[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




 
                       AMERICA'S HELIUM SUPPLY:
                         OPTIONS FOR PRODUCING
                              MORE HELIUM
                          FROM FEDERAL LANDS

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

                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                        Thursday, July 11, 2013

                               __________

                           Serial No. 113-31

                               __________

       Printed for the use of the Committee on Natural Resources



         Available via the World Wide Web: http://www.fdsys.gov
                                   or
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                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
            EDWARD J. MARKEY, MA, Ranking Democratic Member

Don Young, AK                        Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F. H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Tom McClintock, CA                   Jim Costa, CA
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Cynthia M. Lummis, WY                    CNMI
Dan Benishek, MI                     Niki Tsongas, MA
Jeff Duncan, SC                      Pedro R. Pierluisi, PR
Scott R. Tipton, CO                  Colleen W. Hanabusa, HI
Paul A. Gosar, AZ                    Tony Cardenas, CA
Raul R. Labrador, ID                 Steven A. Horsford, NV
Steve Southerland, II, FL            Jared Huffman, CA
Bill Flores, TX                      Raul Ruiz, CA
Jon Runyan, NJ                       Carol Shea-Porter, NH
Mark E. Amodei, NV                   Alan S. Lowenthal, CA
Markwayne Mullin, OK                 Joe Garcia, FL
Chris Stewart, UT                    Matt Cartwright, PA
Steve Daines, MT
Kevin Cramer, ND
Doug LaMalfa, CA
Jason Smith, MO

                       Todd Young, Chief of Staff
                Lisa Pittman, Chief Legislative Counsel
               Jeffrey Duncan, Democratic Staff Director
                David Watkins, Democratic Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                       DOUG LAMBORN, CO, Chairman
                RUSH HOLT, NJ, Ranking Democratic Member

Louie Gohmert, TX                    Steven A. Horsford, NV
Rob Bishop, UT                       Matt Cartwright, PA
Rob Wittman, VA                      Jim Costa, CA
Paul C. Broun, GA                    Niki Tsongas, MA
John Fleming, LA                     Jared Huffman, CA
Glenn Thompson, PA                   Alan S. Lowenthal, CA
Cynthia M. Lummis, WY                Peter A. DeFazio, OR
Dan Benishek, MI                     Tony Cardenas, CA
Jeff Duncan, SC                      Raul M. Grijalva, AZ
Paul A. Gosar, AZ                    Colleen W. Hanabusa, HI
Bill Flores, TX                      Joe Garcia, FL
Mark E. Amodei, NV                   Vacancy
Chris Stewart, UT                    Vacancy
Steve Daines, MT                     Edward J. Markey, MA, ex officio
Kevin Cramer, ND
Doc Hastings, WA, ex officio


                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Thursday, July 11, 2013..........................     1

Statement of Members:
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     5
        Prepared statement of....................................     6
    Lamborn, Hon. Doug, a Representative in Congress from the 
      State of Colorado..........................................     1
        Prepared statement of....................................     2
    Lowenthal, Hon. Alan S., a Representative in Congress from 
      the State of California....................................     3
        Prepared statement of....................................     4

Statement of Witnesses:
    Bhave, Ramesh R., Ph.D., Principal Investigator and Director, 
      Inorganic Membrane Technology Laboratory, Materials Science 
      & Technology Division, Oak Ridge National Laboratory.......    19
        Prepared statement of....................................    20
    Gutberlet, Scott, Vice President, Technical and Commercial 
      Services, QEP Resources, Inc...............................    11
        Prepared statement of....................................    13
    Sears, Wheeler M. ``Bo,'' Jr., President, Weil Helium, LLC...    15
        Prepared statement of....................................    16
        Letter submitted for the record..........................    19
    Spisak, Timothy R., Deputy Assistant Director, Minerals and 
      Realty Management, Bureau of Land Management, U.S. 
      Department of the Interior.................................     7
        Prepared statement of....................................     8

Additional materials supplied:
     Sears, Scott, President and Founder, IACX Energy, Statement 
      submitted for the record...................................    32
                                     



 OVERSIGHT HEARING ON ``AMERICA'S HELIUM SUPPLY: OPTIONS FOR PRODUCING 
                   MORE HELIUM FROM FEDERAL LANDS.''

                              ----------                              


                        Thursday, July 11, 2013

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to notice, at 9:51 a.m., in 
Room 1334, Longworth House Office Building, Hon. Doug Lamborn 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Hastings, Flores, Lowenthal, and 
Cartwright.
    Mr. Lamborn. The Committee will come to order. Thank you 
all for being patient. We had a vote over on the Floor just now 
we had to take care of, and now we are back in business.
    And Representative Lowenthal on the minority side will be 
here momentarily. His opening statement will be given by him at 
such time that he gets here and the first opportunity after he 
arrives. But he will be here shortly.
    Also anytime that a Full Committee Chairman or Ranking 
Member are present, we give them the courtesy and look forward 
to any statements they might make. And so Representative 
Hastings shortly will have a statement as well.
    The Chairman notes the presence of a quorum, which under 
Committee Rule 3(e) is two Members. The Subcommittee on Energy 
and Mineral Resources is meeting today to hear testimony on an 
oversight hearing on ``America's Helium Supply: Options for 
Producing More Helium from Federal Lands.''
    Under Committee Rule 4(f), opening statements are limited 
to the Chairman and Ranking Member. However, I ask unanimous 
consent to include any other Members' opening statements in the 
hearing record if submitted to the clerk by close of business 
today.
    [No response.]
    Hearing no objection, so ordered.
    I now recognize myself for 5 minutes.

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

    Mr. Lamborn. I'd like to thank everyone here today for 
attending this hearing. The Subcommittee is meeting to discuss 
the existing U.S. demand for helium, the future of domestic 
helium production after the closure of the Federal Helium 
Reserve, and existing and potential production of helium from 
Federal lands. Helium is essential to many industries that are 
vital to the United States. It is an essential element in the 
defense, welding, medical, semiconductor, and nuclear 
industries.
    Over the past year, this Subcommittee has focused on 
ensuring that U.S. industries have access to a reliable supply 
of helium by providing for the continued operation of the 
Federal Helium Reserve past its upcoming closure in October.
    In May, the House overwhelmingly passed the bipartisan 
Responsible Helium Administration and Stewardship Act, which 
would complete the privatization of the Federal reserve by 
injecting free market reforms into the current program to 
ensure taxpayers receive a fair value for this Federal 
resource. Also, it would provide for stability in the helium 
market and would protect American jobs and innovation.
    While the continued operation of the helium reserve in 
order to prevent an immediate global helium shortage remains a 
priority for this Committee, we must recognize that the closing 
of the Federal Helium Reserve is imminent. With the reserve 
currently providing nearly half the domestic helium supply and 
30 percent of the global supply of helium, the closure of the 
reserve would leave a major gap in the domestic and global 
helium supply that must be filled by private industry.
    Unfortunately, domestically the private helium industry has 
been slow to develop as the U.S. reserve has dumped cheap 
helium onto the market. This has delayed new significant 
sources of domestic helium from coming online.
    Meanwhile, countries like Algeria, Qatar, and Russia have 
growing helium industries. This could leave Americans 
increasingly dependent on foreign sources of helium to provide 
a critical element of their business, when they could, instead, 
be getting helium produced by U.S. workers right here at home.
    Fortunately, recognizing the need and opportunity, natural 
gas producers are increasingly beginning to extract helium from 
natural gas. Further, helium producers are looking at Federal 
lands as a source of crude helium to fill the void that will be 
left when the helium in the Federal reserve has been depleted 
and the reserve closes.
    And recently, the Nation's first exploratory well devoted 
solely to the extraction of helium was approved by secretarial 
waiver. With the impending closure of the reserve, we must look 
toward securing the Nation's future helium supply. The United 
States has the potential for abundant crude helium production, 
and we must harness that potential to diversify our Nation's 
helium supply and to ensure regulatory certainty for companies 
seeking to tap into this emerging industry.
    Once again, I'd like to thank our witnesses for being here 
to testify before our Subcommittee, and I look forward to 
hearing your testimony.
    I'd now like to recognize Mr. Lowenthal.
    [The prepared statement of Mr. Lamborn follows:]

          Statement of The Honorable Doug Lamborn, Chairman, 
              Subcommittee on Energy and Mineral Resources

    I'd like to thank everyone for attending today's hearing. The 
Subcommittee is meeting to discuss the existing U.S. demand for helium, 
the future of domestic helium production after the closure of the 
Federal Helium Reserve, and existing and potential production of helium 
from federal lands.
    Helium is essential to many industries that are vital to the United 
States. It is an essential element in the defense, welding, medical, 
semiconductor, and nuclear industries.
    Over the past year, this Subcommittee has focused on ensuring U.S. 
industries have access to a reliable supply of helium by providing for 
the continued operation of the Federal Helium Reserve past its upcoming 
closure in October. In May, the House overwhelmingly passed the 
bipartisan ``Responsible Helium Administration and Stewardship Act'' 
which would complete the privatization of the Federal Reserve by 
injecting free market reforms into the current program to ensure 
taxpayers receive a fair value for this federal resource, provide for 
stability in the helium market and protect American jobs and 
innovation.
    While the continued operation of the Helium Reserve in order to 
prevent an immediate global helium shortage remains a priority for this 
Committee, we must recognize the closing of the Federal Reserve is 
imminent. With the Reserve currently providing nearly half of the 
domestic helium supply and 30% of the global supply of helium, the 
closure of the Reserve will leave a major gap in the domestic and 
global helium supply that must be filled by private industry.
    Unfortunately, domestically the private helium industry has been 
slow to develop as the US Reserve has dumped cheap helium onto the 
market. This has delayed new significant sources of domestic helium 
from coming online, meanwhile countries like Algeria, Qatar, and Russia 
have growing helium industries. This could leave Americans increasingly 
dependent on foreign sources of helium to provide a critical element of 
their business when they could instead be getting helium produced by US 
workers right here at home.
    Fortunately, recognizing the need and opportunity, natural gas 
producers are increasingly beginning to extract helium from natural 
gas. Further, helium producers are looking at federal lands as a source 
of crude helium to fill the void that will be left when the helium in 
the Federal Reserve has been depleted and the Reserve closes. And 
recently, the nation's first exploratory well devoted solely to the 
extraction of helium was approved by a Secretarial waiver.
    With the impending closure of the Reserve, we must look towards 
securing this nation's future helium supply. The United States has the 
potential for abundant crude helium production and we must harness that 
potential to diversify our nation's helium supply and ensure regulatory 
certainty for companies seeking to tap into this emerging industry.
    I'd like to thank our witnesses for being here to testify before 
our Subcommittee and I look forward to hearing your testimony.
                                 ______
                                 

 STATEMENT OF THE HON. ALAN S. LOWENTHAL, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Dr. Lowenthal. Thank you, Mr. Chair.
    As this Committee has thoroughly reviewed, helium is a 
unique and non-renewable resource critical to a variety of 
high-tech applications. The most pressing issue related to the 
helium market is the quickly approaching end of the fiscal 
year, which will bring closure to the Federal Helium Reserve 
unless Congress and the President authorize the continued 
operation of the Federal reserve.
    Currently, nearly half of all U.S. helium supplies and a 
third of the global helium supplies come from this reserve. 
Cutting off this supply would have a disastrous consequence for 
hospitals, for manufacturers, and for researchers around the 
world.
    That's why the House passage of H.R. 527, the Responsible 
Helium Administration and Stewardship Act this past April was 
so critical. That bipartisan bill authored by Chairman 
Hastings, Ranking Member Markey, Energy and Minerals Ranking 
Member Holt, and Representative Flores passed the House in 
April in an overwhelming bipartisan vote of 394 to 1.
    While personally I believe that some of the revenue from 
the sale of the publicly owned helium from the Federal Helium 
Reserve should be used for the benefit of all Americans through 
funding of the stateside Land and Water Conservation Fund, the 
need to take expedited action on moving this bill is paramount. 
The Senate Energy and Natural Resources Committee has also 
reported out legislation to extend the life of the reserve, but 
that bill also does spend some of the helium revenue.
    And the full Senate still needs to act and do so quickly. I 
remain optimistic that Congress can address this issue before 
the end of the fiscal year. Undoubtedly, the bipartisan process 
and legislative success of H.R. 527 are correlated, and I hope 
it is a template we can use going forward to tackle other 
pressing issues before this Committee.
    With regard to producing more helium from Federal lands, 
the auction and market pricing mechanism included in H.R. 527 
were designed to create incentives for additional helium 
production on both public and private lands. And with output 
from Federal Helium Reserve declining rapidly and prices 
rising, demand for alternative helium supplies is increasing. 
Operations to produce helium on public lands are pending or 
ongoing at seven different locations across Wyoming, Utah, 
Colorado, Texas, Oklahoma, and Kansas.
    At some of these operations, helium is the primary target, 
and in others, helium is a byproduct of natural gas production. 
We should look to continue sourcing future helium supplies from 
our public lands, which means we can depend less on insecure 
and irregular helium supplies from Russia, Algeria, and Qatar.
    But the permitting process or helium production must 
balance this new production with the protection of the other 
important uses of our public lands: conservation, recreation, 
hunting, and fishing. There is a review process already in 
place at the Interior Department to allow for the development 
of helium from public lands in a way that addressed those 
considerations.
    As more companies begin to look at producing this resource 
from our public lands, we should rightly examine the process 
through which the Interior Department permits this production. 
But I hope that the intent of this hearing is not to pave the 
way for partisan legislation designed to short-circuit that 
permitting process or in some other way elevate helium 
production over all other land uses.
    I yield back my time. Thank you, Mr. Chairman.
    [The prepared statement of Dr. Lowenthal follows:]

    Statement of The Honorable Alan S. Lowenthal, a Representative 
                in Congress from the State of California

    As this Committee has thoroughly reviewed, helium is a unique and 
non-renewable resource critical to a variety of high-tech applications. 
The most pressing issue related to the helium market is the quickly 
approaching end of the fiscal year, which will bring the closure of the 
Federal Helium Reserve unless Congress and the President authorize the 
continued operation of the Federal Reserve. Currently, nearly half of 
all U.S. helium supplies and a third of global helium supplies come 
from the Reserve. Cutting off this supply would have disastrous 
consequences for hospitals, manufacturers, and researchers around the 
world.
    That's why the House passage of H.R. 527, ``The Responsible Helium 
Administration and Stewardship Act'' this past April was so critical. 
That bi-partisan bill, authored by Chairman Hastings, Ranking Member 
Markey, Energy and Minerals Ranking Member Holt and Representative 
Flores passed the House in April in an overwhelming, bipartisan vote of 
394 to 1.
    The Senate Energy and Natural Resources Committee has also reported 
out legislation to extend the life of the Reserve but the full Senate 
still needs to act. And do so quickly. I remain optimistic that 
Congress can address this issue before the end of the fiscal year. 
Undoubtedly, the bi-partisan process and legislative success of H.R. 
527 are correlated, and I hope it is a template we can use going 
forward to tackle other pressing issues in this committee.
    With regard to producing more helium from federal lands, the 
auction and market pricing mechanisms included H.R. 527 were designed 
to incentive additional helium production, on both public and private 
lands. And with output from Federal Helium Reserve declining rapidly 
and prices rising, demand for alternative helium supplies is 
increasing.
    Operations to produce helium on public lands are pending or ongoing 
at seven different locations across Wyoming, Utah, Colorado, Texas, 
Oklahoma, and Kansas. At some of these operations, helium is the 
primary target and at others helium is a by-product of natural gas 
production. We should look to continue sourcing future helium supplies 
from our public lands, which means we can depend less on insecure and 
irregular helium supplies from Russia, Algeria, and Qatar.
    But the permitting process for helium production must balance this 
new production with the protection of the other important uses of our 
public lands--conservation, recreation, hunting, fishing. There is a 
review process already in place at the Interior Department to allow for 
the development of helium from public lands in a way that addressed 
those considerations. As more companies begin to look at producing this 
resource from our public lands, we should rightly examine the process 
through which the Interior Department permits this production. But I 
hope that the intent of this hearing is not to pave the way for 
partisan legislation designed to short-circuit that permitting process 
or in some way elevate helium production over all other land uses.
    I yield back the balance of my time.
                                 ______
                                 
    Mr. Lamborn. You're welcome.
    I would like to recognize the Chairman of the Full 
Committee, Representative Hastings of Washington, for 5 
minutes.

    STATEMENT OF THE HON. DOC HASTINGS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. Hastings. Thank you very much, Mr. Chairman, for 
holding this hearing today. By now I think we all understand 
how important helium is to our 21st century economy as was 
noted by both the Chairman and the Ranking Member. Medical 
equipment, computer chips, fiber optic cables, and other 
devices for defense purposes all require helium, and it is 
vital that we take steps to ensure that a stable supply of 
helium is available in the future.
    As noted, in April, the House did pass legislation to 
prevent an impending helium shortage that would occur if the 
Federal Helium Reserve abruptly closes, which it is scheduled 
to do later this year. This closure would immediately cut off 
half of our helium supply and 30 percent of the world's helium 
supply, and of course at the same time, that would threaten 
American jobs and innovation.
    So I'm hopeful we'll be able to get legislation signed into 
law that will prevent this immediate supply disruption, which 
of course would harm our economy.
    But today we are examining the next steps, and rightfully 
so, that must be taken to continue to ensure a stable supply of 
helium. The reserve will eventually close, and we need to be 
prepared for that day. The Federal Government has been selling 
helium below market value, which up to now has undercut the 
private development of alternative sources. That must change, 
and we must start looking toward the future. Just like we are 
trying to lower our dependence on foreign oil and rare earth 
minerals, we also need to ensure that we are not becoming 
dependent on foreign sources of helium, and the only way to 
prevent that from happening is by increasing helium production 
resources right here at home.
    So the Committee looks forward to hearing from the 
witnesses today about what the prospects are of helium 
production, specifically on Federal lands, and how we can make 
that production a reality in the future.
    And Mr. Chairman, once again, thank you for your courtesy, 
and thank you for holding this hearing.
    [The prepared statement of Mr. Hastings follows:]

          Statement of The Honorable Doc Hastings, Chairman, 
                     Committee on Natural Resources

    Thank you Chairman Lamborn for holding this hearing today.
    By now, I think we all understand how important helium is to our 
21st century economy. Medical equipment, computer chips, fiber optic 
cables and other devices for defense purposes all require helium. It's 
vital that we take steps to ensure a stable supply for the future.
    In April, the House passed legislation to prevent an impending 
helium shortage that would occur if the Federal Helium Reserve abruptly 
closes, as scheduled, later this year. This closure would immediately 
cut off half of our domestic helium supply and 30 percent of the 
world's helium supply while threatening American jobs and innovation. 
I'm hopeful we'll be able to get legislation signed into law that will 
prevent this immediate supply disruption, which would severely harm our 
economy.
    Today we're examining the next steps that must be taken to continue 
to ensure a stable supply of helium. The Reserve will eventually close 
and we need to be prepared for that day. The federal government has 
been selling helium below market value, which up until now has undercut 
the private development of alternative sources. That must change and we 
must start looking towards the future.
    Just like we are trying to lower our dependence on foreign oil and 
rare earth minerals, we need to also ensure that we are not becoming 
dependent on foreign sources of helium. The only way to prevent that 
from happening is by increasing production of helium resources here at 
home.
    I look forward to hearing from our witnesses today about the 
potential for helium production on federal lands and how to make it a 
reality in order to protect American jobs and our economy.
                                 ______
                                 
    Mr. Lamborn. Well, you are certainly welcome.
    We will now hear from our witnesses. I'd like to 
acknowledge they have already come to the table: Mr. Tim 
Spisak, Deputy Assistant Director of Minerals and Realty 
Management for the Bureau of Land Management, U.S. Department 
of the Interior; Mr. Scott Gutberlet, Vice President of 
Technical and Commercial Services for QEP Resources, Inc.; Mr. 
Bo Sears, President of Weil Helium, LLC--if I pronounced that 
correctly----
    Mr. Sears. Weil.
    Mr. Lamborn. Weil. Thank you for the correction.
    And Mr. Ramesh Bhave, Director of the Inorganic Membrane 
Technology Laboratory Physical Chemistry of Materials Group, 
Oak Ridge National Laboratory.
    Like all our witnesses, your written testimony will appear 
in full in the hearing record, so I ask that you keep your oral 
statements to 5 minutes as outlined in our letter to you and in 
Committee Rule 4(a).
    Our microphones are not automatic, so you have to turn on 
the button when you begin speaking. The green light comes on at 
the beginning. You have 5 minutes. The yellow light comes on 
with 1 minute left, and the red light comes on, and you need to 
conclude after 5 minutes are up.
    Mr. Spisak, you may begin. Thank you.

  STATEMENT OF TIMOTHY R. SPISAK, DEPUTY ASSISTANT DIRECTOR, 
MINERALS AND REALTY MANAGEMENT, BUREAU OF LAND MANAGEMENT, U.S. 
                   DEPARTMENT OF THE INTERIOR

    Mr. Spisak. Mr. Chairman and members of the Subcommittee, 
thank you for the opportunity to testify on domestic helium 
production.
    As indicated by a National Academies of Sciences report 
published in early 2010, the market for helium has proven more 
volatile than expected over the last 15 years. The Department 
of the Interior appreciates the continued interest of Congress 
in exploring the issue of helium production beyond the scope of 
the Federal Helium Reserve. We support efforts to increase the 
production of helium from new sources to meet future U.S. 
demand.
    Helium is a critical and non-renewable natural resource. 
The most common and economical way of capturing helium is by 
recovering it during natural gas processing. The BLM plays a 
key role in the management and stewardship of the only 
significant long-term storage facility of crude helium in the 
world known as the Federal Helium Reserve, which is located 
near Amarillo, Texas.
    In 1929, the U.S. Bureau of Mines built the Amarillo helium 
plant and Cliffside gas field facilities produce helium-bearing 
natural gas from a naturally occurring geologic field known as 
the Bush Dome Reservoir.
    In 1960, Congress granted the Bureau of Mines the authority 
to borrow funds from the U.S. Treasury to purchase and store 
helium with the expectation that proceeds from future sales of 
helium would allow the Bureau of Mines to repay the borrowing. 
However, compound interest and the Federal demand rarely met 
the expectations underlying the repayment terms of the 
Treasury's loan.
    In 1996, Congress passed the Helium Privatization Act, 
which required the BLM to, quote, ``offer for sale the vast 
majority of the stock pile of crude helium.''
    Today the BLM operates the Federal Helium Program with the 
primary goals of paying off the helium debt, which we 
anticipate doing by the beginning of the next fiscal year and 
providing the resource to meet public and private needs.
    While sales of the crude helium to private refiners make 
the most significant contributions toward paying off the helium 
debt, the BLM also manages the In-Kind Program, which supplies 
helium to Federal agencies and grant holders for operations and 
research through private authorized Federal helium suppliers.
    Since production of crude helium from the reserve is 
currently in decline, other domestic supplies of helium will be 
needed to meet future U.S. demand without having to import 
helium. The BLM has processes in place to analyze and approve 
applications for helium production on Federal lands, both in 
combination with natural gas production processing and for 
drilling proposals focused exclusively on helium production.
    Because the helium on Federal lands is reserved to the 
United States, natural gas lessees can enter into additional 
contracts with the BLM to provide for the processing and sale 
of the helium. Similar contracts can also be used to enable the 
recovery of helium as a primary gas in combination with our oil 
and gas regulations. This process is used when the gas 
composition in a reservoir consists of a relatively higher 
helium concentration in a low BTU gas stream.
    During Fiscal Year 2012, the Department of the Interior 
collected over $10.4 million in revenue from the sale of about 
1.4 billion cubic feet of helium produced from Federal lands. 
While the long-term potential for such production remains 
unclear, the BLM has noticed a recent increase in expressions 
of interest. The BLM looks forward to working with the 
interested parties on helium production contracts that will 
help meet the helium needs for the country.
    Thank you for the opportunity to testify today. The BLM 
welcomes the further discussion about the Federal Helium 
Program, and I would be happy to answer any questions that the 
Subcommittee may have.
    [The prepared statement of Mr. Spisak follows:]

Statement of Timothy R. Spisak, Deputy Assistant Director, Minerals and 
 Realty Management, 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 domestic helium production. As indicated by a 
National Academy of Sciences (NAS) report published in early 2010, the 
market for helium has proven more volatile than expected when the 
Helium Privatization Act of 1996 became law. The report also concluded 
that the requirement that the Bureau of Land Management (BLM) offer for 
sale nearly all of the Federal Helium Reserve by 2015 could pose a 
threat to the availability of this resource for future U.S. research, 
scientific, technical, biomedical, and national security users of 
helium. The Department of the Interior appreciates the continued 
interest of the Congress in exploring the issue of helium production 
beyond the scope of the Reserve and supports efforts to increase the 
production of helium from new sources to meet future U.S. demand.

Background
    Helium is a critical, non-renewable natural resource that plays an 
important role in research, medical imaging, space exploration, 
military reconnaissance, fiber optics manufacturing, welding and 
commercial diving. According to the 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 the Earth's atmosphere 
and become one less unit available for use tomorrow.''
    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. The BLM 
plays a key role in the careful management and stewardship of the only 
significant long-term storage facility for crude helium in the world, 
known as the Federal Helium Reserve (Reserve), which supplies 
approximately 42 percent of domestic demand and approximately 35 
percent of global demand for crude helium.

The Federal Helium Program
    Because of helium's potential to lift military reconnaissance 
devices high above battlefields, the Federal government's interest in 
the resource dates back to World War I. 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. 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 Amarillo Helium Plant and Cliffside 
Gasfield Facility near Amarillo, Texas, to produce helium-bearing 
natural gas from a naturally occurring geologic field known as the Bush 
Dome Reservoir.
    After World War II, Federal use of helium shifted toward 
applications related to space exploration, and in 1960 Congress passed 
the Helium Act Amendments of 1960. This Act changed the program's 
mandate from exclusive government production of helium to conservation 
of the resource. This was to be accomplished by executing contracts 
with private natural gas producers to purchase extracted crude helium 
for the Federal government to store in the Bush Dome Reservoir. The Act 
granted the Bureau of Mines, the BLM's predecessor agency in managing 
this program, 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.
    Federal demands for helium rarely, if ever, met the expectations 
underlying the terms of the U.S. 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 (principal and interest), and the Bureau of Mines 
appeared to have little prospect of 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 subsequently 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 directed the BLM to begin selling helium no later than 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 of 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 600 million 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 released a follow-up report in 
2010.

The BLM's Helium Operations
    The BLM currently operates the Federal helium program with the 
primary goals of supplying helium to meet the Nation's needs of Federal 
helium users and paying off the ``helium debt.'' To this end, the BLM 
has paid approximately $1.33 billion to the U.S. Treasury since 1995. 
This constitutes substantial progress toward eliminating the helium 
debt, which the HPA froze at approximately $1.37 billion. During FY 
2012, the helium debt was reduced by an additional $180 million from 
Reserve sales, resulting in an outstanding balance of approximately $44 
million at the end of the fiscal year.
    According to the HPA, once the helium debt is retired, the Helium 
Production Fund (used to fund the BLM's helium program operational 
expenses) would be dissolved and all future receipts would be deposited 
directly into the general fund of the U.S. Treasury. The BLM has 
generated enough revenue during this fiscal year through currently 
authorized helium sales to pay off the debt at the beginning of FY 
2014.
    The BLM's current helium program, with a workforce of 51 full-time 
equivalents (FTE), 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. Among its 
responsibilities, the BLM administers the sale of crude helium to 
private refiners. These sales make the most significant contributions 
toward paying off the helium debt. In addition, the agency conducts 
domestic helium resource evaluation and reserve tracking to determine 
the extent of available helium resources. The BLM is also 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 
the Federal mineral estate.
    Another major part of the BLM's helium program is the ``In-Kind'' 
program, which supplies helium to Federal agencies (e.g., the 
Department of Energy and the National Aeronautics and Space 
Administration) for operations and/or research. Before the Helium 
Privatization Act, Congress required Federal agencies to purchase their 
refined 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 a 
commensurate amount of crude helium from the Reserve. In FY 2012, 
Federal agencies purchased $10.3 million of helium through the In-Kind 
program.

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 did not hold. 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 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 early 2010, the NAS released a follow-up report on the BLM's 
management of the Reserve. The report, entitled ``Selling the Nation's 
Helium Reserve,'' focused on ``whether the interests of the United 
States have been well served by the [HPA] and, in particular, whether 
selling off the Reserve has had any adverse effect on U.S. scientific, 
technical, biomedical, and national security users of helium.''
    The 2010 NAS report, which identified some shortcomings of the 2000 
report, takes a markedly different tone than the 2000 report. This 
change in approach reflects the volatility of the helium market over 
the last decade. The NAS report analyzes the relationship between 
supply and demand for helium on a domestic and international basis, as 
well as the BLM's management of the Reserve under the HPA. The report 
concludes that the HPA mandated sell-off is negatively impacting the 
needs of both current and future users of helium in the United States. 
This conclusion is the driving force behind a series of recommendations 
in the report directed at the BLM and the Congress.

Helium Production on Federal Lands
    Since production of crude helium from the Reserve is currently in 
decline, other domestic supplies of helium will be needed to meet 
future U.S. demand without having to import helium.
    The BLM has processes in place to analyze and approve applications 
for helium production on Federal lands--both in combination with 
natural gas production processes and for drilling proposals focused 
exclusively on helium production. As stated above, helium commonly 
exists as a minor component of most natural gas plays. When natural gas 
is produced, it is typically transported by pipeline to a processing 
plant where it is separated into marketable components, which could 
include helium if it is a viable option. Because the helium on Federal 
lands is reserved to the United States, natural gas lessees can enter 
into additional contracts with the BLM to provide for the processing 
and sale of the helium. This type of arrangement occurs near Kemmerer, 
Wyoming, where helium produced from Federal lands partially supplies an 
ExxonMobil helium refinery.
    Similar contracts can also be used to enable the recovery of helium 
as a primary gas in combination with Applications for Permit to Drill 
(APDs). This method is feasible where the gas composition in a 
reservoir consists of relatively higher helium concentration in a low 
Btu gas stream. For example, the BLM recently approved an APD for a 
1,100-foot exploratory well in the Harley Dome gas field in eastern 
Utah and an associated right-of-way to transport the produced gas via a 
surface pipeline to a new gas processing plant. If sufficient quality 
and quantity of helium is confirmed, the proponent will construct a 
four-inch, 7,183-foot pipeline to a small plant where the helium will 
be removed from the gas stream and compressed for truck transport. The 
well will be located five miles west of the Utah-Colorado border on 
Federal lands in northern Grand County and the helium extraction plant 
will be located 1.4 miles from the well on private property.
    During FY 2012, the Department of the Interior collected over $10.4 
million in revenues from the sale of helium produced from Federal 
lands. While the long-term potential for such production remains 
unclear, the BLM has noticed a recent increase in expressions of 
interest for helium production on Federal lands. The BLM looks forward 
to working with interested parties on helium production contracts that 
will help meet the helium needs of the country.

Conclusion
    Thank you for the opportunity to testify today. The BLM welcomes 
further discussion about the Federal helium program. Many Federal 
agencies depend on helium for scientific research, aerospace projects, 
and defense purposes. Since its formal discovery almost 120 years ago, 
helium has proven to be an increasingly important natural resource. The 
expansion of helium-related technology and declining domestic reserves 
means the importance of helium as a strategic resource is likely to 
increase. The BLM continues to serve the country by effectively 
managing the Reserve, and working with natural gas producers to 
efficiently extract helium from natural gas. I would be happy to answer 
any questions the Subcommittee may have.
                                 ______
                                 
    Mr. Lamborn. All right. Thank you.
    Mr. Gutberlet.

 STATEMENT OF SCOTT GUTBERLET, VICE PRESIDENT OF TECHNICAL AND 
            COMMERCIAL SERVICES, QEP RESOURCES, INC.

    Mr. Gutberlet. Thank you, Chairman Lamborn, Ranking Member 
Lowenthal, members of the Committee, my name is Scott 
Gutberlet.
    I'm the Vice President of Commercial and Technical Services 
for QEP Resources located in Denver, Colorado. I'm also a 
degreed petroleum engineer with 25 years of experience in the 
industry, and I currently manage various commercial matters for 
QEP, including projects that may have helium potential.
    QEP Resources is the largest publicly owned exploration and 
production company headquartered in Colorado, and we have 90-
plus years of experience in the energy business. My complete 
testimony has been filed with the Committee, and I appreciate 
the opportunity to discuss our Nation's helium supply situation 
from our perspective as a major oil and gas operator on Federal 
lands.
    More and more, public policy debates relating to the health 
of our economy are focused on monetary and fiscal issues, so 
it's great to be participating in an open and honest 
conversation that deals with real people building real and 
operating real facilities, producing an incredibly valuable and 
unique commodity here in the United States that is so essential 
to so many aspects of our high-tech economy as well as our 
national security.
    QEP has safely and responsibly produced oil and gas on 
Federal lands for our entire 90-plus years history. We are a 
major lease holder of Federal lands in the Rockies, which means 
we understand what it takes to successfully operate on public 
lands. We are also fully cognizant of the responsibilities and 
trust that is inherent to operating on these lands.
    QEP is also a significant player on the midstream business, 
which involves building and operating natural gas processing 
plants. We have many years of experience with these capital-
intensive and complex facilities. The operation of natural gas 
processing plants is required for helium production because of 
the unique processing techniques necessary to recover helium 
from a produced gas stream.
    As you know, helium is always a byproduct of natural gas 
production and never found as a primary volume component of a 
gas stream. Oil and gas production occurs in 32 of our 50 
States. Unfortunately, commercial quantities of helium are only 
found in a small fraction of the fields around the country. 
However, we are fortunate to have the right geologic conditions 
in several parts of the country which allow for helium 
concentrations much higher than the rest of the world.
    This is the reason why, for so many decades, the U.S. was 
the principal supplier of low-cost and reliable helium to 
governments and industries around the world. Some believe that 
helium projects in the Middle East and Russia will make up for 
declining U.S. production. We believe it's risky to rely on 
foreign governments for such a strategically important 
commodity. Simply put, we need to do more to ensure the 
domestic supply of this vital resource.
    The western U.S. has substantial undeveloped helium 
resources in Wyoming, eastern Utah, and the Four Corners area 
of Utah, Colorado, New Mexico, and Arizona. These areas include 
large amounts of Federal mineral and Federal surface estate, 
which in most cases is managed by the Bureau of Land 
Management.
    The alarm raised by many consumers on what will happen to 
helium markets once the National Helium Reserve is depleted and 
the Nation is scrambling to identify next sources of dependable 
and reasonably priced, long-term supply, we appreciate and 
agree with their concerns.
    This Committee's bill, H.R. 527, dealing with the National 
Helium Reserve outside of Amarillo is an excellent step forward 
and was much needed for all concerned. The National Helium 
Reserve currently supplies approximately 50 percent of the U.S. 
demand and 30 percent of the world demand, but it's a declining 
reserve that has a finite remaining life. Congress can and 
should do more to provide regulatory certainty for natural gas 
producers that want to invest and bring new helium resources 
online.
    Like all drilling operations, helium-related projects on 
Federal lands are subject to the National Environmental Policy 
Act, or NEPA, a law which requires comprehensive environmental 
reviews, public comment, and outside participation, which can 
be long and quite costly. Such NEPA requirements routinely lead 
to delays which, depending on the project, can be many years, 
even in areas that have had significant ongoing oil and gas 
activity for many decades.
    Companies need to be confident that Federal agencies will 
issue the appropriate permits in a timely manner. We would 
encourage you to look at legislative language, which would 
provide clear guidelines to Federal agencies, as well as the 
companies that are looking to produce helium, without weakening 
NEPA.
    Congress can draw up a number of existing precedents under 
current law to ensure timely permitting of helium projects 
without limiting or foregoing the necessary environmental 
reviews. Such legislative signals would demonstrate that 
helium-related projects are recognized as a priority for 
development on public lands. As I stated at the beginning of my 
comments, we recognize the responsibilities and trust inherent 
to operating on Federal lands. We are only suggesting you 
provide for the dedication and prioritization of resources to 
assure helium-related projects on Federal lands can be brought 
online in a reasonable time frame.
    We encourage you to act before the helium supply demand 
situation reaches a critical stage and take this opportunity to 
promote long-term helium supplies from domestic sources via 
sensible and practical regulatory oversight.
    Thanks again for the opportunity to speak, and I look 
forward to any questions you may have.
    [The prepared statement of Mr. Gutberlet follows:]

             Statement of Scott Gutberlet, Vice President, 
  Commercial and Technical Services, on behalf of QEP Resources, Inc.

    Chairman Lamborn, Representative Holt and Members of the Committee, 
thank you for the opportunity to provide testimony for today's hearing 
regarding helium supply and production from federal lands. My name is 
Scott Gutberlet and I am the Vice President of Commercial and Technical 
Services for QEP Resources, Inc (``QEP''). As a way of background, I 
have a Bachelor of Science degree in Petroleum Engineering from the 
Colorado School of Mines and 25 years of experience in the U.S. 
exploration and production industry in reservoir engineering, midstream 
business development, strategic planning, and asset management. I 
currently manage various commercial matters for QEP including projects 
that have the potential to produce helium. With a company value in 
excess of $8 billion, QEP is the largest publicly owned independent 
natural gas and crude oil exploration and production company 
headquartered in Denver, Colorado. We have been producing oil and gas 
in the Rockies since the 1920's and our assets include large acreage 
positions on federal lands across multiple states. QEP also has 
significant experience operating natural gas processing plants which is 
a crucial skill-set in any helium production project due to the unique 
processing techniques necessary to extract what are generally low 
concentrations of helium from the production stream and make commercial 
quantities available for sale.
    Helium is a vital product for America's high tech manufacturers 
including its use in MRI machines, semiconductor manufacturing, and 
advanced nuclear reactor designs. In addition, it is essential to the 
construction industry in certain arc welding operations. And as you 
know, it is also a resource of strategic importance for the space 
program and the defense industry.
    The exploration and production industry appreciates the amount of 
time and dedicated work your committee is taking to understand helium 
production and supply and we also applaud this committee's previous 
work on H.R. 527, ``Responsible Helium Administration and Stewardship 
Act'' dealing with the National Helium Reserve outside of Amarillo, TX. 
The language in the bill which was adopted by the House to promote 
price transparency is a positive sign for companies that are looking to 
increase our nation's helium supply. Creating federal policies that 
cause helium to be sold at its true market value is an important step 
for companies like QEP who are looking to potentially enter the helium 
market. However, Congress can do even more to promote the development 
of future supplies of helium.
    Three years after the discovery of natural gas in the Baxter Basin 
of southwest Wyoming that was the beginning of QEP Resources and its 
predecessor company, the federal government in 1925 had the vision and 
incredible foresight to establish the National Helium Reserve in 
response to national security needs and the recognition that since 
helium was a byproduct of natural gas production, special efforts 
needed to be made to facilitate the production and extraction of this 
unique, non-renewable element. For decades, the U.S. was the primary 
helium producer to industries and nations around the world. We are 
fortunate to have the right geologic conditions in many parts of the 
country which make possible helium concentrations much higher than most 
of the rest of the world. While technological progress has devised more 
and more uses for helium, the original conclusion by the federal 
government that helium is a strategic national resource remains 
unchanged.
    Rather than relying on imported helium from unstable and high-
priced international sources, we should look to continue to develop our 
helium resources here in the U.S. The U.S. has significant remaining 
helium potential, much of which is on the federal mineral estate. As 
referenced by several witnesses during the U.S. Senate Energy and 
Natural Resources Committee May 7th hearing, the western U.S. has 
substantial undeveloped helium resources in Wyoming, Utah, and the Four 
Corners area. These areas include large amounts of federal mineral and 
federal surface estate which in most cases is managed by the Bureau of 
Land Management.
    Helium end-users are very concerned about a sufficient supply of 
helium, not only in the short-term but also in the long-term. We 
appreciate and agree with their concern. A constant alarm raised by 
many end-users is what will happen to helium markets once the National 
Helium Reserve is depleted and the nation is scrambling to identify the 
next sources of reliable and reasonably priced long-term supply. The 
National Helium Reserve currently supplies approximately 50% of the 
U.S. helium demand and approximately 30% of the world's demand but it 
is a declining reserve that has a finite remaining life.
    Due to the technically complex and remote nature of these projects 
combined with long lead times involved with engineering and 
construction, minimizing risks for project success is essential. 
Congress can and should do more to provide regulatory certainty for 
natural gas producers that want to invest and bring new helium 
resources online. Operating on federal lands creates unique issues for 
everyone, but especially for those targeting helium extraction and 
production. Like all drilling operations, helium related projects are 
subject to the National Environmental Policy Act (NEPA) when it comes 
to approval for exploration and production activities on federal lands. 
NEPA invites public comment and outside participation that creates 
additional reviews which can often be very lengthy and costly. Such 
NEPA requirements routinely lead to delays which, depending on the 
complexity of the project, can be at least several years, even in areas 
that have had significant ongoing oil and gas development activity for 
decades.
    A company needs to be confident that federal agencies will issue 
the appropriate permits in a timely manner which requires the agencies 
to have the staffing resources to do so. We encourage you to include 
language in future legislation which would provide clear guidelines to 
federal agencies, as well as the companies that are looking to produce 
helium. Such signals should advocate that helium related projects be 
recognized as a priority when it comes to development on public lands. 
Congress can draw upon a number of existing precedents under current 
law to ensure timely permitting of helium projects without limiting or 
forgoing the necessary environmental reviews. We are not suggesting you 
do anything to weaken NEPA reviews. Rather, we are simply suggesting 
you provide for the dedication and prioritization of resources to 
assure helium related projects can be brought online in an expedited 
fashion.
    While some in the end-user community have a primary focus on the 
National Helium Reserve, we believe Congress needs to do more to focus 
on getting more helium out of the ground from within the U.S. While 
there is hope Qatar and Russia's helium resources will make up for the 
declining U.S. production, we believe it is short-sighted and very 
risky to rely on foreign governments to provide such an element of 
strategic and economic importance. We believe Congress needs to act now 
to send signals to the private sector and the relevant federal agencies 
to encourage additional helium supply be developed.
    We would also persuade you to look for opportunities to help 
promote production and conservation of helium wherever possible. Helium 
production from federal lands has the added benefit of requiring the 
operator of helium producing wells to pay a fee to the federal 
government to extract and sell helium. Helium production and the 
resulting federal government revenues can grow together with the right 
price signals and a smart regulatory structure in place, especially for 
projects located on federal lands.
    Thank you for the opportunity to provide testimony to this 
committee. We encourage you to act proactively before the helium 
supply-demand situation reaches a critical stage and take this 
opportunity to promote long-term helium supplies from domestic sources 
via sensible and practical regulatory oversight. I welcome further 
questions and discussion about helium production and the federal 
government's role in helping meet our nation's future helium needs.
                                 ______
                                 
    Mr. Lamborn. Thank you.
    Mr. Sears.

          STATEMENT OF WHEELER M. ``BO'' SEARS, JR., 
                  PRESIDENT, WEIL HELIUM, LLC

    Mr. Sears. Chairman Lamborn, Ranking Member Lowenthal, and 
members of the Subcommittee, I would like to thank you for the 
opportunity to testify today about securing America's future 
helium supply and provide some ideas how this can become 
reality.
    My name is Bo Sears, and I am president of Weil Helium, 
LLC, based in Richmond, Virginia. Weil's primary objective is 
to explore for and produce helium resources in the United 
States and Canada. We successfully drilled a well exclusively 
for helium last year in northern Montana on private lands where 
development plans are currently underway. We have also begun 
testing on another significant project in Southern 
Saskatchewan, Canada.
    These projects, like all of the other helium projects in 
our portfolio, have been targeted only for their helium content 
as there are no appreciable amounts of hydrocarbons in these 
gas streams. Weil is pursuing projects where helium is the 
primary target as opposed to a secondary or tertiary target 
like those found from traditional helium sources.
    We appreciate the hard work the Subcommittee has undertaken 
in its attempt to prolong the life of Cliffside Field. We are 
excited to address where our next domestic sources of helium 
will come from and believe this hearing is an important step to 
ensure that the United States does not become a helium importer 
for the first time in its history.
    Weil Helium has various helium projects on Federal lands, 
and we understand that one of the objectives of this hearing is 
to discuss how to streamline existing helium regulations in a 
manner that promotes new domestic helium supplies. The process 
of drilling for helium is virtually the same as traditional oil 
and gas exploration projects. Like oil and gas, helium is 
discovered with a drill bit.
    The key difference, however, lies solely with helium's 
treatment under a standard Federal and gas lease. The United 
States Minerals Leasing Act of 1920 states that any helium 
found on Federal land belongs to the Federal Government. As a 
result of un-amended portions of the 1920 Act, the helium 
aspect of this Act needs some modernizing. If changes are not 
made, the process for dealing with helium wells on Federal 
lands becomes unreasonably long. A recent example from our 
experience may give the panel some insight.
    We nominated Federal acreage in Utah for a standard Federal 
oil and gas lease in February of 2011 and waited almost 2 years 
for it to appear on the docket for a competitive bid. Once 
acquired, we immediately requested from the BLM a consent to 
extract helium as a primary gas. I'm happy to say that we 
received authorization in June of this year, which was much 
faster than anticipated, but we are far from finished.
    It is now necessary to obtain an interdisciplinary review 
required by the National Environmental Protection Act, or NEPA. 
In addition, approval of a helium processing agreement with the 
BLM is required.
    Assuming we obtain the NEPA approval, a permit to drill, we 
anticipate that the earliest we will be able to commence our 
field development work will be mid-2014. Thus from start to 
finish on this Federal Helium Project, the time required will 
have been over 3\1/2\ years. If Congress truly understands the 
critical nature of our helium supply situation here in the 
U.S., then helium projects need to be put into a higher gear 
procedurally.
    Another important factor that will inspire new supplies of 
helium from groups like us is the helium auction language that 
was presented by this body, and we applaud the hard work and 
dedication this Committee and its staff members have done to 
pass H.R. 527. A market-derived price for domestic helium is 
fundamentally critical for companies to invest in helium 
projects.
    Weil is ready to underwrite some risk dollars to bring in 
new helium, but market prices are an important component of 
this exercise. Without market pricing very soon, we are fearful 
that the price of BLM helium will remain at submarket levels, 
and a headwind will remain for the helium prospectors. It is 
extremely difficult for investors to adequately weigh the 
merits of an investment in helium exploration unless there is 
some upside potential for helium prices.
    There are estimates that say Cliffside Field will be 
depleted in 5 to 10 years. What happens after that? If we allow 
Cliffside Field to simply deplete without even an effort to re-
stimulate helium production, this inaction will hurt this 
country strategically, and we will be left to import this 
indispensable commodity from countries such as Algeria, Qatar, 
and Russia for the long term.
    We believe that imported helium will result in a new supply 
and demand dynamics. These foreign providers of helium will not 
be relying on the 1996 Act for ideas about how they price their 
helium. Higher imports mean higher prices and loss of control 
of product. In short, we need your help for an aggressive 
streamlining of processes to encourage risk capital into the 
helium discovery world.
    We are most appreciative of this body's version of the 
helium legislation that allows for the market forces to impact 
markets sooner rather than later, but the market's work to 
provide the investment dollars needed to pursue future 
projects, and they will do just that.
    Thank you for the opportunity to testify today, and I look 
forward to any questions you might have.
    [The prepared statement of Mr. Wheeler M. ``Bo'' Sears 
follows:]

         Statement of Wheeler M. ``Bo'' Sears, Jr., President, 
                            Weil Helium, LLC

    Chairman Lamborn, Ranking Member Holt, and Members of the 
Subcommittee, I want to thank you for the opportunity to testify today 
about securing America's Future Helium Supply and provide some ideas 
how this can become reality. My name is Bo Sears and I am President of 
Weil Helium, LLC (a subsidiary of Weil Group Resources, LLC) based in 
Richmond, Virginia. Weil's primary objective is to explore for, and 
produce helium resources in the United States and Canada.
    We successfully drilled a well exclusively for helium last year in 
northern Montana where development plans are currently underway. We 
have also begun testing on another significant project in southern 
Saskatchewan, Canada. These projects, like all of the other helium 
projects in our portfolio, have been targeted only for their helium 
content as there are no appreciable amounts of hydrocarbons (i.e. no 
oil and/or natural gas \1\) in these gas streams. Weil is pursuing 
projects where helium is the primary target as opposed to a secondary 
or tertiary target like those found from traditional helium sources.
---------------------------------------------------------------------------
    \1\ Natural gas is commonly defined as methane (CH4) although 
natural gas could infer any natural element or compound that is a gas 
in its natural state.
---------------------------------------------------------------------------
    We appreciate the hard work the Subcommittee has undertaken in its 
attempt to prolong the life of Cliffside Field. We are excited to 
address where our next domestic resources of helium will come from and 
believe this Hearing is an important step to ensure that the United 
States does not become a helium importer for the first time in its 
history.
    Weil Helium has various helium projects on Federal Lands and we 
understand that one of the objectives of this Hearing is to discuss how 
to streamline existing helium regulations in a manner that promotes new 
domestic helium supplies. The process of drilling for helium is 
virtually the same as traditional oil and gas exploration projects. 
Like oil and gas, helium is discovered with a drill bit. By most 
accounts, helium exploration is a ``conventional'' extraction endeavor 
and I know of no helium well that has ever been frac'ed. The key 
difference, however, lies solely with helium's treatment under a 
standard Federal Oil and Gas lease.
    The United States Minerals Leasing Act of 1920 states that any 
helium found on Federal Land belongs to the Federal Government. The 
reason for this stipulation was due to the fact that the United States 
had successfully proven, just before the end of World War I, that they 
could economically extract helium from natural gas from the Petrolia 
Field in North Texas for processing in Fort Worth, Texas. This was a 
feat deemed impossible just five years prior due to the low 
concentrations of helium in the gas and the lack of processing know-
how. The United States continued the helium program with haste despite 
the armistice and the United States' first semi-dirigible, the Navy's 
C-7, took its maiden flight on December 5, 1920. At the time of the 
passage of the Minerals Leasing Act of 1920, helium's only known use 
was for its lighter-than-air properties. It wasn't until 1925 when 
another use for helium was discovered. It was found that helium could 
replace nitrogen for deep sea dives thus preventing Caisson's disease, 
or ``the bends.''
    As a result of unamended aspects of the 1920 Act, the helium aspect 
of this Act needs some modernizing. If changes are not made, the 
process for drilling helium wells on Federal lands becomes unreasonably 
long. A recent example from our experience may give the panel some 
insight. We nominated Federal acreage for a standard Federal Oil and 
Gas lease in February of 2011 and waited almost two years (November 
2012) for it to appear on the docket for competitive bid. While our 
primary focus was the inherent helium resource (and helium is 
explicitly excluded from Federal oil & gas leases), we lost the auction 
to an oil and gas speculator who believed this area contained an 
unconventional hydrocarbon resource. Fortunately, we reached agreement 
with the winning bidder for Weil to pursue only the helium zones in 
this project area because we were instructed by the BLM that helium 
rights would only be granted to holders of the oil & gas rights. We 
immediately requested from the BLM a consent to extract helium as a 
primary gas. I'm happy to say that we received authorization in June of 
this year which was much faster than anticipated. The BLM has done a 
considerable job navigating these tricky waters and we would like to 
thank Tim Spisak and all of his colleagues at the BLM, the Amarillo, 
Texas Field Office, the State Office in Salt Lake City, and the Price, 
Utah Field Office for being so proactive in helping us with this step. 
But we are far from finished. It is now necessary to obtain an inter-
disciplinary review required by the National Environmental Protection 
Act (``NEPA''). In addition, approval of a Helium Processing Agreement 
with the BLM is required. Assuming we obtain the NEPA approval and 
approval of permit to drill, we anticipate that the earliest we will be 
able to commence our field development work will be mid 2014. Thus, 
from start to finish on this Federal Helium project, the time required 
will have been over three and a half years.
    The uncertain timeframes for pursuing helium on Federal lands is 
one reason why Weil has focused on private lands here in the United 
States and Crown lands in Canada. Our Montana helium project, which is 
located on private lands, took a total of 3 months from the time we 
crafted an agreement with the existing operator to the time we drilled 
our helium test well. On our Canadian project, the process took a total 
of 4 months. I will assert here that in order to bring new domestic 
supplies online from Federal Lands, the Federal time frame from start 
to finish needs to be reduced significantly. If the Congress truly 
understands the critical nature of our helium supply situation here in 
the U.S., then helium projects need to be put into a higher gear 
procedurally.
    Another important factor that will inspire new supplies of helium 
from groups like us is the helium auction language that was presented 
by this body and we applaud the hard work and dedication this committee 
and its staff members have done to pass H.R. 527.
    A market derived price for domestic helium is fundamentally 
critical for companies to invest in helium projects. Weil is ready to 
underwrite some risk dollars to bring in new helium, but `market 
prices' are an important component of this exercise. Without market 
pricing very soon, we are fearful that the price of BLM helium will 
remain at submarket levels and a headwind will remain for the helium 
prospectors. It is extremely difficult for investors to adequately 
weigh the merits of an investment in helium exploration and production 
unless there is some upside potential for helium prices. As it 
currently stands, the 1996 Helium Privatization Act (which is still in 
effect) has anchored helium prices at submarket levels for some years 
now and new volumes have been slow to materialize.
    Also as a result of the `96 Act, the refiners on the pipeline 
continue to enjoy a pricing structure, which is formulaic and 
arbitrary. More importantly, and according to the National Academy of 
Sciences, the price of BLM helium is below supply and demand driven 
market prices. The major industrial gas companies are, admittedly, not 
in the helium drilling business, so declining sources of domestic 
helium should come as no surprise knowing that their BLM quota will 
satisfy them until new foreign sources start rolling in. We believe the 
helium paradigm has shifted and we have no choice but to begin 
exploratory efforts to ensure our future domestic supply.
    There are estimates that say the Cliffside Field will be depleted 
in 5 to 10 years. What happens after that? Looking back, wasn't our 
Congress proactively wise when it established the Federal Helium 
Reserve in 1960. Remember, 1960 was a time before MRI machines, fiber 
optic cables, superconductive colliders, etc. If we allow the Cliffside 
Field to simply deplete without even an effort to re-stimulate helium 
production, this inaction will hurt this country strategically and we 
will be left to import this indispensable commodity from countries such 
as Algeria, Qatar, and Russia for the long-term. We believe that 
imported helium will result in new supply and demand dynamics. These 
foreign providers of helium will not be relying on the 1996 Act for 
ideas about how they price their helium. Higher imports will mean 
higher prices and loss of control of product. In short, we need your 
help for an aggressive streamlining of processes to encourage risk 
capital into the helium discovery world. We are most appreciative of 
this body's version of the helium legislation that allows for the 
market forces to impact markets sooner rather than later. Let the 
markets work to provide the investment dollars needed to pursue future 
projects and they will do just that.
    Thank you for the opportunity to testify today and I look forward 
to any questions you might have.
                                 ______
                                 

    [A letter attached to Mr. Sears statement follows:]
    [GRAPHIC] [TIFF OMITTED] T1896.003
    
.eps                                ------                                


    Mr. Lamborn. Thank you, Mr. Sears.
    Mr. Bhave, you are recognized for 5 minutes.

   STATEMENT OF RAMESH R. BHAVE, PH.D., DIRECTOR, INORGANIC 
MEMBRANE TECHNOLOGY LABORATORY PHYSICAL CHEMISTRY OF MATERIALS 
              GROUP, OAK RIDGE NATIONAL LABORATORY

    Dr. Bhave. Chairman Lamborn, Chairman Hastings, Ranking 
Member Lowenthal, and members of the Subcommittee. Thank you 
for the invitation and the honor to appear before you today.
    My name is Ramesh Bhave, and I am the Director of the 
Inorganic Membrane Technology Lab at the Oak Ridge National 
Laboratory in Oak Ridge, Tennessee.
    I am pleased to be here to discuss ORNL's gas separation 
research and membrane technology development and its 
collaborative work with small business to incorporate this 
technology into a system that can efficiently and cost 
effectively separate helium from other gas streams.
    Virtually all helium produced in the U.S. today is from 
fuel-rich natural gas deposits that contains sufficient helium 
to enable economic recovery. However, U.S. production of helium 
is in rapid decline as these currently viable, rich reserves 
are being depleted. This, coupled with rising global demand, 
has resulted in a shortage causing prices to rise. The price of 
helium has increased four-fold from 1998 to 2013.
    Helios Energy, a small business located in western New 
York, estimated that a substantial amount of helium exceeding 
that in the rich fields used today is present in lower-grade 
fields where the amount of energy required to extract helium is 
cost-prohibitive with the existing technology.
    In order to solve this problem, Helios set out to develop 
an advanced technology to cost effectively recover helium from 
these vast, but low-grade, sources. In 2010, Helios received a 
DOE small business technology transfer award to fund their 
efforts. ORNL's recognized leadership in gas separation and 
selective enrichment technologies goes back more than 60 years 
and is rooted in the Manhattan Project.
    The primary role of ORNL in this project is to develop and 
perfect advanced gas separation membranes that are used as part 
of the hybrid system. ORNL molecular sieve membranes enable the 
separation of helium based on the fact that the helium molecule 
is significantly smaller than all other molecules such as 
nitrogen and methane present in the marginal helium sources.
    Phase one of the project was successfully completed in 
early 2011 and achieved all of its technical objectives. Phase 
two of the project has built on the progress made in phase one 
and has advanced the technology to pilot scale. The project is 
on track to meet all of its technical and economical targets 
and objectives. Helios and ORNL are now very well positioned to 
continue the development of the hybrid system and membrane 
technologies for helium recovery and recycle to ensure a 
stable, reliable, competitively priced supply of helium for 
several high-technology and research applications.
    Helios has had some preliminary discussions with a global 
leader in helium in production that has expressed interest in 
this system and hosting the field demonstration plant. The 
timeline for commercialization will depend on the availability 
of Federal and private industry funding. We would not be here 
today if we had not invested in research and development. Based 
on conversations with DOE, it is not clear if phase three 
funding is available, but we continue to explore possible 
options. We believe implementation of such new options for 
producing more helium is critical to address the shortage.
    Thank you, and I'll be happy to answer any questions.
    [The prepared statement of Dr. Bhave follows:]

    Statement of Ramesh R. Bhave, Ph.D. Principal Investigator and 
Director, Inorganic Membrane Technology Laboratory Materials Science & 
   Technology Division, Oak Ridge National Laboratory, Oak Ridge, TN

    Chairman Lamborn, Ranking Member Holt, and members of the 
subcommittee: Thank you for the invitation and the honor to appear 
before you today. My name is Ramesh Bhave, and I am the Director of the 
Inorganic Membrane Technology Lab at Oak Ridge National Laboratory 
(ORNL) in Oak Ridge, TN. I am pleased to be here today to discuss 
ORNL's gas separations research and membrane technology development and 
its collaborative work with a small business to incorporate this 
technology into a system that can efficiently and cost-effectively 
separate helium from other gas streams.
The Helium Supply Problem
    Helium (He) is a scarce, high value, inert gas with unique 
properties that is used in several high technology applications such as 
MRI machines, super-conductors, semi-conductor fabrication, fiber optic 
manufacturing and others. For the last century, the U.S. has dominated 
global helium supply with 2010 production estimated at 125 million 
cubic meters. Virtually all helium produced in the U.S. today is from a 
few ``rich'' natural gas deposits that contain sufficient helium to 
enable economic recovery. However U.S. production of helium is in rapid 
decline as these currently viable rich reserves are being depleted 
(Figure 1). This coupled with rising global demand has resulted in a 
shortage causing prices to rise (Figure 2). As is shown in Figure 2, 
the price of helium increased four-fold from 1998 to 2013.

A Possible Technology Solution
    Helios-NRG, a small business located in Western New York, estimated 
that a substantial amount of helium, exceeding that in the ``rich'' 
fields used today, is present in lower-grade fields where the amount of 
energy required to extract helium is cost-prohibitive with current 
technology. In order to solve this problem, Helios-NRG set out to 
develop an advanced technology to cost-effectively recover helium from 
these vast but ``low grade'' sources.
    In 2010, Helios-NRG received a DOE Small Business Technology 
Transfer (STTR) award to fund their efforts. They believed that a 
hybrid system that integrated membrane and non-membrane technologies 
would permit high purity helium production from marginal, low purity 
sources--at costs comparable to the conventional technology used today 
to recover helium from helium-rich fields. Led by Dr. Ravi Prasad, the 
Helios team brings more than 30 years of technical and business 
experience in gas separations including helium recovery applications. 
They found essential support at ORNL with its expertise in membrane 
separations, forming a team uniquely qualified to develop options for 
addressing the shortage of helium.

ORNL's Historical Research on Membrane Technologies
    ORNL's recognized leadership in gas separation and selective 
enrichment technologies goes back more than 60 years and is rooted in 
the Manhattan project. In the past 30 years, ORNL has focused on 
research and development utilizing advanced membrane technologies to 
address challenges in many energy-intensive separation processes of 
national and commercial importance. Utilizing ORNL's state-of-the-art 
membrane fabrication, characterization and test facilities, ORNL's 
research team has made important contributions in several areas such as 
hydrogen recovery and separations, and post-combustion carbon dioxide 
capture and sequestration technologies. The team is also developing and 
improving advanced processes for lithium and rare earth metal 
extraction and is a leading member of the Department of Energy's (DOE) 
Critical Materials Institute.

ORNL Role in the Helios-NRG STTR Project
    The primary role of ORNL in the Helios-NRG project is to develop 
and perfect the advanced gas separation membranes that are used as part 
of the hybrid system. More specifically, ORNL will provide research and 
development support for the development, demonstration, and deployment 
of molecular sieve membranes in the hybrid system being developed by 
Helios-NRG. ORNL molecular sieve membrane technology has wide 
applications to other important gas separations including hydrogen, 
carbon dioxide and noble gas separations, which are relevant to the 
clean-energy, petrochemical, and high-tech industries. Molecular sieve 
membranes enable the separation of helium based on the fact that the 
helium molecule is significantly smaller than molecules of all the 
other gases such as nitrogen and methane often present in the marginal 
helium sources. ORNL also has membrane fabrication expertise and 
facilities for larger scale prototype development and can support field 
demonstrations with private industry sponsors and partners.

Goals, Objectives, and Funding of the Helios-NRG STTR Project
    The Helios-NRG--ORNL collaboration started in September 2010 with 
the award of the Phase 1 DOE STTR grant and continued to support 
research focused on helium recovery with a Phase 2 DOE STTR award in 
August 2011. Phase 1 and 2 goals, objectives and funding are summarized 
as follows.

Phase 1
    The objective of Phase 1 was to demonstrate the feasibility of the 
concept at bench scale. Preferred membrane materials and fabrication 
techniques were identified and significant progress made towards 
commercial targets. Economic analysis was carried out and showed 
potential to produce helium from marginal sources using the new hybrid 
system at substantial cost advantage over the current commercial helium 
prices.
    Phase 1 of the project was successfully completed in early 2011 and 
achieved all its technical objectives. The total Phase 1 DOE-STTR grant 
to Helios-NRG was approximately $100,000, out of which ORNL funding was 
approximately $43,000.

Phase 2
    Phase 2 of the project builds on the progress made in Phase 1 and 
is intended to advance the technology to pilot scale. This will include 
further improvement in the membrane properties, scale-up of membrane 
fabrication, design/fabrication/testing of a scaled-up hybrid system 
and validation of process economics. It will lay the foundation for 
advancing the technology to demonstration stage.
    Phase 2 funding was awarded in August 2011 and this phase of the 
work will be completed by the end of 2013. The total DOE-STTR funding 
to Helios-NRG is approximately $750,000 out of which ORNL funding was 
approximately $300,000.

Research Progress and Results
    The project has made excellent progress and is on track to achieve 
all of its objectives. As I conclude, here are other highlights:
          Early in the project, advanced hybrid process cycles 
        for helium recovery incorporating membranes and other 
        separation processes were developed and used to establish 
        quantitative targets for membrane development.
          Many membrane materials and fabrication techniques 
        were tested and preferred combinations identified. Excellent 
        progress has been made towards meeting or exceeding the 
        ambitious performance targets. Substantial progress has been 
        made in evaluating different types of helium recovery 
        opportunities including a ``standalone'' case, intended for 
        green-field applications.
          Economic analysis was carried out using the actual 
        properties measured in the pilot unit showing potential to 
        produce 99.99+% helium from marginal sources using the new 
        hybrid system, with substantial economic advantage over the 
        current commercial helium price.
          Helios-NRG completed the design and fabrication of a 
        small test unit in August 2012. Testing of a single molecular 
        sieve membrane tube module was completed in the first quarter 
        of 2013. ORNL and Helios are exploring other, different 
        membrane technologies that may further improve overall system 
        performance. This work is ongoing in the second quarter of 
        2013. Pilot tests confirmed significantly better performance 
        than project targets for both types of membranes.
          ORNL completed the design and assembly of a larger 
        test module containing 8 membrane tubes which was shipped to 
        Helios-NRG in June 2013. This is currently under evaluation at 
        Helios-NRG facilities in New York.

Prospects and Timeline for Possible Commercialization
    Helios-NRG and ORNL are well-positioned to continue the development 
of the hybrid system and membrane technologies for helium recovery to 
ensure a stable, reliable, competitively-priced supply of helium for 
several high technology and research applications. To further enable 
commercialization, Phase 3 of this effort will focus on validation of 
the membrane technologies and the hybrid system in a field 
demonstration plant using actual raw gas bearing helium. Helios-NRG has 
had preliminary discussions with a global leader in helium production 
that has expressed interest in this system and hosting the field 
demonstration plant. The timeline for commercialization will depend on 
the availability of federal and private industry funding. It is 
estimated that based on the results to date, the field demonstration of 
the hybrid helium recovery system can be completed in 48 months, with 
the possibility for commercial deployment by 2020.

[GRAPHIC] [TIFF OMITTED] T1896.001

[GRAPHIC] [TIFF OMITTED] T1896.002

                                 __
                                 
    Mr. Lamborn. Thank you, Mr. Bhave, and thank you for your 
statement. We will now begin the questioning. Members are going 
to be limited to 5 minutes, but we may have additional rounds 
of questions. I'll start by recognizing myself for 5 minutes.
    Let's talk with Mr. Spisak. Do you think that the current 
laws for helium extraction on Federal lands are up to date and 
conducive for modern-day helium production operations?
    Mr. Spisak. Well, generally, the current laws and 
regulations are set up more for these large-scale, natural gas-
based development where you have a significant resource 
available that could support the infrastructure needed to 
develop the helium. As smaller prospects are identified and as 
we're talking here from the panel some of the newer 
technologies that are able to develop lower-grade helium, the 
regs are not quite set up that way.
    We generally, by maintaining ownership from Federal mineral 
estate, it's set up to be able to aggregate at the point where 
the helium is being processed and being extracted. And some of 
the difficulties we have had in the past, and one of the 
requirements that we require of these smaller projects, is to 
ensure that there is a unification of the natural gas rights, 
and so we have the helium contracts.
    So that is the kind of work-arounds we've developed to 
allow these smaller prospects to go. So I think we can make do 
with the current rules and regulations. Certainly any type of 
modernization would help facilitate that going forward.
    Mr. Lamborn. OK. Thank you.
    Mr. Gutberlet, can you explain the difference in the 
processes and the cost between natural gas production and 
helium production in less than 3 minutes?
    Mr. Gutberlet. In standard oil and gas operations, in many 
cases you actually don't need any natural gas processing 
facilities to allow you to sell your products. However, in 
those helium-related projects, you're always going to have 
other components of the natural gas that need to be removed 
from the stream before you can have commercially available 
helium supplies.
    CO2, nitrogen, H2S, methane and so 
forth, all of those can be very costly to separate from the 
helium stream, and as you go further and further downstream 
with the various components, pressures and temperatures get 
greater and greater or lower and lower in terms of temperature-
wise, so it just becomes that much more complex and, of course, 
costly to remove those other components before you have a 
helium product that is available for the market.
    Mr. Lamborn. Can you give us an idea in terms of a 
percentage cost change to these different points you talked 
about vis-a-vis just natural gas processing?
    Mr. Gutberlet. Oh, depending on the components, 
H2S and CO2 are incredibly costly to 
remove. You could have upwards of 30 to 50 percent increase in 
your capital costs just depending on the amount of those 
individual products. Nitrogen rejection units are another very, 
very costly technology that you have to employ. So depending on 
the particular components of the gas, it's easily upwards of 50 
percent.
    Mr. Lamborn. And how much of a variable cost difference is 
there? You talked about fixed capital costs, but how about 
variable cost?
    Mr. Gutberlet. Well, variable cost, the systems that are 
employed to remove H2S and CO2 have a 
significant variable cost component: electricity, power, and 
the solutions themselves that are employed to remove these 
products. So you can have a very significant variable cost 
component operating your expense component to these facilities, 
and that is why, as we have discussed here, historically you 
have gone after the high concentrations of helium. Now, I 
guess, we are chasing the lower concentrations just because of 
all these cost issues that you have referred to.
    Mr. Lamborn. OK.
    Mr. Sears, in your testimony, you said that you nominated 
Federal acreage for a standard oil and gas lease in February of 
2011, and you waited nearly 2 years for that acreage to be put 
up for auction. So I've got four questions in that line. The 
first one is: Were you given any reason why the wait was so 
long?
    Mr. Sears. Not given any reason whatsoever.
    Mr. Lamborn. And do you feel that anything could be done to 
expedite the process that land is made available for helium 
exploration and production?
    Mr. Sears. I would imagine it all boils down to field 
visits, field work, and that type of activity.
    Mr. Lamborn. OK, and I'm running out of time, so I'm going 
to come back to you in the second round of questions, and we'll 
come back to this one. So with that, I'm going to recognize Mr. 
Lowenthal for 5 minutes.
    Dr. Lowenthal. Thank you, Chairman.
    Mr. Spisak, are there currently any pending applications to 
produce helium from public lands where helium is the primary 
target, that is where it is not being captured as a byproduct 
of natural gas production?
    Mr. Spisak. We currently have two agreements. We've got 
three active agreements where there's natural gas production 
and they're producing. There are currently two other agreements 
where the waiver has been granted to allow them to produce 
helium only, and we have a couple more that are in negotiations 
right now, and there are all within the last 2 years that these 
have come up.
    Dr. Lowenthal. And so there are no pending applications?
    Mr. Spisak. We have one pending right now we expect to have 
out this month.
    Dr. Lowenthal. And were those projects conducted fairly 
quickly? Were they quickly processed?
    Mr. Spisak. The first one that came forward a couple years 
ago took a little bit of time because it was the first one, and 
we've tried to figure out what a waiver from a secretary meant. 
And once we got that worked out, the next couple have been 
fairly----
    Dr. Lowenthal. So once you worked that out, you've been 
able to move the process through fairly smoothly?
    Mr. Spisak. And that's just the part for approving the 
waiver to allow a helium sales contract to be sold, but it's 
contingent on the applicant having the natural gas rights tied 
up or----
    Dr. Lowenthal. So where you are now, is it correct to say 
that the BLM is not being overwhelmed with applications to 
produce helium from Federal lands?
    Mr. Spisak. We have other things overwhelming us, yes.
    Dr. Lowenthal. So that is not one of the overwhelming 
things?
    Mr. Spisak. No.
    Dr. Lowenthal. Is the Department's intention, as you 
mentioned, I just want to follow up on what you said before, to 
respond to the Chairman's question that the Department's 
intention is to examine the process for approving projects on 
public lands where helium is the primary target, that have 
already been permitted to develop lessons learned and come up 
with more robust policies if it's needed? So where are you in 
that process as your intention?
    Mr. Spisak. I think it's fair to say we're in the middle of 
that process. We have the couple projects that have come 
forward that we're working through and kind of coming up with a 
framework that would allow us to develop a more formal policy 
that will help guide future projects as they come forward.
    Dr. Lowenthal. Thank you. And, Mr. Spisak, you mentioned in 
your view some of the regulations may need to be updated to 
allow for the development of helium where it's the primary 
target. Does the Department have the authority under the 
Minerals Leasing Act to update these regulations 
administratively?
    Mr. Spisak. Where we have the trouble or where the problem 
area comes in is the oil and gas lease is maintained through 
natural gas production, and the primary term is 10 years, and 
if the helium recovery would go beyond that 10 years and 
there's not any significant natural gas production, how do you 
keep the lease going? And that's an area that we could use some 
work. Whether there's clear authority there to change 
regulations to allow that, I think that's something we need to 
investigate a little----
    Dr. Lowenthal. So you may be able to do it 
administratively. So will you get back to this Committee in 
terms of whether that is possible?
    Mr. Spisak. Sure.
    Dr. Lowenthal. Mr. Bhave, you mentioned in your testimony 
that you anticipate that the membrane technology that you've 
been working on will be deployed commercially in the next 10 
years. How might this technology affect the U.S. helium market?
    Dr. Bhave. Very substantially. In fact, the lot of economic 
analysis that we have done, the production cost of helium, FOB, 
using this technology will be substantially lower than the 
current market prices, so we believe that this will enable more 
usage of helium as we know that there is increasing demand for 
helium, so this would actually help solve some of that 
shortage.
    Dr. Lowenthal. So you're about to deploy--and you really 
have developed this new technology, and yet the research and 
development cuts that we've recently seen in the Republicans' 
energy spending plan mean that projects like this will go 
unfunded in coming years. Is that a problem?
    Dr. Bhave. Yes. That could be a problem, and as I was 
saying that we are having conversations with DOE and others to 
see what sort of funding may be available. It doesn't appear 
there is a clear mechanism, but yes, I mean we are concerned 
about that, and certainly we are exploring possible options.
    Dr. Lowenthal. Thank you, and I yield back my time, Mr. 
Chair.
    Mr. Lamborn. OK. Thank you.
    Mr. Spisak, one area where we could see more development of 
helium is in the natural gas fields in the west where we have 
had historic drilling for natural gas, but limited development 
of helium. One example is in the San Juan Basin where much of 
the natural gas development has been in the Cretaceous layer, 
which has nearly no helium.
    However, according to USGS, the deeper Triassic layer holds 
between 8 to 10 percent helium. My question is: What would be 
the process of a company to change the target zones to develop 
the deeper helium under current law, and does Congress need to 
change the authority to BLM to accommodate that?
    Mr. Spisak. Typically, when we lease a mineral state, it is 
done in a uniform manner, so whether there is a different zone, 
it wouldn't impact the ability to develop. Somewhere like the 
San Juan Basin, though, there are a lot of times where those 
different zones are broken up for various and sundry reasons.
    But if there is a potential helium development zone, it 
would be something that the company would identify through gas 
sampling. And if the volumes are such that it would make it 
cost-effective to put in the equipment, the infrastructure to 
recover it, then at that point we would engage with the company 
and sign a helium sales contract.
    We could do that now, and we have done that sort of thing, 
so there's really no change required. It's just a matter of 
working with the company and consolidating the area of interest 
under the helium contract and going forward.
    Mr. Lamborn. So BLM doesn't need any additional statutory 
authority?
    Mr. Spisak. Not in those types of circumstances, no.
    Mr. Lamborn. And I didn't know that you did leasing 
sometimes or permitting in layers or in zones.
    Mr. Spisak. Well, we don't typically do it that way. It may 
be that it's how the lands came back to the government or maybe 
somebody else would have subdivided different layers.
    Mr. Lamborn. OK. Thank you.
    Mr. Spisak. It's not our preferred state because it does 
complicate things.
    Mr. Lamborn. OK. Thank you.
    Mr. Gutberlet, in your testimony, you discussed the NEPA 
requirements that lead to delays in helium projects. Do you 
have any thoughts on what Congress could do to provide 
regulatory certainty for helium producers and/or to improve the 
NEPA process?
    Mr. Gutberlet. As I understand it, under existing NEPA law, 
Congress has provided discretion to Federal agencies to 
prioritize certain types of projects, and given the strategic 
implications of helium as we've discussed here today, I think 
all we're suggesting is that helium-related projects can also 
fall under the same type of NEPA prioritization given to other 
projects and other industries.
    Mr. Lamborn. OK. Thank you.
    Mr. Sears, do you feel the current process of obtaining a 
special waiver or consent from the Secretary to make helium the 
primary gas extracted from Federal land is the most efficient 
and up-to-date way to manage this resource? And if not, how 
could we improve upon that?
    Mr. Sears. Yes, I believe that helium should be separately 
granted to folks with projects where helium is a primary 
constituent. For instance, virtually all our projects have no 
appreciable amounts of hydrocarbons whatsoever. It is primarily 
nitrogen and helium. So in that case, a project like that would 
not fall under a standard oil and gas lease because there is no 
oil and gas, so we believe that helium, perhaps, could be fast-
tracked in that regard.
    Mr. Lamborn. Mr. Gutberlet, do you have any thoughts on 
that same question?
    Mr. Gutberlet. Could you repeat the question, sir?
    Mr. Lamborn. Is the current process of obtaining a special 
waiver or consent from the Secretary to make helium the primary 
gas extracted from Federal land the most efficient and up-to-
date way to manage that resource? And if not, can that be 
improved?
    Mr. Gutberlet. I'm afraid we don't have any experience in 
projects where helium is the primary revenue component, so I'm 
afraid I'm not an expert on----
    Mr. Lamborn. OK. Thank you.
    And last, Mr. Bhave, in your testimony, you mentioned that 
there are rich helium fields that are used today and lower-
grade fields. Can you explain the difference between those two 
types?
    Dr. Bhave. Sure. When we say rich fields, we talk about 
helium concentrations 5 percent or greater. When we talk about 
the lean fields or low-grade, we're talking about extracting 
helium that is of the .1 to .3 percent. So there is a big 
difference. However, the quantities that you can extract from 
these low-grade are vast, so they actually exceed that of our 
existing rich reserves, and therefore, we were very excited to 
work on this new technology that has the potential to start 
extracting from low-grade to supplement our depleting supply of 
helium.
    Mr. Lamborn. OK. Thank you very much for that 
clarification. We will now have a second round--oh, excuse me. 
We have Representative Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    Mr. Lamborn. And then we'll do a second round.
    Mr. Cartwright. Thank you, Mr. Chairman, Mr. Ranking 
Member, and thank you to all the witnesses for coming today. I 
appreciate your presence and your insights.
    I want to direct my first question to Mr. Spisak. Mr. 
Spisak, I want to talk about geology for a little bit. Can you 
describe the geology in areas where helium may be recoverable 
as the primary target or the primary gas? Are these areas where 
natural gas production has already occurred? Are there areas 
where natural gas production has already occurred, but the 
helium resource has not been depleted?
    Mr. Spisak. Generally, there's helium in all natural gas. 
It might be in the parts per billion range, but the general 
rule of thumb in the past has been if there's about \3/10\ of a 
percent of helium contained in the source gas, then it's 
economically viable. With new technologies, that threshold may 
be pushed down, but if there's natural gas production, it's 
taken the helium up with it. It's produced at the same time, so 
there's no real way to separate it unless there's enough of a 
quantity in there to make it economically viable.
    Mr. Cartwright. OK. Thank you for that.
    And Mr. Bhave, I was listening to your testimony, and one 
of the things you mentioned, and it's also in your written 
submission, is that there is an estimate that there's a 
substantial amount of helium present in lower-grade fields 
where the amount of energy required to extract helium is cost-
prohibitive with current technology. You said that in today's 
testimony. You've also provided for us, Dr. Bhave, a couple of 
tables with your submission. Figure 2 shows us the rise in 
helium prices on the market over the last 14 years, 15 years, 
and just looking at it, it's quite dramatic. Since 1998, it's 
gone from under $4 per hundred cubic feet to over $16 per 
hundred cubic feet. Am I reading that correctly?
    Dr. Bhave. Yes. That is correct.
    Mr. Cartwright. Really it looks like much of the rise has 
occurred in the last 10 years. In fact, looking at your chart, 
it looks like in the last 10 years, helium has more than 
quadrupled in price; is that true?
    Dr. Bhave. Yes, that's true.
    Mr. Cartwright. So I want to tie those two concepts 
together, the dramatic rise in helium price to the statement 
that the energy required to extract helium is cost-prohibitive 
with current technology in lower-grade fields. At some point, 
the price of helium justifies an added expense of that 
separation; does it not?
    Dr. Bhave. Yes, but I think when we say these rich 
reserves, they are still using helium at higher concentrations 
than these low-grade sources.
    Mr. Cartwright. Right.
    Dr. Bhave. But that's the difference. So the existing 
technology of cryogenic distillation as well as absorption is 
able to handle those streams, but when you are looking at very 
low-grade streams that contain very little methane or other 
hydrocarbons and largely nitrogen, that's where the issues are 
in terms of using the existing technology to refine it to 99.99 
percent pure helium.
    Mr. Cartwright. Thank you for that, which makes development 
of new technology all the more important, and you've made that 
point. Dr. Bhave, would you have been able to develop your 
membrane technology without research and development support 
from the Department of Energy?
    Dr. Bhave. No, we would not have. We are very fortunate 
that the Department has chosen this project since 2010, and I 
think it was essential, because the private industry would not 
fund this research at this time.
    Mr. Cartwright. Now Dr. Bhave, last night, the House 
Republicans passed an extremely damaging energy appropriations 
bill that would cut the Department of Energy's budget next year 
by $3 billion below last year's already depressed levels and $4 
billion below the level requested by the President. Investments 
in applied R&D would be cut by more than half under this bill. 
Will massively cutting R&D investments like this undermine 
America's ability to innovate in technologies such as yours?
    Dr. Bhave. Yes. I believe so, and we are very concerned 
about it, and so we are looking at options to find sources for 
funding to continue this effort.
    Mr. Cartwright. Well, thank you, Dr. Bhave, and I yield 
back.
    Mr. Lamborn. OK. Thank you. And to take advantage of the 
great expertise that we have assembled before us, let's do a 
second round of questions, but at the same time, we're about to 
call votes. So to make sure that we wrap up before we have to 
leave for votes and so you don't have to wait for us to come 
back and we're done with this hearing, we'll just have a 2-
minute round. We'll go in the same order that we did earlier. 
So Representative Flores will go first.
    Mr. Flores. Well, thank you, Chairman Lamborn. I'd like to 
remind Mr. Cartwright that the Department of Energy spending 
levels that we set last time are the same as 2007, and the 
world wasn't coming to an end in 2007.
    Mr. Sears, I'd like to continue the line of questioning we 
had with you regarding the 2-year delay it took for you to get 
a lease. And my next question on that subject was: Would it be 
more beneficial for the helium industry if we made helium a 
leasable mineral similar to oil and gas?
    Mr. Sears. Absolutely.
    Mr. Flores. OK. Mr. Spisak, do you have any comments on 
that?
    Mr. Spisak. I think it really has to go hand in hand with 
the technology issue, because we tried to lease out helium 
prospectively back in the early 1990s, and the helium lessee, 
the person that won that wasn't able to get an agreement with 
the natural gas lessee, which they had to be able to work 
together to be able to produce together, and we wasted 
basically 10 years trying to work some accommodation, that we 
didn't really have a needle to kind of push them along, and so 
there are challenges with that approach.
    Mr. Flores. Continuing on this helium leasing and helium 
permit processing question for a minute, a couple of facts we 
know, that helium is essential to U.S. industry and, number 
two, we're going to close the reserve in the near future. So, 
in light of that, does BLM give any sort of priority processing 
for NEPA reviews or APD applications for helium exploration?
    Mr. Spisak. Nothing has been identified as far as priority 
processing. It's basically the oil and gas leasing process that 
is----
    Mr. Flores. Right. But one of the things that sort of 
bothers me is that we have a fast-track process for wind and 
solar, and it seems to me like we ought to have a similar 
process for helium since it's such a critical element. Would 
you agree with that?
    Mr. Spisak. That could be something that could be 
considered, but I can take that back.
    Mr. Flores. Thank you. I yield back.
    Mr. Lamborn. Thank you.
    Mr. Lowenthal.
    Dr. Lowenthal. Thank you, Mr. Chair.
    Mr. Spisak, can you talk about the time frame for approving 
these projects where helium is the primary target. This is 
relatively new, I think, as you pointed out, that the industry 
is pursuing. My concerns are: Is the Department more efficient 
at learning what needs to be evaluated in processing these 
applications? Where are we?
    Mr. Spisak. The process that we've been talking mainly 
about is the helium waiver and then the contracts associated 
with that. I think it is now fairly streamlined, but that's 
just half of it. The other half is that a condition of the 
waiver is they work with the oil and gas lessee and work 
through that process. If they have that already worked out when 
they come to us, then it can move forward very quickly. If not, 
as the example here that Mr. Sears mentioned, it could derail 
the whole process.
    Dr. Lowenthal. The permitting times will then continue to 
decrease as you point out, as the industry and the Department 
become more familiar with this process?
    Mr. Spisak. On the helium side, but the natural gas lessee 
side is within----
    Dr. Lowenthal. Talking about the helium side.
    Mr. Spisak. Yes.
    Dr. Lowenthal. I just want to say that I'm troubled that 
we're hearing, I think, from the Majority that imposing 
artificial timelines on the Department to approve these 
applications and eviscerating the NEPA process, as they've 
tried to do with the oil, gas, and mining industries, will 
continue. So I just want to say I'm very concerned that we'll 
see a process that is working now, as it goes forward, will 
protect other interests and that we will eviscerate that 
process.
    Thank you, and I yield back my time.
    Mr. Lamborn. OK. Thank you. I will recognize myself for 2 
minutes.
    Mr. Spisak, earlier you said BLM wasn't overwhelmed by 
requests to extract helium. However, with the impending closure 
of the reserve, do you expect to see an increased interest in 
helium development both from natural gas and as a primary gas?
    Mr. Spisak. I think as it becomes clear that there is 
interest and the market starts driving that, it's very possible 
that we'll get more people coming to us to develop low-BTU 
helium.
    Mr. Lamborn. OK. So what you said earlier is only as of 
today and could change in the short term?
    Mr. Spisak. It's very possible. Sure.
    Mr. Lamborn. OK. Thank you. And also, Mr. Spisak, if I'm 
correct, the secretarial waivers are just a small part of the 
overall process. Can you tell us what NEPA-related documents 
are required and what is the timeline of the NEPA process?
    Mr. Spisak. The NEPA, and I'm not a NEPA expert by any 
stretch, but the NEPA process is not any different for the oil 
and gas or the helium side. It's a Federal action that our 
field offices have to go through and identify impacts and such, 
and since the helium development is very similar to an oil and 
gas development, all the same types of impacts are possible and 
would need to be analyzed.
    Mr. Lamborn. And what length of time does all that take?
    Mr. Spisak. They vary from months to years depending on 
whether you have to do an EA or an EIS.
    Mr. Lamborn. OK. So it easily could be in the years?
    Mr. Spisak. It would be dependent on how up-to-date the RMP 
is and other documents, or other analyses, that may have 
occurred in that area. If it's an area where there hasn't been 
any development before, it might be longer because new NEPA 
would have to be----
    Mr. Lamborn. If there's already been oil and gas 
development in the past, does that make it go faster?
    Mr. Spisak. I would expect they'd be able to tier off of 
that type of analysis for the helium impacts. I would not 
expect there to be a lot of helium impacts associated with 
development, but you're still drilling wells, you're still 
potentially putting in operational pipelines, those types of 
impacts. And depending where they are, the surface expressions 
and whether there is threatened and endangered species, all 
that sort of thing wouldn't be any different whether it's 
helium or oil and gas.
    Mr. Lamborn. Mr. Gutberlet or Mr. Sears, do you have a 
final comment on the NEPA process, especially if there is 
existing hydrocarbon activities?
    Mr. Gutberlet. We have varied experience in our operations 
in the Rockies. We have some projects that go in a reasonable 
time frame, which would be a few years for the NEPA experience. 
We've had other projects that are actually still ongoing that 
are now over 7 years waiting for the EIS and EA and NEPA 
process to work its way through in areas where we've been 
producing since the 1930s. So we've seen varied experience, and 
it's more than likely just factors of staffing, of 
prioritization, of the complexities of the projects and 
multiple things.
    Mr. Lamborn. Mr. Sears, then we'll wrap up.
    Mr. Sears. We don't have any NEPA experience just yet.
    Mr. Lamborn. OK.
    Mr. Sears. We've been focusing primarily on private lands 
primarily because of this.
    Mr. Lamborn. I'll just conclude, but thank you. I'll just 
say this process, if not a broken process, needs to be 
streamlined somehow, especially if we do have a closure in 
October and we're scrambling to discover and exploit new 
resources. And we're going to be in a world of hurt partly 
because of the litigation and the regulation that NEPA causes.
    OK. Thank you all for being here. I want to ask unanimous 
consent to enter into the record a statement by Scott Sears, 
President and Founder of IACX Energy.
    [No response.]
    Hearing no objection, so ordered.
    [The prepared statement of Mr. Scott Sears follows:]

          Statement submitted for the record by Scott Sears, 
                   President and Founder, IACX Energy

    Mr. Chairman and Members of the Committee, IACX Energy (``IACX'') 
sincerely appreciates the invitation to provide a written statement 
today for this important hearing before the Subcommittee on Energy and 
Mineral Resources--and we apologize that our schedules made our 
presence at the hearing impossible.
    By way of background, IACX is a midstream natural gas and gas 
treating company headquartered in Dallas, Texas. IACX presently 
operates 20 gas treating facilities (18 nitrogen rejection and two 
helium extraction) in six states, and the company owns or controls 
natural gas pipelines in Kansas, Oklahoma and Texas. IACX hold eight 
patents involving the separation of gases. Our company is growing to 
meet demand for our unique technologies and assets, especially as it 
relates to the separation of nitrogen and/or helium from natural gas at 
or near the wellhead. It is the latter topic that has relevance for 
today's proceedings. IACX recently installed its second gaseous helium 
unit in Kansas and we are currently executing on numerous other 
projects across the Western and Mid-Continent regions of the U.S. There 
are many challenges before us as it relates to promoting new American 
supplies of helium, but we're encouraged by the progress of the 
industry, and we are heartened by this subcommittee's continued 
interest in this important issue.
    The topic of finding, processing and selling refined helium from 
American sources is one in which IACX is particularly interested. We 
believe that there are changes that can be made to the existing federal 
mineral leasing regulations that will reform some of the 1920-era 
provisions that impede modern day helium extraction. IACX believes that 
reasonable updates to existing laws will encourage the discovery of new 
domestic helium sources and the investment in extraction and processing 
facilities. Many of the existing helium laws that stifle exploratory 
efforts today have been on the books since 1920, back when federally 
derived helium was reserved exclusively for the U.S. military's 
strategic dirigible (blimp) program. The times, military needs, uses 
for helium and market conditions have changed--but regulations for 
producing helium have not.

America has more helium than it realizes
    There are still high-helium gas deposits here in the US, many on 
Federal lands. But the exploration, mining, discovery and production of 
helium gas, as its own distinct or accretive endeavor, has suffered 
from a multi-generational era of obliviousness with regard to the 
sourcing and uses of helium. In fact, before the admirable work that 
this committee has done to educate policymakers and the public, most 
Americans had no idea that helium was scarce and is irreplaceable for 
many high tech applications. Most independent natural gas producers 
don't even recognize the value of the helium that may be contained in 
their gas streams. Even if they did, the question of the helium's 
extraction and purification presents a considerable barrier of 
progress. IACX believes that the recognition of helium as a value 
constituent in natural gas will be accelerated if the final version of 
recently debated helium legislation resembles the House's H.R. 527, the 
``Responsible Helium Administration and Stewardship Act''. Transparency 
in pricing of helium itself will create more supplies if there is a 
market-driven incentive for explorers to risk the necessary capital to 
find new supplies. And the sooner this transparency becomes reality, 
the sooner new volumes of domestic helium will find its way into the 
market.

Helium is still a mystery for most people, including prospective helium 
        miners
    In recent Congressional hearings on the topic, we heard that helium 
is important for so many different and important things--it's not just 
about balloons and blimps. There is a genuine concern among a variety 
of American industries and laboratories that helium shortages will 
persist as the rule and not the exception. Throughout these recent 
hearings, the `demand' and `distribution' segments of the helium 
industry were impressively and exhaustively examined. I think we can 
all agree that there exists today a potential scarcity of supply of 
helium but not a scarcity of demand or distribution. We are very 
pleased that this forward-thinking Subcommittee has chosen to shift the 
focus of discussion to this neglected topic of incentivizing new, 
domestic helium supplies.

Some of the challenges facing new, domestic helium sourcing endeavors
    From a mining operation perspective, the digging, capture, 
production, gathering, and refining of domestic helium from Federal 
lands is complicated for various reasons:
    1.  The exploration and production of helium as a primary gas 
constituent on federal lands requires the explicit consent ``of the 
Secretary [of the Interior]''. At IACX's Harley Dome, Utah helium 
project, the process for receiving this consent alone took more than 
two years. These delays did not result from bureaucratic inertia, but 
rather because the novelty of helium-only production and sales from 
federal lands. This `request for consent' exposed the fact that was no 
such precedent for helium driven extraction on federal lands. We are 
proud of the fact that IACX helped establish this precedent, but these 
processes still need review and change.
          As helium values increase through time, we believe this issue 
        will become especially problematic for producers. In cases 
        where natural gas prices are low and helium prices high, it's 
        conceivable that helium will be the constituent of primary 
        value, and producers would then be, unexpectedly, burdened by 
        this regulation.
    2.  Presuming that a ``helium-only'' mining project is successful, 
the law is vague with respect to perpetuating the rights of extraction. 
For example, because helium is explicitly excluded from the Mineral 
Leasing Act of 1920 (as amended), helium production alone cannot `hold' 
an oil & gas lease but an oil & gas lease is required to explore and 
mine for helium reserves. There is presently nothing that connects the 
helium production with the federal oil & gas lease form (where helium 
is the primary constituent), yet there's a vague mandate on the Federal 
level that, somehow someway, connects the two. This is simply broken.
    3.  Helium has always been considered a byproduct of natural gas, 
and then, not always a byproduct with value: helium reduces natural 
gas' BTU content. Industries typically don't spend primary capital 
dollars on by-product constituents, such as helium. This is one of the 
reasons why helium scarcity accelerates during times of depressed 
natural gas prices.

Proposed `fixes' of existing helium laws
    IACX believes that some very simple changes to the existing helium 
laws will go a long way in clearing the path for new helium supplies. 
For one, the Mineral Leasing Act of 1920 (as amended) needs to be 
updated. Here are two ideas:
    1.  Change the wording of the Mineral Leasing Act to include helium 
extraction as one of the value constituents, or
    2.  Remove the exclusion of helium from the Mineral Leasing Act.
    In either case, a Helium Processing Agreement will still need to be 
consummated between the producer and the Amarillo Field Office of the 
BLM. IACX has already done this for its Harley Dome project and is in 
the process of doing it in our Woodside Dome project. Helium is an 
atypical commodity and it requires special handling, measurement, and 
tailored royalty considerations that don't necessarily fit the 
traditional `oil & gas' model. If either one of the above ideas were 
implemented, we believe the process for helium discovery will be 
greatly helped. Moreover, all divisions of the BLM would have a precise 
methodology for 21st Century helium exploration endeavors because the 
Mineral Leasing Act has been consecrated and amended through time.

Where will the new domestic sources of helium come from?
    The principals of IACX have spent several years looking for high 
helium deposits. Presently, we're operating two gaseous helium units 
that are producing private (non-government) helium and taking it 
directly to the market. IACX is also involved in two primary helium 
projects on Federal lands: the Harley Dome Field and the Woodside Dome 
Field. The Woodside Dome Field was once set aside (by Executive Order) 
as ``U.S. Helium Reserve #1'' in 1924 and the Harley Dome Field was 
once set aside as ``U.S. Helium Reserve #2'' in 1934. These fields 
never produced helium (or anything else), perhaps because the helium 
was the primary value constituent--the balance of the gas in these two 
fields is largely inert gas containing virtually no hydrocarbons. 
IACX's low-pressure helium extraction technologies have also helped 
turn these idle helium fields into potentially significant new sources 
of supply.
    We see considerable opportunities for helium extraction as a 
primary gas and as a by-product gas in states such as Montana, Wyoming, 
Colorado, Utah, New Mexico, Kansas, Arizona, Oklahoma, Texas, Arkansas, 
Michigan, Indiana, Illinois and Kentucky. In most cases, incidences of 
helium in natural gas are less than 0.5 percent; therefore, hydrocarbon 
gas and liquids need to lead the project's economics. In other areas, 
such as Harley Dome, helium percentages can reside in gas deposits 
exceeding 7%; however, in these `high helium' anomalies, the host gas 
is usually inert nitrogen. At 7% helium, a project can begin to stand 
on its own as a helium-only project.

IACX as a primary helium developer and as a facilitator of helium value 
        for others with helium
    IACX Energy is proud of its role in bringing in new volumes of 
helium in the very recent past and in the very near future. We believe 
that the new ``openness'' proposed in the House's ``Responsible Helium 
Administration and Stewardship Act'' will shed light on this largely 
misunderstood element. With pending `price transparency' already in the 
works, we believe that economic incentives will soon drive new helium 
exploration and extraction efforts. A simple review and updating of the 
existing, antiquated laws will only help future helium endeavors and 
supplies. IACX and its industry partners are forging a path into new 
areas of helium exploration and we're excited about the future and 
thankful to this Subcommittee.
    We are also standing by to help the entire natural gas producing 
community by providing a service for the extraction, purification and 
marketing of gaseous helium. Many natural gas producers that we speak 
to are surprised to find that not only is there helium in their gas, 
but that it can also be economically captured and sold. When economic 
incentive augments supplies of a critical, strategic commodity such as 
helium, everyone along the supply chain wins. A retuning of regulations 
related to helium exploration and extraction will help ensure a stable 
supply of helium for the United States for many years to come.
                                 ______
                                 
    Mr. Lamborn. I thank the panel for their testimony. Members 
of the Committee may have additional questions for the record, 
and I ask that you would respond to these in writing. We're 
about to go over to vote, so we're going to wrap up now. If 
there's no further business, without objection, the Committee 
stands adjourned.
    [Whereupon, at 10:49 a.m., the Subcommittee was adjourned.]

                                 
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