before the Gulf incident 
occurred on April 20. Still, even without the horrific accident we 
still see unfolding in the Gulf, one might reasonably ask ``Why Helium? 
Why now?''
    So, let's begin with a little background on helium and its 
importance.
    Helium, a box on the periodic table for me when I was a student, is 
more than just the party balloon with which we all associate it. Helium 
occurs as a constituent of natural gas in most natural gas fields in 
the United States---but not always in commercial quantities. Only some 
natural gas fields have high enough concentrations of helium to make 
its extraction economically attractive to private industry. Most of 
those fields--about two-thirds of our domestic supply of helium--reside 
in North Texas, Oklahoma, and Kansas. The rest is located in Wyoming, 
Colorado, and Utah.
    You may be interested to know that the United States government 
stores significant tax payer-owned as well as privately-owned helium in 
a unique underground natural dome located just outside of Amarillo, 
Texas, maintained by the American taxpayer.
    So, here's the thing----helium isn't just a gas used for party 
balloons and deep sea diving. In fact, helium is essential to a common 
medical diagnostic tool with which many of us are familiar--MRIs, or 
``magnetic resonance imaging.'' Helium is also essential to numerous 
other applications, from optical fibers to space rockets to next-
generation nuclear reactors. Our space agency, NASA, needs helium--107 
million cubic feet a year--to pressurize and purge the engines of space 
shuttles. The Department of Energy relies on helium in research 
laboratories to operate superconductors. In many scientific and medical 
uses, there is no substitute for helium because of its unique 
properties--a low boiling point, high thermal conductivity, and 
inertness.
    We are fortunate in the United States to have major helium 
resources--at least 20% of the identified resources worldwide--and we 
are the number one producer. Our domestic helium assets include a 
Federal stockpile of helium, also known as the Federal Helium Reserve, 
which contains approximately 24 billion cubic feet of helium--enough 
helium to meet our diverse domestic needs for years, if managed wisely.
    At a glance, this may sound like a rosy situation. Yet a new report 
by the National Academies, which we will hear more about today, has 
assessed supply and demand for helium and the Federal helium program 
and finds that:
      The 1996 Helium Act's directive to sell off the Federal 
Helium Reserve by 2015 is detrimental to the taxpayer.
      We would be selling off a valuable natural resource 
commodity too quickly and too cheaply.
      And, finally, and I think most importantly, the report 
warns that the U.S. is at risk of becoming a net importer of helium in 
the next 10-15 years if we do not amend the 1996 law.
    These are stark warnings. Future shortages of affordable helium 
would be a major obstacle in the U.S. for advances in medicine, 
science, aerospace and many other critical applications.
    Which brings us to the purpose of and need for today's hearing.
    In 1996, it made sense to Congress to privatize and sell off its 
helium resources. Circumstances have changed, as the National Academies 
report so clearly illustrates. We should and will consider whether a 
new direction is needed for the Federal Helium Program, and discuss 
such key questions as:
      Whether the continued sell off of the Federal Helium 
Reserve is appropriate. If a stockpile should be maintained, how do we 
determine a prudent size?
      Whether the prices and fees for Federal helium and 
storage of private helium are appropriate.
      Whether government policies adequately encourage helium 
conservation.
    We have a distinguished panel to help us address these questions, 
including the co-chairs of the National Academies' most recent report 
on the helium program---the former Director of the U.S. Geological 
Survey, Dr. Charles Groat, and Dr. Robert Richardson, winner of the 
Nobel Prize in Physics in 1996.
    I look forward to all the witnesses' testimony, and now recognize 
the distinguished Ranking Member of the Subcommittee.
                                 ______
                                 

    STATEMENT OF THE HON. DOUG LAMBORN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Mr. Lamborn. Thank you, Mr. Chairman. I want to thank you 
for holding this hearing today, and for the witnesses for being 
here.
    But before we start, I, too, recognize that this is the 
first hearing of the Energy and Minerals Subcommittee since the 
tragic explosion of the Deepwater Horizon rig in the Gulf of 
Mexico. I would like to express my sympathy, as well, and offer 
my condolences to the workers whose lives have been cut short 
and their families, whose lives will never be the same.
    I also hope that the environmental and economic damages can 
be kept to a minimum.
    The Natural Resources Committee has oversight on this 
offshore leasing spill, and the natural resource damages caused 
by it, and it is critical that we continue active engagement on 
this matter. I know that we have hearings planned on this 
disaster, and that the Committee has been actively engaged in 
working to address the crisis, as well as to answer the 
questions about what happened, and if the government has 
responded appropriately. This is a major concern for us as a 
committee and for the entire nation, and we will continue to 
keep the residents of the area in our thoughts.
    Today's hearing is on our nation's Helium Program and the 
National Academy's recent report about the effects of the 1996 
Helium Privatization Act. Since the Helium Program's inception 
in 1925, it has changed substantially. The program has served a 
broad range of interests over nearly a century, including 
providing for our nation's defense, scientific research, 
medical needs, and aerospace technology.
    The National Academy's examination of the privatization of 
the helium industry has generated a number of important 
questions. Should the U.S. finish the privatization of the 
helium industry, or should we revisit the privatization issue 
in light of changing demands for helium and the nation's 
growing import dependence on energy and mineral resources?
    Should the Bureau of Land Management continue to maintain 
the long-term storage facility for crude helium? Should the 
reserve be completely depleted by its current schedule of 2015? 
And at what rate should the government continue to sell off its 
helium reserve?
    Also, in our current economic state, it is critical to 
examine the projected worldwide supply and demand of helium 
over a long term. And after such examination, what course of 
action should the government take for a long-term policy?
    Our Helium Program has proved to be a great asset to our 
defense, and to our technological development over the past 
century, and we must continue with its responsible management.
    To close, I will have a few questions for our witnesses, 
and I am looking forward to hearing their testimony. Thank you, 
Mr. Chairman, and I yield back.
    [The prepared statement of Mr. Lamborn follows:]

     Statement of The Honorable Doug Lamborn, Ranking Republican, 
                     Committee on Natural Resources

    Thank you, Mr. Chairman; I want to thank you for holding this 
hearing today. But before we start I would like to recognize that this 
as the first hearing of the energy and mineral resources subcommittee 
since the tragic explosion of the Deepwater Horizon in the Gulf of 
Mexico. I would like to express my sympathy and offer my condolences to 
workers whose lives have been cut short and their families whose lives 
will never be the same.
    The Natural Resources Committee has oversight on this offshore 
leasing spill and the natural resource damages caused by the spill, and 
it's critical that we continue active engagement on this matter. I know 
that we have hearings planned on this disaster and that the Committee 
has been actively engaged and work to address the crisis as well as to 
answer the questions about what happened and if the government has 
responded appropriately. This is a major concern for us as a committee 
and for the entire nation and we will continue to keep the residents of 
the area in our thoughts.
HEARING
    Today's hearing is on our nation's helium program and the National 
Academies recent report about the effects of the 1996 Helium 
Privatization Act. Since the helium program's inception in 1925 it has 
changed substantially. The program has served a broad range of 
interests over the including: providing for our nation's defense, 
scientific research, medical needs and aerospace technology. The 
National Academies examination of the privatization of the helium 
industry has generated a number of important questions:
      Should the U.S. continue to finish the privatization in 
the helium industry?
      Should the Bureau of Land Management continue to maintain 
the long-term storage facility for crude helium? Should the reserve be 
completely depleted by its current schedule of 2015? And at what rate 
should the government continue to sell off its helium reserve?
      Also, in our current economic state it is critical to 
question what the demand and supply of helium is worldwide over a 
longer term. And after such examination what course of action should 
the government take for a long-term policy?
    Our helium program has proven to be a great asset to our defense 
and our technology development over the past century and we must 
continue with its responsible management.
CLOSE
    I will have a couple of questions for our witnesses and I am 
looking forward to hearing their testimony.
    Mr. Chairman I yield back.
                                 ______
                                 
    Mr. Costa. Thank the gentleman from Colorado for your kind 
words, and we both share in the loss of lives that took place 
as a result of that accident, and to the families.
    So we will now proceed with our witnesses. And we have four 
that we will hear testimony from.
    I believe most of you, if not all of you, have testified 
before a Congressional panel. You know the rules. You have a 
five-minute statement to make. There are three lights there in 
front of you. The green light stays on for four minutes, and 
then the yellow light goes on on your fifth minute. And when 
the red light goes on, hold onto your chair. No, not really.
    The Chairman tends to be fairly benign about those things, 
but we do want to keep it within the five minutes, please, if 
at all possible.
    And then, when we finish with our four witnesses, we will 
then give the opportunity for members of the Subcommittee to 
ask questions.
    So our first witness is Ms. Marcilynn Burke, Deputy 
Director of the Bureau of Land Management. She is accompanied 
by I believe Mr. Tim Spisak, is that right?
    Ms. Burke. Spisak.
    Mr. Costa. Spisak, OK. Deputy Assistant Director for 
Minerals and Realty Management for the Bureau of Land 
Management. Let us begin with you, and we will proceed on to 
our other witnesses. Welcome.

 STATEMENT OF MARCILYNN BURKE, DEPUTY DIRECTOR, BUREAU OF LAND 
MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR; ACCOMPANIED BY TIM 
   SPISAK, DEPUTY ASSISTANT DIRECTOR FOR MINERALS AND REALTY 
 MANAGEMENT, BUREAU OF LAND MANAGEMENT, U.S. DEPARTMENT OF THE 
                            INTERIOR

    Ms. Burke. Thank you, Mr. Chairman, and good morning to the 
other members of the Subcommittee. I want to thank you for this 
opportunity to testify on the Bureau of Land Management's 
Helium Program.
    The BLM plays a key role in the management and stewardship 
of the nation's helium resource. And as you said, I am joined 
here by Mr. Tim Spisak. And he managed the BLM's helium 
operations from 1997 to 2004.
    I will briefly summarize my written testimony, and ask that 
the written testimony in its entirety be made a part of this 
record.
    Helium is a critical non-renewable natural resource that 
has an increasingly important role in the scientific, medical, 
and engineering fields. The Federal government's interest in 
helium dates back to World War I and its potential to lift 
military reconnaissance devices high above battlefields.
    Recognizing the importance of helium, the Mineral Leasing 
Act of 1920 reserved to the Federal government all helium 
produced on Federal land, a reservation that remains in effect 
today.
    There have been three key legislative actions regarding the 
Helium Program. In 1925, Congress created the Federal Helium 
Program under the Bureau of Mines, which allowed for Federal 
production, storage, and refinement of helium from the Hugoton 
Gas Fields in Texas, Oklahoma, and Kansas.
    The Helium Act of 1960 changed the program's mandate from 
exclusive government production of helium to conservation of 
the resource. This legislation granted the Bureau of Mines the 
authority to borrow money from the U.S. Treasury, to purchase 
helium from private gas producers in order to store the helium 
at the Bush Dome Reservoir near Amarillo, Texas.
    The proceeds from the sales of helium were expected to 
allow the Bureau of Mines to repay the debt. Demand for helium 
rarely, if ever, however, met the expectations underlying the 
terms of the Treasury's loans to the Bureau of Mines.
    When the 1995 deadline to pay off the debt arrived, the 
$252 million the Bureau had spent on privately produced helium 
had increased, with interest, to $1.3 billion. Congress then 
passed the Helium Privatization Act of 1996, which requires the 
BLM to make available for sale the vast majority of the 
stockpile of crude helium, with the goal of paying off the 
helium debt by 2015.
    When Congress passed the Act, there was approximately 30.5 
billion standard cubic feet of helium in storage in the Bush 
Dome Reservoir. The Act mandated that the BLM offer for sale 
all of the helium in excess of 600 million standard cubic feet 
of permanent reserve.
    The Act requires the BLM to use the amount of the helium 
debt and the helium in storage as parameters for its sales of 
crude helium. To this end, the BLM offers for sale 2.1 billion 
cubic feet of crude helium each year. The Act also mandated 
that the Federal government stop refining helium; thus, 
privatizing the refining helium market.
    The BLM currently operates the Federal Helium Program based 
in Amarillo, Texas, with the primary goal of paying off the 
helium debt. To this end, the BLM has paid over $750 million to 
the Treasury. In addition to operating a storage and pipeline 
system, the program operates a crude helium enrichment unit 
that helps draw down the helium reserve in a more uniform 
manner.
    The program also manages helium extracted from Federal 
resources not connected to the Hugoton Fields, including the 
management of associated fees and royalty contracts.
    Another major component of the Helium Program is the In-
Kind Program, which supplies helium to Federal agencies such as 
NASA and the Department of Energy for scientific research, 
aerospace projects, and defense purposes.
    Under the In-Kind Program, Federal agencies purchase all of 
their refined helium from private suppliers, who in turn are 
required to purchase an equivalent amount of crude helium from 
the Federal Helium Reserve. The National Academies of Science 
has completed two studies of the BLM's Helium Program, one in 
2000 and another this year. The BLM is currently reviewing this 
version, pre-publication version of this report, and looks 
forward to future discussion about its recommendations.
    The BLM welcomes further discussion about the Helium 
Program and the BLM's role in meeting future helium needs for 
the country. The expansion of helium-dependent technology and 
declining domestic reserves means the importance of helium as a 
strategic resource is likely to increase. We look forward to 
working with this committee in order to address this important 
issue. Thank you.
    [The prepared statement of Ms. Burke follows:]

           Statement of Marcilynn A. Burke, Deputy Director, 
       Bureau of Land Management, U.S. Department of the Interior

    Mr. Chairman and members of the Subcommittee, thank you for the 
opportunity to testify on the Bureau of Land Management's Helium 
Program. I am Marcilynn Burke, Deputy Director of the Bureau of Land 
Management. Tim Spisak, BLM's Deputy Assistant Director for Minerals 
and Realty Management, is accompanying me today.
Background
    Helium is a critical non-renewable natural resource. While best 
known for filling celebratory balloons and adjusting the pitch of the 
human voice, helium also plays an important role in medical imaging, 
space exploration, military reconnaissance, underwater diving, and 
fiber optics manufacturing. According to the National Academy of 
Sciences (NAS), helium's best known property--being lighter than air--
means ``that every unit of helium that is produced and used today will 
eventually escape Earth's atmosphere and become one less unit available 
for use tomorrow.'' The BLM plays a key role in the careful management 
and stewardship of the nation's important helium resource.
    The most common and economical way of capturing helium is by 
stripping it from natural gas during gas production. Geologic 
conditions in Texas, Oklahoma, and Kansas make the natural gas in these 
areas some of the most helium-rich in the United States, ranging from 
0.5 to 1.5 percent of the gas extracted during production. After World 
War I, recognition of the potential for helium recovery in the Texas 
Panhandle, Western Oklahoma, and Kansas area (collectively, the 
``Hugoton'' field) led to the development of the Federal helium program 
focused in that area. In 1929, the Bureau of Mines built the Cliffside 
Storage Facility near Amarillo, Texas, to store helium in a naturally 
occurring geologic storage field known as the Bush Dome Reservoir.
The Federal Helium Program/Congressional Authorities
    The Federal government's interest in helium dates back to World War 
I and its potential to lift military reconnaissance devices high above 
battlefields. Recognizing this key military use for helium, the Mineral 
Leasing Act of 1920 reserved to the Federal government all helium 
produced on Federal lands--a reservation that remains in effect today. 
Soon after the passage of the Mineral Leasing Act, Congress recognized 
the need to ensure that helium would be available for defense needs, 
and created the Federal helium program in 1925. By 1929, the Bureau of 
Mines began operating helium extraction and purification plants in the 
Texas panhandle.
    After World War II ended, Federal use of helium shifted towards 
space exploration, and in 1960 Congress passed the Helium Act. This Act 
changed the program's mandate from exclusive government production of 
helium to conservation of the resource by encouraging private natural 
gas producers to sell extracted helium to the Federal government for 
storage in the Bush Dome Reservoir. The Helium Act granted the Bureau 
of Mines the authority to borrow funds from the U.S. Treasury to 
purchase the helium, with the expectation that the proceeds from future 
sales of helium would allow the Bureau of Mines to repay the debt. This 
borrowing authority, established by Congress in lieu of a direct 
appropriation, required the Bureau of Mines to repay the loan by 1985. 
Subsequent legislation extended the deadline to 1995.
    Demand for helium rarely, if ever, met the expectations underlying 
the terms of the Treasury's loan to the Bureau of Mines. When the 1995 
deadline to pay off the debt arrived, the $252 million the Bureau had 
spent on privately-produced helium had increased to $1.3 billion 
(principle and interest), and the Bureau of Mines appeared to have 
little prospect of ever repaying the debt. In his 1995 State of the 
Union address, President Bill Clinton stated that it was his 
Administration's goal to privatize the Federal helium program.
    Congress then passed the Helium Privatization Act of 1996 (HPA), 
which required the BLM (which assumed jurisdiction over the program 
after the termination of the Bureau of Mines) to make available for 
sale the vast majority of the stockpile of crude helium. The mandate 
allowed the BLM to begin selling helium as late as 2005, in order to 
avoid market disruption. The BLM was to make a consistent amount of 
helium available every year at a price based on the amount of remaining 
helium debt and the amount helium in storage. When Congress passed the 
HPA, there was approximately 30.5 billion standard cubic feet (scf) of 
helium in storage in the Bush Dome Reservoir. The HPA mandated the BLM 
to make available for sale all of the helium in excess of a 0.6 billion 
scf permanent reserve.
    Additionally, the HPA required the BLM to cease all helium 
production, refining, and marketing activities to effectively privatize 
the refined helium market in the United States. Finally, the Act 
provided for the NAS to review the impacts of the 1996 Act. The NAS 
published its first study in 2000, and recently released a 
prepublication copy of its 2010 report.
The BLM's Helium Operations
    The BLM currently operates the Federal Helium program with a 
primary goal of paying off the ``helium debt.'' To this end, the BLM 
has paid over $750 million dollars to the Treasury, a substantial step 
towards eliminating the helium debt, which the HPA froze at 
approximately $1.3 billion dollars. BLM anticipates repaying the helium 
debt by the end of 2015. According to the HPA, once the helium debt is 
retired, the Helium Fund (used to fund the BLM's helium program 
operational expenses) would be dissolved and all future receipts would 
be deposited directly into the Treasury.
    The BLM's current helium program, with its 55 full-time employees, 
operates not only the original storage and pipeline system, but also a 
crude helium enrichment unit, owned by private industry refiners that 
facilitates transmission of helium to private helium operations on the 
BLM's helium pipeline.
    The BLM is responsible for administering helium extracted from 
Federal resources, including management of fees and royalty contracts. 
These operations are not limited to the Hugoton gas field, but also 
occur in fields in Colorado, Wyoming, Utah, and any other state where 
producers extract helium from natural gas. Additionally, the BLM is 
responsible for administering the sale of crude helium to private 
refiners. These sales make the most significant contributions toward 
paying off the helium debt. The agency also conducts domestic and, to a 
lesser extent, international helium resource evaluation and reserve 
tracking to determine the extent of available helium resources.
    Another major part of BLM's helium program is the ``In-Kind'' 
program, which supplies helium to Federal agencies (e.g., the 
Department of Energy and NASA) for operations and/or research. Before 
the Helium Privatization Act, Congress required Federal agencies to 
purchase their helium supplies from the Bureau of Mines. Under the 
current In-Kind program, Federal agencies purchase all of their refined 
helium from private suppliers who, in turn, are required to purchase an 
equivalent amount of crude helium from the Federal helium reserve. In 
2009, Federal agencies purchased just over $8 million of helium through 
the In-Kind program, down from $11.6 million in 2008.
    Finally, the program is in the final stages of disposing of 
facilities no longer needed for the storage and transmission of crude 
helium as required by the HPA.
The National Academy of Sciences Reports
    In 2000, the NAS published its first analysis of the impacts of the 
HPA. Its general finding was that the Act would not have an impact on 
helium users. Additionally, the NAS report concluded that because the 
price-setting mechanism was based on the amount of the helium debt, and 
not the market for helium, the government's significantly higher price 
would mean the helium refining industry would buy crude helium from the 
BLM only as a last resort for fulfilling private contracts. However, 
private helium refiners would still be required to purchase crude 
helium from the BLM under the In-Kind program.
    Over the course of the last decade, however, it has become apparent 
that assumptions underlying the 2000 NAS Report are not accurate. 
First, the NAS's assumption that ``[t]he price of helium [would] 
probably remain stable through at least 2010'' has proven faulty. The 
market for helium has seen significant fluctuations on both the demand 
side--which dropped significantly in 2008 after peaking the prior 
year--and on the supply side, which experienced a significant decline 
in private supplies between 2006 and 2008. In the face of this 
volatility, prices for helium rose steadily over the course of the 
decade. By 2008, the market price for helium began to hover near the 
BLM's price, leading to greater withdrawals from the Federal reserve 
than the 2000 NAS Report anticipated.
    Another market impact that the 2000 NAS Report did not address was 
international supply and demand for helium. According to the U.S. 
Department of Commerce, domestic consumption of helium decreased 2.7 
percent per year from 2000-2007, while exports to the Pacific Rim grew 
6.8 percent annually, exceeding the 5.1 percent growth rate in Europe. 
The international market also experienced supply issues because of 
refining capacity problems at plants in Qatar and Algeria, which would 
normally help supply both Europe and Asia.
    In February 2010, the NAS released a prepublication copy of an 
updated assessment of the impact of the HPA. The BLM is currently 
reviewing the NAS's prepublication document, and are providing 
feedback. The BLM welcomed the recommendations in the 2000 NAS report, 
and we anticipate working closely with the authors of the 2010 report. 
Additionally, the BLM looks forward to working with this Committee, its 
counterparts, and partners in discussing NAS's recommendations related 
to the helium program.
Conclusion
    The BLM welcomes further discussion about the BLM's helium program 
and the Bureau's role in meeting future helium needs for the country, 
especially for Federal agencies that depend on helium for scientific 
research, aerospace projects, and defense purposes. Since its discovery 
in the early 20th Century, helium has proven to be an increasingly 
important resource for scientific, medical, and engineering purposes. 
The expansion of helium-dependent technology and declining domestic 
reserves means the importance of helium as strategic resource is likely 
to increase. The BLM continues to serve the country by effectively 
managing the Federal helium reserve, and working with natural gas 
producers to efficiently extract helium from natural gas.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Costa. Thank you. And you were within the timeframe, so 
the Chairman appreciates that.
    Our next witness is Ms. Anu Mittal, is that correct?
    Ms. Mittal. Yes.
    Mr. Costa. The Director for Natural Resources and 
Environment for the U.S. Government Accountability Office. So 
please begin your testimony.

  STATEMENT OF ANU K. MITTAL, DIRECTOR, NATURAL RESOURCES AND 
       ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Mittal. Thank you, Mr. Chairman. Mr. Chairman and 
members of the Subcommittee, I am pleased to be here today to 
participate in your hearing on the Federal Helium Program.
    As you know, the Federal government has played a role in 
the production, storage, conservation, and use of helium for 
over 80 years. In the early 1990s, GAO reported on various 
aspects of the Helium Program, and made recommendations to 
Interior and the Congress regarding possible changes to the 
program.
    The passage of the Helium Privatization Act of 1996 and the 
construction of the Helium Enrichment Unit in 2003 have changed 
the program since our work in the early 1990s. My testimony 
will focus on these changes, and the key issues that we believe 
that the Congress will need to address before 2015.
    I would like to first summarize some of the key effects of 
the 1996 Act. First, with regard to the helium debt, as you 
know, the 1996 Act effectively froze the debt as $1.37 billion. 
Because interest stopped accruing on the debt, Interior has 
been able to pay off a large portion of this amount, and 
expects to pay off the entire debt by 2015. When the debt is 
paid off, the Helium Fund that Interior uses to operate the 
program will also be terminated.
    Second, the 1996 Act required Interior to offer for sale 
all but 600 million cubic feet of crude helium in storage by 
2015. Interior, however, has not been able to sell all of the 
helium that it has offered for sale, and only about 68 percent 
of the helium offered for sale has been sold. Therefore, about 
9 billion cubic feet of crude helium is expected to remain in 
storage in 2015.
    Third, the Act required Interior to set the price for crude 
helium, using a formula that would cover program costs, pay off 
the debt, and account for inflation. As a result, the initial 
minimum selling price for Federal crude helium after the Act 
was passed was higher even than the private price for refined 
helium.
    Over time, however, private helium prices have continued to 
increase, and are now almost double the Federal crude price.
    Fourth, the Act established an In-Kind Program to meet 
Federal needs for helium. While total Federal demand for helium 
has fluctuated from year to year, it represents only about 10 
percent of the total domestic demand. However, since 2001, the 
total domestic demand for helium has generally decreased, and 
total foreign demand, on the other hand, has consistently 
increased.
    Finally, a key development which has addressed the helium 
purity concern that we reported in the early 1990s is the 
construction and operation of the Cliffside Helium Enrichment 
Unit. According to Interior officials, as we have just heard, 
the enrichment unit has allowed them to better manage the draw-
down in purity of the helium in storage.
    As you would expect, some of these changes have led to 
concerns about the future availability of helium for Federal 
and other uses. And because the 1996 Act does not provide 
specific direction for the Helium Program past 2015, we have 
identified three key issues that the Congress will need to 
address within the next five years.
    First, how should the helium remaining in storage after 
2015 be used? In light of the changing demand for helium and 
the potential for future shortages, we believe that the 
Congress will have to decide whether the 9 billion cubic feet 
of crude helium expected to be in the reserve by 2015 should be 
sold, or should be conserved.
    Second, how will the Helium Program be funded after 2015? 
If the helium debt is paid off in 2015 and the Helium Fund is 
terminated, it is not clear how the operations of the program 
will be paid for. Currently, the program does not receive any 
appropriated funds. Instead, the revenues generated by the 
program go into the Helium Fund, and the program has access to 
those funds to pay for day-to-day operations. The Congress will 
have to decide how the program's operations will be funded 
after the Helium Fund is terminated.
    Finally, at what price should Interior sell the remaining 
crude helium in storage? Interior's price for crude helium 
since 1996 has been tied to the program's operating costs and 
debt. Once the debt is paid off, it will no longer be a factor 
in setting this price; and therefore, raises uncertainty about 
how Interior will or should set the price for remaining crude 
helium in storage.
    The price set by Interior is important because it affects 
the private industry price for both crude and refined helium.
    Mr. Chairman, as you can see, these uncertainties 
demonstrate that it is time once again for the Congress to step 
in and decide the future direction and operation of the Helium 
Program.
    This concludes my prepared statement. I would be happy to 
respond to any questions that you have.
    [The prepared statement of Ms. Mittal follows:]

      Statement of Anu K. Mittal, Director, Natural Resources and 
           Environment, U.S. Government Accountability Office

    Mr. Chairman and Members of the Subcommittee:
    I am pleased to be here today to participate in this hearing to 
discuss the federal helium program currently managed by the Department 
of the Interior's (Interior) Bureau of Land Management (BLM). As you 
know, helium is an important nonrenewable natural resource that has a 
variety of uses. The federal government uses helium for, among other 
things, the space program, national security applications, and 
scientific research. For many of its uses, helium has no substitute.
    During the 1960s and early 1970s, to fulfill the conservation 
objective of the Helium Act Amendments of 1960, \1\ Interior purchased 
about 34 billion cubic feet of helium from private crude helium 
producers. \2\ In the 1990s, we reported to, and testified before this 
Subcommittee on Interior's management of the helium program. \3\ In May 
1993, we testified that Interior had enough helium in storage to meet 
federal needs until at least 2070 and that a reassessment of the 
objectives of the Helium Act was needed.
---------------------------------------------------------------------------
    \1\ Pub. L. No. 86-777, 74 Stat. 918 (1960), codified as amended at 
50 U.S.C. Sec. Sec. 167-167m.
    \2\ ``Crude helium'' is a gas containing approximately 50 to 85 
percent helium.
    \3\ GAO, Mineral Resources: Federal Helium Purity Should Be 
Maintained, GAO/RCED-92-44 (Washington, D.C.: Nov. 8, 1991); GAO, 
Mineral Resources: Meeting Federal Needs for Helium, GAO/RCED-93-1 
(Washington, D.C.: Oct. 30, 1992); GAO, Mineral Resources: Meeting 
Federal Needs for Helium, GAO/T-RCED-93-44 (Washington, D.C.: May 20, 
1993); GAO, Mineral Resources: H.R. 3967 - A Bill to Change How Federal 
Needs For Refined Helium Are Met, GAO/T-RCED-94-183 (Washington, D.C.: 
Apr. 19, 1994); and GAO, Terminating Federal Helium Refining, GAO/RCED-
95-252R (Washington, D.C.: Aug. 28, 1995).
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    Since our reports in the early 1990s, key changes have affected the 
federal helium program and a recent report by the National Academies' 
National Research Council concluded that it is time once again to 
reassess the program. \4\ My testimony today will (1) summarize the 
findings and recommendations from our work in the early 1990s, (2) 
highlight key changes that have occurred in the areas that we reported 
on in the early 1990s, and (3) describe some of the issues facing BLM's 
helium program in the near future.
---------------------------------------------------------------------------
    \4\ National Research Council, Selling the Nation's Helium Reserve 
(Washington, D.C.: National Academies Press, prepublication copy 
released on Jan. 22, 2010). Last accessed at http://www.nap.edu/
catalog.php?record_id=12844 on April 20, 2010.
---------------------------------------------------------------------------
    To address these issues, we reviewed our prior reports and 
testimonies from the early 1990s. To identify key changes that have 
occurred in the areas that we reported on in the past and some of the 
issues facing BLM's helium program in the near future, we reviewed 
applicable laws and regulations, relevant studies, and data on the 
helium program from BLM and Interior's U.S. Geological Survey. In 
addition, we interviewed BLM officials associated with the helium 
program located at BLM's headquarters in Washington, D.C.; BLM's New 
Mexico State Office in Santa Fe, New Mexico; \5\ and BLM's Amarillo 
Field Office in Amarillo, Texas. To assess the reliability of data used 
in this statement, we examined the data to identify obvious errors or 
inconsistencies, interviewed knowledgeable BLM officials, and, to the 
extent possible, compared the data with other sources. We determined 
the data to be sufficiently reliable for the purposes of presenting 
overall trends. Officials with BLM's helium program concurred with the 
new information presented in this testimony and provided technical 
clarifications, which we incorporated as appropriate.
---------------------------------------------------------------------------
    \5\ In addition to New Mexico, BLM's New Mexico State Office also 
has jurisdiction over Kansas, Oklahoma, and Texas. The helium program 
is administered by BLM's Amarillo Field Office in Amarillo, Texas.
---------------------------------------------------------------------------
    We conducted this performance audit from April 2010 to May 2010 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives.
Background
    Helium is an inert element that occurs naturally in gaseous form 
and has a variety of uses (see table 1). \6\ Helium's many uses arise 
from its unique physical and chemical characteristics. For example, 
helium has the lowest melting and boiling point of any element and as 
the second lightest element, gaseous helium is much lighter than air.
---------------------------------------------------------------------------
    \6\ Helium in this statement refers to helium-4, the most abundant 
naturally occurring helium isotope. Helium-3, which has its own supply 
and demand issues, is not the focus of this statement. We currently 
have an ongoing review looking into the implications of shortages in 
helium-3.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Certain natural gas fields contain a relatively large amount of 
naturally occurring helium, which can be recovered as a secondary 
product. The helium is separated from the natural gas and stored in a 
concentrated form that is referred to as crude helium because it has 
yet to go through the final refining process.
    The federal government has been extensively involved in the 
production, storage, and use of helium since the early part of the 20th 
Century. The federal government and private sector cooperatively 
produced helium before 1925, specifically for military uses. The Helium 
Act of 1925, \7\ as amended, assigned responsibility for producing 
helium for federal users to the Department of the Interior's Bureau of 
Mines. \8\ The act provided that funds from helium sales be used to 
finance the program. From 1937 until 1960, the Bureau of Mines was the 
sole producer of helium. The 1925 act, as amended, also established a 
revolving fund known as the helium production fund for the program. 
Such revolving funds are used to finance a continuing cycle of 
government-owned business-type operations in which outlays generate 
receipts that are available for continuing operations. In the federal 
budget, this fund is referred to as the Helium Fund and it is used to 
account for the program's revenues and expenses.
---------------------------------------------------------------------------
    \7\ Pub. L. No. 68-544, 43 Stat. 1110 (1925), originally codified 
at 50 U.S.C. Sec. 161 et seq. These sections of the United States Code 
were completely amended, renumbered, revised, or repealed. The current 
citation is 50 U.S.C. Sec. Sec. 167-167m.
    \8\ The Bureau of Mines was established in 1910 and abolished in 
1996. The helium program was transferred to BLM.
---------------------------------------------------------------------------
    The Helium Act Amendments of 1960 stipulated that the price of 
federal helium cover all of the helium program's costs, including 
interest on the program's debt. The 1960 act required the Secretary of 
the Interior to determine a value for net capital and retained earnings 
and establish this value as debt in the Helium Fund, and to add 
subsequent program borrowings to that debt. The program's borrowings 
were authorized by subsequent appropriations acts and recorded as 
outlays in the federal budget in the years in which they were expended. 
In addition, the interest was added to the debt in the Helium Fund. 
However, the interest is simply a paper transaction, not a government 
outlay. The Bureau of Mines determined that the value of the program's 
net capital and retained earnings was about $40 million in 1960. 
Subsequent borrowings from the U.S. Treasury totaling about $252 
million were used to purchase helium for storage. By September 30, 
1991, the debt had grown to about $1.3 billion, of which more than $1 
billion consisted of interest because the interest accrued faster than 
the program could repay the debt.
    The government's reserve of crude helium is stored in the ground in 
an area of a natural gas field that has a naturally occurring 
underground structural dome near Amarillo, Texas. The purity of the 
stored crude helium diminishes (degrades) over time as it mixes with 
the natural gas that is present in the storage area. Moreover, when 
extracted at an excessive rate, the degradation is accelerated because 
the natural gas surrounding the helium is pulled toward the extraction 
wells faster than the helium. This causes the helium to mix with the 
natural gas more rapidly. As a result, larger volumes of the mixture of 
natural gas and helium must be extracted to obtain the needed helium. 
In addition to the government's reserve of crude helium, private 
companies that are connected to BLM's pipeline and pay a storage fee 
are also able to store and retrieve their own private crude helium 
reserves from the same storage area.
    As directed by the Congress, the National Academies' National 
Research Council reviewed the helium program and released a report in 
2000 that evaluated changes made in the program, effects of these 
changes on the program, and several scenarios for managing the federal 
helium reserve in the future. \9\ Because of subsequent changes in 
price and availability of helium, in 2008, the National Research 
Council convened a committee to determine if the current implementation 
of the helium program was having an adverse effect on U.S. scientific, 
technical, biomedical, and national security users of helium. The 
committee reported on these effects in early 2010 and concluded that 
the current implementation of the program has adversely affected 
critical users of helium and was not in the best interest of the U.S. 
taxpayers or the country.
---------------------------------------------------------------------------
    \9\ National Research Council, The Impact of Selling the Federal 
Helium Reserve (Washington, D.C.: National Academy Press, 2000).
---------------------------------------------------------------------------
GAO Reported on Helium Debt, Pricing, Purity, and Alternatives for 
        Meeting Federal Helium Needs in the Early 1990s
    Our November 1991 and October 1992 reports included findings and 
recommendations on the helium program's debt, the pricing of crude 
helium, the purity of helium in storage, and three alternatives for 
meeting federal needs for helium. \10\
---------------------------------------------------------------------------
    \10\ GAO/RCED-92-44 (helium purity); and GAO/RCED-93-1 (helium 
debt, pricing, and alternatives).
---------------------------------------------------------------------------
In 1992, GAO Recommended that Congress Cancel the Debt in the Helium 
        Fund
    In October 1992, we reported that the Helium Fund debt had grown to 
about $1.3 billion, as of September 30, 1991. \11\ Section 6(c) of the 
Helium Act Amendments of 1960 stipulated that (1) the price of federal 
helium should cover all of the helium program's costs, including 
interest on the program's debt; and (2) the debt should be repaid 
within 25 years, unless the Secretary of the Interior determines that 
the deadline should be extended by not more than 10 years. With the 10-
year extension, the deadline for paying off the debt and accumulated 
interest was September 13, 1995. In 1992, we estimated that, in order 
for the Bureau of Mines to repay the debt by the 1995 deadline, it 
would have to charge federal agencies with major requirements for 
helium over $3,000 per thousand cubic feet, compared with the 1992 
price of $55. These agencies, which were required under section 6(a) of 
the 1960 act to purchase helium from the Bureau of Mines, would have 
had no choice but to pay a higher price for helium. We concluded that 
this would have no net effect on the overall federal budget if those 
agencies received additional appropriations to pay for helium at a 
higher price because the appropriations would offset the increased 
revenues to the helium program.
---------------------------------------------------------------------------
    \11\ GAO/RCED-93-1.
---------------------------------------------------------------------------
    Because conditions affecting the Bureau of Mines' helium program 
had changed since the Helium Act Amendments of 1960, one of the 
recommendations in our October 1992 report was that the Congress should 
consider canceling the debt in the Helium Fund. This is because we 
concluded at the time that it was no longer realistic to expect the 
agency to repay the debt by the statutory deadline of 1995, and 
canceling the debt would not adversely affect the federal budget as the 
debt consisted of outlays that had already been appropriated and 
interest that was a paper transaction. We reported that canceling the 
Helium Fund debt, however, would likely allow the Bureau of Mines to 
undercut private industry's refined helium prices, thus adversely 
affecting the private helium-refining industry.
In 1992, GAO Found That the Federal Price for Helium Affected the 
        Private Helium Industry and Identified Alternatives to Foster 
        the Private Helium Industry
    The Helium Act Amendments of 1960 also were intended to foster and 
encourage a private helium industry. In our October 1992 report, we 
found that the helium price set by the Bureau of Mines had an effect on 
the growth of the private helium industry. \12\ After the 1960 act was 
passed, the Bureau of Mines' refined helium price for federal users 
rose from $15.50 per thousand cubic feet to $35 in 1961 to cover the 
anticipated costs of conserving helium, which principally included 
purchasing helium for storage. This 126-percent increase in the federal 
refined helium price caused the private industry to believe that it 
could economically produce and sell refined helium. While private-
sector prices fluctuated from a low of $21 in 1970, they gradually 
increased to $37.50 by 1983, which matched the Bureau of Mines' 1982 
price. Over this period, the Bureau of Mines' price for helium 
continued to be higher than or equal to the private-sector price, and 
from 1983 to 1991 it appeared to act as a ceiling for private-sector 
prices. In 1991, the federal price increased to $55, and private-sector 
prices gradually increased to about $45. These price trends led us to 
conclude in 1992 that once a private helium refining industry had 
developed, it was able to successfully compete with the Bureau of 
Mines' program.
---------------------------------------------------------------------------
    \12\ GAO/RCED-93-1.
---------------------------------------------------------------------------
    However, in our October 1992 report, we also noted that if the 
Congress decided to cancel the Helium Fund debt then this would affect 
how the Bureau of Mines sets its helium prices and would likely allow 
it to undercut private-sector prices. Therefore, we noted that if the 
Congress decided that fostering the private helium industry was still 
an objective of the Helium Program then additional actions would be 
needed. One alternative we identified was to require the Bureau of 
Mines to price its helium comparably to private-sector prices by 
ascertaining private-sector prices and using a comparable price or by 
setting a price that covered the Bureau of Mines' capital costs, 
operating expenses, estimated costs of a normal level of inventory, and 
an industry-like rate of return on its investment. A second alternative 
was to eliminate competition by requiring that all federal needs be met 
by the Bureau of Mines but prohibiting the federal helium program from 
selling helium to nonfederal customers.
In 1991, GAO Made a Recommendation on the Purity of the Helium in 
        Storage
    In our November 1991 report on helium purity, we found that the 
Bureau of Mines was not restricting the rate at which helium was being 
extracted from the helium reserve, causing the purity of the crude 
helium to degrade faster than would otherwise occur. \13\ We noted that 
because of this accelerated degradation, the Bureau of Mines was 
incurring additional costs to extract and refine federal helium. \14\ 
While some mixing with natural gas is inevitable, according to a study 
by the Bureau of Mines in 1989, the mixing should be minimized so that 
the crude helium's purity can be maintained at as high a level as 
possible in order to avoid higher future costs of extracting and 
refining federal helium. In our 1991 report, we reported that, 
according to Bureau of Mines' engineers, the accelerated degradation 
could be avoided by restricting total extractions to 3 million cubic 
feet of helium per day. At the Bureau of Mines' request, an outside 
petroleum engineering consulting firm reviewed the Bureau of Mines' 
engineering, geologic, and other studies and agreed that an extraction 
rate restriction of 3 million cubic feet per day was needed to protect 
the purity of the stored crude helium.
---------------------------------------------------------------------------
    \13\ GAO/RCED-92-44.
    \14\ Refined helium has a varying purity of 99.99 percent to 
99.9999 percent helium.
---------------------------------------------------------------------------
    In 1989, the Bureau of Mines decided to restrict total daily 
extractions to 3 million cubic feet but later rescinded that 
restriction after an industry association expressed concern to the 
Director of the Bureau of Mines that the restriction might adversely 
affect private companies' ability to obtain crude helium to meet their 
needs. At the time of our 1991 review, the Director told us that he had 
not reviewed the Bureau of Mines' study when making the decision to 
rescind the restriction and Bureau of Mines' engineers estimated that 
if the helium continued to be degraded at the rate it was being 
degraded at that time, the Bureau of Mines would incur additional costs 
of as much as $23.3 million in 1991 dollars to extract and refine 
federal helium from the helium reserve through the year 2050.
    In 1991, we recommended that the Bureau of Mines determine if 
setting an acceptable extraction rate was warranted and, if so, to 
specify that rate. In addition, we noted that if an extraction rate was 
specified, the Bureau of Mines should either restrict private company 
extractions or impose a charge on private companies that store helium 
in the helium reserve when their extractions exceed the established 
acceptable rate.
In 1992, GAO Recommended That Congress Reassess the Objectives of the 
        Helium Program
    In our October 1992 report, we evaluated three alternatives for 
meeting federal needs for helium: (1) continue the Bureau of Mines' 
existing program, (2) require that all federal needs be supplied by 
private industry, and (3) allow all federal agencies to choose to 
purchase helium from the Bureau of Mines or private industry. \15\ 
These three alternatives had the potential to affect the objectives of 
the Helium Act Amendments of 1960, the program's debt, the federal 
budget, and the total cost of supplying helium to the U.S. economy 
differently. For example, in 1992, we reported that the growth of a 
private industry capable of meeting federal needs created a competitive 
market where the federal helium prices directly affected the private 
industry. In this environment, if the Bureau of Mines priced helium to 
repay the Helium Fund debt by 1995, it would need to charge an 
extremely high price, which would likely drive the Bureau of Mines out 
of the helium business. On the other hand, if the debt had been repaid 
or cancelled, the federal price likely would be lower than private 
prices, which could have an adverse effect on the private helium 
refining industry. We concluded that the choice among these and other 
possible alternatives was ultimately a public policy decision that 
should consider many issues. We recommended that the Congress reassess 
the act's objectives in order to decide how to meet current and 
foreseeable federal needs for helium.
---------------------------------------------------------------------------
    \15\ GAO/RCED-93-1.
---------------------------------------------------------------------------
Two Key Developments Have Affected the Issues That GAO Reported on in 
        the Early 1990s
    Since our reports in the early 1990s, two key developments--the 
Helium Privatization Act of 1996 and the construction of the Cliffside 
Helium Enrichment Unit in 2003--have caused considerable changes to the 
federal helium program. These two developments addressed or altered the 
areas that we had raised concerns about in the early 1990s. 
Specifically, the Helium Privatization Act of 1996 affected helium debt 
and pricing, and it reset the program's objectives. The Cliffside 
Helium Enrichment Unit addressed the issue of helium purity in storage.
The Helium Privatization Act of 1996 Affected the Helium Debt, Pricing, 
        and the Program's Objectives
    After our reports in the early 1990s, the Congress passed the 
Helium Privatization Act of 1996, which significantly changed the 
objectives and functions of the Interior's helium program. \16\ For 
example, the 1996 act made the following key changes:
---------------------------------------------------------------------------
    \16\ Pub. L. No. 104-273, 110 Stat. 3315 (1996), codified at 50 
U.S.C. Sec. Sec. 167-167m.
---------------------------------------------------------------------------
      Interior was required to close all government-owned 
refined helium production facilities and to terminate the marketing of 
refined helium within 18 months of enactment (50 U.S.C. Sec. 167b(b));
      the helium program's debt was frozen as of October 1, 
1995 (50 U.S.C. Sec. 167d(c));
      Interior was required to offer for sale all but 600 
million cubic feet of the crude helium in storage on a straight-line 
basis--a depreciation method that spreads out the cost of an asset 
equally over its lifetime--by January 1, 2015 (50 U.S.C. 
Sec. 167f(a)(1));
      Interior was required to set sale prices to cover the 
crude helium reserve's operating costs and to produce an amount 
sufficient to reimburse the federal government for the amounts it had 
expended to purchase the stored helium. The price at which Interior 
sells crude helium was required to be equal to or greater than a 
formula that incorporates the amount of debt to be repaid divided by 
the volume of crude helium remaining in storage, with a Consumer Price 
Index adjustment (50 U.S.C. Sec. Sec. 167d(c), 167f(a)(3)). 
Furthermore, when the debt is fully paid off, the revolving Helium Fund 
shall be terminated (50 U.S.C. Sec. 167d(e)(2)(B));
      Interior should maintain its role in the helium storage 
business (50 U.S.C. Sec. 167b(a)); and
      established a modified ``in-kind'' program to meet 
federal needs for helium. Rather than purchasing refined helium 
directly from Interior, federal agencies were required to purchase 
their major helium requirements from persons who have entered into 
enforceable contracts to purchase an equivalent amount of crude helium 
from Interior (50 U.S.C. Sec. 167d(a)). \17\
---------------------------------------------------------------------------
    \17\ The term ``person'' means any individual, corporation, 
partnership, firm, association, trust, estate, public or private 
institution, or state or political subdivision thereof. 50 U.S.C. 
Sec. 167(2).
---------------------------------------------------------------------------
    These changes affected the federal helium program in various ways. 
For example, because the 1996 act effectively froze the debt at $1.37 
billion and interest no longer accrued, BLM has been able to pay off a 
large portion of its debt. As of the end of fiscal year 2010, BLM 
expects to have paid off 64 percent of the debt; it expects to pay off 
the entire debt around 2015 (see fig. 1).


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    In addition, since the 1996 act required a specific method for 
pricing crude helium, the initial minimum BLM selling price for crude 
helium after the act was passed was almost double the price for private 
crude helium at that time. However, after BLM started to sell its crude 
helium according to the method specified in the act, the market price 
for crude and refined helium began to change. According to the National 
Research Council, the private sector began using the BLM crude price as 
a benchmark for establishing its price, and, as a result, privately 
sourced crude helium prices increased and now they meet or exceed BLM's 
price. Increases in the price of crude helium have also led to 
increases in the price of refined helium (see fig. 2). Refined helium 
prices have more than doubled from 2002 through 2008 pursuant to demand 
trends. One of the factors for recent price increases was a disruption 
in helium supply from plants closing because of weather-related issues. 
Prices increased around 2007 due to the decline in production capacity.


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    As part of the resetting of the helium program's objectives, 
the 1996 act established a revised approach for meeting federal needs 
for helium. In 1998, BLM began engaging in in-kind sales to federal 
agencies. The in-kind regulations established procedures for BLM to 
sell crude helium to authorized helium supply companies and required 
federal agency buyers to purchase helium from these approved suppliers. 
\18\ Since the in-kind program started, the sales to federal agencies 
have fluctuated, primarily due to the National Aeronautics and Space 
Administration's (NASA) unique requirement for large volumes of helium 
on a sporadic basis. Total federal in-kind sales for fiscal year 2009 
were 175.67 million cubic feet (see fig. 3).
---------------------------------------------------------------------------
    \18\ 43 C.F.R. Sec. 3195.

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    Since the act was passed, demand for helium has changed over 
time (see fig. 4). Total domestic demand has generally decreased since 
2001. The vast majority of domestic sales are made to private 
industries, with federal agencies making up about 10 percent of the 
sales. On the other hand, total foreign demand has consistently 
increased, and the amount of helium exported was approximately equal to 
the amount of helium removed from storage each year from 2000 to 2007. 
In 2008, the amount of helium exported exceeded the amount of helium 
removed from storage.

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The Cliffside Helium Enrichment Unit Addressed the Helium Purity 
        Issue
    The second key development, which has affected the helium purity 
issue that we reported on in the early 1990s, is the construction and 
operation of the Cliffside Helium Enrichment Unit. In response to 
degrading helium supplies, in 2003, Cliffside Refiners Limited 
Partnership--a consortium of private-sector refiners--designed and 
constructed an enrichment unit to produce crude helium of sufficient 
concentration and pressure for further refining. According to BLM 
officials, the total cost of building the enrichment unit was 
approximately $22 million and was paid for by the Cliffside Refiners 
Limited Partnership. BLM, in partnership with the Cliffside Refiners 
Limited Partnership, operates the unit. At full capacity, the 
enrichment unit supplies more than 6 million cubic feet per day or 2.1 
billion cubic feet per year of crude helium. The crude helium that is 
produced from this process is either sold or retained in storage, 
depending upon demand. As part of the operation, pipeline-quality 
residual natural gas is also made available for sale. In addition to 
the proceeds from the helium sales, BLM uses proceeds from the natural 
gas sales to fund the Cliffside helium operations and the remaining 
revenues are returned to the U.S. Treasury.
    According to BLM officials, the enrichment unit has allowed BLM to 
better manage the drawdown and purity of the helium in storage because 
it is able to control the wells and the helium content of the feed. 
Without the enrichment unit, BLM would have to produce from high helium 
wells first to meet purity requirements and that would have a 
detrimental effect on the purity of later production, according to 
these officials.
The Helium Program's Direction after 2015 Is Uncertain
    Changes in helium prices, production, and demand have generated 
concerns about the future availability of helium for the federal 
government and other critical purposes. The Helium Privatization Act of 
1996 does not provide a specific direction for the helium program past 
2015--less than 5 years away. As a result of these factors, there is 
uncertainty about the program's direction after 2015. Specifically:
      How should the helium remaining in storage after 2015 be 
used? The Helium Privatization Act of 1996 required BLM to offer for 
sale substantially all of the helium in storage by January 1, 2015. 
While the required amounts have been offered for sale, only 68 percent 
of the amounts offered for sale have actually been sold (see table 2). 
If the past sales trends continue, BLM will still have significantly 
more crude helium in storage than the 600 million cubic feet target 
established in the 1996 act. In addition, the demand for helium has 
changed over time, with foreign demand outpacing domestic demand. 
According to the recent report by the National Academies' National 
Research Council, the United States could become a net importer of 
helium within the next 10 to 15 years, and the principal new sources of 
helium will be in the Middle East and Russia. Given these 
circumstances, the National Academies' report recommended that the 
Congress may want to reevaluate how the domestic crude helium reserve 
is used or conserved. It is uncertain at this point how the helium in 
storage after 2015 will be used.

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      How will the helium program be funded after 2015? 
Regardless of whether BLM is directed to continue selling off the crude 
helium in storage after 2015 or conserve it, there will almost 
certainly continue to be some form of a helium program after 2015. 
However, if the helium debt is paid off in 2015 as currently projected 
and the revolving helium fund is terminated, it is not clear how the 
operations of the helium program will be paid for. Currently the helium 
program does not receive any appropriated funds for its operations. The 
revenues generated by the program go into the Helium Fund and the 
program has access to those funds to pay for its day-to-day operations. 
It is uncertain at this point how the helium program's operations will 
be funded after 2015.
      At what price should BLM sell its crude helium? Since the 
Helium Privatization Act of 1996 was passed, BLM has set the price for 
federal crude helium at the minimum price required by the act. However, 
because federal crude helium reserves provide a major supply of crude 
helium, we expect BLM's prices will continue to affect private industry 
market prices for crude and refined helium. In addition, in recent 
years, the helium market has been influenced by other market forces as 
well as supply disruptions that have resulted in price increases. For 
example, in 2006, failure of a major crude helium enrichment unit 
process vessel led to unscheduled outages and eventually to a major 
plant shutdown. When BLM first set its price after the 1996 act, its 
price was estimated to be significantly higher than the market price, 
but now the reverse is true--BLM's price is estimated to be at or below 
the market price. On one hand, BLM could consider raising its price to 
ensure that the federal government is getting a fair market return on 
the sales of its assets. On the other hand, raising the price could 
potentially further erode sales. Furthermore, the 1996 act, like the 
Helium Act Amendments of 1960 before it, tied the price to the 
program's operating expenses and debt. If the debt is paid off in 2015 
as projected, the debt will no longer be a factor in setting helium 
prices. BLM officials told us that the 1996 act sets a minimum selling 
price and that the Secretary of the Interior has the discretion to set 
a higher price. BLM is planning to reevaluate its selling price, 
according to agency officials. As a result, it is uncertain how BLM 
will price its crude helium in the future.
    In conclusion, Mr. Chairman, there have been a number of changes in 
the market for helium since the Congress passed the Helium 
Privatization Act of 1996. As the end point for the actions that were 
required to be taken under the act come upon us in the next 5 years, 
the Congress may need to address some unresolved issues such as how to 
use the remaining helium in storage, how the helium program will 
operate once the Helium Fund expires in 2015, and how to set the price 
for the helium owned by the federal government.
    Mr. Chairman, this concludes my prepared statement. I would be 
pleased to answer any questions that you or other Members of the 
Subcommittee may have at this time.


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GAO Contact and Staff Acknowledgments
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the last page of this statement. Individuals making key contributions 
to this testimony include Jeffery D. Malcolm and Barbara Patterson, 
Assistant Directors; Carol Bray; Meredith Graves; and Caryn Kuebler. 
Also contributing to this testimony were Michele Fejfar, Jonathan 
Kucskar, and Jeremy Sebest.
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                                 ______
                                 
    Mr. Costa. Thank you very much. The five points that you 
referenced in your summary are areas I want to revisit when we 
have that time. But we have two more witnesses.
    Dr. Robert Richardson, Professor and Vice Provost for 
Research, Emeritus and Senior Science Advisor for the President 
and Provost of Cornell University. And, as I noted in the 
opening, he was, in 1996, awarded a Nobel Prize in Physics, and 
we are very honored that he is here.
    In addition, for members of the Subcommittee--using helium 
in his work, you are correct. Obviously, there is a tie here.
    But for members of the Subcommittee, Dr. Charles Groat, who 
is also a professor and Chair in Energy and Mineral Resources 
for the Department of Geological Sciences at the University of 
Texas at Austin, and was the former Director of the U.S. 
Geological Survey from 1998 to 2005. The two professors have 
submitted their written testimony in tandem. So while they will 
each be making a presentation for five minutes, the written 
testimony, for your information, is one that they have done 
together. It has a wonderful title: ``Up In The Air: The BLM's 
Disappearing Helium Program.'' No puns intended, I suspect.
    Dr. Robert Richardson, we are very anxious to hear your 
testimony. Please begin.

  STATEMENT OF ROBERT C. RICHARDSON, Ph.D., VICE PROVOST FOR 
RESEARCH, EMERITUS AND SENIOR SCIENCE ADVISOR TO THE PRESIDENT 
                AND PROVOST, CORNELL UNIVERSITY

    Dr. Richardson. I have made a career of low-temperature 
research using liquid helium for 50 years. The Chairman of the 
Subcommittee gave an admirable summary of the uses of helium.
    Mr. Costa. Thank you very much, Doctor.
    Dr. Richardson. And I will confine my remarks to 
substitution, conservation, and recovery of helium because 
helium is far too precious for frivolous use.
    Mr. Costa. Thank you.
    Dr. Richardson. For some applications, other gases can 
replace helium. The main reason helium is widely used in some 
applications is that it is far too cheap. Other applications 
rely on helium's unique properties, and there are no 
alternative uses.
    In the first category where the substitutions might exist, 
these include lifting. For uses requiring lifting, you can 
easily substitute hydrogen, if there are safety concerns. For 
instance, in India, hydrogen is substituted for helium for 
party balloons. And the quantity of hydrogen in the party 
balloons, it is not particularly dangerous, and it makes it 
more exciting for the kids.
    [Laughter.]
    Dr. Richardson. Welding. The chemical inertness is the key 
for the welding. And argon can be substituted for helium, and 
the helium gas is slightly more expensive than argon, but not 
enough more expensive.
    Helium, Europe mostly uses argon, but the United States 
uses helium. And then semi-conductor and optics manufacturing, 
and most of Asia uses our helium to manufacture fiber optics. 
Argon or hydrogen will be substituted.
    The essential product is super-conducting magnets and the 
basic research. I will conclude.
    [The joint prepared statement of Dr. Richardson and Dr. 
Groat follows:]

 Statement of Charles G. ``Chip'' Groat, Ph.D. and Robert Richardson, 
Ph.D., Co-Chairs, Committee on Understanding the Impact of Selling the 
  Helium Reserve, National Research Council of the National Academies

    Good morning, Mr. Chairman and members of the Committee. My name is 
Charles Groat. I am Director of the Energy and Earth Resources Graduate 
Program and Professor in the Jackson School of Geosciences and a 
Professor in the LBJ School of Public Affairs at the University of 
Texas at Austin. My name is Robert Richardson. I am the F.R. Newman 
Professor of Physics at Cornell University. We are co-chairs of the 
National Research Council's Committee on Understanding the Impact of 
Selling the Helium Reserve. 1
---------------------------------------------------------------------------
    \1\ The National Research Council is the operating arm of the 
National Academy of Sciences, the National Academy of Engineering, and 
the Institute of Medicine of the National Academies, chartered by 
Congress in 1863 to advise the government on matters of science and 
technology.
---------------------------------------------------------------------------
    The study we will be discussing was commissioned by the Department 
of the Interior's Bureau of Land Management (BLM) and the principal 
task of our committee was to determine whether the sell-off of the 
nation's helium reserve as prescribed by law has had an adverse effect 
on the United States' scientific, technical, biomedical, and national 
security users of helium. Our committee concluded that the sell-off has 
had and will continue to have adverse effects and we developed a series 
of recommendations to address several outstanding issues with respect 
to the reserve.
    To provide context for those recommendations, we will first give a 
brief overview of our critical helium needs, with a focus on the plight 
of the small research user community, and also discuss those uses where 
substitutes or conservation and recycling are possible. We will follow 
this with a discussion on helium supply issues, the federal helium 
reserve itself and the sale of federally owned helium. Our testimony 
will conclude with a discussion of our major recommendations regarding 
the reserve and its management in the future.
Uses of Helium
    Ready access to affordable helium is critical to many sectors in 
academe, industry and government and the range of those uses is quite 
impressive, enabling research at the coldest of temperatures, weather 
monitoring, surveillance in areas of combat, and optical fiber 
production, among many other applications.
    The diversity in uses for helium arises from its unique physical 
and chemical characteristics--specifically, its stable electronic 
configuration and low atomic mass. Among those unique characteristics 
are the temperatures at which helium undergoes phase transitions 
(liquefies and freezes). Helium has the lowest melting and boiling 
points of any element: It liquefies at 4.2 Kelvin and 1 atmosphere and 
solidifies only at extremely high pressures (25 atmospheres) and low 
temperatures (0.95 Kelvin). These characteristics have led to many 
cryogenic applications for helium; the largest single category of 
applications by percentage of helium consumed. These range from the 
efforts of individuals engaged in small-scale cryogenic research to 
large groups using high-energy accelerators and high-field magnets. All 
rely upon helium to conduct their research and because the federal 
government supports many of these researchers, it has a direct stake in 
their continued success. Cryogenic users also include segments of the 
medical profession, not only for biological research in devices such as 
superconducting quantum interference devices (SQUIDS), but also for 
diagnosis with tools such as magnetic resonance imaging (MRI) devices.
    Helium's ability to remain liquid at extremely low temperatures 
also gives rise to its usage for purging and pressurizing systems and 
as such, helium is a critical component in our nation's space 
exploration and defense efforts. The National Aeronautics and Space 
Administration (NASA) and the Department of Defense (DOD) use 
significant amounts of helium, as it is the only gas that can be used 
to purge and pressurize the tanks and propulsion systems for rockets 
fueled by liquid hydrogen and oxygen.
    Other uses rely on helium's lifting capabilities. As the second 
lightest element, gaseous helium is much lighter than air, causing it 
to be quite buoyant. When combined with helium's chemical inertness--
especially when compared with the highly flammable alternative, 
hydrogen--its buoyancy makes helium an ideal lifting gas. NASA and the 
Department of Energy (DOE) use helium to support weather-related 
missions and various research and development programs funded by these 
agencies, both at government facilities and at universities. DOD also 
must have ready access to helium to operate the balloon- and dirigible-
based surveillance systems needed for national security.
    Other applications draw on other characteristics of helium--its 
relatively high thermal conductivity, low viscosity, and high 
ionization potential--either alone or in combination. These 
applications include welding, providing controlled atmospheres for 
manufacturing operations, and detecting leaks in equipment providing 
vacuum environments to science and industry. Table 1 summarizes the 
principal applications of helium and the share of use in the United 
States.
    Small-Scale Researchers. Among the events that triggered this study 
were soaring prices and limited supplies that characterized the refined 
helium market in the fall of both 2006 and 2007. The committee, 
composed of individuals from a wide range of professions--economists, 
business people, and scientists--noted that small-scale scientists were 
particularly hard hit by price shocks and interruptions in the supply 
of refined helium during that time. An informal poll conducted by 
committee members of approximately 40 research programs at universities 
and national laboratories that use helium indicated that shortages of 
liquid helium interrupted the helium supply for almost half of these 
programs, with some interruptions lasting for weeks at a time during 
the late summer and fall of both 2006 and 2007. For many of those 
scientists, losing access to helium, even temporarily, can have long-
term negative repercussions for their research.
    In general, the federal grant programs that support these 
researchers simply are not designed to cope with significant pricing 
shifts and other market volatilities experienced here. Grants typically 
are for a two to three year period and for a set amount that does not 
adjust if a principal expense of research such as helium significantly 
increases. Further, the relatively short duration of such grants, with 
no guaranty of renewal, effectively precludes these research programs 
from entering into long-term contracts that might at least partially 
reduce the risk of significant prices increases and shortages.
    Domestic vs. foreign consumption. The balance between domestic and 
foreign consumption of helium has shifted significantly in the past 15 
years. Until the mid-1990s, substantially all helium production took 
place in the United States. This factor, combined with high shipping 
costs and limited availabilities, meant that until recently, the amount 
of helium consumed abroad was fairly small. In 1990, for example, 70 
percent of worldwide helium consumption was in the United States.
    Since 2000, the demand for helium in the United States has remained 
fairly constant but has grown significantly elsewhere, reducing the 
U.S. share of total consumption. See Figure 1. Foreign growth has been 
assisted by the opening of several helium-producing facilities outside 
the United States that will be discussed later in this testimony, as 
well as by improved capabilities in the short-term storage and handling 
of refined helium. This period also saw a significant increase in 
industrial applications, principally in semiconductor and optical fiber 
fabrication facilities outside the United States, and the shifting of 
industrial facilities that use helium from the United States to foreign 
countries. By 2007, United States helium consumption had dropped to 
below 50 percent of worldwide demand. Despite a slight downturn in 
overall demand for helium associated with the global recession in 2008-
2009, the committee believes, based on recent trends, that foreign 
demand should continue to increase relative to demand in the United 
States, such that U.S. relative consumption is expected to drop even 
further by 2012, to slightly more than 40 percent.
    Substitution, Conservation, Recovery. For some applications, other 
gases can replace helium, but other applications rely critically on 
helium's unique properties and there are no alternatives. Applications 
in the first category, where substitutes for helium might exist, 
include these:
      Lifting. For these uses, where low density is the only 
requirement, hydrogen is sometimes substituted if safety concerns can 
be met.
      Welding. Here, chemical inertness is the key property. 
For processes such as gas tungsten arc welding--a critical process 
applicable to reactive metals such as stainless steel, titanium, 
aluminum, and others in high-value, high-reliability applications--
Europe mostly uses argon, while the United States uses helium.
      Semiconductor and fiber optics manufacturing. In these 
applications, high thermal conductivity is the important property. 
Often, hydrogen may be substituted.
    In the above applications, economics, market conditions, 
availability, safety, and legislation can influence the choice among 
helium and other gases.
    In contrast, other applications require the unique properties of 
helium, typically relying on the extremely low boiling point of liquid 
helium to achieve a desired result. These applications include the 
following:
      Purging/Pressurizing. Entities such as NASA and DOD must 
purge and then pressurize liquid hydrogen (LH2) and liquid oxygen (LOx) 
rocket propulsion systems and fuel tanks that may be at liquid air 
temperatures or colder. Although gaseous hydrogen might have the right 
physical properties for use in LOx systems, its reactivity with oxygen 
precludes its use. Nitrogen is not desirable because nitrogen might 
contaminate the LOx. In LH2 environments, all gases other than helium 
and hydrogen would freeze, clogging fuel lines and systems and 
rendering the rocket engines nonfunctional.
      Superconductivity. All applications that employ 
superconducting magnets, including medical magnetic resonance imaging 
(MRI) machines, high energy accelerators and many high field magnets 
used in research, rely on the continued availability of helium. Current 
materials and technologies dictate that only helium can act as the 
crucial refrigerant to cool these materials below superconducting 
thresholds.
      Basic research. Here, no other substance can be used as a 
refrigerant to achieve temperatures from 4.2 K above absolute zero down 
to millikelvins.
Supply of Helium
    Sources. Helium is the second-most-abundant element in the 
universe, but its diffusive properties mean that atmospheric helium 
leaks into space, rendering it relatively scarce on Earth. At only 5.2 
parts per million (ppm) in air, it is not economically feasible to 
extract helium from the atmosphere using current technology. Rather, 
the principal source of helium is natural gas fields. Helium nuclei (or 
alpha particles) are produced in the radioactive decay of heavy 
elements such as uranium and thorium, located in Earth's crust. While 
most of these helium atoms find their way to the surface and escape, a 
small fraction are trapped by the same impermeable rock strata that 
trap natural gas. Such natural gas usually consists primarily of 
methane and secondarily of ethane, propane, butane, and other 
hydrocarbons and various other contaminants, including H2S, 
CO2, and He.
    There are three different situations in which helium contained in 
natural gas may be economically recovered:
      Helium may be extracted as a secondary product during the 
primary process of producing methane and natural gas liquids (NGLs) 
such as propane, ethane, butane, and benzene.
      For natural gas fields that have sufficient 
concentrations of helium and other non-fuel gases such as sulfur and 
CO2 to economically justify their extraction, the gas in 
those fields may be directly processed for the non-fuel constituents.
      Helium may be extracted during the production of 
liquefied natural gas (LNG), which consists primarily of liquefied 
methane.
For the first two recovery processes, current technology requires 
threshold concentrations of 0.3 percent helium before separation of the 
helium is commercially feasible. For the third process, the helium is 
extracted from the tail gases, the gases that remain after the methane 
has been liquefied. The helium concentration in those tail gases is 
much higher than in the original gas, allowing the economical 
extraction of helium even through the original natural gas might 
contain as little as 0.04 percent helium.
    Figure 2 shows the principal domestic sources of helium. 
Historically, most helium in the United States has been recovered using 
the first method described above, as a byproduct of producing methane 
and natural gas liquids. Almost all of that helium has been produced in 
the mid-continental region around the Hugoton Field. As is described in 
later testimony, this is where the federal helium reserve system is 
located. The Hugoton Field is mature and the production of methane, NGL 
and secondary products such as helium from that field is expected to 
significantly decline over the next several years. In the last few 
decades, helium has been produced in Wyoming using the second method 
described above, where the natural gas is directly processed for its 
helium and other non-fuel content. Potential helium reserves have also 
been explored in the Four Corners area.
    Outside of the United States, only small reserves of the first two 
sources of helium have been exploited and for many years, the rest of 
the world has relied upon the United States as their principal source 
of helium. Recently, the development of large LNG facilities has opened 
up new, potential sources of helium. The principal countries in which 
those facilities are being developed are Algeria, Qatar, and Russia, 
with smaller facilities coming online in Australia. These areas are 
expected to become increasingly more important sources of helium as the 
Hugoton and adjoining fields mature. See Figure 3.
    Supply Chain. After being refined, helium is transported to end 
users through a fairly complicated supply chain. In the United States, 
the helium typically is liquefied and delivered by refiners either to 
their transfill stations situated throughout the United States or to 
distributors of industrial gases. This transportation is handled using 
expensive domestic tanker trucks or bulk-liquid shipping containers 
standardized according to the International Organization for 
Standardization (ISO), each of which holds approximately 1.0 to 1.4 
million cubic feet (MMcf) of helium. While some of the largest helium 
users contract directly with a refiner for their helium purchases and 
deliveries, most sales to end users are through the retail division of 
a refiner or a distributor. The refiners and distributors then 
repackage the helium, either in its liquid state into dewars--
evacuated, multiwalled containers designed to hold liquid helium--of 
varying sizes or in its gaseous state into pressurized cylinders, tube-
trailers, or other modules as needed by the end users.
Federal Policy Regarding Helium
    Helium has long been the subject of public policy deliberation and 
management, largely because of its many strategic uses and its unusual 
source. Shortly after natural gas fields containing helium were 
discovered at the beginning of the last century, the U.S. government 
recognized helium's potential importance to the nation's interests and 
placed its production and availability from federally owned mineral 
interests under strict governmental control. In the early years, helium 
principally was used for its lifting capability, as a safe alternative 
to highly flammable hydrogen. By the mid-1920s full-scale production 
facilities had been built and were being operated by the federal 
government to support its lighter-than-air aviation programs.
    In the 1960s, helium's strategic value in cold war efforts was 
reflected in policies that resulted in the creation of the federal 
helium reserve. Although much of the infrastructure predates the cold 
war, the Federal Helium Reserve as a program began and currently 
consists of
      The Bush Dome reservoir, a naturally occurring 
underground structural dome in the Cliffside Field near Amarillo, 
Texas, where federally owned (and some privately owned) crude helium is 
stored;
      An extensive helium pipeline system running through 
Kansas, Oklahoma, and Texas (the Helium Pipeline) that connects crude 
helium extraction plants with each other, with helium refining 
facilities, and with the Bush Dome reservoir,
      Various wells, pumps and related equipment used to 
pressurize the Bush Dome reservoir, to place into and withdraw crude 
helium from it, and to operate other parts of the helium reserve.
    The 1960s efforts also included inducements for private companies 
to develop helium extraction and refining facilities and to sell crude 
helium to the United States. The program was quite successful, 
resulting in the accumulation of approximately 35 billion cubic feet 
(Bcf) of helium by the mid 1970s. This amount was many times the 600 
(750) million cubic feet (MMcf) of helium then being consumed 
domestically (globally) and so further purchases were suspended. The 
amount of helium maintained in the helium reserve remained fairly 
constant for the next 20 years.
    The latest manifestation of public policy is expressed in the 
Helium Privatization Act of 1996 (1996 Act), which directs that 
substantially all of the helium accumulated as a result of those 
earlier policies be sold off by the year 2015, at prices sufficient to 
repay the federal government for its outlays associated with the helium 
program, plus interest.
    Context of Current Study. The last section of the 1996 Act called 
for the Secretary of the Interior to commission a study from the 
National Academies to determine whether disposal of federally owned 
helium pursuant to the 1996 Act would have a substantial adverse effect 
on critical interests of the country. The report that followed (2000 
Report) found that because the helium market had been quite stable 
since the 1980s and the price at which federally owned helium must be 
sold under the 1996 Act was significantly higher than the price at 
which privately owned crude helium was then being sold, the sell off of 
the helium would not have a substantial adverse effect on critical 
users. The report predicted that the price of privately owned crude 
would gradually rise to the price at which federally owned helium was 
being offered, and until it reached that level very little federally 
owned helium would be purchased, given the availability of cheaper 
sources.
    While the helium market remained fairly stable for several years 
after issuance of the 2000 Report, that report did not accurately 
predict the market's response to efforts to sell-off federally owned 
helium. In March 2003, when BLM first offered federally owned helium 
for sale, the entire 1.6 Bcf offered for sale was purchased. Rather 
than gradually rising, the prices for privately owned crude helium 
rapidly rose such that by 2007, those prices were on par with and often 
exceeded the legislatively prescribed price for federally owned helium. 
Retail prices for helium commensurably rose, more than doubling between 
2003 and 2008. In addition, during the summer and fall of 2006 and 
2007, the helium market encountered widespread shortfalls, with some of 
the interruptions lasting for weeks at a time.
    The amount of federally owned helium being sold is enormous: it is 
currently equivalent to approximately one-half of U.S. helium needs and 
almost one-third of global demand. One consequence is that the price of 
federally owned helium, which is set not by current market conditions 
but by the terms of the 1996 Act, dominates, if not actually controls, 
the price for crude helium worldwide.
    Committee Findings, Recommendations. As mentioned at the beginning 
of this testimony, the principal charge of our committee was to 
determine whether the sell-off of the nation's helium reserve as 
prescribed by law has had an adverse effect on the United States' 
scientific, technical, biomedical, and national security users of 
helium. In response to this charge, the committee determined that 
selling off the helium reserve, as required by the 1996 Act, has 
adversely affected critical users of helium and is not in the best 
interest of U.S. taxpayers or the country. The sell-down of federally 
owned helium, which had originally been purchased to meet the nation's 
critical needs, is coming at a time when demand for helium by critical 
and noncritical users has been significantly increasing, especially in 
foreign markets. If this path continues to be followed, within the next 
ten to fifteen years the United States will become a net importer of 
helium whose principal foreign sources of helium will be in the Middle 
East and Russia.
    In addition, the pricing mandated by the 1996 Act has triggered 
significant increases in the price of crude helium, accompanied by 
equally significant increases in the prices paid by end users. Finally, 
the helium withdrawal schedule mandated by the 1996 Act is not an 
efficient or responsible reservoir management plan. If the reserve 
continues to be so managed, a national, essentially nonrenewable 
resource of increasing importance to research, industry, and national 
security will be dissipated.
    The committee recommends several ways to address the outstanding 
issues. Several of its recommendations respond to the very large impact 
that selling off the reserve has had and is continuing to have on the 
helium market in general, including a recommendation that procedures be 
put in place that open the price of federally owned helium to the 
market.
    Another of the committee's concerns is that the drawdown schedule 
required by the 1996 Act, which dictates that the reserve helium be 
sold on a straight-line basis--the same amount must be sold each year 
until the reserve is substantially gone--is a wasteful way to draw down 
a reservoir. Because it is much more costly and more likely to leave 
significant amounts of helium unrecoverable than alternative drawdown 
scenarios, the committee recommends that this portion of the 1996 Act 
be revisited. In addition, given recent developments in the demand for 
and sources of helium (the principal new sources of helium will be in 
the Middle East and Russia, and if the sell-down continues, the United 
States will become a net importer of helium in the next 10 to 15 
years), the committee recommends that Congress reconsider whether 
selling off substantially all federally owned helium is still in the 
nation's best interest.
    The committee also addresses the needs of small-scale, government-
funded researchers who use helium, a group that has been hit 
particularly hard by sharp price rises and shortages that have 
characterized the helium market in recent times. This group was singled 
out mainly because such research is an important public enterprise and 
the funding mechanisms available to the researchers, typically grants 
on 3-year cycles for set amounts, do not allow them to respond to 
short-term fluctuations. These research programs should have some 
protection from the instabilities recently characterizing the helium 
market. Accordingly, the committee recommends that the researchers be 
allowed to participate in an existing program for government users of 
helium that would give them priority when there is a helium shortage. 
It also recommends that funding agencies help such researchers to 
acquire equipment that would reduce their net helium requirements. 
Implementing these recommendations would not subsidize such users nor 
would it require significant additional outlays: Indeed, over time, it 
would lead to the much more efficient use of the federal funds with 
which helium is purchased.
    Because the helium market is rapidly changing and helium is 
critically important to many critical users, the committee includes 
recommendations that would facilitate long-range planning to meet the 
nation's helium needs, including the collection and dissemination of 
needed information and the formation of a standing committee to 
regularly assess whether national needs are being appropriately met. 
The remaining conclusions and recommendations consist of steps to help 
properly manage the helium reserve and protect this important national 
resource. The language of the committee's full recommendations is 
contained in the summary of the report, which is attached to this 
statement.
    Finally, while noting that the question of how critical helium 
users in the United States will be assured a stable supply of helium in 
the future is beyond the scope of its charge, the committee points out 
that several important issues related to this topic remain unanswered. 
How will the large amounts of federally owned helium that remain after 
the mandated sell-off deadline in 2015 be managed after that date? 
Moreover, from a wider perspective, should a strategic helium reserve 
be maintained? These questions need to be answered in the near future, 
well before most federally owned helium is sold.
    This concludes our testimony to the committee. Thank you for the 
opportunity to testify on this important topic. We would be happy to 
elaborate on any of our comments during the question and answer period.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 

            Summary from Selling the Nation's Helium Reserve

               A Report of the National Research Council

    Ready access to affordable helium is critical to many sectors in 
academe, industry and government. Many scientists--from individuals 
engaged in small-scale cryogenic research to large groups using high-
energy accelerators and high-field magnets--rely upon helium to conduct 
their research and because the federal government supports many of 
these researchers, it has a direct stake in their continued success. 
The medical profession also depends on helium, not only for biological 
research in devices such as superconducting quantum interference 
devices (SQUIDS), but also for diagnosis with tools such as magnetic 
resonance imaging (MRI) devices. Industrial applications for helium 
range from specialty welding to providing the environments in which 
semiconductor components and optical fiber are produced. Government 
agencies that require helium include the National Aeronautics and Space 
Administration (NASA) and the Department of Defense (DOD), as only 
helium can be used to purge and pressurize the tanks and propulsion 
systems for NASA and DOD's rockets fueled by liquid hydrogen and 
oxygen. NASA and the Department of Energy (DOE) also use helium to 
support weather-related missions and various research and development 
programs funded by these agencies, both at government facilities and at 
universities. Finally, DOD must have ready access to helium to operate 
the balloon- and dirigible-based surveillance systems needed for 
national security.
    The Federal Helium Reserve, managed by the Bureau of Land 
Management (BLM) of the U.S. Department of the Interior, is the only 
significant long-term storage facility for crude helium in the world 
and currently plays a critical role in satisfying not only our nation's 
helium needs but also the needs of the world. The federally owned crude 
helium now on deposit in the Reserve was purchased by the federal 
government as a strategic resource during the cold war. After the cold 
war, Congress enacted legislation (the Helium Privatization Act of 1996 
referred to hereinafter as the 1996 Act) directing that substantially 
all of the federally owned helium in the Reserve be sold at prices 
sufficient to repay the federal government's outlays for the helium and 
the infrastructure, plus interest. The present report, called for by 
BLM, examines whether BLM's selling of this helium in the manner 
prescribed by law is having an adverse effect on U.S. users of helium 
and, if so, what steps should be taken to mitigate the harm. 
2
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    \2\ As discussed more fully in the section of Chapter 1 entitled 
``Review of the 2000 Report's Conclusions,'' the 1996 Act called for an 
Academy study to determine if such disposal would have a substantial 
adverse effect on U.S. interests. That study, The Impact of Selling the 
Federal Helium Reserve, published by the NRC in 2000 and referred to 
hereinafter as the 2000 Report, concluded that the 1996 Act would not 
substantially affect matters. While several of that study's findings 
remain valid, it did not correctly predict how the 1996 Act would 
impact prices or how the demand side of the helium market would grow, 
in part a response to the ready availability of helium arising from the 
sell-off of the Helium Reserve pursuant to the 1996 Act. These factors 
have significantly impacted the current market for helium.
---------------------------------------------------------------------------
    This report assesses the current status of the supply and demand 
for helium as well as the operation of the federal helium program. It 
concludes that current efforts to comply with legislative prescriptions 
have had and will continue to have negative impacts on the needs of 
both current and future users of helium in the United States. The sell-
down of federally owned helium, which had originally been purchased to 
meet the nation's critical needs, is coming at a time when demand for 
helium by critical and noncritical users has been significantly 
increasing, especially in foreign markets. If this path continues to be 
followed, within the next ten to fifteen years the United States will 
become a net importer of helium whose principal foreign sources of 
helium will be in the Middle East and Russia. In addition, the pricing 
mandated by the 1996 Act has triggered significant increases in the 
price of crude helium, accompanied by equally significant increases in 
the prices paid by end users. Finally, the helium withdrawal schedule 
mandated by the 1996 Act is not an efficient or responsible reservoir 
management plan. If the reserve continues to be so managed, a national, 
essentially nonrenewable resource of increasing importance to research, 
industry, and national security will be dissipated.
                      FINDINGS AND RECOMMENDATIONS
          specific recommendations for immediate improvements
    To address these issues, the committee first lays out three 
specific recommendations for improving the federal helium program: 
changing the methods for pricing the helium being sold, committing more 
resources to managing the physical facilities at the Federal Helium 
Reserve, and providing assistance for small-scale scientists by 
expanding the sales program for government users to include them and 
promoting conservation and reuse by these users.
Pricing Mechanism
    The 1996 Act set minimum selling prices, adjusted for inflation, 
for crude helium held by the BLM such that the sale of that helium at 
those prices would generate sufficient revenue to repay the federal 
government for what it originally spent to purchase the helium and to 
build the supporting infrastructure, plus interest. BLM has elected to 
sell its helium at those minimum prices. At the time of the 1996 Act, 
the minimum selling price was almost double the price being paid for 
privately owned crude helium. A market that had been stable for several 
decades prior to the sell-off of federally owned helium, experiencing 
neither drastic price increases nor shortages of supply, 3 
began to change after BLM started to sell its crude helium. Almost 
immediately, privately sourced crude helium prices began to rise, and 
those prices continued to steadily increase so that they now meet or 
exceed BLM's price, and many of the sales contracts for private helium 
expressly tie future selling prices to BLM's price. Thus this 
legislatively set price for federally owned helium is now setting the 
price for crude helium, and there is no assurance that this price has 
any relationship to the current market value of that helium.
---------------------------------------------------------------------------
    \3\ 2000 Report, page 9.
---------------------------------------------------------------------------
    To the extent BLM's price is lower than the price the market would 
otherwise set for crude helium, this pricing mechanism could have 
several negative consequences: (1) it could lead to inaccurate market 
signals, increased consumption, and accelerated depletion of the 
Federal Helium Reserve; (2) it could retard efforts to conserve and 
develop alternative sources of crude helium, (3) it could result in 
transfers of taxpayer assets to private purchasers at below-market 
values--that is, it could amount to a taxpayer-financed subsidy for 
consumption of this scarce publicly owned resource; and (4) sales of 
federally owned crude helium could end up subsidizing exports of 
helium.
    The managers of the Reserve should shift to a market-based pricing 
policy to improve the exploitation of this important national asset. 
The report notes that several mechanisms could be used to implement 
market-based pricing and thereby introduce competition, or the threat 
of it, to the process. However, one complicating factor is that before 
federally owned helium can be used, it must be refined, and the 
refining capacity linked to the Reserve is owned by four companies. The 
committee believes that market-based pricing of crude helium from the 
Reserve will require that purchasers other than those four companies 
have access to refining capacity linked to the Reserve. However, 
additional details on mechanisms to provide access to excess refining 
capacity and to attain the goal of market-based pricing of crude helium 
from the Reserve are beyond the committee's charge.
        Recommendation. The Bureau of Land Management (BLM) should 
        adopt policies that open its crude helium sales to a broader 
        array of buyers and make the process for establishing the 
        selling price of crude helium from the Federal Helium Reserve 
        more transparent. Such policies are likely to require that BLM 
        negotiate with the companies owning helium refining facilities 
        connected to the helium pipeline the conditions under which 
        unused refining capacity at those facilities will be made 
        available to all buyers of federally owned crude helium, 
        thereby allowing them to process the crude helium they purchase 
        into refined helium for commercial sale.
Management of the Reserve
    An additional aspect of the 1996 Act that has significant--and 
undesirable, in the judgment of this committee--implications for the 
overall management of the Helium Reserve is the Act's requirement that 
the sale of federally owned crude helium is to take place on a 
straight-line basis. 4 The mandated constant extraction rate 
conflicts with standard practices for the exploitation of this type of 
reservoir, which is that production rates vary over the economic life 
of a deposit, typically declining over time. Declining production rates 
and reservoir pressures delay encroachment of water from nearby 
aquifers and connected reservoirs, and promote the efficient drainage 
and recovery of the resource gas in place.
---------------------------------------------------------------------------
    \4\ The law directs that crude helium from the reserve be offered 
for sale in such amounts as may be necessary to dispose of all helium 
in excess of 600,000,000 cubic feet on a straight-line basis between 
January 1, 2005 and January 1, 2015. Although BLM has offered helium 
for sale in the amounts required by the 1996 Act, not all such helium 
has been purchased and as a consequence significant amounts of 
federally owned helium will remain in the Federal Reserve after January 
1, 2015. This is discussed in more detail in Chapter 5 in the section 
entitled ``Sell-Down of Crude Helium Pursuant to 1996 Act.''
---------------------------------------------------------------------------
        Recommendation. The BLM should develop and implement a long-
        term plan that incorporates appropriate technology and 
        operating practices for delivering crude helium from the 
        Reserve in the most cost-effective manner.
Assistance for Small-Scale Researchers
    Among the events that triggered this study were the soaring prices 
and limited supplies that characterized the refined helium market in 
the fall of both 2006 and 2007. The committee, composed of individuals 
from a wide range of professions--economists, business people, and 
scientists--notes that small-scale scientists were particularly hard 
hit by price shocks and interruptions in the supply of refined helium 
during that time. An informal poll conducted by committee members of 
approximately 40 research programs at universities and national 
laboratories that use helium indicated that shortages of liquid helium 
interrupted the helium supply for almost half of these programs, with 
some interruptions lasting for weeks at a time during the late summer 
and fall of both 2006 and 2007. While anecdotal, these poll results 
provide clear indication that this community of users is directly 
impacted by general shortages of helium. For many of those scientists, 
losing access to helium, even temporarily, can have long-term negative 
repercussions for their research.
    In general, the federal grant programs that support these 
researchers simply are not designed to cope with the pricing shifts and 
other market volatilities experienced here. The grants typically are 
for a two to three year period and for a set amount that does not 
adjust if a principal expense of research such as helium significantly 
increases. Further, the relatively short duration of such grants, with 
no guaranty of renewal, effectively precludes these research programs 
from entering into long-term contracts that might at least partially 
reduce the risk of significant prices increases and shortages. Further, 
if BLM were to implement the market-based pricing mechanism recommended 
in this report, the retail price for helium may commensurably increase, 
which will have an even greater negative impact on those helium users.
    These negative impacts could, however, be mitigated at least in 
part through a programmatic and policy change that would allow small 
users being supported by government contracts and grants to participate 
in a program--commonly referred to as the in-kind program 
5--operated by BLM for the sale of helium to federal 
agencies and their contracting agents. Under that program, qualified 
buyers purchase their refined helium indirectly from BLM on a cost-plus 
basis. 6 Notably, participants in the program have priority 
access to helium in times of shortages. 7 The committee 
believes that such an expansion of the in-kind program would eliminate 
supply concerns and many of the price fluctuations that have negatively 
affected federally funded researchers during the past few years. 
Further, such an extension would be without significant cost to the 
programs supporting these researchers and, indeed, should lead to a 
more efficient use of the federal funds being used to purchase helium.
---------------------------------------------------------------------------
    \5\ The in-kind program is discussed in more detail in Chapter 5 in 
the section entitled ``In-Kind'' Program of Crude Helium 
Distribution.''
    \6\ As discussed more fully in the section of chapter 5 entitled 
``In-Kind Program of Crude Helium Distribution'' the price is 
negotiated between the supplier and user and includes BLM's cost of 
crude helium plus refining and transportation costs and profits for the 
refiner and distributor.
    \7\ 50 U.S.C.A. Section 167d (a);
---------------------------------------------------------------------------
        Recommendation. The crude helium in-kind program and its 
        associated customer priorities should be extended by the Bureau 
        of Land Management, in cooperation with the main federal 
        agencies not currently participating in the in-kind program--
        for example, the National Science Foundation, the National 
        Institutes of Health, and the extramural grant programs of the 
        Department of Energy--to research being funded in whole or in 
        part by government grants.
    In addition to recommending that these users be allowed to 
participate in the in-kind program, the committee believes that the 
conservation and reuse of helium by these users should be promoted by 
the agencies funding this research. Although adopting such a policy may 
be costly in the short-run, the committee judges that it would save 
money in the long-run and would help to reduce many of the negative 
effects of the price and supply disruptions referred to in the 
preceding discussion.
        Recommendation. Federal agencies such as the Department of 
        Energy, the National Science Foundation, the National 
        Aeronautics and Space Administration and the Department of 
        Defense, which support research using helium, should help 
        researchers at U.S. universities and national laboratories 
        acquire systems that recycle helium or reduce its consumption, 
        including low-boil-off cryostats, modular liquefaction systems, 
        and gaseous recovery systems.
    The committee notes that because total U.S. research applications 
account for only 2 to 4 percent of all usage of refined helium in the 
United States, the negative effects of supply and price disruptions for 
the U.S. research community not currently participating in the in-kind 
program could be addressed at relatively low cost. Moreover, in the 
judgment of this committee, the benefits for the nation that would 
accrue from minimizing these disruptions would be substantial.
         general recommendations for meeting u.s. helium needs
    In addition to the specific recommendations just discussed, the 
committee sets out more general recommendations for how to best meet 
the nation's current and future helium needs. These include 
recommendations for (1) collecting and making available the information 
needed to more effectively manage the Federal Helium Reserve and to 
formulate future helium policy, and (2) initiating strategies to 
develop a more comprehensive long-term program for meeting the nation's 
helium needs.
Collection of Information
    One of the difficulties encountered by this committee and the 
previous NRC committee that issued the 2000 Report was the lack of 
timely and sufficient information to evaluate the supply and demand 
sides of the helium market, especially non-U.S. supply and demand, and 
the operation of the Federal Helium Reserve. Such information is needed 
by those who formulate and carry out U.S. policies on helium in order 
to make good decisions.
        Recommendation. The Bureau of Land Management (BLM) should 
        acquire, store, and make available to any interested party the 
        data to fill gaps in (1) the modern seismic and geophysical log 
        data for characterization of the Bush Dome reservoir, (2) 
        information on the helium content of gas reservoirs throughout 
        the world, including raw data, methodology, and economic 
        assessment that would allow the classification of reserves 
        contained in specific fields, and (3) trends in world demand. 
        BLM or other agencies with the necessary expertise, such as the 
        U.S. Geological Survey, should develop a forecast over the long 
        term (10-15 years) of all U.S. demand for helium for scientific 
        research and for space and military purposes.

        Recommendation. Unless expressly prohibited from doing so, 
        Bureau of Land Management should publish its database on the 
        helium concentrations in the more than 21,500 gas samples that 
        have been measured throughout the world and provide its 
        interpretations of gas sample analyses, especially those 
        reflecting likely prospective fields for helium.
Long-Range Planning
    Helium is critically important to many U.S. scientific, industrial, 
and national defense sectors. Further, the helium market is rapidly 
changing, as evidenced by the unforeseen developments on both the 
supply side and demand side of that market since the 2000 Report was 
released. Finally, because the Reserve is so large, steps undertaken in 
connection with it can have unintended consequences, the most pertinent 
being the effect of the pricing mechanism adopted by BLM pursuant to 
the 1996 Act on worldwide prices for helium. These considerations merit 
the development of a more permanent and sustained plan for managing 
this valuable resource.
    In addition, the Federal Helium Reserve is a finite resource and so 
at some point in the future will be depleted. However, the helium needs 
of users in the in-kind program will continue. The BLM and the White 
House Office of Science and Technology Policy (OSTP) should develop a 
strategy to address these important future needs.
        Recommendation. The Bureau of Land Management should promptly 
        investigate the feasibility of extending the Helium Pipeline to 
        other fields with deposits of commercially available helium as 
        a way of prolonging the productive life of the Helium Reserve 
        and the refining facilities connected to it.

        Recommendation. The Bureau of Land Management (BLM) should form 
        a standing committee with representation from all sectors of 
        the helium market, including scientific and technological 
        users, to regularly assess whether national needs are being 
        appropriately met, to assist BLM in improving its operation of 
        the Federal Helium Reserve, and to respond to other 
        recommendations in this report.

        Recommendation. The Bureau of Land Management, in consultation 
        with the Office of Science and Technology Policy and relevant 
        congressional committees, should commission a study to 
        determine the best method of delivering helium to the in-kind 
        program, especially after the functional depletion of the Bush 
        Dome reservoir, recognizing that this will not happen until 
        well after 2015.

        Recommendation. The congressional committee or committees 
        responsible for the federal helium program should reevaluate 
        the policies behind the portions of the 1996 Act that call for 
        the sale of substantially all federally-owned helium on a 
        straight-line basis. It or they should then decide whether the 
        national interest would be better served by adopting a 
        different sell-down schedule and retaining a portion of the 
        remaining helium as a strategic reserve, making this reserve 
        available to critical users in times of sustained shortages or 
        pursuant to other predetermined priority needs.
                               conclusion
    The committee notes that securing a stable and accessible helium 
supply in the future requires addressing several important issues that 
are beyond the scope of this study. For example, the legislative 
framework for the operation of the federal helium program is silent on 
the management of the Federal Helium Reserve after January 1, 2015, the 
mandated date for disposal of substantially all federally owned crude 
helium. What is to be done with the remaining federally owned crude 
helium? How will BLM operations beyond 2015 be financed? Should the 
Reserve, either as a federal or a private entity, as appropriate, 
continue to exist after the BLM debt to the U.S. Treasury has been 
retired? While the committee supports maintaining a strategic reserve, 
addressing these issues requires the involvement of Congress and the 
broader federal science policy establishment because they go well 
beyond the reserve management responsibilities of BLM.
                                 ______
                                 
    Mr. Costa. Thank you very much, Professor. We will look 
forward to having an opportunity to ask you some additional 
questions when we get to that part of the hearing.
    Our last witness, but certainly not least, as I indicated, 
both Professor Groat and Professor Richardson have submitted 
their written testimony together. Dr. Charles Groat is 
Professor and Chair in the Energy and Mineral Resources for the 
Department of Geological Sciences at the University of Texas at 
Austin. As I noted, Dr. Groat was also the former Director of 
the U.S. Geological Survey from 1998 to 2005.
    Could you please present your testimony, Dr. Groat?

   STATEMENT OF CHARLES G. GROAT, Ph.D., CHAIR IN ENERGY AND 
      MINERAL RESOURCES, DEPARTMENT OF GEOLOGICAL SCIENCES

    Dr. Groat. Thank you, Mr. Chairman. I appreciate the 
opportunity to summarize the results of the National Research 
Council study on the impacts of selling off the national helium 
reserve.
    As the Chairman and Dr. Richardson discussed the use of 
helium, I will make a couple of comments about the supply 
situation.
    In 2009, approximately 170 million cubic meters of helium 
were extracted from natural gas or withdrawn from the helium 
reserves. Approximately 78 percent of that production comes 
from the United States, 10 percent from Algeria, and most of 
the remainder from Russia, Poland, and Qatar.
    The U.S. supplies all domestic demand, and approximately 80 
percent of world demand. Part of the supply comes from the sale 
of helium from the Federal Reserve. The Helium Privatization 
Act of 1996 called for sales of 2.1 billion cubic feet, as 
noted earlier, per year in order to sell off the reserve by 
2015.
    In 2009, the Amarillo Field Office of BLM sold 940 million 
cubic feet. The Federal Reserve contains about 18 billion cubic 
feet, as of 2009. Given the actual rate of sales, there will be 
more than the mandated amount, 600 million cubic feet, as noted 
by other witnesses, of helium left in the reserve in 2015, 
which raises the question from the committee, what happens 
after 2015.
    The principal change charged to our committee was to 
determine whether the sell-off of the Nation's helium reserve, 
as prescribed by law, has had an adverse effect on the United 
States' scientific, technical, biomedical, and national 
security users of helium.
    In response to this charge, the committee determined that 
selling off the helium reserve in the manner prescribed by the 
1996 Act has adversely affected critical users of helium, and 
is not in the best interest of U.S. taxpayers or the country.
    The sell-down of Federally-owned helium is coming at a time 
when demand for helium by critical and non-critical users has 
been significantly increasing, especially in foreign markets. 
If this path continues to be followed, within the next 10 to 15 
years the United States will become a net importer of helium, 
whose principal foreign sources will be the Middle East and 
Russia.
    In addition, the pricing mandated by the 1996 Act has 
triggered significant increases in the price of crude helium. 
The helium withdrawal schedule mandated by the 1996 Act is not 
an efficient or responsible reservoir management plan.
    Another of the committee's concerns is that the draw-down 
schedule required by the 1996 Act, which dictates that the 
reserve of helium be sold on a straight-line basis, the same 
amount must be sold each year until the reserve is 
substantially gone, is a wasteful way to draw down a reservoir, 
because it is more costly and more likely to leave significant 
amounts of helium unrecoverable than alternative draw-down 
scenarios.
    The committee, therefore, recommends that a portion of the 
1996 Act be revisited, that particular portion.
    Furthermore, the committee recommends that the Congress 
reconsider whether selling off substantially all the Federally-
owned helium is still in the nation's best interest.
    The committee also addressed the needs of small-scale, 
government-funded researchers, a group that has been 
particularly hard-hit by the sharp price rises and the 
shortages that have characterized the helium market in recent 
times. These research programs should have some protection from 
the instabilities recently characterizing the helium market.
    Accordingly, the committee recommends that the researchers 
be allowed to participate in an existing In-Kind Program for 
government users of helium that would give them priority when 
there is a helium shortage, and insulation from the 
accompanying dramatic retail price increases.
    Because the helium market is changing rapidly, and helium 
is critically important to many users, the committee report 
includes recommendations that would facilitate long-range 
planning to meet the nation's helium requirements. Including 
the collection and dissemination of needed information, and the 
formation of a standing committee to regularly assess whether 
the national needs are being appropriately met.
    Finally, while noting that the question of how critical 
helium users in the United States will be assured a stable 
supply of helium in the future was beyond the scope of its 
charge, the committee points out that several important issues 
related to this topic remain unanswered.
    How will the large amount of Federally-owned helium that 
remained after the mandated sell-off in 2015 be managed after 
that date? Moreover, from a wider perspective, should the 
strategic helium reserve be maintained?
    These questions need to be answered in the near future, 
well before more Federally-owned helium is sold and will 
require action by the Congress.
    This concludes my spoken remarks.
    [The joint prepared statement of Dr. Groat and Dr. 
Richardson can be found on page 24.]
    Mr. Costa. Thank you very much. A number of questions that 
I had have been answered as it relates to the 1996 proposal at 
that time by a sense of Congress to, in essence, eliminate the 
reserve by 2015.
    Professor Groat, you clearly, I think, have given us a 
sense that we need to revisit that 1996 policy by the Congress 
at that time.
    What has changed so dramatically in terms of the demand and 
the usage of helium that puts us on a different track? And I 
guess the other question, I guess, is, it seems like logically 
you are indicating that if we eliminate the reserve, we will 
go, in a short period of time, from being the net provider of 
helium throughout the world, to a net importer.
    And I am wondering, is there not a third scenario in which, 
in fact, as a result of the elimination of the reserve, that it 
might increase domestic production for helium, and how that 
would take place absent the reserve.
    There are two parts to that question, the demand and then 
the----
    Dr. Groat. Right. I think the stimulus for the price 
erratic, the changes in pricing were, the events had started in 
2003, when you actually began selling the helium reserve off, 
and went on the market with helium. They sold 1.6 billion cubic 
feet. And as one of the testimonies pointed out earlier, the 
price for government helium at that time was high, and private-
sector helium was low.
    It didn't take very long for private-sector helium to move 
up above the government helium, so there was a large price 
increase. At the same time, there were demand increases 
globally and in the United States. There were some planned and 
unplanned maintenance issues, both at the----
    Mr. Costa. But if I am a consumer of helium, either for 
scientific purposes or because I manufacture MRI machines, why 
would I buy helium from the private sector, when it came 
significantly higher than the reserve?
    Dr. Groat. Well, the government was only selling its helium 
to refiners. So they----
    Mr. Costa. I see.
    Dr. Groat. It had to be refined first. You couldn't buy it 
directly from the government any more.
    Mr. Costa. OK. So then the refiners were making a good 
profit.
    Dr. Groat. They were doing better, yes. In fact, and that 
combined with the straight-line sell-off set a Federal price 
that remain now very low. And the refined price, retail price 
went up very high. Couple that with world demand increasing, 
particularly in Asia.
    So we had the beginnings of a critical supply-and-demand 
situation that really affected the small researchers probably 
most significantly because they have fixed budgets. They can't 
go back for more money to buy more helium. And so they really 
felt the pinch, and were probably the most vocal about that.
    Your question about supply is an interesting one. Are there 
ways to increase the supply. If you look at the total resource 
base of helium in the United States, it is huge. But the base 
that is commercially exploitable is not. And so it is a 
legitimate question to wonder whether, if the price continues 
to go up, which would force some of the substitutions Dr. 
Richardson talked about, some of the conservation that could 
take place; if that price were to go up, would that encourage 
others to process other helium resources for the helium?
    In other words, there are helium and natural gas in the 
Four Corners area.
    Mr. Costa. Right. Did you look at that?
    Dr. Groat. We did not.
    Mr. Costa. You did not.
    Dr. Groat. We did not. In fact, Mr. Chairman, one of the 
things we pointed out that we were very emphatic about was that 
the availability of information about potential sources of 
helium, about demand for helium, about supply economic issues, 
is sparse. We had a great difficulty in getting original data, 
and that is one of the reasons we put such an emphasis on 
trying to gather that information in formulating long-range 
plans.
    Mr. Costa. Do both you and Dr. Richardson believe we ought 
to maintain a reserve?
    Dr. Richardson. Yes.
    Dr. Groat. I think the committee and Dr. Richardson and I 
both felt--the committee wasn't asked that question, but 
individuals on the committee, including both of us, feel the 
reserve has a legitimate and important role in the future.
    Mr. Costa. Dr. Richardson, how do you, you talked about how 
there are other uses. You went from party balloons to welding 
to other kinds of things that should not be used helium, that 
hydrogen and some of the other gases can be substitutes for.
    But how do you, I mean, isn't that ultimately a function of 
price? Or is it just availability?
    Dr. Richardson. I think the price. And I think that helium 
probably has a factor of 20, too cheap.
    Mr. Costa. Too cheap, OK. I want to get back to that in a 
moment. But I do want to ask our lead witness if, in fact, it 
has been an issue that she has had with the Department, with 
the Secretary or with others within the Administration, to 
revisit the current plan that has been moving forward as she 
outlined, as you outlined, Ms. Marcilynn, to basically pay off 
by 2015 and continue to implement this. Or is there a 
reconsideration taking place now within your agency and by the 
Department? In light of the changes that many of the witnesses 
have indicated in recent years.
    Ms. Burke. Yes. Mr. Chairman, the report has certainly 
generated quite a bit of discussion within the Bureau, and we 
are well aware of the supply-and-demand issues that have 
changed over time, making our helium less expensive relative to 
other sources.
    But the Helium Privatization Act is very specific in its 
direction to the Bureau. So----
    Mr. Costa. No, I understand that. But is there any--I am 
just trying to get a sense. Is there any discussion taking 
place to reconsider that?
    Ms. Burke. Yes.
    Mr. Costa. OK. My time has expired. I will now defer to the 
gentleman from New Jersey. We have, I am told, votes in about 
15 minutes. So what I will intend to do is give every Member 
here an opportunity to have five minutes for their questions. 
And if there is further time, we will maybe consider some 
others.
    But when votes are called, it is the Chair's intention to 
shortly thereafter close the hearing.
    Mr. Holt.
    Mr. Holt. Thank you, Mr. Chairman. And I thank you and the 
staff for assembling a good group of witnesses on what is a 
topic that is more important than generally recognized. And so, 
thank you.
    As someone who actually wrote on this subject three decades 
ago, about why it was important for the government, why it was 
in the public interest to maintain helium reservoirs; and as 
someone who was not in Congress when the revisions were made in 
the mid-nineties, but who read with alarm what Congress had 
done; I am delighted that the Chairman is revisiting this now.
    First of all, Dr. Richardson, did I understand you 
correctly to say that you think the, in your own opinion, that 
the price for helium is off by a factor of 20? Is that--all 
right?
    Dr. Richardson. Party balloons are three dollars, and I 
think that it would be appropriate for them to sell at $60.
    Mr. Holt. Thank you.
    Dr. Richardson. Because, I mean, it is not a major use, but 
it is symptomatic of the problem.
    Mr. Holt. Well, that raises lots of other questions. But I 
thought, I thought that in recent years--and I suppose this 
would be a question for Ms. Burke--that private, the private 
commercial price for helium is more or less pegged to the 
Federal price now. That there was not much discrepancy between. 
Am I misguided in this? Or maybe someone else can answer that. 
OK.
    Mr. Spisak. Yes. Generally, the Bureau price is, serves as 
a benchmark price. And a lot of contracts are tied to that. But 
they will add on a refining charge. And so it is always going 
to be above.
    With some of these shortages that occurred over the last 
several years due to some of the supply issues, you have the 
market driving the price up quite a bit higher. And it doesn't 
always come back once it goes up.
    Mr. Holt. A question, maybe starting with Dr. Richardson 
and Dr. Groat, but for anyone who wants to chime in. 
Recognizing that predictions are difficult, especially about 
the future, can anybody explain why the predictions about the--
historically, the predictions about the use of helium have been 
pretty far off? And will that help us, the lesson, can we draw 
lessons from that to help us understand what future need might 
be?
    Dr. Groat. Mr. Holt, I think part of the problem has been a 
benefit. It has been technology. There have been developments 
in technology. MRIs, for example, fiber optics, those sorts of 
things that put demands on helium that weren't anticipated in 
some of the earlier projections. And then the growth of the 
Asian economy that does a lot of this work has increased the 
volume of demand internationally.
    So I think the supply, the demand situation has probably 
been the least accurately projected. And one of our chief 
concerns was that with a standing committee, we might have a 
chance to keep a better handle on those kinds of changes than 
we have been able to do in the past.
    Mr. Holt. Do we need to mandate or ask for better data 
about supplies? Does that require new studies, or just 
reporting of data?
    Dr. Groat. Speaking from the committee's opinion, I think 
we felt strongly that obtaining more data was important, and 
that the responsibility for doing that would need to be fixed 
with an agency or with an organization so it was clear what the 
responsibilities are.
    The helium is, through the USGS Mineral Service, actually 
funded, or supported through BLM, does do routine statistical 
gathering of information. So there is some information. But the 
specificity is difficult to obtain that is needed. And also, 
some of the market changes are very difficult to monitor. And 
we would really benefit, I think, from better efforts there, 
and clear responsibility assignments, which aren't there now.
    Mr. Holt. Thank you. I am intrigued by your--well, my time 
is up.
    Mr. Costa. Go ahead.
    Mr. Holt. I am intrigued by the suggestion of the NRC 
panel, that helium be supplied in kind or on a subsidized basis 
to small researchers. It seems to me that would not be terribly 
expensive.
    But I guess the question is, from a Congressional point of 
view, how would that be accomplished? This committee, 
obviously, would have no jurisdiction over that, I think. Do 
you have any advice for us on that?
    Dr. Groat. I can speak, reflect some of the committee 
discussions, and perhaps the others would care to speak in.
    Much of the research that uses helium by the small research 
community is Federally funded: NSF, DOE. So they are 
technically Federal users of helium, but they have no mechanism 
for accessing it, since the money comes through a Federal 
agency.
    So it would be contingent upon the agency doing the funding 
to have a program for getting at the In-Kind Program. So I am 
not so sure it is a question of it is illegal or immoral for 
that to happen. It is a question of mechanisms or processes 
that would be workable to do it.
    And we think access to the In-Kind Program would be a great 
insulator for the research community, and solve many of its 
problems. But how you do it is the difficult part.
    Mr. Holt. Thank you.
    Mr. Costa. You are welcome. The gentleman from Maryland is 
next, Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman. I am neither a 
physicist nor an economist, so I am kind of hanging on by my 
fingernails here for this conversation.
    But Dr. Groat, could you just take me through again why you 
believe that if we don't, if we don't sort of adjust the 
current trend, we are going to end up being importers of helium 
from other places? Just take me through that one more time.
    Dr. Groat. A couple of factors. One is that there aren't 
new deposits being put on line in the United States right now. 
I shouldn't say--that is not absolutely true because there are 
small ones. But the major supply that we tap now is very 
mature. And so it is subject to decline with time.
    So if we don't look at any economic incentives to develop 
new supplies and our existing ones decline, and we end up 
selling off the Federal reserve, the domestic supply base of 
helium is going to drop off dramatically over the next 10 to 15 
years. We will still have a demand.
    Now, the U.S. demand has flattened out, but the global 
demand, when added to, the international added to ours has gone 
up dramatically. And so if we are not supplying it, and if the 
dependency for helium for our own needs and the global needs 
are based on foreign sources, and those are based on LNG 
facilities in Algeria and Qatar and Russia; and if there is a 
glut of natural gas on the market and we may not see all--it is 
almost a perfect storm of factors that could lead to critical 
supply shortages for the U.S. community, and a global situation 
where their supply needs aren't met, as well.
    So it is a number of factors working together that could 
cause a supply disruption in a fairly short period of time.
    Mr. Sarbanes. So it is not that our reserves will be 
disappearing; it is that our management of the economics of 
this will be such that we won't, we won't have the kind of 
access to the reserves and the production capacity and so forth 
that will allow us to deliver that out of our own resource, as 
opposed to getting it someplace else? Is that correct?
    Dr. Groat. There is some of both. Our own reserves in the 
U.S. are being depleted.
    Mr. Sarbanes. They are.
    Dr. Groat. If there were economic incentives to develop 
additional ones, then it would help solve that problem.
    But the amount of helium out there in natural gas that is 
being processed for LNG, which takes a much lower 
concentration, and if it were all processed, and if it were 
turned into helium, then we would not have a numerical supply 
situation. It comes down, as you mentioned, to economics, and 
the willingness of the private sector to invest in providing 
that helium.
    Mr. Sarbanes. I think I was being misled by the fact that 
by 2015, we are still going to have a certain amount of helium 
in the reserve. Which makes one thing that we are OK in terms 
of supply.
    But what you are saying is that eventually that is just a 
matter of time, if we don't address this broader issue.
    Dr. Groat. Yes, correct. The law says there will be 600 
million cubic feet left. And then the sell-off rate is telling 
us that it won't all be gone that was intended to be gone by 
2015, so we will have a significant amount of helium left in 
the reserve. But no responsibility for what happens after that, 
as BLM has pointed out. So that is the part that is hanging 
over us right now.
    Mr. Sarbanes. Thank you.
    Mr. Costa. I just want to, I have a couple other questions. 
I don't know if Mr. Holt does, but they really take on the 
questions that my colleagues just asked.
    I mean, it is being depleted, in fact, because that was the 
public policy that was enumerated in 1996, right? That the 
Federal government should not be in the business of holding a 
helium strategic reserve.
    I mean, we had, I mean, we had a strategic petroleum 
reserve that used to be in California as a part of our Navy 
strategic defense planning. It was felt that the use of helium 
really dated back 80 years to a policy that was no longer 
strategic in nature.
    And so in 1996, good, bad, or indifferent--I mean, that is 
why we are reexamining it--the plan was to phase this out by 
2015. That is what we are doing, right?
    And what you are suggesting in the report is that in 
reflection of what has taken place between now and 1996, and 
what you see us going forward with, that you are saying it is 
in the United States' best interest in terms of our longer-term 
public policy that we maintain a reserve.
    Dr. Groat. Go ahead.
    Dr. Richardson. Yes.
    Mr. Costa. Dr. Richardson. And not only for strategic 
purposes and research, but also for commercial use?
    Dr. Richardson. Urgent commercial use, yes. You know, the 
next generation of nuclear power reactors will require helium.
    Mr. Costa. And that is a very important potential energy 
source, I believe.
    Dr. Richardson. Yes.
    Mr. Costa. To further the line of questioning that 
Congressman Sarbanes was asking, I mean, I guess the 
alternative is, if we eliminate this--again, you are going to 
have to help us a little bit, because I suffer from the same 
level of expertise as my colleague from Maryland on this 
subject matter.
    Helium is produced when we are producing natural gas, 
right? Generally speaking, from natural gas fields? And I guess 
the theory might have been, in 1996, is that if we no longer 
have this helium reserve, that when--and of course, especially 
in California, but elsewhere, natural gas I refer to sometimes 
as the energy du jour because of its clean-burning attributes 
related to natural gas. And so it is an energy source with, 
when we have air quality issues in California, that is sought 
after. And there is much more demand and increased production 
taking place of natural gas.
    Would that not indicate that as a part of that, that 
additional helium will be produced at the same time? Or am I 
missing something here?
    Dr. Groat. I think the fact that most of the helium that we 
have in the United States is situated in very limited 
geographic areas means that much of the natural gas isn't 
coincident with those areas. So we can increase our natural gas 
significantly, production significantly, without necessarily 
tapping natural gas that contains a lot of helium. So that is 
the basic problem.
    But in theory, in general, if we increase natural gas 
production, and if it includes areas like the Four Corners 
area, then we would be tapping natural gas that has some 
helium. And if the price were high enough to encourage 
commercial development of that, we might actually see some 
incremental increases in the helium resource base.
    Mr. Costa. How would the Helium Program be funded, Ms. 
Mittal, after 2015, once the program's debt is paid off?
    Ms. Mittal. That is a question that we think Congress is 
going to have to address. Because once the Helium Fund is 
terminated, there is no mechanism for funding the program.
    Right now what happens is, as BLM sells the helium in 
storage, the funds are put in the Helium Fund, and then BLM has 
access to those funds to operate the program. But the fund is 
tied to the debt. So once the debt is paid off, the Helium Fund 
gets terminated, and then there is no mechanism to operate the 
program.
    So either Congress is going to have to, if one wants to 
continue a Helium Program, Congress will either have to 
appropriate funds for the program, or create some new mechanism 
by which the fund can continue, or some other appropriate 
vehicle is there for BLM to manage the operations of the 
program.
    Mr. Costa. So that, in part, is the discussions I guess 
that is taking place within the Department, and what this 
Subcommittee ought to be focused on as it relates to whether or 
not we want to continue the current policy or make changes. I 
mean, those are at the heart of the question, I guess.
    Ms. Burke. Yes, Mr. Chairman.
    Mr. Costa. At what price should the BLM sell its helium? In 
the past the debt has been a factor in price, and price has 
been above market price. After the 2015 debt will be paid off 
at current prices at or below market. And of course, Dr. 
Richardson has already opined as to his thoughts about the 
inexpensiveness of what the current price of helium is today. 
Yes. No, Dr. Mittal I think was, that was in part what you----
    Ms. Mittal. It was one of the issues that I identified that 
needs to be addressed.
    You are absolutely right. Once the debt is paid off, it 
ceases to be a factor in the formula that BLM has been using to 
price helium. And so we have to consider what the policy, 
public policy objective of the program is.
    If we want the program to be one of conservation or 
allowing the industry to take over more of the production of 
helium, then you might consider a market, a higher-than-market 
price for the price of the crude in storage.
    If you want to make sure that the Federal government is 
getting its too-fair value for the helium in storage, then you 
might consider a market price.
    If the whole objective of the program is to eliminate the 
reserve completely, then you might go with a price that is 
below market price. So again, it hinges back to what are the 
public-policy goals for the Helium Program going forward.
    Mr. Costa. Well, that is why we are reexamining this, and 
that is why your testimony is important. I mean, the policy 
again, as I understood it, as was noted by Congressman Holt, 
none of us were here when it was established. But as I, and 
maybe someone can correct me if I am wrong, but it was 
basically to get the government out of the business of a 
strategic helium reserve.
    And what Professor Richardson and Professor Groat are 
telling us is you don't think that the private sector can 
handle whatever the needs are, whether it be for research or 
for medical science, or for the next production of nuclear 
reactors, absent a government strategic reserve? I mean, I 
guess that is the bottom, that is the threshold question that 
we need to wrestle with here. Dr. Groat, and then Dr. 
Richardson.
    Dr. Groat. I think----
    Mr. Costa. I mean, if we just eliminate, you know, under 
the theory that I guess established this program in 1996 is, is 
that whatever those needs are--and I think we have all 
substantiated that the needs are important, they are critical, 
and they are going to be a part of our long-term requirements 
for this country in the 21st century. So that, I think, is 
established.
    The question is, I guess, is there a role for the 
government to continue on this? Or can the private sector 
handle this? Or will we just become dependent upon foreign 
sources, as I think someone indicated?
    Dr. Groat. I think you hit the heart of the question. And 
that is, why do we have reserves in the first place. And we had 
many reserves, strategic minerals and so forth, that helium was 
one of them. And then we went through a period in the nineties 
when we decided, as a matter of policy, to get out of the 
reserve business; that private sector and supply and demand 
will take care of the situation. It is no longer necessary or 
in the best interest of the United States to maintain these 
kind of reserves. Helium was part of that, the privatization.
    Yet today the question is not so much could the private 
sector produce helium. I think the policy question is, and this 
is a personal opinion, is whether or not the government has a 
role in ensuring certain users are insulated because they are 
so critical from price and supply shocks, because it is in the 
best interest of the United States. Our small research 
community, small-user research community on the committee felt 
very strongly that their role was critical to the well-being of 
the United States in doing research. And if they are denied a 
supply, then it is not good for the United States. So they 
would argue that the reserve is important, and access to it, 
for them, is important.
    And I am sure the MRI folks and the nuclear reactors of the 
future will feel that they are an important part of the United 
States' future. So again, back to the policy question, is the 
government's role to provide this insulation through a reserve 
program worthy of reconsideration again. Perhaps not only for 
helium, but there may be some other critical things that are in 
the same family.
    Mr. Costa. Any other questions by my colleagues? Yes, 
Congressman Holt.
    Mr. Holt. Thank you, Mr. Chairman. And thank you again for 
that line of questioning, because I think you get at the heart 
of the question before us.
    A couple of kind of random questions. In your paper, Dr. 
Groat and Dr. Richardson, and briefly in your testimony, you 
talk about efficiencies in the use of helium. How much is to be 
gained? What savings are there in efficiencies?
    You talk about low-boil-off cryostats. But if you are 
filling dirigibles, you know, maybe the amount that is lost 
from cryostats isn't, or the amount that might be saved might 
not be so important.
    So can you give me an idea of how important it might be? We 
just passed a week ago here in the House something called Home 
Star to encourage efficient use of energy. Maybe we need a Lab 
Star or a Dirigible Star program----
    Dr. Richardson. Yes.
    Mr. Holt.--or a Welstar to encourage efficient use of 
helium.
    How significant is this?
    Dr. Richardson. You know, the NASA and the Department of 
Defense use liquid helium for purging rockets. And it would be 
expensive, but it would be worthwhile to recapture that helium. 
Because it is 25 percent of the uses, for instance.
    Mr. Holt. So could it be, for example, a condition of sale 
that the user have some approved recapture technology?
    Dr. Richardson. Well, if it is expensive enough to begin 
with, then the user would be naturally encouraged to recover 
the helium.
    Dr. Groat. That is an interesting point about some 
condition of sale. The committee did discuss how can you 
encourage conservation and more efficient use. And again, back 
to the small research user, they don't have the resources 
available to put in these recycling conservation things. And if 
there were some process by----
    Mr. Holt. But they are using only a few percent----
    Dr. Groat. They are not using very much, no. They are 
perhaps the most acutely affected, but they are not--
percentage-wise, you are correct, they are not.
    But the large commercial users already do. MRI industry and 
people like that are more cautious about recycling. But there 
are large segments, as Dr. Richardson pointed out, that don't 
or can't. And that is one step the committee felt was, could be 
encouraged.
    Mr. Holt. A question, actually maybe for an economist or 
someone else, but let me ask it of you. Why not depend on 
Qatar? Why do you think that a domestic supply is needed?
    I mean, there are certainly many things that we are 
dependent on, not the latest of which is petroleum, where we 
have, you know, backed in or walked in or gladly embraced 
dependence on international suppliers.
    Dr. Groat. I think, Mr. Holt, initially the thoughts of 
Qatar, Algeria, and Russia being our suppliers made people 
nervous. But beyond that, you are correct; we still get a lot 
of critical minerals and resources from countries that aren't 
terribly stable or friendly. So that is not a new thing.
    My personal concern is not so much those countries, but it 
is dependence on the international LNG production as the source 
for that helium. If the world glut in natural gas persists, 
then there are going to be some LNG facilities that don't make 
it economically. And if the ones that produce helium are among 
those, we could see a decrease in an intended large source of 
supply.
    So it is less strategic and more economic, at least that is 
my personal concern.
    Mr. Holt. Are there other comments on that?
    [No response.]
    Mr. Holt. Thank you, Mr. Chairman.
    Mr. Costa. Thank you for your focus and interest. And now, 
when I see you on the Floor, I can ask you how you wrote your 
thesis on helium several decades ago.
    Mr. Holt. Sorry, it wasn't my thesis, but I had written on 
the subject decades ago.
    Mr. Costa. Well, we appreciate all the witnesses' testimony 
this morning. It was helpful. And we will look, as the 
Administration is looking, at this policy that has been in 
place, whether or not we need to have some mid-course 
corrections, as the National Academies have indicated, it seems 
to me. And I think it is an important issue, clearly not only 
strategically for the United States, but commercially as we go 
forward. So your testimony will be well used.
    The Subcommittee on Energy and Mineral Resources hearing is 
now adjourned.
    [Whereupon, at 11:22 a.m., the Subcommittee was adjourned.]

    [Additional material submitted for the record follows:]

    [A letter and attachment submitted for the record by Mark 
Haynes, President, Concordia Power, on Behalf of the NGNP 
Alliance, follows:]

May 13, 2010

The Honorable Jim Costa
Chairman
Subcommittee on Energy And Mineral Resources
Committee on Natural Resources
1324 Longworth House Office Building
Washington, D.C. 20515

Dear Chairman Costa:

    Thank you for conducting your oversight hearing on ``Up in the Air: 
The BLM's Disappearing Helium Program'' today. Among other things, this 
hearing helps highlight the great importance of helium to our economy 
and the need for its careful management.
    On behalf of the Next Generation Nuclear Plant Industrial Alliance, 
I am writing to bring to your attention the importance of helium to 
what may ultimately prove to be one of the most important future energy 
options: high temperature gas cooled reactors or HTGRs. HTGRs are quite 
different from the water cooled reactors that constitute the vast 
majority of the world's existing nuclear fleet. By utilizing helium as 
a coolant, along with other important design and materials differences, 
HTGRs exhibit unparalleled safety characteristics and are able to 
operate in high temperature regimes that make it possible for them to 
ultimately supplant fossil fuel use and substantially reduce greenhouse 
gas production in many industrial and transportation uses. The attached 
one page summary discusses these uses.
    In the overall picture of current world helium production(193,000 
cubic meters in 2008), HTGR use is not large. A deployment of 1,000 
HTGR modules would use about 5.0% of the world's current production on 
an ongoing basis. It is important to assure, however, that future 
helium supplies and production are managed to enable a long-term supply 
for the HTGR nuclear energy technology.
    Thank you again for your attention to this very important resource.

Sincerely,

Mark Haynes
President
Concordia Power
On Behalf of the NGNP Alliance

cc:  The Honorable Douglas L. ``Doug'' Lamborn. Ranking Member

Attachment
                                 ______
                                 

                  Next Generation Nuclear Plant (NGNP)

          and High Temperature Gas Cooled Reactor Technology:

                  Environmental and Economic Benefits

    The approximately 20% of U.S. energy consumption associated with 
industrial uses (primarily in the form of process heat), is almost 
completely derived from fossil fuels and cannot be replaced by 
renewable sources such as wind and solar. The ONLY option for a 
substantial greenhouse gas free substitute for this energy and its 
associated emissions, is High Temperature Gas-cooled Reactors (HTGRs).
GREENHOUSE GAS REDUCTIONS AND INCREASED ENERGY SECURITY
    HTGRs can provide reliable, economic process heat and cogenerated 
electricity needed for the petrochemical, petroleum and fertilizer 
industries as well as for heavy oil recovery and upgrade applications 
that otherwise rely on burning natural gas. In these applications, a 
nominal 600MWt HTGR modular unit can avoid 0.8 million metric tons of 
carbon dioxide annually--essential to achieving the long term U.S. 
environmental goals. Further, the natural gas is then available as a 
feedstock--important stewardship of resources.
    For the end uses discussed above, a conservative estimate shows 
that a U.S. market for at least 200 HTGR modules could exist in the 
next four decades. A 200-module deployment would eliminate 160 million 
metric tons/year of CO2 and reduce U.S. natural gas 
consumption by 32% of current consumption in the industrial and 
commercial sectors or 13% of total natural gas consumption in 2008 
Importantly, the potential CO2 and natural gas offset via an 
export market for HTGRs is even more significant
    Beyond these applications, HTGRs can be integrated with coal 
conversion processes (e.g., gasification and coal-to-liquids) that can 
produce transportation fuels and hydrocarbon feedstock for the 
petrochemical industry. The use of HTGRs in this manner would result in 
essentially no carbon footprint for production of transportation fuels 
and hydrocarbon feedstocks using indigenous coal. Fifteen 100,000 
barrel per day coal-to-liquids plants integrated with 480 HTGR modules 
could reduce U.S. oil imports by 26% of current U.S. petroleum imports
ECONOMIC BENEFITS
    Achieving the HTGR energy supply capability described above (and 
assuming no export sales) would result in significant economic activity 
and job creation. HTGRs are designed to be constructed in plants of 4 
to 8 modules. Each 4-module plant would create approximately 12,400 
jobs during construction and approximately 1200 permanent jobs at the 
site during plant operation. Looked at another way and depending on the 
ultimate number of reactors built domestically, the $2 - $3 billion 
estimated federal investment in the NGNP Project to achieve HTGR 
commercialization would leverage over $2 trillion in economic activity. 
These figures do not assume any exports which have the potential to 
substantially increase these totals.

                                 
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