[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
__________
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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.
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\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.
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\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.
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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.
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\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.
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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.
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\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.
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\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.
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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.
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\9\ National Research Council, The Impact of Selling the Federal
Helium Reserve (Washington, D.C.: National Academy Press, 2000).
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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\
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\10\ GAO/RCED-92-44 (helium purity); and GAO/RCED-93-1 (helium
debt, pricing, and alternatives).
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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.
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\11\ GAO/RCED-93-1.
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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.
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\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.
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\13\ GAO/RCED-92-44.
\14\ Refined helium has a varying purity of 99.99 percent to
99.9999 percent helium.
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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).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
GAO Contact and Staff Acknowledgments
For further information about this testimony, please contact Anu K.
Mittal at (202) 512-3841 or [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
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.
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\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.''
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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.