[Senate Hearing 113-51]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 113-51
 
                                 HELIUM
=======================================================================



                                HEARING

                               before the

                              COMMITTEE ON

                      ENERGY AND NATURAL RESOURCES

                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                   TO

          CONSIDER S. 783, THE HELIUM STEWARDSHIP ACT OF 2013

                               __________

                              MAY 7, 2013


                       Printed for the use of the
               Committee on Energy and Natural Resources




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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                      RON WYDEN, Oregon, Chairman

TIM JOHNSON, South Dakota            LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana          JOHN BARRASSO, Wyoming
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
BERNARD SANDERS, Vermont             MIKE LEE, Utah
DEBBIE STABENOW, Michigan            DEAN HELLER, Nevada
MARK UDALL, Colorado                 JEFF FLAKE, Arizona
AL FRANKEN, Minnesota                TIM SCOTT, South Carolina
JOE MANCHIN, III, West Virginia      LAMAR ALEXANDER, Tennessee
CHRISTOPHER A. COONS, Delaware       ROB PORTMAN, Ohio
BRIAN SCHATZ, Hawaii                 JOHN HOEVEN, North Dakota
MARTIN HEINRICH, New Mexico

                    Joshua Sheinkman, Staff Director
                      Sam E. Fowler, Chief Counsel
              Karen K. Billups, Republican Staff Director
           Patrick J. McCormick III, Republican Chief Counsel


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Chan, Moses, Ph.D., Professor of Physics, Pennsylvania State 
  University.....................................................    27
Duran, Carolyn, Ph.D., Director of Chemical Risk and Compliance, 
  Global Sourcing and Procurement, Intel Corporation.............    22
Joyner, David, President, Air Liquide Helium America, Inc........    19
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     2
Nelson, Walter L., Director, Helium Sourcing and Supply Chain, 
  Air Products and Chemicals, Inc., Allentown, PA................     9
Spisak, Timothy R., Deputy Assistant Director, Minerals and 
  Realty Management, Bureau of Land Management, Department of the 
  Interior.......................................................     3
Wyden, Hon. Ron, U.S. Senator From Oregon........................     1

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    47

                              Appendix II

Additional material submitted for the record.....................    53


                                 HELIUM

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                          TUESDAY, MAY 7, 2013

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:32 a.m. in room 
SD-366, Dirksen Senate Office Building, Hon. Ron Wyden, 
chairman, presiding.

 OPENING STATEMENT OF HON. RON WYDEN, U.S. SENATOR FROM OREGON

    The Chairman. The committee will come to order.
    Today the committee meets to receive testimony on S. 783, 
the Helium Stewardship Act of 2013. This is a bipartisan bill 
that Senator Murkowski and I introduced to create an orderly 
phaseout of the commercial use of the Federal Helium Reserve 
while preventing the disruption of the helium supply chain upon 
which major parts of our economy depend. While many consumers 
only contact with helium comes when they are purchasing party 
balloons, it is a critical resource for a number of important 
sectors of the American economy.
    It's used as a coolant for MRI machines.
    It's used in semiconductor manufacturing, fiber optics 
manufacturing, and research and development.
    It's used to pressurize and purge piping systems to detect 
leaks in specialized wells and to improve breathing mixtures 
for deep sea diving.
    Substitutes are often unavailable. The current global 
supply is constrained. There have been some misconceptions 
about the helium program and this legislation to phaseout.
    So what I'd like to do is spend a couple of minutes talking 
about what the program and the legislation is all about.
    First, the helium program does not cost taxpayers money. It 
actually raises money. In fact, phasing it out over the next 
several years instead of abruptly terminating the program at 
the end of September will raise hundreds of millions of 
dollars.
    Second, the legislation doesn't extend the Federal Helium 
Reserve indefinitely. The program will terminate for commercial 
users when the supply in the reserve falls below 3 billion 
cubic feet. At the current rate of sales from the reserve, that 
would occur within the next 5 or 6 years. The reserve currently 
supplies 40 percent of the domestic and 30 percent of global 
helium demand.
    As our witnesses are going to discuss this morning, there 
simply are no practical alternatives to replacing that supply 
today. Under the bipartisan legislation, BLM would be directed 
to phaseout commercial sales from the reserve over the next 5 
or 6 years. This ought to give all parties the additional time 
needed to establish alternative sources of helium before the 
BLM wells go dry.
    Current law requires the Federal Government to sell off the 
crude helium remaining in the reserve in order to repay the 
U.S. Treasury the $1.3 billion in debt that's incurred while 
creating it. That debt would be fully repaid this Fiscal Year. 
As a result, the helium program will terminate in October 
absent Congressional action.
    Additional helium supplies were expected to be in place by 
the time the debt was paid off and commercial sales were 
terminated. Those supplies simply are not there now. If 
Congress does not extend operation of the Reserve, there would 
be a significant disruption in a number of sectors of our 
economy--everything from semiconductor manufacturing to medical 
imaging. Obviously this would come at a time when the American 
economy certainly doesn't need new obstacles.
    Now, the House of Representatives has already acted. Two 
weeks ago they passed legislation similar to S. 783 by a vote 
of 394 to 1. It's important that the Senate proceed as well.
    Our bipartisan bill has two primary objectives.
    First, to ensure helium market stability for end-users and 
to ensure a fair return on this Federal asset to American 
taxpayers.
    This legislation is designed to strike the right balance 
providing for an orderly, gradual transition resulting in 
minimal market disruption to end-users and at the same time 
finding a way to establish a fair market price and transparency 
that will increase return for taxpayers and stimulate private 
sector sources. Our bill calls for an additional auction of 10 
percent of supply and increasing that amount by an additional 
10 percent a year until only 3 billion cubic feet of helium 
remain in the reserve. These 3 billion cubic feet would be 
reserved for future Federal use, for defense, for aerospace, 
and research experiments that lead to the discoveries that 
drive economic growth. At the same time it would require the 
development of a long-term plan for Federal helium purchases.
    Helium certainly is not the most high profile natural 
resource. It is significant. It is central to an efficient, 
well-run economy.
    This legislation is critical to ensure that we continue on 
a trajectory for economic growth that protects domestic 
manufacturing jobs and our industrial partners as well as 
Federal users across the Nation.
    Let me turn now to my friend and colleague, Senator 
Murkowski, for her opening statement and any comments she'd 
like to make.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. I appreciate 
the hearing this morning, but also your sense of urgency and 
that we need to address that. I think that that is important.
    I welcome our witnesses. Look forward to the expertise that 
you will share with us today.
    Just a couple observations, Mr. Chairman.
    First is a practical consequence of current law. We only 
have until October to get this legislation to the President for 
signature. I think it's important that we meet that deadline by 
reporting a bill from this committee, letting the full Senate 
consider our work, reconciling any differences that we might 
have with the House and then allowing both chambers to consider 
the result.
    Second point, I was surprised to see so many critical 
statements about the House's decision to debate and advance 
their own helium legislation a couple weeks ago. Clearly there 
are other pressing issues to consider. But I believe that 
moving legislation on small, but as you have pointed out, very 
important issues, such as this, even as we continue to debate 
the larger and more divisive ones.
    I think that that reflects well in the Congress as a whole. 
The Floor is not just a place to have disagreements. It's also 
a place to take up legislation that we can agree on as the 
House now has on helium.
    I would like everyone to know that Chairman Wyden and I 
appreciate the urgency here. We will work with leadership to 
advance the bill in a timely way. In the process I hope that we 
will be able to remind everyone that regular order works and is 
the process that is most likely to result in good, sound 
policymaking.
    Last and perhaps on a more lighter note this morning, let 
me say that advancing this bill will lift a weight off the 
shoulders of many sectors that rely upon helium. It's a noble 
effort that can float above the partisan fray. We should all 
rise in support of it.
    You got to have a little levity this morning, Mr. Chairman, 
on a rainy day.
    The Chairman. I can't possibly compete with that. Well 
said, Senator Murkowski. You're absolutely right about the 
urgency of this.
    We're going to work together and move this quickly.
    So we have Mr. Tim Spisak, Deputy Assistant Director of the 
Bureau of Minerals and Realty Management at the Bureau of Land 
Management.
    Walter Nelson, Director of Helium Sourcing and Supply.
    David Joyner, President of Air Liquide Helium America.
    Carolyn Duran, Senior Materials Manager at Intel.
    Moses Chan, Professor of Physics at Pennsylvania State 
University.
    We welcome all of you.
    I know there's always a compulsion to kind of read your 
statement. We will put it, in its entirety, in the record. If 
you could take 5 minutes or so and perhaps just summarize your 
remarks, that would be helpful.
    Why don't we begin with you, Mr. Spisak?

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

    Mr. Spisak. Mr. Chairman, Ranking Member Murkowski, thank 
you for the opportunity to testify on the helium, Federal 
Helium Program, and S. 783, the Helium Stewardship Act.
    The bill would make various changes to the Helium 
Privatization Act of 1996 including establishing a phased 
approach to drawing down the Federal Helium Reserve. 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 supports S. 783 and welcomes the opportunity to 
improve the management of this valuable resource.
    Helium is a critical, non renewable, natural resource. The 
most common and economic 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 the 1920s the U.S. Bureau of Mines built the Amarillo 
Helium Plant and the Cliffside Gas Field Facility to produce 
helium bearing, natural gas from a naturally occurring geologic 
field, known as the Bush Dome Reservoir.
    In 1960 the 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 underlined in the repayment loans 
of the Treasury's loan.
    In 1996, Congress passed the Helium Privatization Act which 
required the BLM to offer for sale the vast majority of the 
stockpile of crude helium as well as getting out of the helium 
refining business.
    Today, the BLM operates the Federal Helium Program with the 
primary goals of paying off the helium debt which the BLM 
anticipates doing at the beginning of Fiscal Year 2014 and 
providing the resource to meet public and private needs.
    While sales of crude helium to private refiners make the 
most significant contributions toward paying off the 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.
    In 2000, the NAS published its first analysis of the 
impacts of the 1996 Act. Its general finding was that the Act 
would not have a material impact on helium users.
    In early 2010 the NAS released a follow up report on the 
BLM's management of the reserve. The follow up report concluded 
that the 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 Congress.
    S. 783 addresses many of the concerns that the 2010 NAS 
report identified regarding the Federal Government's 
involvement in the helium market. Most importantly the bill 
will--would create a set of phased authorities for the BLM's 
management of the reserve establishing a glide path from the 
sales mandate and under the Privatization Act.
    The Department supports S. 783 and the approach to 
gradually scale back the Federal Helium Program.
    S. 783 stipulates 3 phases to the draw down.
    Phase A, allocation transition.
    Phase B, the auction implementation.
    Phase C, continued access for Federal users.
    Under the bill sales of crude helium during Phase B would 
be conducted partially at auction.
    S. 783 would also reauthorize the helium production fund 
and require that the BLM disclose certain information related 
to the Federal helium system.
    Furthermore, the bill would require the Secretary of the 
Interior and the Secretary of Energy to complete several 
reports and studies on helium.
    Thank you for the opportunity to present testimony on the 
Federal Helium Program and S. 783. The BLM welcomes further 
discussion about the Federal Helium Program and the BLM's role 
in meeting future helium needs for the country.
    I would be happy to answer any questions that the committee 
may have.
    [The prepared statement of Mr. Spisak follows:]

  Prepared Statement of Timothy R. Spisak, Deputy Assistant Director, 
 Minerals and Realty Management, Bureau of Land Management, Department 
                            of the Interior
    Mr. Chairman and members of the Committee, thank you for the 
opportunity to testify on S. 783, the Helium Stewardship Act, which 
would make various changes to the Helium Privatization Act of 1996, 
including establishing a phased approach to drawing down the Federal 
Helium Reserve. As indicated by a National Academy of Sciences (NAS) 
report published in early 2010, the market for helium has proven more 
volatile than expected over the last 15 years and the current law's 
requirement that the Bureau of Land Management (BLM) offer for sale 
nearly all of the 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 supports S. 783 and welcomes the opportunity to improve the 
management of this valuable commodity.
                               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 Amendment Act. 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 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 BLM's predecessor agency in 
this area, 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. The BLM is responsible 
for administering helium extracted from Federal resources, including 
management of fees and royalty contracts. These operations are not 
limited to the Hugoton gas field, but also occur in fields in Colorado, 
Wyoming, Utah, and any other state where producers extract helium from 
the Federal mineral estate. Additionally, the BLM is responsible for 
administering the sell-off of crude helium to private refiners. These 
sales make the most significant contributions toward paying off the 
helium debt. The agency also conducts domestic helium resource 
evaluation and reserve tracking to determine the extent of available 
helium resources.
    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 United States Congress.
S. 783, Helium Stewardship Act
    S. 783 addresses many of the concerns that the 2010 NAS report 
identified regarding the Federal government's involvement in the helium 
market. Most importantly, the bill would create a set of phased 
authorities for the BLM's management of the Reserve, establishing a 
``glide path'' from the sales mandated under the HPA to a scenario 
where 3 billion scf of helium would be reserved solely for Federal 
users, grant holders, or contractors. This would accomplish the 
original goals of the HPA--the exit of the Federal government from the 
broader helium market and the paying off of the helium debt--while 
protecting long-term supply interests for the Federal government. The 
Department supports S. 783 and the approach to gradually scale back the 
Federal helium program. The Administration would like to continue 
working with the Committee and sponsors on details of a technical 
nature.
    The bill stipulates three phases to the drawdown: ``Phase A: 
Allocation Transition;'' ``Phase B: Auction Implementation;'' and 
``Phase C: Continued Access for Federal Users.'' Phase A would begin on 
the bill's date of enactment and end on September 30, 2014. During 
Phase A, the BLM would be required to sell crude helium in a manner 
that would result in minimum market disruption. The Department believes 
that this time period is reasonable to prepare the market for broader 
program reforms.
    Phase B would begin on October 1, 2014, and end when the volume of 
recoverable crude helium in the Reserve reaches 3 billion scf. During 
Phase B, the BLM would balance factors involving the maximization of 
total recovery from the Reserve; the maximization of total financial 
return to the taxpayer; the amount of production capable from the 
Reserve; the demand of Federal users, grant holders, and contractors; 
and minimization of market disruption when determining the annual 
quantity of crude helium to offer for sale. Also during Phase B, the 
BLM would annually auction a percentage of the total crude helium 
offered for sale, beginning at 10 percent, and increasing by 10 percent 
increments each subsequent year, up to a maximum of 100 percent. This 
percentage would be subject to adjustment if necessary to minimize 
market disruptions that pose a threat to the economic well-being of the 
United States. The Department supports this phased approach to 
implementing an auction system, and believes that auctions can be 
implemented with minimal market disruption.
    Phase C would begin when the volume of recoverable crude helium in 
the Reserve reaches 3 billion scf and presumably last until all 
recoverable helium has been exhausted from the Reserve. During Phase C, 
the BLM would be authorized to sell crude helium only for use by 
Federal agencies contractors, and grant holders. The Department 
supports the provision to reserve the remaining volume for Federal use.
    Other significant aspects of S. 783 involve reauthorization of the 
Helium Production Fund and requirements that the BLM disclose certain 
information related to the Federal helium system. Reauthorization of 
the Helium Production Fund is consistent with the 2014 President's 
Budget, which includes a proposal to reauthorize the fund in 
combination with substantive reforms to BLM helium sales based on 
recent recommendations from the National Academy of Sciences. The 
Department and the BLM are committed to ensuring that the public 
receives a fair return on publicly owned energy and related resources. 
The Department and the BLM are also firmly committed to making 
information about how government operates more accessible, and consider 
transparency and open government a high priority. The Department looks 
forward to discussing these issues further with the sponsors and the 
Committee, and the Administration continues to evaluate any cost 
implications of this legislation.
    Furthermore, the bill would require the Secretary of the Interior 
to complete several reports and studies on helium. These include global 
and national helium gas resource assessments, and, in coordination with 
the Secretary of Energy, national forecasts and global trends of helium 
demand and an inventory of helium uses in the United States. The bill 
would also direct the Secretary of Energy to support several areas of 
helium separation -related research; allow the Secretary of the 
Interior, in consultation with the Secretary of Energy, to assess the 
feasibility of establishing a facility to separate the isotope helium-
3; and direct the Secretary of the Interior, in consultation with 
various Federal agencies, to submit a report to Congress on a Federal 
Agency Helium Acquisition Strategy. The Department supports additional 
studies and research on helium, but defers to the Department of Energy 
regarding the research projects for which the Department of Energy 
would have the lead.
    Finally, the bill specifies that its provisions shall not affect or 
diminish the rights and obligations of the Secretary of the Interior 
and private parties under agreements in existence on the date of 
enactment, and directs the Secretary to promulgate such regulations as 
are necessary. The Department supports the provision which honors 
existing agreements between the BLM and private parties.
                               conclusion
    Thank you for the opportunity to present testimony on S. 783. The 
BLM welcomes further discussion about the Federal helium program and 
the BLM's role in meeting future helium needs for the country, 
especially for Federal agencies that depend on helium for scientific 
research, aerospace projects, and defense purposes. Since its 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 Committee may have.

    The Chairman. You've also set a land speed record for your 
testimony.
    [Laughter.]
    The Chairman. We thank you.
    Mr. Nelson, welcome.

 STATEMENT OF WALTER L. NELSON, DIRECTOR, HELIUM SOURCING AND 
 SUPPLY CHAIN, AIR PRODUCTS AND CHEMICALS, INC., ALLENTOWN, PA

    Mr. Nelson. Good morning. Mr. Chairman, Senator Murkowski, 
thank you for the invitation to testify before the committee.
    I applaud the common sense approach you have taken to 
develop a pragmatic bill to reform and reauthorize the private 
helium sales from the Federal Helium Reserve. This bill 
accomplishes the goal of maximizing the return to the U.S. 
taxpayer, ensuring the reliability of supply for end users, 
honoring contracts and property rights and it does this without 
disrupting helium supply chains. Very impressive.
    With very few changes we hope it becomes law.
    My name is Walter Nelson. I'm responsible for helium source 
management at Air Products, a Pennsylvania based industry gas 
company that operates in almost every State. Today I'm also 
representing the helium refiners, whose investments of tens of 
millions of dollars in the BLM's production and refining 
capacity have enabled Congress to accomplish its objectives of 
privatizing the helium reserve.
    Before discussing details of the legislation, I want to 
make sure the committee understands how uncommonly complex the 
BLM system is. I've included a diagram with my testimony that 
enables you to see the unique and complicated intersection 
between private industry and government.
    The government helium is stored under private land.
    The crude helium is produced by a privately owned plant 
that owned or that's operated by the government.
    It's transported hundreds of miles through a government 
owned pipeline where it is finally purified by privately owned 
refining plants.
    Only then is the helium refined and available for usage by 
customers.
    At each stage in the process: storing, delivering, refining 
and transporting the helium, we must make investments in 
plants, in equipment and personnel, all of which are 
underpinned by the contracts we have with the BLM and the 
contracts that we have with our end users.
    This morning I'd like to focus on the ways in which S. 783 
gets it right and two areas in which small changes would 
improve the bill.
    First, the core idea of the bill, an auction starting at 10 
percent and ramping up thereafter is workable. We believe that 
such an auction method would harness free market forces to 
deliver a fair return to the taxpayer while limited disruptions 
to the helium supply chain. By phasing in the auction, we can 
continue to have dependable supplies of helium allowing us to 
offer long term supply agreements so that businesses can engage 
in essential planning and avoid disruption in their operations.
    The wisdom of your approach contrasts, with all due 
respect, with the House's approach with a semi-annual auction 
of 100 percent commences almost immediately. This would create 
tremendous uncertainty of supply to end users and the timing 
infringes on our existing contracts. The semi-annual auction, 
needlessly complicates long term planning for every helium 
stakeholder, how much refining capacity to maintain, who will 
have helium and how much. Your bill provides the certainty that 
everyone is looking for.
    Second, we support the price determination mechanism of the 
bill. The comprehensive confidential survey that will become 
the Henry Hub index for crude helium which will ensure that 
fair market prices will be obtained for helium in future years.
    Third, it is essential to ensure that owners of previously 
purchased helium, currently sitting in storage within the BLM 
reservoir, are able to withdraw their helium in order to 
service the market. The reason this helium is sitting in the 
reservoir and not being refined and delivered to end users is 
due to the limitations of the current BLM production system.
    The bill also recognizes that some helium inventory is 
necessary for proper functioning of the system. The House bill, 
on contrast, would put hundreds of millions of dollars worth of 
private helium off limits for years, an obvious 
unconstitutional taking.
    Now I would like to share a few observations about aspects 
of the legislation that could be improved.
    First, the bill requires the refiners as a condition to 
purchase non-auction helium make excess refining capacity 
available at commercially reasonable prices to those companies 
who want helium at an auction who do not have refining 
capacity. This is simply a reflection of what happens in the 
free market today. If there is excess capacity tolling 
agreements are entered into without any interference from 
Congress. Putting this is statute invites regulations that are 
unnecessary in a free market.
    As shown in the diagram, our refineries receive helium not 
just from the BLM, but from various private companies, who 
extract helium from the nearby native gas fields. If there's a 
temporary slowdown in volume from the private sources, it may 
briefly appear that we have excess capacity, but we do not. The 
capacity that is contractually obligated for the private 
sources is not excess and cannot be used for tolling.
    As the volume of the BLM does decline, some refineries will 
naturally be shuttered. If the committee deems that a tolling 
provision is essential, it should be amended to refer to only 
excess capacity that is operational and is not contractually 
obligated.
    Second, the safety valve provision is important to give the 
Secretary the needed latitude in determining the amount to be 
auctioned. But to minimize market disruption we strongly urge 
the committee to give the Secretary the full discretion to 
increase or decrease the auctioned amounts as necessary.
    Let me wrap up with these final remarks.
    The world helium markets are in a state of transition and 
uncertainty. The world's current largest supply, the BLM 
reservoir, is in decline. Significant resources are coming 
online, but there have been repeated delays.
    Shortages are creating tremendous volatility in the spot 
markets. This is not the type of environment to experiment with 
wholesale, untested changes in the world's most reliable and 
stable source of supply, the BLM reserve. The environment calls 
for level headed reforms that are phased in incrementally. That 
is exactly the approach you have taken.
    Your bill would ensure that taxpayers get fair market value 
for the government's helium while preserving the stability that 
has benefited customers and high tech manufacturers across the 
country.
    Thank you for the very pragmatic approach that you have 
taken to this very complicated issue. We stand ready to work 
with the committee to assure that we avert the helium cliff and 
develop workable legislation that ultimately becomes law.
    Thank you.
    [The prepared statement of Mr. Nelson follows:]

  Prepared Statement of Walter L. Nelson, Director, Helium Sourcing & 
     Supply Chain, Air Products and Chemicals, Inc., Allentown, PA
                              introduction
    Chairman Wyden, Senator Murkowski and members of the Committee, 
thank you for the opportunity to testify about helium legislation. My 
name is Walter Nelson and as Air Products director of helium sourcing 
and supply chain, I am responsible for identifying where Air Products 
will get its helium and how it will be delivered to our customers--I 
feel a personal and professional commitment to be sure that Congress 
gets helium legislation right.
    First, I want to commend the leadership of this Committee for 
introducing a bill that, while not perfect, reflects real wisdom about 
how to address the BLM helium situation going forward. This bill 
accomplishes the goals of maximizing the return to the US taxpayer, 
ensuring the reliability of supply for end users, honoring contract and 
property rights, and it does this without disrupting the helium supply 
chains, all at the same time--very impressive!
    I will use my testimony to review how we have arrived at the 
inflection point on helium that we face today, what choices Congress 
faces, and what the implications are for the choices that Congress will 
make. The House recently passed legislation that gives us concern. 
Helium refiners felt a great sense of relief when your bill was 
introduced, because it reflects pragmatic ways to approach the 
controversial issues embedded in the larger helium issue--a phase-in of 
an auction in a manner that is consistent with reliable helium supply 
to end users, and respect for existing contracts, which is essential to 
keeping the entire BLM system functioning properly. While the bill does 
include a tolling provision that has the feel of an intrusion on 
private property rights--more or less forcing us, as a condition for 
doing business with the US Government, to provide use of our employees 
and use of equipment we invested in for the sole benefit of competitors 
who chose not to make the same investments that we did. The bill, 
however, overall strikes a balance that we hope every stakeholder can 
support.
    Let's be clear: Air Products and the other refiners are committed 
to assuring that helium in the BLM reserve remains accessible as of the 
time that BLM pays off its current debt, which by statute would 
otherwise terminate the federal helium program. The failure to enact 
legislation in time would be inexcusable, especially since the Senate 
has had such a broad bi-partisan consensus on a means to that end for 
over a year. We are glad to see that that same spirit of bi-
partisanship continues in the form of S. 783. We hope that this 
legislation can move through the Senate promptly and that it will serve 
as the template for the final law.
          air products and its background in the helium market
    Air Products, with revenues of roughly $10 billion per year, is an 
American corporation with a global industrial gas business. The company 
provides hydrogen for oil refineries so they can produce cleaner-
burning gasoline, hydrogen for fuel cell cars and buses, liquid 
hydrogen for space launches, oxygen for patients in hospitals and to 
steel mills for use in blast furnaces, nitrogen to enable the 
manufacture of computer chips, and helium for MRI scanners and 
semiconductor manufacturing. In short, its core business is helping 
major industries operate more cleanly and efficiently. Air Products has 
more than 20,000 employees in over 50 countries.
    Air Products is one of the leading suppliers of helium worldwide, 
and the largest refiner of helium on the BLM pipeline system. To be 
clear, helium is a byproduct of natural gas. We don't own the gas 
fields or operate the natural gas plants. Energy companies in that 
business extract the helium, and it's through our refineries that we 
supply helium to a wide range of manufacturers. The Company's equipment 
processes more than half of the helium extracted from the earth 
globally, and it has pioneered many of the processes critical to 
getting helium from the ground to vital customers, such as extraction, 
production, distribution, and storage technologies used in the helium 
industry today.
    That expertise was recognized by virtue of the United States 
government's selection of Air Products to engineer and construct the 
first helium extraction units when the federal government began its 
helium conservation program in 1959. More recently, Air Products 
designed and constructed the helium enrichment plant in 2003 that 
supplies the BLM's helium pipeline system, which continues to operate 
to this day.
    Air Products decided to build its first helium refining plant over 
30 years ago in the northern panhandle of Texas. The plant, designed 
and built by Air Products with proprietary technology, was first 
operational in 1982, expanded in 1985 and upgraded in 2010. Air 
Products subsequently constructed two more helium refining plants 
adjacent to a third party natural gas processing plant near Liberal, 
Kansas. The first plant started production in 1991 and the second 
plant, when completed in 1999, was the largest helium refining plant in 
the world. In 1995, Air Products became the first company to design and 
build a helium refining plant that used crude helium that had been 
extracted during the production of liquefied natural gas (LNG). More 
recently Air Products, through a joint venture with Matheson, 
constructed a helium refining plant in Wyoming. This plant was 
completed in 2011 and it is expected to begin production later this 
year when our supplier's natural gas plant becomes operational.
                      where does helium come from?
    Helium is one of the most abundant elements in the universe, 
however on earth helium is only found in naturally-occurring 
underground natural gas reservoirs. Additionally there are a limited 
number of locations around the globe where helium exists in high enough 
concentrations to make it economically feasible to capture and refine.
    There are no naturally-occurring underground reservoirs of pure 
helium. Helium is a rare gas and it only forms in certain locations 
deep below the surface of the earth where the radioactive decay of 
uranium and thorium occurs with the formation of gas. While there is 
considerable attention to the discovery of gas formations throughout 
the US and the world, helium tends not to be found in most of them. The 
largest gas fields that are known to contain helium today are located 
in the United States, Algeria, Qatar, Australia, Iran and Russia. 
Approximately 75 percent of the world's helium supply currently comes 
from the United States, with 30 percent originating from the US 
Government's Federal Helium Reserve.
    Helium refiners purchase crude helium from energy companies that 
are extracting helium from methane-rich natural gas, as well as from 
the BLM. Refiners then purify the helium, liquefy it by cooling it to -
450 degrees Fahrenheit, and then transport and sell the helium into the 
global retail market. Once helium is extracted, purified, and 
liquefied, it has a shelf life of only 30 to 45 days before it begins 
to warm up and turn back into a gas. The liquid helium is transported 
globally from the liquefaction facilities to other facilities where the 
product is repackaged into cylinders, tube trailers and dewars for 
ultimate delivery to customers.
   the history of congress's role in assuring sensible management of 
                            helium supplies
    The recognition of the significance of helium to the national 
defense and for research and medical purposes prompted Congress to pass 
the Helium Conservation Act of 1925. From 1929 until 1960, the federal 
government was the only domestic producer of helium. The majority of 
the helium originally produced was used to support the Navy's rigid 
airship program, the precursor to today's blimps. During World War II, 
some helium was used in the Manhattan Project. Helium, in short, was 
vital to national defense.
    After World War II, Congress advanced the cause of helium 
conservation through the Helium Act Amendments of 1960, pursuant to 
which Air Products constructed all nine of the original helium 
extraction units, a testament to the company's leadership in the field. 
The federal government then purchased all of the helium that was 
extracted and stored it in the Bush Dome, a geological structure within 
the Cliffside natural gas field located north of Amarillo, Texas. In 
1973 the government stopped buying helium because it had accumulated 
more than enough helium for strategic uses as well as accumulated in 
excess of one billion dollars of debt over the 10 year conservation 
period.
    Between 1980 and 2000, private industry constructed six helium 
refining plants at different locations along the BLM's 450 mile crude 
helium pipeline that extends from northern Texas through the panhandle 
of Oklahoma and into Kansas, to produce high-purity gaseous and liquid 
helium from both private and federal crude helium supply. In addition, 
these private companies began entering into storage contracts with the 
BLM to store helium in the Bush Dome, creating what became known as the 
BLM pipeline system, a unique and complicated intersection between 
private industry and government where both government and private 
helium is co-mingled in storage under private land. The crude helium is 
produced by a privately owned plant operated by the government, and is 
then transported hundreds of miles through a government-owned pipeline, 
where it is finally purified by privately owned refining plants. This 
system and its operations are very unique and only exist in the United 
States.
    The commitment to privatization ushered in by Congress in 1995-96 
prompted a reassessment of the historical federal role in helium, 
motivated by a desire to get the federal government out of enterprises 
that could be handled by the private sector. The result was the Helium 
Privatization Act of 1996. BLM was directed to shut down and close the 
government-operated helium refining plant near Amarillo, Texas, and to 
offer for sale the 30+ billion cubic feet of crude helium stored in the 
Federal Helium Reserve to private industry. Congress also directed that 
BLM's helium reserves were to be offered for sale over a 15 year period 
to pay off the $1.3 billion debt to the United States Treasury that was 
accumulated over 10 years during the helium conservation program. 
Congress contemplated a more extreme and immediate exit from the helium 
business but realized that such a course of action would have disrupted 
the market and been imprudent from the standpoint of the taxpayer and 
the end users of helium. Very similar conditions also exist today.
   the federal helium reserve is essential to a stable helium market
    The BLM today operates as a natural gas producer at the Cliffside 
field, where it extracts natural gas from wells, separates the gas, and 
then sells the natural gas and helium to private industry. BLM produces 
approximately two billion cubic feet of crude helium annually, which is 
about 30 percent of the worldwide supply. The BLM system consists of 
the Bush Dome, an underground storage reservoir where the United States 
government stockpiled helium during the conservation period and into 
which companies that have refined helium can deposit the helium until 
it is used; together with multiple natural gas wells that are used to 
extract natural gas from the ground and a gathering system of pipes 
which connects all the wells together; a helium enrichment plant to 
process the gas; and a 450 mile crude helium pipeline system that 
extends from northern Texas across the panhandle of Oklahoma and into 
Kansas.
    The crude helium enrichment plant is operated by the BLM, but the 
plant is owned by an entity called the Cliffside Refiners Limited 
Partnership (CRLP), a partnership made up of helium refiners that owned 
facilities on the BLM pipeline in 2000. The CRLP partners include Air 
Products, Praxair, Linde (formerly the British Oxygen Company), and 
Colorado Industrial Gas (formerly owned by El Paso Energy and recently 
acquired by Kinder Morgan). The CRLP was formed in July 2000 with the 
charter to support the federal government in fulfilling the 
requirements of the Helium Privatization Act of 1996. The CRLP invested 
over $26 million at the Cliffside field to fund design and construction 
of the crude helium enrichment plant. BLM operates the CRLP-owned plant 
today, enabling the sale of government helium and natural gas (methane, 
in this case) to private industry. The CRLP was honored for excellence 
by the Secretary of the Interior Gail Norton in 2004--receiving the 
Four C's Award which exemplified Secretary Norton's Four Cs philosophy 
of consultation, cooperation and communication all in the service of 
conservation.
    The BLM pipeline infrastructure today supports private industry by 
connecting eight private crude helium extraction plants and six private 
liquid helium refining plants to the BLM's reservoir at Cliffside. 
Without this pipeline system, private industry would not be able to 
efficiently deliver crude helium from the extraction plants to the 
helium refining plants in the region. The BLM pipeline system and the 
private industry helium plants together supply approximately two-thirds 
of the worldwide helium supply.
   helium privatization could not have been possible without private 
                              investments
    In 1996 Congress decided it wanted to privatize the helium in the 
BLM reservoir. I would like to direct your attention to the diagram of 
the BLM helium system that is attached at the end of this testimony. 
What sat in the reservoir at that point--in the lower left of the 
diagram--was a mixture of helium with other gases. Government had 
injected helium into the reservoir decades before mainly for defense 
and scientific research purposes. When Congress decided to privatize 
the helium, the Cliffside helium enrichment unit, which is essential to 
refining the gas initially, did not exist. Private refiners invested 
millions of dollars to build it. Without that investment, the helium 
would still be in the ground. But once we built that plant 2003, the 
helium started to flow.
    The non-refiners (our competitors) did not invest in the helium 
enrichment plant, nor did they invest in their own helium refineries. 
They had the resources to do both, but they did neither. They invested 
elsewhere. These companies, many years later, now complain that we have 
an oligopoly. Their position is that Congress should legislate that we 
have to use our private property and our prior investments for their 
private benefit through tolling. When they urge Congress to force us to 
use our private resources to refine helium, when they chose years ago 
not to invest in their own helium refinery, we hope you can understand 
why it does not feel fair to us. In fact, when we do have excess 
capacity and the commercial terms are right, we do already enter into 
``tolling agreements'' with companies that do not have their own 
refining capacity.
            helium is essential in many vital walks of life
    Helium is an indispensable element in the production of fiber optic 
cable, flat panel TVs, semiconductors, dataphones, and MRI scanners. 
There are no substitutes. Helium has very unique chemical and physical 
properties that make it essential to modern day life. It is the second 
lightest element (after hydrogen), and being lighter than air, it is 
used not just in balloons and airships but in other applications such 
as military surveillance and communication blimps. Because of its small 
molecular size, it is ideal for high tech leak detection. Helium is 
chemically inert and non-reactive which makes it a premier carrier gas 
for analytical testing and a protective gas for controlled atmospheres 
used in semiconductor manufacturing.
    Liquid helium is the coldest substance on earth, so it is used to 
keep the electrical coils in MRIs cold, as well as for special low-
temperature scientific research. Its low liquefaction point makes it 
vital to space launches where gaseous helium is used to pressurize and 
purge the flammable liquid hydrogen fuel. Helium has the highest 
ionization potential which makes it the gas of choice for high tech 
metal and plasma arc welding. It has very low solubility and is used to 
replace nitrogen in diving gas mixtures used by deep sea divers. Helium 
has very high specific heat and thermal conductivity which makes it 
ideal for the gaseous cooling of fiber optic cable and nuclear 
reactors.
       what is causing the helium shortage, and when will it end?
    The current shortage in the helium market is unprecedented. While 
the industry experienced a brief helium shortage back in 2006-2007, the 
current shortage started at the end of 2011 and we expect it to 
continue through 2013 until new helium sources are brought on-stream. 
The factors contributing to supply constraints include a decline in 
helium extraction from natural gas, disruptions in helium production 
from existing plants, and delays in the start-up of new facilities.
    In the United States we have seen a decline in helium production as 
energy companies focus their drilling plans on natural gas that is rich 
in liquids rather than the dry gas which typically has more helium. 
Additionally, the BLM is allocating product because the helium 
reservoir is now in its final decline phase. In Algeria and Qatar, 
production of LNG and helium has decreased due to the fragile worldwide 
economy and maintenance work at the LNG facilities.
    We expect helium supplies will continue to remain tight until new 
helium production begins in Algeria, Qatar and Riley Ridge, Wyoming 
later this year. The Algeria project is expected to add an additional 
two percent to worldwide helium capacity, Qatar II up to 18 percent, 
and the Riley Ridge project up to four percent. Only after these three 
new plants are operational and existing plants are back running at full 
output will the global supply begin to fully stabilize. Looking to the 
future--new sources of helium will still be required to offset BLM 
supply declines over the next 10 years and beyond.
    This recent history of supply problems proves one thing: if the BLM 
system is off limits as soon as 2013, current shortages will be 
considered modest compared to the dire situation that helium users will 
face.
  enactment of a successor to the helium privatization act of 1996 in 
                           2013 is essential
    Air Products and virtually all stakeholders consider it essential 
for Congress to pass a successor statute that would preserve a system 
that for the most part has accomplished important objectives: assuring 
supply to essential uses of helium, preserving a BLM system that has 
many moving parts that need to work as a whole, and at stable prices. 
We see no reason to tinker with the essential functioning of the BLM 
system. But we don't have time to spare, and here's why.
    The Helium Privatization Act of 1996 directed BLM to cease pure 
helium production and to sell off the helium remaining in the 
reservoir. The Act expires at the end of 2014. The best available 
modeling predicts that there will still be 10-12 billion cubic feet of 
recoverable helium remaining in the reservoir at the end of 2014. At 
current production rates of about two billion cubic feet per year, the 
reservoir could continue to produce helium for five to six more years.
    This same modeling, however, has determined that the reservoir 
production rates will begin to decline to approximately one billion 
cubic feet per year after 2016. As a result, the usable life of the 
reservoir may be extended beyond 2020. This is sufficient time for new 
planned helium projects to become operational, replacing the lost 
Federal Reserve helium, but unless there is a successor statute to the 
expiring Helium Privatization Act of 1996, the BLM system will not be 
able to continue operations. To repeat: unless BLM has the authority to 
continue to operate the federal reservoir--which it won't if there is 
no successor statue--all of the helium that remains in the reserve will 
be inaccessible. That means that 30 percent of the worldwide supply 
will be essentially locked up, causing prices to skyrocket, some users 
with no ability to access helium, and chaos in the economic sectors 
that now rely on helium.
    In fact, though, the time pressure is even worse. Under the 
statute, once BLM pays off the $1.3 billion debt accumulated by the 
federal government during the helium conservation period, pursuant to 
the Helium Privatization Act of 1996 the self-funded United States 
Treasury account will be closed and BLM could then only continue 
operations with appropriated funds. Otherwise, there will be no funding 
mechanism to allow BLM to operate the federal reservoir or the 450 mile 
pipeline that acts as a vital supply chain for private industry. When 
the 1996 Act was written, Congress projected that the reservoir would 
be depleted by the end of 2014, when the Act expires. Helium has been 
removed from the reservoir at rates lower than those projected at the 
time, which is why there remains helium to be managed and a successor 
statute necessary. Thus, the various walks of life that would come to a 
halt without helium would be affected not upon the expiration of the 
Helium Privatization Act of 1996 on December 31, 2014, but when there 
is no funding mechanism beyond the end of FY2013.
    That said, we are confident that with new helium sources becoming 
operational over the next few years, we will not be back here, 
petitioning Congress for yet another extension of the helium 
legislation. As far as we are concerned, once the 1996 Act is extended 
to account for the sell-off of the remaining helium in the reserve--and 
we are fairly confident now that we know by when the reserve will be 
essentially depleted--the federal government will be out of the helium 
business for good (other than supplying limited helium supplies to 
federal research and defense needs).
       establishing a market price for helium must be done right
    In the context of enacting legislation in a timely manner, Air 
Products advocates that the Department of the Interior develop and 
adopt a mechanism to establish a fair and reasonable market price for 
the remaining crude helium sold by the BLM from the reservoir. We 
believe the Secretary of Interior should be given authority to conduct 
a confidential survey and to collect data from private industry, which 
would be used in conjunction with federal helium royalty data, in order 
to determine market pricing.
    We strongly recommend that Congress make clear that the Department 
of the Interior follow specific principles when using the confidential 
survey data to establish the market price. First, the pricing 
considered must be for volumes of helium that are similar in size to 
those volumes currently offered for sale by the Secretary. Helium 
purchases of small volumes will attract spot pricing, which may be 
higher and therefore will distort the survey data. Second, the pricing 
considered must be limited to sourcing transactions where the helium is 
being purchased for the first time. Any prices for the re-sale of 
wholesale helium in secondary or tertiary transactions must not be 
considered because these prices will include profit, which will distort 
the survey data. The confidential survey data collected must be 
comprehensive enough to characterize all pricing escalation indexes, 
including any index or reference to the BLM's posted price for 
conservation helium.
    Clear guidance must be provided to the Department of the Interior 
on which companies should be included in the survey, when the survey 
must be conducted, what data must be submitted, how the data must be 
classified, how the data should be interpreted, what the qualifications 
of the individuals to analyze the data must be, how confidentiality 
will be maintained, how to address non-compliance, and how to audit or 
validate the data to ensure falsification does not occur. Including all 
these requirements in any legislation is impractical. Instead, we 
recommend that these details be incorporated into the Committee report 
and in all other reports accompanying this legislation. We look forward 
to working with the Committee to achieve this important objective.
                a phased-in auction is the best approach
    The core idea of this bill--an auction starting at 10 percent of 
annual BLM production and ramping up thereafter--is workable. We 
believe that such an auction method harnesses free market forces to 
deliver a fair return to the US taxpayer, while not causing disruptions 
to the helium supply chain. Refiners currently have storage and 
delivery contracts with BLM that expire in 2015. It is these contracts, 
in turn, that have allowed us to enter into contracts with end users, 
the high tech manufacturers who are so reliant on helium to make their 
products and serve consumers. By phasing in the auction, we can 
continue to have dependable supplies of helium allowing us to offer 
long-term supply agreement so that these businesses can engage in 
essential planning and avoiding disruption in their operations.
    Let me take a moment to describe the problem with the auction 
approach taken in the House bill. To our customers, helium is as 
essential to certain product lines as is electricity. Imagine if there 
was a semi-annual auction for electricity, and large manufacturers did 
not know, from one six month period to the next, if their particular 
power company ``won'' electricity or not. That is the consequence of 
the House's approach, except the essential input is not electricity but 
helium. Long-term planning will be impossible, and spot pricing will be 
the order of the day. This can hardly be deemed a positive outcome. 
Helium customers would be faced with significant supply uncertainty and 
would not have the ability to plan as they do today. That is why the 
phased-in has such appeal.
    For that reason, we will confess to concerns with even the Senate's 
auction in the out years, starting, say, when the auction will be 50 
percent or higher. The good news is that new sources of helium appear 
quite likely to be coming on-stream by then, both in the US and around 
the world. If that were not the case, an auction of 50 percent or 
higher would raise questions about our ability to assure customers that 
they would know, with the certainty that they need, whether any helium 
refiner would have helium or not. We have the same misgivings as 
regards the federal users.
 assuring the greatest return for the taxpayer from sale of blm helium
    Since this issue began receiving congressional attention last year, 
there has been a recurring theme: let's maximize the return to the US 
taxpayer. Refiners in general have no real stake in what price BLM 
establishes because our raw material costs are passed through to the 
market. Our main goal is assuring uninterrupted supply to our 
customers. But we should be clear about two facts. First, BLM could 
charge anything it wants for helium--today--under current law. There is 
no bar to BLM raising its pricing, and indeed, over the past three 
years, BLM has increased its prices by 30 percent, which we in turn had 
to pass on to our customers. Second, BLM could establish an auction 
under current law. There is no bar to that either. Should Congress be 
unable to reauthorize the helium statute, and should it be necessary to 
appropriate funds to keep the BLM helium program operating, BLM could 
raise its prices to whatever it wanted, and it could develop any lawful 
mechanism for selling the helium as well. Using the market survey that 
is included in S. 783, which BLM could do even without additional 
legislation, there is no reason that BLM could not be charging market 
price.
    It appears that all this effort is going into a major revision of 
existing law because the National Academy of Sciences and Office of the 
Inspector General and Government Accounting Office all took a look at 
this issue and concluded that BLM wasn't getting a high enough price 
the helium it was selling. To repeat, BLM could charge anything it 
wanted to under existing law for its crude helium. But if the Committee 
is intent on directing BLM to do a better job of assessing what the 
``right'' price should be, we think the direction to BLM to engage in a 
thorough confidential market survey, combined with at first a limited 
auction of the non-allocated amount of helium, will result in price 
discovery that will maximize the return to the taxpayer. This price--
not the auction price, but a price that is arrived at through many 
factors including the auction price--would then be the price assigned 
to the allocated amount, that is, the amount not sold at auction.
               respecting existing contracts is critical
    Our contracts with BLM have been the bedrock of the ability to get 
helium to all of the customers--the large household name enterprises 
that justifiably want the BLM helium to remain accessible--who are 
intent, as we are, on getting legislation enacted in time. The 
provision in your bill that specifically respects existing contracts is 
important to keep the BLM system from being awash in litigation after 
enactment of new legislation. The Winstar case makes clear that 
Congress cannot pass legislation that necessitates a breach of contract 
without exposing the United States Government to liability for damages. 
Thankfully, your legislation does not appear do that.
 conditioning receipt of blm helium on the requirement to ``toll'' for 
                       competitors is unnecessary
    A provision of the bill requires the refiners, as a condition to 
purchase non-auctioned crude helium, to make ``excess refining 
capacity'' available to those companies who succeed at auction that do 
not have refining capacity on the system ``at commercially reasonable 
rates.'' The Committee needs to understand that this provision is 
merely a statement of the current state of affairs and ``Economics 
101'' in the helium business. If refiners do have excess capacity, they 
already do offer it to non-refiners at commercially reasonable rates. 
We refer to these as ``tolling agreements''.
    Our refineries receive helium not just from the BLM but from 
various other private companies who extract helium from natural gas in 
the panhandle region of the United States. We are contractually 
obligated to take the gas from these private sources. If there is a 
temporary slowdown in volume from the private sources, it may briefly 
appear that we have excess capacity, but we do not. The capacity that 
is contractually obligated to the private sources is NOT excess and 
cannot be used for other suppliers.
    As the BLM helium supply declines, there will necessarily be 
refineries on the system that are not needed to be operational. We do 
not consider it appropriate for a statute to direct us to put into 
operation for the benefit of our competitors refining capacity that we 
have determined we do not need for ourselves.
    If the Committee considers it essential to include a ``tolling'' 
provision in the legislation, we ask that ``excess refining capacity'' 
should only cover that capacity that is not ``contractually obligated'' 
and which is ``operational.''
    We believe that the most effective manner to incent refiners to 
provide tolling services is to prioritize delivery according to who 
wins it at auction. By prioritizing any helium purchased at auction, 
this assures the winner will have pipeline delivery priority and not 
impact any helium that a refiner may have access to, thus ensuring that 
there could be a competitive market for refiners to toll and ensure 
their plant is running at as high a capacity as possible. We are in the 
business of selling helium, not of refining it for others who opted not 
to build their own refineries. If we truly have excess capacity, we put 
that capacity on the market. We recognize that the bill does not 
mandate tolling, yet it places a condition on our receipt of BLM helium 
that has the feel of interference in the free market, and puts us at 
the mercy of regulators or judges to determine the definition of a 
``commercially reasonable price'' and whether capacity is truly 
``excess.'' This does not seem to be an appropriate role for Congress. 
We doubt that any of our customers would like to have Congress direct 
them to make product for their competitors.
           important second tier issues the bill must address
    Unlike its House counterpart, your bill addresses issues that are 
important to the optimal functioning of the BLM system. For instance, 
it is essential to ensure that owners of previously purchased helium, 
currently sitting as inventory in the BLM reservoir, are able to 
withdraw their crude helium in order to service the market. The reason 
that helium is sitting in the reservoir, and is not being refined 
immediately after being purchased, is the limitation of the pipeline 
capacity. Your bill wisely recognizes that helium in inventory is 
necessary for the proper functioning of the system. This minimizes the 
risk that helium will be left stranded, or would have to be vented. The 
House bill, in contrast, would put hundreds of millions of dollars of 
purchased helium off limits for years, an obvious unconstitutional 
``taking,'' and inconsistent with the smooth functioning of the overall 
system.
    S. 783 provides for ongoing funding of operations and for the 
critical investments that will be necessary to support the BLM 
infrastructure--compression equipment, wells, and plant modifications, 
for instance. These improvements will be essential to ensure the 
maximum recovery of helium from the reservoir as it is depleted.
    The ``safety valve'' is an important feature of S. 783, but in our 
view, it is important to give the Secretary full latitude to determine 
the amount to be auctioned. As the bill is currently written, the 
Secretary does not have the full discretion to manage auction amounts 
in a way that minimizes market disruption and increases returns to the 
U.S. taxpayer. This would require a small change in the bill so that 
the Secretary must meet the same standard, whether auction amounts are 
increased or decreased. We urge the Committee to give the Secretary 
full discretion to increase or decrease the amount to be auctioned, to 
minimize market disruption.
    Finally, we are pleased that the bill addresses helium 3, an 
important strategic issue that needs and warrants attention from the 
federal government. There is currently an inter-agency task force, 
comprised of representatives from 14 separate agencies, looking at 
helium 3. The Department of Interior is not among those agencies. If 
the Secretary of Interior is to be given jurisdiction over helium 3 by 
virtue of the situation of BLM within the Department of the Interior, 
we recommend that the Secretary be directed to consult with the members 
of the task force before proceeding on this issue.
                               conclusion
    The world helium markets are in a state of transition and 
uncertainty, and the world's current largest supplier--the BLM 
reservoir--is in decline. Significant new sources are coming on line, 
but there have been repeated delays, and some of them are in 
politically unstable regions of the world. Shortages are creating 
tremendous volatility in the spot markets. This is not the type of 
environment in which to experiment with wholesale, untested changes in 
the world's most stable source of supply--the BLM Reserve. This 
environment calls for level-headed reforms that are phased in 
incrementally. That is exactly the approach you have taken. Your bill 
would ensure that taxpayers get a fair market price for the 
government's helium, while preserving much of the stability that has 
benefited consumers and high-tech manufacturers across the country.
    Congress got it right when it established the federal helium 
reservoir and the surrounding infrastructure managed by BLM. The system 
has worked well for decades. Congress got it right yet again in the 
Helium Privatization Act of 1996, when it set in motion a process for 
selling off the helium previously captured in the federal reservoir. 
End users have had helium when they need it, and price and access have 
been stable. The public does not think much about helium--aside from 
party balloons and blimps--because the system has worked so well.
    S. 783 is a good bill. Apart from the needlessly intrusive tolling 
provision, we are highly supportive of it, and we would expect that all 
stakeholders would share this view. Unlike its House counterpart, if S. 
783 became law, it would allow helium to flow uninterruptedly through 
the BLM system, there would be limited change in the supply of helium 
to end users, and BLM would have full authority--which we believe it 
has today--to charge full market rates for helium, thus assuring a 
healthy return to the US taxpayer.
    The Senate's approach to the helium issue, from the start, has been 
informed, measured, pragmatic, and workable. Since our business rests 
on implementation of a workable method for moving BLM's helium reserves 
to end users, we want to do everything we can to see that the Senate's 
approach is enacted. We have been gratified by the bipartisan, non-
ideological support this Committee's leaders commanded for their helium 
bill last year, and we are pleased to see the same this year. Air 
Products appreciates the opportunity to testify again on this issue, 
and will do everything we can with our know-how to advise Congress 
along the way to an outcome that everyone can be proud of.
    Mr. Chairman and Senator Murkowski, thank you for the pragmatic 
approach you have taken to this complicated issue. We stand ready to 
work with the Committee to assure that we avert the helium cliff and 
develop effective legislation that the President can sign into law.

    The Chairman. Thank you, Mr. Nelson.
    Mr. Joyner.

   STATEMENT OF DAVID JOYNER, PRESIDENT, AIR LIQUIDE HELIUM 
                         AMERICA, INC.

    Mr. Joyner. Good morning, Chairman Wyden, Ranking Member 
Murkowski and members of the committee.
    My name is David Joyner. I'm the President of Air Liquide 
Helium America. I appear today on behalf of American Air 
Liquide Air Gas Incorporated as well as Matheson Tri-Gas 
Incorporated, who are the major participants in the domestic 
helium markets who do not currently operate refineries on the 
Federal helium pipeline.
    Collectively despite being practically shut out of the 
market for the Federal crude helium, our companies serve a 
significant portion of the U.S. helium market. We're deeply 
appreciative of the work of the committee and its staff in 
assuring our participation as you consider this legislation and 
at a level consistent with our involvement and importance to 
the U.S. helium market.
    As you would expect our companies are different and each of 
us has views on the legislation that are specific to our 
individual corporations. We have each submitted statements 
reflecting those views. I'm here today to share with you those 
4 principles upon which we all profoundly agree. Those are 
extending the operation of the Federal Helium Reserve, expanded 
market access and transparency, as well as the enactment of the 
conditional tolling provision.
    First, we all agree that the legislation to extend 
operation of the Federal Helium Reserve is vital to the U.S. 
economy. Failure to continue operation of the reserve would 
remove close to a third of the global helium supplies and 
almost half the domestic supply from the market. Accordingly we 
appreciate the amount of energy and time you have devoted to 
achieve this vital goal.
    Second, we strongly endorse the expanded access and market 
transparency that your legislation seeks to foster. Three 
companies who operate refineries on the Federal helium pipeline 
have enjoyed near exclusive access to the reserve for almost 20 
years. As documented by the Department of the Interior's 
Inspector General, this arrangement has potentially cost the 
U.S. taxpayer $100 million over the life of the program. It's 
also destroyed markets and free market principles. Expanded 
access and market transparency are items that are long overdue.
    To achieve these goals you have included an auction process 
and several other provisions designed to ensure greater access 
to the Federal helium market. For those goals in this 
legislation to be realized, we believe the expansion of access 
begin sooner than the late 2014 date specified in the current 
bill. If there is an extended period before the auction begins 
we would recommend that there be an immediate and significant 
increase in the allocation to other buyers and to non-refiners.
    Another year of 100 percent allocation to the 3 companies 
is antithetical to the goals supported in this legislation and 
would again, postpone any benefits that would accrue to U.S. 
taxpayers and end users by increasing the competition and 
access. Now while our companies have some difference of opinion 
on the precise allocation percentages. We all agree that the 
non-allocated share of annual volumes should be increased 
substantially, something much closer to the portion of the 
market we serve.
    In expanding access by adjusting these allocations is not 
complex and it does not necessitate the continuation of near 
100 percent allocation to the 3 refineries for another year. We 
believe that if refiners are to be guaranteed access to a 
percentage of volumes then non-refiners should also be 
guaranteed access to a percentage of volumes as well.
    Finally, if these purchase volumes should be linked to a 
delivery schedule from the BLM. So if you purchase the volumes 
you have the ability to actually take delivery of them.
    On a related matter, we believe the inclusion in the bill 
of language related to refiners existing contracts is 
unwarranted. It provides them with protections which go beyond 
those in the contracts themselves. The U.S. House of 
Representatives agree with this position. Overwhelmingly 
defeated an amendment offered by Representative Dent that would 
provide such additional protection.
    In support of this principle we believe that the auction 
percentages not reserved for refiners should be allotted to 
non-refiners who own and maintain adequate facilities and 
equipment to meet delivery schedules and quality standards for 
deliveries to end users. This would both promote open 
competition and ensure that the market will not be subject to 
the actions of outside speculators and ensuring reliable supply 
to end users. In the same vein we believe that no participation 
in the auction process should be permitted--no participant in 
the auction process should be permitted to acquire more than 30 
percent of the auction volumes to ensure that a broad array of 
buyers participate in these auctions.
    Finally our companies strongly support the provision 
calling for conditional tolling service for both the auction 
process as well as for any Federal crude helium purchase 
outside of auction percentages. We appreciate the committee's 
recognition that the goals of increased competition and greater 
return to taxpayers cannot be achieved without some certainty 
of access to tolling services.
    Mr. Chairman, as documented by the reports issued by the 
DOI Inspector General and the National Academy of Sciences, the 
existing regime for Federal helium sales is deeply flawed and 
extending the operation of reserve this is a one time 
opportunity to correct the flaws of that regime by ensuring 
greater competition which will help secure the supply for end 
users and a fair return for the U.S. taxpayers.
    We appreciate the many positive changes that your 
legislation makes to the current situation and believe that 
with the suggestions we've made your legislation will fully 
accomplish the goals of the committee.
    I look forward to answering your questions. Our group looks 
forward to working with you throughout the process.
    [The prepared statement of Mr. Joyner follows:]

      Prepared Statement of David Joyner, President, Air Liquide 
                          Helium America, Inc.
    Good morning Chairman Wyden, Ranking Member Murkowski, and members 
of the Committee. My name is David Joyner, and I am the President of 
Air Liquide Helium America, Inc., the helium company for American Air 
Liquide. I appear today on behalf of American Air Liquide, Airgas Inc. 
and Matheson Tri-Gas, Inc., who are the major participants in the 
domestic helium market that do not operate helium refineries on the 
federal helium pipeline. Collectively, despite being practically shut 
out of the market for federal crude helium, our companies serve a 
significant portion of the U.S. helium market. We are deeply 
appreciative of the work of this Committee and its staff in ensuring 
our participation as you consider this legislation and at a level 
consistent with our involvement and importance to the U.S. helium 
market.
    As you would expect, our companies are different, and each of us 
has views on the pending legislation which are specific to our 
individual corporations. See individual company statements attached 
hereto as Appendix A*. We have each submitted statements reflecting 
those views. I am here today to share with you those core principles 
upon which we all profoundly agree:
---------------------------------------------------------------------------
    * See Appendix II.

   Extending the Operation of the Federal Helium Reserve;
   Expanded Market Access and Transparency; and
   Enactment of the Conditional Tolling Provision

    First, we all agree that legislation to extend operation of the 
Federal Helium Reserve is vital to the U.S. economy. Failure to 
continue operation of the reserve would remove close to one-third of 
global helium supplies and almost half the domestic supply from the 
market. Accordingly, we appreciate the amount of time and energy you 
have devoted to achieving this vital goal.
    Second, we strongly endorse the expanded access and market 
transparency that your legislation seeks to foster. Three companies who 
operate refineries on the federal helium pipeline have enjoyed near 
exclusive access to the reserve for almost 20 years. As documented by 
the Department of the Interior's Inspector General, this arrangement 
has potentially cost the U.S. taxpayer $100 million over the life of 
the program. It has also distorted markets and, in some cases, led to 
supply shortages. Expanded access and market transparency are items 
that are long overdue.
    To achieve these goals, you have included an auction provision. 
While our companies have some difference of opinion about auctions, for 
this auction to be most meaningful, we believe it should begin much 
sooner than the 2014 date specified. Auction of federal helium is not a 
complex process. The auction involves the sale of a single commodity to 
a limited number of bidders on an annual basis. This is far less 
complex than many other auction processes which routinely occur in 
different markets, and we fully believe that the Bureau of Land 
Management is well equipped to get the process underway in short order. 
Accordingly, we believe a workable auction process can be put into 
place within 180 days of enactment. Alternatively, if the current 
timeline is to be kept, it is imperative that, in the intervening year, 
the current allocation system employed by the BLM must be modified to 
ensure greater access. Another year of 100 percent allocation to three 
companies is antithetical to the goals supported in this legislation 
and would again postpone any benefits that would accrue to U.S. 
taxpayers and end-users by increasing competition and access.
    While our companies have some difference of opinion on the precise 
allocation percentages, we all agree that the non-allocated share of 
annual volumes should be increased substantially--something much closer 
to the significant portion of the market we serve. I reiterate, the 
auction process is not so complex that it necessitates the continuation 
of a near 100 percent allocation to the three refiners. We believe that 
if refiners are to be guaranteed access to percentage volumes then non-
refiners should also be guaranteed a percentage of volumes. On a 
related matter, we believe the inclusion in the bill of language 
related to the refiners' existing contracts is unwarranted, and 
provides them protections which go beyond those in the contracts 
themselves. The U.S. House of Representatives agreed with this position 
and overwhelmingly defeated an amendment (312-87) offered by Reps. 
Charles Dent (R-PA) and Elizabeth Esty (D-CT) that would provide such 
additional protection. See Joint Letter from Non-Refiners attached 
hereto as Appendix B**.
---------------------------------------------------------------------------
    ** See Appendix II.
---------------------------------------------------------------------------
    In support of this principle, we believe that the auction 
percentages not reserved for refiners should be restricted to non-
refiners who own and maintain ``adequate facilities and equipment to 
meet delivery schedules and quality standards'' for delivery to end-
users. This would both promote open competition and ensure that the 
market will not be subjected to the actions of outside speculators. In 
the same vein, we believe that no participant in the auction process 
should be permitted to acquire more than 30 percent of auction volumes.
    Finally, our companies strongly support the provision calling for 
conditional tolling services both for the auction process as well as 
for any federal crude helium purchased prior to the time when the 
auctions begin. We appreciate the Committee's recognition that the 
goals of increased competition and greater return to the taxpayer 
cannot be achieved without some certainty of access to tolling 
services.
    Mr. Chairman, as documented by the reports issued by the DOI 
Inspector General and the National Academy of Sciences, the existing 
regime for federal helium sales is deeply flawed. In extending the 
operation of the reserve, this is a one-time opportunity to correct the 
flaws of that regime by ensuring greater competition which will help 
ensure security of supply for end-users and a fair return to the U.S. 
taxpayer. We appreciate the many positive changes that your legislation 
makes to the current situation and believe that with the suggestions we 
have made your legislation will more fully accomplish the goals that 
you have set forth.
    I look forward to answering your questions and our group looks 
forward to working with you throughout this process.

    The Chairman. Thank you, Mr. Joyner.
    We're all so very happy to have a talented Oregonian here. 
Dr. Carolyn Duran, Senior Materials Manager from Intel, a major 
Oregon private sector employer. I understand you're speaking 
for the Semiconductor Association as well. So Ms. Duran, 
welcome. Please proceed with your remarks.

 STATEMENT OF CAROLYN DURAN, PH.D., DIRECTOR OF CHEMICAL RISK 
    AND COMPLIANCE, GLOBAL SOURCING AND PROCUREMENT, INTEL 
                          CORPORATION

    Ms. Duran. Thank you. I think I brought the Oregon rain 
with me because it's sunny and 85 right there, right now.
    So, Mr. Chairman and Ranking Member Murkowski, thank you 
for the opportunity to testify on the Helium Stewardship Act of 
2013. I am here on behalf of Intel, the Semiconductor Industry 
Association and a broader coalition of industrial and 
scientific users of helium.
    My name is Carolyn Duran. I'm the Director of Chemical Risk 
and Compliance for Global Sourcing and Procurement at Intel 
Corporation. In this capacity I'm responsible for risk 
mitigation for chemicals and gases used in our manufacturing 
technologies. I appreciate your efforts to address the critical 
issue of helium supplies for American industry.
    The current BLM authority to operate the Federal Helium 
Reserve expires October 7th of this year. Currently the reserve 
represents around 30 percent of global supplies of helium and 
closure would result in significant supply line disruptions 
affecting multiple industries. S. 783 is key legislation that 
directly addresses this risk ensuring a continued, stable 
supply for the next few years.
    Our coalition shares concerns around the eminent closure of 
the reserve. The existing deadline heightens the criticality of 
the situation. We, the downstream users of helium, urge the 
Senate to mark up and pass legislation quickly so that serious 
supply disruptions can be averted.
    Semiconductors are a foundational American industry and one 
in which we have maintained a global lead since its inception. 
Our sector is the second leading export industry and employs 
over a million direct and indirect jobs in related industries 
throughout the economy. Semiconductors and the products they 
enable are the cornerstone of all modern electronics which in 
turn enable virtually every aspect of modern life from health 
care to transportation to energy and so on.
    Where does helium fit in?
    Its inert nature, small size, high thermal conductivity and 
extremely low boiling point make it an ideal and unique 
chemical for many applications. Within semiconductor 
manufacturing it's used as a carrier gas for deposition 
processes and as a dilutant in plasma etch processes. It's an 
ideal choice for testing equipment for leaks and helps maintain 
an ultra clean environment needed for these advanced 
technologies.
    Helium is important in the medical industry where MRIs rely 
on the extremely low boiling point to enable the super 
conducting properties of the magnets necessary to enable the 
technology.
    Additionally helium is critical to the scientific community 
where its unique properties enable advancements in condense 
matter physics, brain research and cryogenics, to name a few.
    The helium supply market has experienced and is currently 
facing supply shortages. Many U.S. users of helium have had to 
struggle through reduced helium deliveries and significant 
price increases. Where possible we've reduced our consumption 
through conservation, substitution and recycling, but our 
dependence on helium cannot be eliminated.
    This leads me to the key issue at hand. If U.S. users are 
already struggling to obtain a stable supply of helium, what 
would happen if the reserve ceased sales of 30 percent of the 
world's supply to private entities? While the exact results 
cannot be known I can say with confidence that it would be 
disruptive to an already tenuous supply line. Our industry, 
already realizing shortages, would be directly impacted. An 
extended shortage would have a broad impact to the very 
industries that rely on our products.
    Congress must take action immediately to prevent 
significant disruption in the helium market. Without prompt 
action 30 percent of the world's supply of helium will be no 
longer available. This potential result would be harmful to our 
economy and is completely avoidable. The Helium Stewardship Act 
of 2013 would help continue the supply of helium while also 
transitioning the program to a more market based, transparent 
system.
    Our broad based group of industrial and scientific helium 
end users developed a set of principles that we hope will guide 
the efforts of Congress to address the helium supply. S. 783 is 
consistent with these principles.
    The bill provides a framework for secure supply in the near 
term by providing for continued operation of the reserve and 
the sale of helium to private entities.
    It provides price transparency through clear reporting 
requirements for both the BLM and those who purchase helium.
    The phase in approach of the auction addresses the 
potential of short term supply instabilities.
    The gradual phase in and annual cadence provides for 
additional certainty that will help support long term supply 
contracts with existing suppliers.
    The bill also contains several important provisions to help 
increase future supplies of helium.
    One improvement we would strongly urge the committee to 
consider is to include very clear language that provides that 
in the event of an implementation delay, for whatever reason, 
the current process for allocating helium would remain in 
place. The current bill includes much appreciated language 
aimed at minimizing market disruption, but we think it needs to 
be strengthened and made clear to ensure a disruption does not 
occur.
    We have raised this issue with the committee staff. We are 
confident that they understand our concerns and that 
appropriate revisions to this language can be incorporated into 
the bill.
    Intel Corporation and the rest of the semiconductor 
industry, as well as our broader coalition, are reliant on a 
consistent, secure supply of helium. We are appreciative of the 
extensive work done by Chairman Wyden and Senator Murkowski on 
this bill to address the imminent danger posed by lack of 
action.
    Once again, we urge the Senate to mark up and pass 
legislation quickly to extend the authority of the BLM past the 
October 7th expiration date. This is absolutely necessary to 
prevent disruption to an already tenuous supply of helium.
    Thank you for the opportunity to testify on behalf of Intel 
Corporation, the broader U.S. semiconductor industry and our 
coalition of industrial and scientific users of helium. I'm 
happy to take questions.
    [The prepared statement of Ms. Duran follows:]

 Prepared Statement of Carolyn Duran, Ph.D., Director of Chemical Risk 
   and Compliance, Global Sourcing and Procurement, Intel Corporation
    Mr. Chairman and Ranking Member Murkowski, thank you for the 
opportunity to testify on behalf of Intel and the Semiconductor 
Industry Association on the ``Helium Stewardship Act of 2013'' (S.783). 
My name is Carolyn Duran, and I am the Director of Chemical Risk and 
Compliance for Global Sourcing and Procurement at Intel Corporation. In 
this capacity I am responsible for risk mitigation for chemicals and 
gases used in our manufacturing technologies globally. I appreciate 
your efforts to address the critical issue of helium supplies for 
American industry.
    The current BLM authority to operate the Federal Helium Reserve 
expires October 7, 2013. Currently, the Federal Helium Reserve 
represents around 40 percent of the US supply of helium and 30 percent 
of global supplies, and closure of the Reserve would result in 
significant supply line disruptions affecting multiple industries 
within our country. S.783 is key legislation that directly addresses 
this risk, ensuring a continued, stable supply of this critical 
material for the next few years. I am here today not only on behalf of 
Intel and the Semiconductor Industry Association (SIA), our industry 
trade association,\1\ but also as part of a broader downstream 
coalition\2\ comprised of companies across many manufacturing sectors 
as well as scientific users of helium, all of whom share similar 
concerns around the imminent cessation of sales of helium from the 
Federal Helium Reserve.\3\ The existing deadline heightens the 
criticality of the situation, and we, the downstream users of helium, 
urge the Senate to mark-up and pass legislation quickly, so that 
serious supply disruptions can be averted. This important legislation 
must move forward promptly in order to avoid damage to our economy and 
to maintain U.S. leadership in advanced manufacturing and scientific 
leadership.
---------------------------------------------------------------------------
    \1\ Information on SIA is available at www.semiconductors.org.
    \2\ Our coalition includes the following companies and 
organizations: American Physical Society, Applied Materials, Corning 
Incorporated, Cree, Inc., The Dow Chemical Company, Fairchild 
Semiconductor, Freescale Semiconductor, General Electric Company, 
GLOBALFOUNDRIES Inc., Information Technology Industry Council (ITIC), 
Intel Corporation, IBM Corporation, Kodak, Materials Research Society, 
Medical Imaging & Technology Alliance (MITA), Micron Technology 
Incorporated, National Electrical Manufacturers Association (NEMA), ON 
Semiconductor, Philips, Semiconductor Industry Association (SIA), 
Siemens, and Texas Instruments Incorporated.
    \3\ See http://www.energy.senate.gov/public/index.cfm/files/
serve?File_id=02eced68-3093-4794-bb52-15a26f3481ef.
---------------------------------------------------------------------------
    Founded in 1968, Intel Corporation is the world's largest 
semiconductor company, with net revenues of $53.3B in 2012. Intel 
continues to invest in US manufacturing, with over half of our roughly 
100,000 person employee base residing in the United States. Intel's 
latest technologies for microprocessor fabrication, assembly and test 
are developed and implemented Oregon and Arizona. In 2012 alone, Intel 
invested over $8.5B in capital in the United States. Additionally, over 
three quarters of our chip manufacturing occurs in U.S. factories 
located in Arizona, New Mexico, Oregon and Massachusetts. Our products 
are sold globally with more than three quarters of our revenues 
occurring outside the United States. Helium is a critical element in 
many aspects of our leading edge technology manufacturing processes.
    Semiconductors are a foundational American industry and one in 
which the U.S. industry has maintained a global lead since its 
inception. Our sector is the second-leading export industry and employs 
almost 250,000 employees in jobs with wages that average over 
$120,000--well above the average of the rest of US manufacturing. The 
broader economic impact of our industry is much greater. SIA studies 
indicate that in addition to jobs in our sector, those jobs support 
over a million indirect jobs in related industries throughout the 
economy. Even broader still, semiconductors and the products they 
enable are the cornerstone of all modern electronics, which in turn 
enable virtually every aspect of modern life, from health care to 
transportation to energy and so on.
    But Intel and the semiconductor industry is not alone in our 
reliance on helium to deliver advanced technologies. Helium is a 
critical component in the medical industry, where MRI's rely on the 
extremely low boiling point (4 degrees Kelvin, near absolute zero) to 
enable the superconducting properties of the magnets necessary to 
enable the technology. Many companies use helium to create a protective 
atmosphere for arc welding. Eighteen percent of helium goes to laser 
welding used in the production of numerous products, including 
electrical and auto components. An additional six percent is used for 
testing of air-conditioners for leaks. Additionally, helium is critical 
to the scientific community, where its unique properties enable 
advancements in condensed matter physics, brain research and 
cryogenics, to name a few. In short, helium is critical to important 
sectors of America's economy and leadership in advanced manufacturing, 
as well as our country's leadership in scientific advancements.
    In order to illustrate the importance of helium in producing 
today's leading edge semiconductor products, I'd like to take a moment 
to walk you through the complexities of our manufacturing processes. 
Our most sophisticated semiconductor products feature more than a 
billion transistors etched onto silicon die the size of a fingernail. 
Realizing this level of complexity takes several hundred steps and 
several weeks on the manufacturing line, all inter-related. The world's 
leading scientists and engineers use sophisticated equipment and 
processes to control at the atomic level, across wafers as large as 
twelve inches in diameter. At each step in the process, researchers 
develop new processes, using many different chemicals, to deliver the 
required properties resulting in improved performance and better 
products. The advancement of semiconductor technology over time, 
commonly known as ``Moore's Law,'' has driven the semiconductor 
industry to extraordinary achievements which today result in 
semiconductor chips that provide phones, tablets and notebooks with 
more computing power than rooms of computers decades ago. While Intel 
releases a new technology every two years, behind this is several 
billion dollars in R&D investment and six or more years of engineering 
effort. With each new technology requiring roughly twenty-five percent 
new tools, delivering new technologies is incredibly capital intensive. 
Leading edge semiconductor manufacturing equipment can cost over $100M 
per ``tool,'' and a new factory can cost upwards of $5 billion dollars.
    Chemicals and gases are critical to the manufacturing process. If 
one were to look at the periodic table, you would find that many of the 
elements are used in our manufacturing process. Helium is one of these 
gases. In fact, helium is one gas that is used pervasively throughout 
the process, and without it, our factories would not operate.
    This is true for all semiconductor manufacturing, not just Intel. 
Why is this the case? Helium has unique physical and chemical 
properties that are utilized not only within the manufacturing process 
steps, but also to help achieve the ultra-clean manufacturing and 
assembly environments essential for advanced semiconductor 
manufacturing.\4\ As an inert gas with high thermal conductivity, it is 
used as a carrier gas for deposition processes, and as a dilutant in 
plasma etch processes. Its low boiling point (4 Kelvin, near absolute 
zero) enables specialized wafer cooling applications. Additionally, due 
to the small size and inertness of the helium molecule, it is an ideal 
choice for testing equipment for leaks. This is used for safety testing 
for other chemicals used in the manufacturing process, as well as to 
maintain the ultra-clean environment needed for these advanced 
technologies. It is these same properties that make helium compelling 
for use in semiconductor manufacturing that make helium difficult to 
manage. The small size of the molecule, while critical for leak 
testing, results in leakage out of the very containers used to store 
helium. Just like helium leaking out a helium balloon, cylinders of 
helium lose roughly 1 percent of the gas each day. Due to this fact 
alone, we are dependent of regular deliveries to our facility to 
maintain a stable supply line. Any disruption, even of a few days, 
could slow production in a semiconductor facility. A significant delay 
could result in the need to shut a facility down. This is an untenable 
option for our company and other industries, and for the country as a 
whole.
---------------------------------------------------------------------------
    \4\ National Academies of Science, ``Selling the Nation's Helium 
Reserve'' (2010) at pp. 63, 67.
---------------------------------------------------------------------------
    Due to prior shortages, over the past several years Intel and other 
manufacturers have worked to replace helium with alternatives, such as 
argon or nitrogen, where possible. We continually undergo conservation 
efforts in both existing and new technologies. In some cases, the 
degradation in properties or performance associated with alternatives 
has led to a need to continue utilization of helium. When transitions 
to alternate gases are feasible, they typically result in costly 
retrofits to existing tools and equipment used to make our products. 
When helium is utilized for its low boiling point, as in MRI's and 
condensed matter physics, there simply are no substitutes.
    The helium supply market has experienced and is currently facing 
supply shortages. Many U.S. users of helium have had to struggle 
through reduced helium deliveries and significant price increases.
    This leads me to the key issue at hand: If U.S. users are already 
struggling to obtain a stable supply of helium critical to their 
technology, what would happen if the Federal Helium Reserve ceased 
sales of 30 percent of the world's supply to private entities? While 
the exact results cannot be known, I can say with confidence that it 
would be disruptive to an already tenuous supply line. The 
semiconductor industry, already realizing shortages, would be directly 
impacted. If the supply were to be disrupted for a significant amount 
of time, the resulting shutdown of our manufacturing facilities would 
directly impact the overall economy. A shortage impacting our industry 
will have a broad impact to the very industries that rely on our 
products, including health care, transportation and the energy sectors. 
While this outcome is not likely, it is possible, but unacceptable. We 
have seen supply line disruptions in other areas of the semiconductor 
business that have led to price increases and shortages.
              the helium stewardship act of 2013 (s. 783)
    Congress must take action immediately to prevent significant 
disruption in the helium market. Without prompt action, BLM's authority 
to sell helium from the Reserve will expire later this year, and 30 
percent of the world's supply of helium will no longer be available to 
important sectors of our economy. This potential result would be 
harmful to our economy, and is completely avoidable. The Helium 
Stewardship Act of 2013 would help continue the supply of helium, while 
also transitioning the program to a more market-based, transparent 
system.
    Our broad-based group of industrial and scientific helium end-users 
developed a set of principles that we hope will guide the efforts of 
Congress to address the helium supply. These principles include the 
following:

          1. Establish a framework for secure, continuous supplies of 
        helium that can be implemented through long-term contracts with 
        suppliers.
          2. Ensure price transparency.
          3. Provide for mechanisms to prevent market speculation or 
        manipulation.
          4. Adequate transition period to assure continuity in 
        supplies.
          5. Promote increased supplies of helium in the future.

    The ``Helium Stewardship Act of 2013'' (S.783) is consistent with 
the spirit of these principles. The bill provides a framework for a 
secure supply in the near term by providing for continued operation of 
the Federal Helium Reserve and the sale of helium to private entities. 
It provides price transparency through clear reporting requirements for 
both the BLM and those who purchase helium. The phase-in approach of 
the auctions addresses the potential of short-term supply 
instabilities; the gradual phase-in of the auction and annual cadence 
provides for additional certainty that will enable companies to work 
with existing suppliers and help support long-term supply contracts. 
The bill calls for an annual auction, which our coalition believes will 
enhance the reliability and stability of the helium supply. The bill 
also contains several important provisions to help increase future 
supplies of helium.
    One improvement we would strongly urge the Committee to consider is 
to include very clear language that provides that, in the event of an 
implementation delay of the new auction, for whatever reason, the 
current process for allocating Helium would remain in place. The 
current bill includes much-appreciated language aimed at minimizing 
market disruption, but we think it needs to be strengthened and made 
clearer to ensure a disruption does not occur. We have raised this 
issue with the Committee staff, and we are confident that they 
understand our concerns and that appropriate revisions to this language 
can be incorporated into the bill.
    Intel Corporation and the rest of the semiconductor industry, as 
well as our broader coalition, are reliant on a consistent, secure 
supply of helium to produce our products, and we are appreciative of 
the extensive work done by Chairman Wyden and Senator Murkowski on this 
bill to address the imminent danger posed by lack of action. Once 
again, we urge the Senate to mark-up and pass legislation quickly to 
extend the authority of the BLM past the October 7, 2013 expiration 
date. This is absolutely necessary to prevent disruption to an already 
tenuous supply line of helium, critical natural resource.
    Thank you for the opportunity to testify on behalf of Intel 
Corporation, the broader US semiconductor industry, and our coalition 
of industrial and scientific users of helium. I am happy to take any 
questions.

    The Chairman. Dr. Duran, thank you.
    I particularly appreciate your focusing on the relationship 
of helium to the American industrial base. I think we all 
understand, as Oregonians, for example, how important this has 
been to semiconductors, to electronics. I think what you've 
done is taken the Oregon message, something we see translate 
into high skill, high wage jobs in our State and make it writ 
large so it affects the whole country and what it means for 
American industry. So I thank you very much.
    Ms. Duran. Thank you.
    The Chairman. You make Oregon proud today.
    Alright.
    Dr. Moses Chan, Professor of Physics.

     STATEMENT OF MOSES CHAN, PH.D., PROFESSOR OF PHYSICS, 
                 PENNSYLVANIA STATE UNIVERSITY

    Mr. Chan. Good morning, Mr. Chairman and Senator Murkowski. 
I appreciate the opportunity to testify before you today.
    My name is Moses Chan. I teach physics at Penn State 
University. I'm a member of the National Academy of Sciences. I 
served in a committee convened by NRC to address a number of 
questions regarding the current law that required the selloff 
of the Federal Helium Reserve. A report of this study was 
issued in 2010.
    I testified before this committee last year with regard to 
the Helium Stewardship Act of 2012. In my testimony this 
morning I have updated my statement I have made before. I'm 
glad the committee is picking up this important issue again.
    We have heard from Dr. Duran that how important helium is 
for a lot of industry of our country. I will speak, however, 
this morning primarily from the perspective of a low 
temperature scientist. We, as a group, are interested in 
understanding the behavior of material and also electronic 
system close to absolute zero, liquid helium provides the means 
to cool it down to such a temperature.
    These studies are not as esoteric as it seems. Everyone in 
this room have cell phones. We also have other sophisticated 
electronic system as pointed out by Dr. Duran. The physical 
principle how this sophisticated electronic equipment and other 
semiconductor physics were made possible by the discovery and 
clarifying painstaking experiment carried out under the low 
temperature environment.
    Magnetic resonance imaging, MRI, is another example of 
society benefit that exists only as a result of ground breaking 
experiments in 1950s and 1960s carried out at low temperature. 
In addition in order for MRI devices to work there must be very 
strong and extremely stable superconducting magnet. This is 
provided by immersing the magnet in liquid helium.
    These examples are only a small example of low temperature 
experiments that have been made to the benefit of society. 
Ongoing research conducting with the help of liquid helium in 
our Nation's universities, for example on quantum computing and 
in the other government lab and industrial laboratories as 
well, will, without a doubt, lead to new technology that will 
improve our children and grandchildren's lives and contribute 
to the economic well being of our country.
    The scientific community uses, in fact, a very small 
fraction of the helium in the world market estimated to be 
about 3 percent. However because of the nature of the 
experiment where it's truly vulnerable to any delay or shortage 
of the supply of helium, if a shipment of liquid helium is late 
by more than a couple of days then the experiment must be 
warmed up prematurely. Weeks or even months of work will become 
useless.
    Since liquid helium is very cold it is constantly boiling 
off in the storage container. It is not practical for any 
university or government lab to stockpile large quantity of 
liquid helium in anticipation of a late shipment.
    The price of helium is another important issue. A typical 
helium scientist in my university are supported by a research 
grant by NSF or DOE and other government agency. Liquid helium 
often accounts for up to 40 to 50 percent of the budget of the 
grant. Therefore any substantial hike in the price will have a 
detrimental effect on the research program.
    Unfortunately in the last 4 years the price of liquid 
helium has really gone up on the order of 400 percent. 
Therefore say from about $3.50 a liter now. Some of our 
colleagues are paying $15 a liter, in University of Oregon, by 
the way.
    The price hike appears to be accelerating. For example last 
year, between last year and this year, the price of some of our 
colleagues getting 100 percent increase in the price.
    In addition interruption in supply loss in more than a week 
happened in 2006 and 2007 and also happened last summer in 2012 
where at least 29 universities and laboratories have helium 
shipment abruptly canceled or delayed. This interruption and 
price hike is creating havoc to a lot of the research programs.
    The 2010 NRC report identified a number of problems with 
aspect a straight line selling off the helium reserve required 
to take place by 2015. I've included some of the 
recommendations in the written testimony that was in this 
report. I'm heartened to see that the Helium Stewardship Act of 
2013 that you are considering is addressing many of the 
problems identified in the report.
    I want to take this opportunity to highlight the 
recommendations that directly affect the helium research 
community.
    The report recommended that researchers with helium Federal 
grants be allowed to participate in the existing program for 
government user of helium that would give them priority when 
there is a helium shortage. I'm very pleased that the 
Stewardship Act responds positively to this recommendation.
    Following the issue of our report, BLM began to allow 
researchers, individual researchers, to register for the in 
kind program. But the implementation of this in kind or at cost 
plus program have been having some difficulties. As I point out 
some of our colleagues are paying prices like 4 or 5 times 
larger than other people. Ensuring this in kind balance at cost 
plus expenses program to be applied consistently and with 
transparency is extremely important.
    The NRC report also recommended that the funding agency 
like NSF, DOE, help researchers to acquire helium recycling 
equipment that would reduce the long term need of buying new 
liquid helium. Unfortunately it appears that because of limited 
funding this recommendation has not been implemented in any 
significant degree.
    I thank you for your attention. I will be happy to answer 
any questions.
    [The prepared statement of Mr. Chan follows:]

    Prepared Statement of Moses Chan, Ph.D., Professor of Physics, 
                     Pennsylvania State University
    Good morning, Mr. Chairman, Ranking Member Murkowski, and members 
of the Committee. My name is Moses Chan. I am a Professor of Physics at 
Penn State University and a member of the National Research Council's 
Committee on Understanding the Impact of Selling the Helium Reserve.\1\
---------------------------------------------------------------------------
    \1\ The National Research Council is the operating arm of the 
National Academy of Sciences, the National Academy of Engineering, and 
the Institute of Medicine of the National Academies, chartered by 
Congress in 1863 to advise the government on matters of science and 
technology.
---------------------------------------------------------------------------
    I will be discussing the study prepared by that committee as part 
of testimony on S. 783, The Helium Stewardship Act of 2013. The study 
was commissioned by the Department of the Interior's Bureau of Land 
Management (BLM) and the principal task of our committee was to 
determine whether the sell-off of the nation's helium reserve as 
prescribed by law has had an adverse effect on the United States' 
scientific, technical, biomedical, and national security users of 
helium. Our committee concluded that the sell-off has had and will 
continue to have adverse effects and we developed a series of 
recommendations to address several outstanding issues with respect to 
the reserve.
    To provide context for those recommendations, I will first give a 
brief overview of our critical helium needs, with a focus on the plight 
of the small research user community, and also discuss those uses where 
substitutes or conservation and recycling are possible. I will follow 
this with a discussion on several matters addressed in the report--
helium supply issues, the federal helium reserve itself, and the sale 
of federally owned helium. My testimony will conclude with a discussion 
of the committee's major recommendations regarding the reserve and its 
management in the future.
                             uses of helium
    Ready access to affordable helium is critical to many sectors in 
academe, industry and government and the range of those uses is quite 
impressive, enabling research at the coldest of temperatures, weather 
monitoring, surveillance in areas of combat, and optical fiber 
production, among many other applications.
    The diversity in uses for helium arises from its unique physical 
and chemical characteristics--specifically, its stable electronic 
configuration and low atomic mass.
    Among those unique characteristics are the temperatures at which 
helium undergoes phase transitions (liquefies and freezes). Helium has 
the lowest melting and boiling points of any element: It liquefies at 
4.2 Kelvin and 1 atmosphere and solidifies only at extremely high 
pressures (25 atmospheres) and low temperatures (0.95 Kelvin). These 
characteristics have led to many cryogenic applications for helium; the 
largest single category of applications by percentage of helium 
consumed. These range from the efforts of individuals engaged in small-
scale cryogenic research to large groups using high-energy accelerators 
and high-field magnets. All rely upon helium to conduct their research 
and because the federal government supports many of these researchers, 
it has a direct stake in their continued success. Cryogenic users also 
include segments of the medical profession, not only for biological 
research in devices such as superconducting quantum interference 
devices (SQUIDS), but also for diagnosis with tools such as magnetic 
resonance imaging (MRI) devices.
    Helium's ability to remain liquid at extremely low temperatures 
also gives rise to its usage for purging and pressurizing systems and 
as such, helium is a critical component in our nation's space 
exploration and defense efforts. The National Aeronautics and Space 
Administration (NASA) and the Department of Defense (DOD) use 
significant amounts of helium, as it is the only gas that can be used 
to purge and pressurize the tanks and propulsion systems for rockets 
fueled by liquid hydrogen and oxygen.
    Other uses rely on helium's lifting capabilities. As the second 
lightest element, gaseous helium is much lighter than air, causing it 
to be quite buoyant. When combined with helium's chemical inertness--
especially when compared with the highly flammable alternative, 
hydrogen--its buoyancy makes helium an ideal lifting gas. NASA and the 
Department of Energy (DOE) use helium to support weather-related 
missions and various research and development programs funded by these 
agencies, both at government facilities and at universities. DOD also 
must have ready access to helium to operate the balloon- and dirigible-
based surveillance systems needed for national security.
    Other applications draw on other characteristics of helium--its 
relatively high thermal conductivity, low viscosity, and high 
ionization potential--either alone or in combination. These 
applications include welding, providing controlled atmospheres for 
manufacturing operations, and detecting leaks in equipment providing 
vacuum environments to science and industry. Table 1 summarizes the 
principal applications of helium and the share of use in the United 
States.
    Small-Scale Researchers.--Among the events that triggered this 
study were soaring prices and limited supplies that characterized the 
refined helium market in the fall of both 2006 and 2007. The committee, 
composed of individuals from a wide range of professions--economists, 
business people, and scientists--noted that small-scale scientists were 
particularly hard hit by price shocks and interruptions in the supply 
of refined helium during that time. An informal poll conducted by 
committee members of approximately 40 research programs at universities 
and national laboratories that use helium indicated that shortages of 
liquid helium interrupted the helium supply for almost half of these 
programs, with some interruptions lasting for weeks at a time during 
the late summer and fall of both 2006 and 2007. For many of those 
scientists, losing access to helium, even temporarily, can have long-
term negative repercussions for their research.
    In general, the federal grant programs that support these 
researchers simply are not designed to cope with significant pricing 
shifts and other market volatilities experienced here. Grants typically 
are for a two to three year period and for a set amount that does not 
adjust if a principal expense of research such as helium significantly 
increases. Further, the relatively short duration of such grants, with 
no guaranty of renewal, effectively precludes these research programs 
from entering into long-term contracts that might at least partially 
reduce the risk of significant prices increases and shortages.
    Domestic vs. foreign consumption.--The balance between domestic and 
foreign consumption of helium has shifted significantly in the past 15 
years. Until the mid-1990s, substantially all helium production took 
place in the United States. This factor, combined with high shipping 
costs and limited availabilities, meant that until recently, the amount 
of helium consumed abroad was fairly small. In 1990, for example, 70 
percent of worldwide helium consumption was in the United States.
    Since 2000, the demand for helium in the United States has remained 
fairly constant but has grown significantly elsewhere, reducing the 
U.S. share of total consumption. See Figure 1*. Foreign growth has been 
assisted by the opening of several helium-producing facilities outside 
the United States that will be discussed later in this testimony, as 
well as by improved capabilities in the short-term storage and handling 
of refined helium. This period also saw a significant increase in 
industrial applications, principally in semiconductor and optical fiber 
fabrication facilities outside the United States, and the shifting of 
industrial facilities that use helium from the United States to foreign 
countries. By 2007, United States helium consumption had dropped to 
below 50 percent of worldwide demand. Despite a slight downturn in 
overall demand for helium associated with the global recession in 2008-
2009, the committee believed, based on recent trends, that foreign 
demand should continue to increase relative to demand in the United 
States.
---------------------------------------------------------------------------
    * Figures 1-3 have been retained in committee files.
---------------------------------------------------------------------------
    Substitution, Conservation, Recovery.--For some applications, other 
gases can replace helium, but other applications rely critically on 
helium's unique properties and there are no alternatives. Applications 
in the first category, where substitutes for helium might exist, 
include these:

   Lifting.--For these uses, where low density is the only 
        requirement, hydrogen is sometimes substituted if safety 
        concerns can be met.
   Welding.--Here, chemical inertness is the key property. For 
        processes such as gas tungsten arc welding--a critical process 
        applicable to reactive metals such as stainless steel, 
        titanium, aluminum, and others in high-value, high-reliability 
        applications--Europe mostly uses argon, while the United States 
        uses helium.
   Semiconductor and fiber optics manufacturing.--In these 
        applications, high thermal conductivity is the important 
        property. Often, hydrogen may be substituted.

    In the above applications, economics, market conditions, 
availability, safety, and legislation can influence the choice among 
helium and other gases.
    In contrast, other applications require the unique properties of 
helium, typically relying on the extremely low boiling point of liquid 
helium to achieve a desired result. These applications include the 
following:

    Purging/Pressurizing.--Entities such as NASA and DOD must purge and 
then pressurize liquid hydrogen (LH2) and liquid oxygen 
(LOx) rocket propulsion systems and fuel tanks that may be at liquid 
air temperatures or colder. Although gaseous hydrogen might have the 
right physical properties for use in LOx systems, its reactivity with 
oxygen precludes its use. Nitrogen is not desirable because nitrogen 
might contaminate the LOx. In LH2 environments, all gases 
other than helium and hydrogen would freeze, clogging fuel lines and 
systems and rendering the rocket engines nonfunctional.

   Superconductivity.--All applications that employ 
        superconducting magnets, including medical magnetic resonance 
        imaging (MRI) machines, high energy accelerators and many high 
        field magnets used in research, rely on the continued 
        availability of helium. Current materials and technologies 
        dictate that only helium can act as the crucial refrigerant to 
        cool these materials below superconducting thresholds.
   Basic research.--Here, no other substance can be used as a 
        refrigerant to achieve temperatures from 4.2 K above absolute 
        zero down to millikelvins.
                            supply of helium
    Sources.--Helium is the second-most-abundant element in the 
universe, but its diffusive properties mean that atmospheric helium 
leaks into space, rendering it relatively scarce on Earth. At only 5.2 
parts per million (ppm) in air, it is not economically feasible to 
extract helium from the atmosphere using current technology. Rather, 
the principal source of helium is natural gas fields. Helium nuclei (or 
alpha particles) are produced in the radioactive decay of heavy 
elements such as uranium and thorium, located in Earth's crust. While 
most of these helium atoms find their way to the surface and escape, a 
small fraction are trapped by the same impermeable rock strata that 
trap natural gas. Such natural gas usually consists primarily of 
methane and secondarily of ethane, propane, butane, and other 
hydrocarbons and various other contaminants, including H2S, 
CO2, and He.
    There are three different situations in which helium contained in 
natural gas may be economically recovered:

   Helium may be extracted as a secondary product during the 
        primary process of producing methane and natural gas liquids 
        (NGLs) such as propane, ethane, butane, and benzene.
   For natural gas fields that have sufficient concentrations 
        of helium and other non-fuel gases such as sulfur and 
        CO2 to economically justify their extraction, the 
        gas in those fields may be directly processed for the non-fuel 
        constituents.
   Helium may be extracted during the production of liquefied 
        natural gas (LNG), which consists primarily of liquefied 
        methane.

    For the first two recovery processes, current technology requires 
threshold concentrations of 0.3 percent helium before separation of the 
helium is commercially feasible. For the third process, the helium is 
extracted from the tail gases, the gases that remain after the methane 
has been liquefied. The helium concentration in those tail gases is 
much higher than in the original gas, allowing the economical 
extraction of helium even through the original natural gas might 
contain as little as 0.04 percent helium.
    Figure 2 shows the principal domestic sources of helium. 
Historically, most helium in the United States has been recovered using 
the first method described above, as a byproduct of producing methane 
and natural gas liquids. Almost all of that helium has been produced in 
the mid-continental region around the Hugoton Field. As is described in 
later testimony, this is where the federal helium reserve system is 
located. The Hugoton Field is mature and the production of methane, NGL 
and secondary products such as helium from that field is expected to 
significantly decline over the next several years. In the last few 
decades, helium has been produced in Wyoming using the second method 
described above, where the natural gas is directly processed for its 
helium and other non-fuel content. Potential helium reserves have also 
been explored in the Four Corners area.
    Outside of the United States, only small reserves of the first two 
sources of helium have been exploited and for many years, the rest of 
the world has relied upon the United States as their principal source 
of helium. Recently, the development of large LNG facilities has opened 
up new, potential sources of helium. The principal countries in which 
those facilities are being developed are Algeria, Qatar, and Russia, 
with smaller facilities coming online in Australia. These areas are 
expected to become increasingly more important sources of helium as the 
Hugoton and adjoining fields mature. See Figure 3.
    Supply Chain.--After being refined, helium is transported to end 
users through a fairly complicated supply chain. In the United States, 
the helium typically is liquefied and delivered by refiners either to 
their transfill stations situated throughout the United States or to 
distributors of industrial gases. This transportation is handled using 
expensive domestic tanker trucks or bulk-liquid shipping containers 
standardized according to the International Organization for 
Standardization (ISO), each of which holds approximately 1.0 to 1.4 
million cubic feet (MMcf) of helium. While some of the largest helium 
users contract directly with a refiner for their helium purchases and 
deliveries, most sales to end users are through the retail division of 
a refiner or a distributor. The refiners and distributors then 
repackage the helium, either in its liquid state into dewars--
evacuated, multiwalled containers designed to hold liquid helium--of 
varying sizes or in its gaseous state into pressurized cylinders, tube-
trailers, or other modules as needed by the end users.
                    federal policy regarding helium
    Helium has long been the subject of public policy deliberation and 
management, largely because of its many strategic uses and its unusual 
source. Shortly after natural gas fields containing helium were 
discovered at the beginning of the last century, the U.S. government 
recognized helium's potential importance to the nation's interests and 
placed its production and availability from federally owned mineral 
interests under strict governmental control. In the early years, helium 
principally was used for its lifting capability, as a safe alternative 
to highly flammable hydrogen. By the mid-1920s full-scale production 
facilities had been built and were being operated by the federal 
government to support its lighter-than-air aviation programs.
    In the 1960s, helium's strategic value in cold war efforts was 
reflected in policies that resulted in the creation of the federal 
helium reserve. Although much of the infrastructure predates the cold 
war, the Federal Helium Reserve as a program began and currently 
consists of

   The Bush Dome reservoir, a naturally occurring underground 
        structural dome in the Cliffside Field near Amarillo, Texas, 
        where federally owned (and some privately owned) crude helium 
        is stored;
   An extensive helium pipeline system running through Kansas, 
        Oklahoma, and Texas (the Helium Pipeline) that connects crude 
        helium extraction plants with each other, with helium refining 
        facilities, and with the Bush Dome reservoir,
   Various wells, pumps and related equipment used to 
        pressurize the Bush Dome reservoir, to place into and withdraw 
        crude helium from it, and to operate other parts of the helium 
        reserve.

    The 1960s efforts also included inducements for private companies 
to develop helium extraction and refining facilities and to sell crude 
helium to the United States. The program was quite successful, 
resulting in the accumulation of approximately 35 billion cubic feet 
(Bcf) of helium by the mid 1970s. This amount was many times the 600 
(750?) million cubic feet (MMcf) of helium then being consumed 
domestically (annually?) (globally) and so further purchases were 
suspended. The amount of helium maintained in the helium reserve 
remained fairly constant for the next 20 years.
    The latest manifestation of public policy is expressed in the 
Helium Privatization Act of 1996 (1996 Act), which directs that 
substantially all of the helium accumulated as a result of those 
earlier policies be sold off by the year 2015, at prices sufficient to 
repay the federal government for its outlays associated with the helium 
program, plus interest.
    Context of Current Study.--The last section of the 1996 Act called 
for the Secretary of the Interior to commission a study from the 
National Academies to determine whether disposal of federally owned 
helium pursuant to the 1996 Act would have a substantial adverse effect 
on critical interests of the country. The report that followed (2000 
Report) found that because the helium market had been quite stable 
since the 1980s and the price at which federally owned helium must be 
sold under the 1996 Act was significantly higher than the price at 
which privately owned crude helium was then being sold, the sell off of 
the helium would not have a substantial adverse effect on critical 
users. The report predicted that the price of privately owned crude 
would gradually rise to the price at which federally owned helium was 
being offered, and until it reached that level very little federally 
owned helium would be purchased, given the availability of cheaper 
sources.
    While the helium market remained fairly stable for several years 
after issuance of the 2000 Report, that report did not accurately 
predict the market's response to efforts to sell-off federally owned 
helium. In March 2003, when BLM first offered federally owned helium 
for sale, the entire 1.6 Bcf offered for sale was purchased. Rather 
than gradually rising, the prices for privately owned crude helium 
rapidly rose such that by 2007, those prices were on par with and often 
exceeded the legislatively prescribed price for federally owned helium. 
Retail prices for helium commensurably rose, more than doubling between 
2003 and 2008. In addition, during the summer and fall of 2006 and 
2007, the helium market encountered widespread shortfalls, with some of 
the interruptions lasting for weeks at a time.
    The amount of federally owned helium being sold is enormous: at the 
time our report was issued in 2010, it was equivalent to approximately 
one-half of U.S. helium needs and almost one-third of global demand. 
One consequence is that the price of federally owned helium, which is 
set not by current market conditions but by the terms of the 1996 Act, 
dominates, if not actually controls, the price for crude helium 
worldwide.
    Committee Findings, Recommendations.--As mentioned at the beginning 
of this testimony, the principal charge of our committee was to 
determine whether the sell-off of the nation's helium reserve as 
prescribed by law has had an adverse effect on the United States' 
scientific, technical, biomedical, and national security users of 
helium. In response to this charge, the committee determined that 
selling off the helium reserve, as required by the 1996 Act, has 
adversely affected critical users of helium and is not in the best 
interest of U.S. taxpayers or the country. The sell-down of federally 
owned helium, which had originally been purchased to meet the nation's 
critical needs, is coming at a time when demand for helium by critical 
and noncritical users has been significantly increasing, especially in 
foreign markets. If this path continues to be followed, within the next 
ten to fifteen years the United States will become a net importer of 
helium whose principal foreign sources of helium will be in the Middle 
East and Russia.
    In addition, the pricing mandated by the 1996 Act has triggered 
significant increases in the price of crude helium, accompanied by 
equally significant increases in the prices paid by end users. Finally, 
the helium withdrawal schedule mandated by the 1996 Act is not an 
efficient or responsible reservoir management plan. If the reserve 
continues to be so managed, a national, essentially nonrenewable 
resource of increasing importance to research, industry, and national 
security will be dissipated.
    The committee recommends several ways to address the outstanding 
issues. Several of its recommendations respond to the very large impact 
that selling off the reserve has had and is continuing to have on the 
helium market in general, including a recommendation that procedures be 
put in place that open the price of federally owned helium to the 
market.
    Another of the committee's concerns is that the drawdown schedule 
required by the 1996 Act, which dictates that the reserve helium be 
sold on a straight-line basis--the same amount must be sold each year 
until the reserve is substantially gone--is a wasteful way to draw down 
a reservoir. Because it is much more costly and more likely to leave 
significant amounts of helium unrecoverable than alternative drawdown 
scenarios, the committee recommends that this portion of the 1996 Act 
be revisited. In addition, given recent developments in the demand for 
and sources of helium (the principal new sources of helium will be in 
the Middle East and Russia, and if the sell-down continues, the United 
States will become a net importer of helium in the next 10 to 15 
years), the committee recommends that Congress reconsider whether 
selling off substantially all federally owned helium is still in the 
nation's best interest.
    The committee also addresses the needs of small-scale government-
funded researchers who use helium, a group that has been hit 
particularly hard by sharp price rises and shortages that have 
characterized the helium market in recent times. This group was singled 
out mainly because such research is an important public enterprise and 
the funding mechanisms available to the researchers, typically grants 
on 3-year cycles for set amounts, do not allow them to respond to 
short-term fluctuations. These research programs should have some 
protection from the instabilities recently characterizing the helium 
market. Accordingly, the committee recommends that the researchers be 
allowed to participate in an existing program for government users of 
helium that would give them priority when there is a helium shortage. 
It also recommends that funding agencies help such researchers to 
acquire equipment that would reduce their net helium requirements. 
Implementing these recommendations would not subsidize such users nor 
would it require significant additional outlays: Indeed, over time, it 
would lead to the much more efficient use of the federal funds with 
which helium is purchased.
    Because the helium market is rapidly changing and helium is 
critically important to many critical users, the committee includes 
recommendations that would facilitate long-range planning to meet the 
nation's helium needs, including the collection and dissemination of 
needed information and the formation of a standing committee to 
regularly assess whether national needs are being appropriately met. 
The remaining conclusions and recommendations consist of steps to help 
properly manage the helium reserve and protect this important national 
resource. The language of the committee's full recommendations is 
contained in the summary of the report, which is attached to this 
statement.
    Finally, while noting that the question of how critical helium 
users in the United States will be assured a stable supply of helium in 
the future is beyond the scope of its charge, the committee points out 
that several important issues related to this topic remain unanswered. 
How will the large amounts of federally owned helium that remain after 
the mandated sell-off deadline in 2015 be managed after that date? 
Moreover, from a wider perspective, should a strategic helium reserve 
be maintained? These questions need to be answered in the near future, 
well before most federally owned helium is sold.
    This concludes my testimony to the committee. Thank you for the 
opportunity to testify on this important topic. I would be happy to 
elaborate on any of my comments during the question and answer period. 


            Summary from Selling the Nation's Helium Reserve
               a report of the national research council
    Ready access to affordable helium is critical to many sectors in 
academe, industry and government. Many scientists--from individuals 
engaged in small-scale cryogenic research to large groups using high-
energy accelerators and high-field magnets--rely upon helium to conduct 
their research and because the federal government supports many of 
these researchers, it has a direct stake in their continued success. 
The medical profession also depends on helium, not only for biological 
research in devices such as superconducting quantum interference 
devices (SQUIDS), but also for diagnosis with tools such as magnetic 
resonance imaging (MRI) devices. Industrial applications for helium 
range from specialty welding to providing the environments in which 
semiconductor components and optical fiber are produced. Government 
agencies that require helium include the National Aeronautics and Space 
Administration (NASA) and the Department of Defense (DOD), as only 
helium can be used to purge and pressurize the tanks and propulsion 
systems for NASA and DOD's rockets fueled by liquid hydrogen and 
oxygen. NASA and the Department of Energy (DOE) also use helium to 
support weather-related missions and various research and development 
programs funded by these agencies, both at government facilities and at 
universities. Finally, DOD must have ready access to helium to operate 
the balloon-and dirigible-based surveillance systems needed for 
national security.
    The Federal Helium Reserve, managed by the Bureau of Land 
Management (BLM) of the U.S. Department of the Interior, is the only 
significant long-term storage facility for crude helium in the world 
and currently plays a critical role in satisfying not only our nation's 
helium needs but also the needs of the world. The federally owned crude 
helium now on deposit in the Reserve was purchased by the federal 
government as a strategic resource during the cold war. After the cold 
war, Congress enacted legislation (the Helium Privatization Act of 1996 
referred to hereinafter as the 1996 Act) directing that substantially 
all of the federally owned helium in the Reserve be sold at prices 
sufficient to repay the federal government's outlays for the helium and 
the infrastructure, plus interest. The present report, called for by 
BLM, examines whether BLM's selling of this helium in the manner 
prescribed by law is having an adverse effect on U.S. users of helium 
and, if so, what steps should be taken to mitigate the harm.\2\
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    \2\ As discussed more fully in the section of Chapter 1 entitled 
``Review of the 2000 Report's Conclusions,'' the 1996 Act called for an 
Academy study to determine if such disposal would have a substantial 
adverse effect on U.S. interests. That study, The Impact of Selling the 
Federal Helium Reserve, published by the NRC in 2000 and referred to 
hereinafter as the 2000 Report, concluded that the 1996 Act would not 
substantially affect matters. While several of that study's findings 
remain valid, it did not correctly predict how the 1996 Act would 
impact prices or how the demand side of the helium market would grow, 
in part a response to the ready availability of helium arising from the 
sell-off of the Helium Reserve pursuant to the 1996 Act. These factors 
have significantly impacted the current market for helium.
---------------------------------------------------------------------------
    This report assesses the current status of the supply and demand 
for helium as well as the operation of the federal helium program. It 
concludes that current efforts to comply with legislative prescriptions 
have had and will continue to have negative impacts on the needs of 
both current and future users of helium in the United States. The sell-
down of federally owned helium, which had originally been purchased to 
meet the nation's critical needs, is coming at a time when demand for 
helium by critical and noncritical users has been significantly 
increasing, especially in foreign markets. If this path continues to be 
followed, within the next ten to fifteen years the United States will 
become a net importer of helium whose principal foreign sources of 
helium will be in the Middle East and Russia. In addition, the pricing 
mandated by the 1996 Act has triggered significant increases in the 
price of crude helium, accompanied by equally significant increases in 
the prices paid by end users. Finally, the helium withdrawal schedule 
mandated by the 1996 Act is not an efficient or responsible reservoir 
management plan. If the reserve continues to be so managed, a national, 
essentially nonrenewable resource of increasing importance to research, 
industry, and national security will be dissipated.
                      FINDINGS AND RECOMMENDATIONS
          specific recommendations for immediate improvements
    To address these issues, the committee first lays out three 
specific recommendations for improving the federal helium program: 
changing the methods for pricing the helium being sold, committing more 
resources to managing the physical facilities at the Federal Helium 
Reserve, and providing assistance for small-scale scientists by 
expanding the sales program for government users to include them and 
promoting conservation and reuse by these users.
Pricing Mechanism
    The 1996 Act set minimum selling prices, adjusted for inflation, 
for crude helium held by the BLM such that the sale of that helium at 
those prices would generate sufficient revenue to repay the federal 
government for what it originally spent to purchase the helium and to 
build the supporting infrastructure, plus interest. BLM has elected to 
sell its helium at those minimum prices. At the time of the 1996 Act, 
the minimum selling price was almost double the price being paid for 
privately owned crude helium. A market that had been stable for several 
decades prior to the sell-off of federally owned helium, experiencing 
neither drastic price increases nor shortages of supply,\3\ began to 
change after BLM started to sell its crude helium. Almost immediately, 
privately sourced crude helium prices began to rise, and those prices 
continued to steadily increase so that they now meet or exceed BLM's 
price, and many of the sales contracts for private helium expressly tie 
future selling prices to BLM's price. Thus this legislatively set price 
for federally owned helium is now setting the price for crude helium, 
and there is no assurance that this price has any relationship to the 
current market value of that helium.
---------------------------------------------------------------------------
    \3\ 2000 Report, page 9.
---------------------------------------------------------------------------
    To the extent BLM's price is lower than the price the market would 
otherwise set for crude helium, this pricing mechanism could have 
several negative consequences: (1) it could lead to inaccurate market 
signals, increased consumption, and accelerated depletion of the 
Federal Helium Reserve; (2) it could retard efforts to conserve and 
develop alternative sources of crude helium, (3) it could result in 
transfers of taxpayer assets to private purchasers at below-market 
values--that is, it could amount to a taxpayer-financed subsidy for 
consumption of this scarce publicly owned resource; and (4) sales of 
federally owned crude helium could end up subsidizing exports of 
helium.
    The managers of the Reserve should shift to a market-based pricing 
policy to improve the exploitation of this important national asset. 
The report notes that several mechanisms could be used to implement 
market-based pricing and thereby introduce competition, or the threat 
of it, to the process. However, one complicating factor is that before 
federally owned helium can be used, it must be refined, and the 
refining capacity linked to the Reserve is owned by four companies. The 
committee believes that market-based pricing of crude helium from the 
Reserve will require that purchasers other than those four companies 
have access to refining capacity linked to the Reserve. However, 
additional details on mechanisms to provide access to excess refining 
capacity and to attain the goal of market-based pricing of crude helium 
from the Reserve are beyond the committee's charge.

          Recommendation.--The Bureau of Land Management (BLM) should 
        adopt policies that open its crude helium sales to a broader 
        array of buyers and make the process for establishing the 
        selling price of crude helium from the Federal Helium Reserve 
        more transparent. Such policies are likely to require that BLM 
        negotiate with the companies owning helium refining facilities 
        connected to the helium pipeline the conditions under which 
        unused refining capacity at those facilities will be made 
        available to all buyers of federally owned crude helium, 
        thereby allowing them to process the crude helium they purchase 
        into refined helium for commercial sale.
                       management of the reserve
    An additional aspect of the 1996 Act that has significant--and 
undesirable, in the judgment of this committee--implications for the 
overall management of the Helium Reserve is the Act's requirement that 
the sale of federally owned crude helium is to take place on a 
straight-line basis.\4\ The mandated constant extraction rate conflicts 
with standard practices for the exploitation of this type of reservoir, 
which is that production rates vary over the economic life of a 
deposit, typically declining over time. Declining production rates and 
reservoir pressures delay encroachment of water from nearby aquifers 
and connected reservoirs, and promote the efficient drainage and 
recovery of the resource gas in place.
---------------------------------------------------------------------------
    \4\ The law directs that crude helium from the reserve be offered 
for sale in such amounts as may be necessary to dispose of all helium 
in excess of 600,000,000 cubic feet on a straight-line basis between 
January 1, 2005 and January 1, 2015. Although BLM has offered helium 
for sale in the amounts required by the 1996 Act, not all such helium 
has been purchased and as a consequence significant amounts of 
federally owned helium will remain in the Federal Reserve after January 
1, 2015. This is discussed in more detail in Chapter 5 in the section 
entitled ``Sell-Down of Crude Helium Pursuant to 1996 Act.''

          Recommendation.--The BLM should develop and implement a long-
        term plan that incorporates appropriate technology and 
        operating practices for delivering crude helium from the 
        Reserve in the most cost-effective manner.
                 assistance for small-scale researchers
    Among the events that triggered this study were the soaring prices 
and limited supplies that characterized the refined helium market in 
the fall of both 2006 and 2007. The committee, composed of individuals 
from a wide range of professions--economists, business people, and 
scientists--notes that small-scale scientists were particularly hard 
hit by price shocks and interruptions in the supply of refined helium 
during that time. An informal poll conducted by committee members of 
approximately 40 research programs at universities and national 
laboratories that use helium indicated that shortages of liquid helium 
interrupted the helium supply for almost half of these programs, with 
some interruptions lasting for weeks at a time during the late summer 
and fall of both 2006 and 2007. While anecdotal, these poll results 
provide clear indication that this community of users is directly 
impacted by general shortages of helium. For many of those scientists, 
losing access to helium, even temporarily, can have long-term negative 
repercussions for their research.
    In general, the federal grant programs that support these 
researchers simply are not designed to cope with the pricing shifts and 
other market volatilities experienced here. The grants typically are 
for a two to three year period and for a set amount that does not 
adjust if a principal expense of research such as helium significantly 
increases. Further, the relatively short duration of such grants, with 
no guaranty of renewal, effectively precludes these research programs 
from entering into long-term contracts that might at least partially 
reduce the risk of significant prices increases and shortages. Further, 
if BLM were to implement the market-based pricing mechanism recommended 
in this report, the retail price for helium may commensurably increase, 
which will have an even greater negative impact on those helium users.
    These negative impacts could, however, be mitigated at least in 
part through a programmatic and policy change that would allow small 
users being supported by government contracts and grants to participate 
in a program--commonly referred to as the in-kind program\5\--operated 
by BLM for the sale of helium to federal agencies and their contracting 
agents. Under that program, qualified buyers purchase their refined 
helium indirectly from BLM on a cost-plus basis.\6\ Notably, 
participants in the program have priority access to helium in times of 
shortages.\7\ The committee believes that such an expansion of the in-
kind program would eliminate supply concerns and many of the price 
fluctuations that have negatively affected federally funded researchers 
during the past few years. Further, such an extension would be without 
significant cost to the programs supporting these researchers and, 
indeed, should lead to a more efficient use of the federal funds being 
used to purchase helium.
---------------------------------------------------------------------------
    \5\ The in-kind program is discussed in more detail in Chapter 5 in 
the section entitled `` `In-Kind' Program of Crude Helium 
Distribution.''
    \6\ As discussed more fully in the section of chapter 5 entitled 
``In-Kind Program of Crude Helium Distribution'' the price is 
negotiated between the supplier and user and includes BLM's cost of 
crude helium plus refining and transportation costs and profits for the 
refiner and distributor.
    \7\ 50 U.S.C.A Section 167d (a);

          Recommendation.--The crude helium in-kind program and its 
        associated customer priorities should be extended by the Bureau 
        of Land Management, in cooperation with the main federal 
        agencies not currently participating in the in-kind program--
        for example, the National Science Foundation, the National 
        Institutes of Health, and the extramural grant programs of the 
        Department of Energy--to research being funded in whole or in 
---------------------------------------------------------------------------
        part by government grants.

    In addition to recommending that these users be allowed to 
participate in the in-kind program, the committee believes that the 
conservation and reuse of helium by these users should be promoted by 
the agencies funding this research. Although adopting such a policy may 
be costly in the short-run, the committee judges that it would save 
money in the long-run and would help to reduce many of the negative 
effects of the price and supply disruptions referred to in the 
preceding discussion.

          Recommendation.--Federal agencies such as the Department of 
        Energy, the National Science Foundation, the National 
        Aeronautics and Space Administration and the Department of 
        Defense, which support research using helium, should help 
        researchers at U.S. universities and national laboratories 
        acquire systems that recycle helium or reduce its consumption, 
        including low-boil-off cryostats, modular liquefaction systems, 
        and gaseous recovery systems.

    The committee notes that because total U.S. research applications 
account for only 2 to 4 percent of all usage of refined helium in the 
United States, the negative effects of supply and price disruptions for 
the U.S. research community not currently participating in the in-kind 
program could be addressed at relatively low cost. Moreover, in the 
judgment of this committee, the benefits for the nation that would 
accrue from minimizing these disruptions would be substantial.
         general recommendations for meeting u.s. helium needs
    In addition to the specific recommendations just discussed, the 
committee sets out more general recommendations for how to best meet 
the nation's current and future helium needs. These include 
recommendations for (1) collecting and making available the information 
needed to more effectively manage the Federal Helium Reserve and to 
formulate future helium policy, and (2) initiating strategies to 
develop a more comprehensive long-term program for meeting the nation's 
helium needs.
Collection of Information
    One of the difficulties encountered by this committee and the 
previous NRC committee that issued the 2000 Report was the lack of 
timely and sufficient information to evaluate the supply and demand 
sides of the helium market, especially non-U.S. supply and demand, and 
the operation of the Federal Helium Reserve. Such information is needed 
by those who formulate and carry out U.S. policies on helium in order 
to make good decisions.

          Recommendation.--The Bureau of Land Management (BLM) should 
        acquire, store, and make available to any interested party the 
        data to fill gaps in (1) the modern seismic and geophysical log 
        data for characterization of the Bush Dome reservoir, (2) 
        information on the helium content of gas reservoirs throughout 
        the world, including raw data, methodology, and economic 
        assessment that would allow the classification of reserves 
        contained in specific fields, and (3) trends in world demand. 
        BLM or other agencies with the necessary expertise, such as the 
        U.S. Geological Survey, should develop a forecast over the long 
        term (10-15 years) of all U.S. demand for helium for scientific 
        research and for space and military purposes.

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

          Recommendation.--The Bureau of Land Management should 
        promptly investigate the feasibility of extending the Helium 
        Pipeline to other fields with deposits of commercially 
        available helium as a way of prolonging the productive life of 
        the Helium Reserve and the refining facilities connected to it.

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

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

          Recommendation.--The congressional committee or committees 
        responsible for the federal helium program should reevaluate 
        the policies behind the portions of the 1996 Act that call for 
        the sale of substantially all federally-owned helium on a 
        straight-line basis. It or they should then decide whether the 
        national interest would be better served by adopting a 
        different sell-down schedule and retaining a portion of the 
        remaining helium as a strategic reserve, making this reserve 
        available to critical users in times of sustained shortages or 
        pursuant to other predetermined priority needs.
                               conclusion
    The committee notes that securing a stable and accessible helium 
supply in the future requires addressing several important issues that 
are beyond the scope of this study. For example, the legislative 
framework for the operation of the federal helium program is silent on 
the management of the Federal Helium Reserve after January 1, 2015, the 
mandated date for disposal of substantially all federally owned crude 
helium. What is to be done with the remaining federally owned crude 
helium? How will BLM operations beyond 2015 be financed? Should the 
Reserve, either as a federal or a private entity, as appropriate, 
continue to exist after the BLM debt to the U.S. Treasury has been 
retired? While the committee supports maintaining a strategic reserve, 
addressing these issues requires the involvement of Congress and the 
broader federal science policy establishment because they go well 
beyond the reserve management responsibilities of BLM.

    The Chairman. Thank you all. It's been very helpful.
    The Federal Government has been trying to get this helium 
issue right since 1960, folks. Since 1960. It has just gone on 
and on and on.
    We've seen one President after another tackle it. Let me 
just tell you that Senator Murkowski and I are determined now 
to defy the odds and actually get this fixed. So we are very 
much in need of your input and your counsel.
    Let me just ask a few questions and then recognize my 
colleague.
    Let me focus first on what this means for taxpayers, Mr. 
Spisak, because I think that has been central to this debate. 
In November 2012, the Department of the Interior Office of the 
Inspector General released a report that found BLM is not 
obtaining market value for Federal crude helium sales and that 
this is a result of a missed opportunity to raise millions of 
dollars in additional revenue for taxpayers. So what Senator 
Murkowski and I do in S. 783 is focus on a new strategy to 
obtain the fair market value of helium through the auction and 
third party market surveys.
    Do you believe that this kind of approach is going to help 
your agency achieve a fair market price for helium and increase 
the return on investment of this Federal resource for 
taxpayers?
    Mr. Spisak. Yes. I think introducing an auction component 
into the sales can only improve BLM's ability to secure a 
better, a higher price, an increased rate of return. It should 
allow for more participants which will help drive up that 
price.
    The Chairman. Now let me bring all of you into this or 
those who would like to participate. When most people listen to 
all of this, they say what's happening in the private sector? 
There's a government role, but why has this--to pick up on 
Senator Murkowski's eloquent language--not taken off in the 
private sector? I mean, let's get into this and unpack how this 
is really going to move ahead in the private marketplace.
    Now, in 2010 the National Academy of Sciences said that 
because BLM supplies such a large portion of the market, BLM 
effectively sets the price for both Federal and non-Federal 
crude helium globally. The National Academy concluded that BLM 
depressed the global price for helium and this slowed the 
search for alternatives and new sources of helium.
    So what we seek to do in S. 783 is to institute a new 
pricing approach that requires BLM to auction a steadily 
increasing percentage of its helium to make sure that the BLM 
price reflects the fair market value of helium.
    So tell us your assessment of whether this kind of pricing 
approach can help stimulate production of helium, particularly 
in the private sector so that reliable supplies are available 
once the Federal Helium Reserve is depleted.
    Who would like to take a crack at that?
    Mr. Nelson. Certainly, Mr. Chairman, I'll attempt to answer 
that question.
    Again, we really applaud the committee for the approach 
that you've taken, the wisdom of starting off with a 10-percent 
auction. We believe it will deliver price discovery. It will 
deliver that price discovery in a way that minimizes disruption 
in the marketplace.
    So it will enable the existing helium that's in inventory 
to continue to be withdrawn through the allocated delivery 
process. It will respect the sanctity of our existing 
contracts. With the auction, whomever wins the auction whether 
it's 10 percent the first year or twenty percent the third or 
thirty in the early years. Provided there's priority of 
delivery of that helium, again, there will be more than a 
sufficient number of bidders that will enable you to have the 
appropriate price discovery that you're looking for.
    The Chairman. Anybody else?
    Again, the end game is private sector development. It's 
going to become something of a mantra with respect to this 
after all of these years.
    Anybody else want to give their assessment?
    Mr. Joyner. Yes, Mr. Chairman, if I could add to that?
    I mean the auction process, you know, surely is going to 
tell us what a buyer is willing to pay for that given year. The 
key to driving it to market price though, is the competitive 
factor and ensuring that the access provisions to non refiners 
and a broad array of buyers to participate in the auction is 
going to be key to arriving at a market price.
    You really have to link these.
    First access, the availability to purchase the volume in 
the ground, but then also the ability to get it delivered. 
Because the way the current process functions you can buy the 
product in the ground. But if you're not a refiner you have no 
delivery allocation into the pipeline.
    So it's important to link those two and then link those 
with tolling services because it's just a piece in the assembly 
line. You have to pull these 3 together in order to bring other 
buyers to the table to generate the true market price that 
you're after.
    The Chairman. Does the Oregonian want the last word on 
this?
    Ms. Duran. Intel is not in the gas production business so I 
don't know that we would be appropriate to comment on the 
pricing. Our focus is really on the continuity of supply. So 
one way or another knowing that BLM will run out, we need to 
make sure that there's a future expectation for supply.
    The Chairman. Very good.
    Ms. Duran. Thank you.
    The Chairman. Dr. Chan.
    Mr. Chan. I also don't, like Dr. Duran.
    The Chairman. We'll let you pass.
    Alright.
    [Laughter.]
    The Chairman. Just understand that central to this--looking 
back over these 50 years--people are saying what does this mean 
for taxpayers? What does this mean for industry? How do we move 
this into the private sector so that 50 years from now you 
don't have people sitting here having exactly the same debate?
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman. Thank you all 
for your comments this morning. It's been very helpful.
    Mr. Nelson, it's good to hear that you think that the 
legislation the Chairman and I have been working on with our 
staffs is one that is good. It is workable. Avoids this helium 
cliff that you speak of. Also for your suggestions that we 
might be able to further improve it.
    The issue of delivery is one that you have just raised 
here, Mr. Joyner. But you're sitting here with a potentially 
complicated scenario. I guess it's not potential, it is a 
complicated scenario.
    You've got a year's worth of helium that's in storage.
    You've got additional volumes that will be allocated or 
auctioned over time.
    There may be some interest in adding refining capacity to 
the pipeline.
    So who gets their helium and when on a pipeline with 
limited and diminishing capacity will be an issue.
    Mr. Spisak, how do you anticipate that the BLM will handle 
this going forward? Do we perhaps need to provide some 
additional guidance or authority here for scheduling helium 
delivery beyond what we have in the legislation?
    Mr. Spisak. Thank you.
    The 3 phases.
    The first phase where it would, kind of, continue with the 
transition allows us to, kind of, get through our existing 
storage contracts and to a place where we can set ourselves up 
for the start of the auction. By ramping up the auction over a 
multiyear period, you know, slowly at first, I believe gives us 
the tools to be able to make it work going forward.
    Senator Murkowski. OK. So you don't think we need to add 
anything further in terms of guidance? You're good with it?
    Mr. Spisak. As far as the volumes and such I think there's 
enough flexibility in there to be able to allow us to do what 
we need to do.
    Senator Murkowski. OK.
    It's our understanding that there have been some attempts 
in the past by small, mobile refining interests to gain access 
to the Federal helium pipeline and that those requests have 
been turned down by BLM.
    Can you just confirm whether or not this is the case?
    If so, why any entities that might be seeking access would 
be denied?
    Mr. Spisak. I am not aware of any specific case where a 
company was denied access to the pipeline. Generally there are 
cost requirements and related to connecting. But that shouldn't 
be an obstacle. It's more tied to the capital investment 
associated with bringing the pipeline and the location of where 
the resources are.
    There are a number of private pipelines that are connected 
to the Federal operated pipeline. We've accommodated those in 
the past. I know there are several smaller operations that 
we're actually working with in Utah, primarily, where they're 
using small recover units. They're in the early stages of that 
development.
    But it's primarily that the relationship of how close the 
resource is to the pipeline. If it's too far away it wouldn't 
make sense to build the capital investment of putting in a 
pipeline to make the connection.
    Senator Murkowski. So do you feel that there is any 
ambiguity with the Secretary's authority to consider granting 
new access to the pipeline? Is that something that we might 
want to consider with our language?
    Mr. Spisak. The issue that may have kept some people out of 
the existing storage contracts convey a priority to the 
existing refining capacity as of a date in 2000. With the 
direction in this bill, I think it's clear that at the point 
when the storage contracts would be renewed in October 2015, 
that we be working to remove that priority so anybody that 
wishes to refine and connect up to the pipeline they can do so.
    Senator Murkowski. I think they could.
    Mr. Joyner. Senator.
    Senator Murkowski. Yes, Mr. Joyner.
    Mr. Joyner. If you would. Just a little context around that 
delivery issue and how it's working in practice. I appreciate 
you bringing it up because it's a key point of the legislation 
that's yet to be addressed in addition to these purchase 
volumes.
    Because what happens today is when you purchase this volume 
and the delivery policy is upstream of that or such that only 
refiners can take delivery. So what you're buying something, 
but you have no ability to take delivery to us. You have no 
delivery scheduling from the BLM. That's not addressed in the 
legislation.
    The way the current policy results, a good example is one 
of our competitors, Matheson Tri-Gas, testified to the House. 
They bought millions of feet of product years ago and have had 
no ability to extract that product. They can't get it delivered 
from the BLM to the infrastructure. They cannot get it tolled. 
So they have this stranded helium issue.
    So it's key that legislation address an equivalent delivery 
scheduling for the product in addition to just opening up 
access for other buyers to purchase it. Otherwise you'll be 
left with the same system whether it's new refineries or other 
buyers. You can't get access to the product unless it's 
addressed in this legislation.
    Senator Murkowski. So you think that we need to clarify 
with some language there?
    Mr. Joyner. Absolutely. Otherwise it's just going to 
continue what is happening in the, kind of, closed system 
environment today.
    Senator Murkowski. OK.
    Then just one quick question for you, Dr. Chan. I'm told 
that some Federal users may be getting a smaller volume of 
helium than they had anticipated receiving. I think this is 
probably consistent with the global shortage that we're seeing 
in the delivery reduction to private users.
    I'm just trying to understand the situation here. Are 
Federal users receiving less helium than they signed up for? Do 
you think this is consistent with the contracts and other 
measures in place related to those transactions?
    Mr. Chan. I'm not aware in the last few years that there is 
any shortage in receiving the helium.
    Senator Murkowski. Is anybody else familiar with that?
    Dr. Duran.
    Ms. Duran. I can say from an industrial, not a Federal 
grant, from an industrial perspective we have seen shortages. 
We have had to up our ante on our conservation and make choices 
about how we use it within the semiconductor industry 
specifically.
    Senator Murkowski. OK.
    None necessarily within the Federal users, if you will, 
just the overall.
    Ms. Duran. Right.
    Senator Murkowski. Global shortages that we're 
anticipating.
    Ms. Duran. I would say from a Federal perspective having 
gone to graduate school and used helium in my research as well. 
The price is a big deal.
    Mr. Chan. Yes.
    Ms. Duran. Especially when you look at the reduced funding 
that's going to Federal research grants. When you look at that 
and the increased price that Dr. Chan discussed than you are 
making choices about the experiments you can run. So it's maybe 
a self induced shortage driven by price, frankly.
    Mr. Chan. With that, I definitely agree.
    Senator Murkowski. Good. Good.
    Thank you, Mr. Chairman.
    The Chairman. Just one other question on this issue with 
respect to tolling.
    Now, Mr. Nelson, according to the data that was provided in 
the 2010 Academy study there's over a billion cubic feet of 
excess refining capacity connected to the BLM pipelines. So 
under our bill excess capacity would be made available at 
commercially reasonable rates to refine helium and, of course, 
to purchase at auction. Without a way to refine the auction of 
helium, it's unlikely it would be a genuine auction.
    Can you tell the committee among the refiners connected to 
the Federal pipeline how much excess refining capacity is 
available now?
    Mr. Nelson. Certainly, Mr. Chairman.
    Again, the tolling provision is certainly one of the more 
controversial pieces of the bill. Again, tolling is the process 
whereby the refiners would effectively relinquish a portion of 
their refining capacity to process crude helium for someone who 
does not have refining capacity. The refiners have historically 
tolled for non refiners or for end users when there is capacity 
available.
    It's more than just the capacity that's available in the 
refining plants. Mr. Chairman, I would conclude again, I'm not 
privy to the specific capacities of my competitors. So I would 
have to defer to the report of the NAS study that is probably 
as close to the possible to be correct.
    But it's more than just the refining capacity of the 
plants. It's the capacity of the system. We don't have the 
ability to toll today because the system is at capacity. The 
BLM system is effectively oversubscribed. We don't have the 
ability to move any molecules into our plant even though we may 
have capacity to toll.
    The third piece, of course, for any tolling to take place 
is there needs to be commercially reasonable terms under which 
two parties would agree to enact a tolling activity.
    The Chairman. Same question for you, Mr. Spisak.
    Mr. Spisak. Mr. Nelson's point about the system capacity, I 
think, is right on the mark. The field as time goes on can only 
produce a certain amount of gas. As time goes on it's less and 
less.
    There's also the pipeline system that takes gas produced 
from the Hugoton Gas Field, that midcontinent area and that's 
also going through decline. So the amount of crude helium 
available from the system is going down. But the helium 
refining capacity is virtually the same.
    So as time goes on there's a larger and larger mismatch. So 
that's why there's some interest in trying to, you know, bring 
additional molecules into the system. But if they're far away, 
like in Utah, it wouldn't make sense to build a pipeline that 
far to ship that gas.
    So that's the mismatch that is occurring. It's making it 
difficult for companies to toll helium.
    The Chairman. Alright. Let's see. We want to find the 
whereabouts of Senator Barrasso at this point, a very fine 
member of our committee.
    Time out here for a little logistics planning.
    What we're going to do is since Senator Barrasso has a lot 
of expertise on these kinds of policy issues, we're going to 
hold the hearing record open so that he can pose his questions 
in writing.
    We intend to work very closely with him and do this in a 
bipartisan way.
    You all have been helpful. I mean, literally, looking back 
at the fact that this debate started before a whole lot of 
people in this room were even born is an indication how 
important it is to get this right.
    So I thank you all for your patience. You've given us a lot 
of good suggestions. You'll be getting a number of questions 
from Senators for a response in writing.
    We thank all of you for your attendance today.
    The committee is adjourned.
    [Whereupon, at 10:25 a.m. the hearing was adjourned.]
                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

     Responses of Timothy R. Spisak to Questions From Senator Wyden
    Question 1. In 2010, the National Academy of Sciences noted that 
because BLM supplies such a large portion of the market BLM now 
effectively sets the price for both Federal and non-Federal crude 
helium globally. NAS concluded that BLM depressed the global prices for 
helium and that this has effectively slowed the search for alternatives 
and new sources of helium. S.783 addresses this issue by instituting a 
new pricing mechanism that requires BLM to auction a steadily 
increasing percentage of its helium to make sure that the BLM price 
reflects the fair-market value of helium. Do you think this new pricing 
system will help to stimulate production of helium by private natural 
gas producers so that reliable domestic supplies are available once the 
Federal Helium Reserve is depleted?
    Answer. Yes, the BLM believes that increases in the helium price 
using the new pricing system will help to stimulate production of 
helium by private natural gas producers and lead to a reliable domestic 
supply of helium.
    Question 2. Under both the Senate and the House bills it's clear 
that the BLM will be getting out of the commercial helium business once 
and for all. (In both bills, commercial sales halt when BLM has drawn 
down the Reserve to 3 billion cubic feet. This remaining helium would 
be kept only for future Federal use.) It is my understanding that only 
a limited amount of helium can be extracted from the Reserve every year 
just because of the mechanics of the system. How many more years of 
commercial sales would you estimate are left before BLM hits the 3 
billion cubic feet target proposed in both the House and Senate bills? 
And how many more years until no additional helium can be extracted 
even for Federal use?
    Answer. Counting all sources of helium in the Reserve (both 
conservation helium and helium in the native gas), it will take about 
five years to reach 3 billion cubic feet (Bcf). Once the 3 Bcf level is 
reached, about three more years' worth of helium could be extracted for 
Federal use without facility investments. With facility investments, 
delivery for Federal use could last up to seven years after the 3 Bcf 
threshold. Facility investments include increased compression and 
retooling of the crude helium enrichment unit to allow for a lower 
production flowrate from the crude helium enrichment unit. In addition, 
it is possible that the current facility would need to be replaced with 
a smaller facility.
    Question 3. Do you believe the BLM has sufficient tools and 
legislative authority under S.783 to assess the amount of excess 
refining capacity available at individual refineries? What would the 
practical implications be of modifying ``excess refining capacity'' in 
S.783 to mean ``operational'' and ``non-contracted'' refining capacity 
on the ability of non-refiners to obtain tolling agreements?
    Answer. Yes, the BLM believes it would have sufficient tools and 
legislative authority under S. 783 to assess the amount of excess 
refining capacity available at individual refineries.
    Excess refining capacity of any particular plant would not be 
beneficial if the amount of helium being produced out of Cliffside and 
the rest of the Mid-Content Area is below the total capacity of all 
plants on the pipeline. Based on the continuously increasing demand for 
helium and declining production and delivery rates from Cliffside, it 
is unlikely that the total helium refining capacity for all plants on 
the pipeline will be met. However, the proposed modification to S. 783 
is beneficial in that it specifically refers to the refining capacity 
in a plant that is above a company's capacity requirements and takes 
into consideration the total output from Cliffside.
    Response of Timothy R. Spisak to Question From Senator Murkowski
    Question 1. One of the concerns that we have heard from a variety 
stakeholders is that any delays in BLM implementation of the bill we 
are considering could disrupt the supply chain for helium. We have 
built in a grace period of approximately one year for BLM to get its 
ducks in a row and included language to provide options for BLM if the 
agency falls short in some way regarding implementation. But obviously 
we want the legislation implemented in a timely way, once it is 
enacted.
    Are you confident that BLM can complete the work needed to 
implement this bill in the amount of time that we have provided to do 
so?
    Answer. Yes, the BLM believes that a time frame of approximately 
one year will be sufficient to implement the bill.
    Response of Timothy R. Spisak to Question From Senator Barrasso
    Question 1. In 2010, the National Academy of Sciences issued a 
report which found that the Bureau of Land Management (BLM) has been 
selling crude helium from the Federal Helium Reserve at below-market 
prices.
    In November of 2012, the Department of the Interior's Inspector 
General stated that: ``BLM does not have the capability needed to 
identify and maintain market value prices for its helium reserve.'' The 
Inspector General explained that: ``Without changes to the program, 
there is no assurance that BLM's. . .helium sales. . .will be made at 
market value.''
    BLM's below-market prices have not only short-changed American 
taxpayers but they have also discouraged investment in alternative 
sources of helium such as those in Wyoming, which has over 50 percent 
of the nation's helium reserves. It will be increasingly important that 
we develop these alternative sources of helium as the Federal Helium 
Reserve winds down.
    Does S. 783 give BLM all the tools it needs to sell helium from the 
Reserve at market value? If not, what additional tools does BLM need in 
order to sell helium from the Reserve at market value?
    Answer. The BLM believes it would have most of the tools it needs 
to sell helium from the Reserve at market value. However, a provision 
that authorizes the Secretary of the Interior to levy penalties on 
entities that do not provide the required information could be useful 
to ensure full compliance.
                                 ______
                                 
       Response of Moses Chan to Question From Senator Murkowski
                        delivery of full volume
    Question 1. I am told that some federal users may be getting a 
smaller volume of helium than they had anticipated receiving. This 
would be consistent with the global shortage we've faced and delivery 
reductions to private users, but I wanted to raise the issue and gather 
additional information from you if I could. Are federal users receiving 
less helium than they signed up for, and do you think this is 
consistent with the contracts and other measures in place related to 
those transactions?
    Answer. I am happy to answer your question. In the summer of 2012, 
scientists in universities and National labs experienced wide spread, 
late, and sometimes canceled shipments of liquid helium. The shipments 
were often rationed; they did not get the full amount they ordered.
    Some but not all of the 29 Universities that experienced difficulty 
were registered with the Bureau of Land Management (BLM) for the In-
Kind program. It is my understanding that all the National Labs are 
enrolled in the In-Kind program. Because Federal users and grantees are 
entitled to priority supply under that program, reducing allocations to 
In-Kind program users implies a breach of the contracts signed by the 
vendors with BLM.
    I would also like to bring to your attention to a related issue. 
Since late last year, many, if not all the universities that buy liquid 
helium have registered for the In-Kind program. However, there is 
evidence that many of the In-Kind users are not being helped by the 
``cost plus'' concept. In fact, many of the In-Kind university users 
have been informed of a dramatic price increase of nearly 100%--from 
$7.50 a liter to $15.00 a liter between 2012 and 2013. The raw helium 
price (equivalent to less than $2.00 a liquid liter) sold to the 
vendors by BLM over the same time period increased by no more than 5%. 
We do not understand how such price increase can be consistent with the 
In-Kind program.
                                 ______
                                 
     Responses of Carolyn Duran to Questions From Senator Barrasso
    Question 1. One of the principal purposes of S. 783 is to provide 
helium end-users, such as Intel, access to the Federal Helium Reserve. 
The bill would establish an auction process whereby the prevailing 
party at the auction would be able to have its crude helium refined at 
commercially reasonable rates. Do you expect that Intel and other 
helium end-users will participate in the auction process?
    Answer. I cannot predict whether Intel or any other end-user will 
participate in the auction process. Because of its unique properties, 
helium can be challenging to store and ship, and end-users typically 
lack expertise in the management of helium. Nonetheless, the end-user 
community would like to ensure that helium legislation provides the 
option for end-users to participate in an auction as a means of 
facilitating a more competitive market for helium.
    Question 2. The House recently passed a helium bill (H.R. 527) 
which establishes a very different auction process than the Senate 
bill. From your perspective, which auction process is likely to 
encourage greater participation among helium end-users?
    Answer. It is unclear whether end-users would participate more in 
an auction under either of the differing versions of the bill. Because 
individual end-users comprise only a very small portion of the overall 
helium supply, it seems likely that end-users could participate in the 
auction under either approach.
    Question 3. The Federal Helium Reserve provides about 30 percent of 
the world's supply of helium. However, production at the Reserve is in 
significant decline. Moreover, the House and Senate bills would shut 
off the private sector's access to the Reserve once it is drawn down to 
3 billion cubic feet. At that point, only Federal users, such as the 
Department of Defense and NASA, will have access to the Reserve. It is 
estimated that the Reserve will reach 3 billion cubic feet within the 
next 7 years. If helium end-users can't find alternative supplies in 
sufficient quantities, will Intel ask Congress to give it and others 
access to the helium set aside for Federal users?
    Answer. Our understanding is that other sources of helium supply 
are expected to come on-line around the world in the next several 
years. In addition, many end-users are investing in helium conservation 
and recycling, as well as the identification of alternatives to the use 
of helium in some applications, in order to reduce the overall need for 
helium. Under these circumstances, we anticipate that end-users will 
not require access to the helium in the Reserve once it is drawn down 
to 3 billion cubic feet. This legislation is critical as a near-term 
solution to the shortage in the helium supply, and other measures must 
be implemented by the private sector to provide for a long-term 
solution.
    Question 4. Dr. Chan explained in his written testimony that helium 
can be extracted: (1) directly as is done in Wyoming; (2) as a 
byproduct of methane production; or (3) during the production of 
liquefied natural gas (LNG). The concentration of helium must be at 
least 0.3 percent for it to be economic to extract helium directly or 
as a byproduct of methane production. However, the concentration of 
helium need only be 0.04 percent for it to be economic to extract 
helium during the production of LNG. As a helium end-user, does Intel 
view the prospect of LNG export terminals here in the United States as 
a positive step toward ensuring sufficient domestic supplies of helium?
    Answer. I do not have expertise in issues such as the helium 
extraction process, the concentrations of helium that must be present 
for economic extraction, or the production and export of liquefied 
natural gas. Accordingly, I cannot opine on whether LNG export 
terminals would be a positive step toward ensuring sufficient domestic 
supplies of helium.
                                 ______
                                 
      Response of David Joyner to Question From Senator Murkowski
    Question 1. There is already a years-worth of helium in storage. 
Additional volumes will be allocated or auctioned over time. And there 
may be interest in adding refining capacity to the pipeline. This makes 
for a complicated scenario, in terms of who gets their helium and when 
on a pipeline with limited and diminishing capacity. How do you 
anticipate the BLM will handle this issue going forward and do we need 
to provide additional guidance or authority for scheduling helium 
delivery in the legislation we are considering today?
    Answer. Yes, Congress needs to provide additional statutory 
guidance to BLM for scheduling helium delivery in S. 783. For the 
reasons set out below, we recommend including legislative language that 
ensures that pipeline access is granted in equivalent volumes to any 
person who has acquired crude helium after the date of enactment.
    This question gets to the heart of whether the provisions being 
advocated in S. 783 are successful in bringing about positive changes 
to the way the Federal Helium Reserve (the ``Reserve'') is managed. As 
we discussed at the May 7th hearing, the three companies that operate 
helium refineries on the Federal Helium Pipeline (the ``Refiners'') 
currently receive close to 100 percent of the federal crude helium 
released each year from the Reserve. This captive control of a 
taxpayer-owned resource means less competition, less security of supply 
for end-users, and less return for U.S. taxpayers. Additionally, we 
remain concerned that S. 783's language relative to existing agreements 
potentially allows this closed system to remain in place. To remedy 
this situation, S. 783 rightly includes the first essential step: a 
conditional tolling provision to open up access to this closed system 
and encourage the Refiners to enter into tolling agreements with 
outside parties who purchase federal crude helium. This provision is 
consistent with the market-based approach recommended by the National 
Research Council in its 2010 Report on the Reserve.
    While the tolling provision in S. 783 is vital, it will only 
accomplish the Committee's goals if S. 783 also provides a second vital 
step: guidance and authority on BLM's ability to schedule helium 
deliveries. Under the current delivery system, which I anticipate BLM 
will likely continue to follow, BLM provides 100 percent of the annual 
delivery allocations in the Federal Helium Pipeline to the Refiners. As 
a result of these internal BLM decisions, past purchasers of federal 
crude helium, who already have product stored in the Reserve, have been 
unable to get delivery of such product into the taxpayer's pipeline 
system. To remedy this fatally flawed situation, any purchased volumes 
of crude helium, whether under the current allocation system or as part 
of the new auction process, must come with equivalent, dedicated 
delivery volumes on the Federal Helium Pipeline to a refinery chosen by 
the buyer. If this language is not included, then non-refiners could 
once again find themselves with product they have purchased in the 
ground but with no way to take delivery of that product. At the May 7th 
hearing, I referred to this as ``stranded helium.'' If, however, S. 783 
connects volumes purchased with dedicated delivery volumes on the 
pipeline, the Refiners would not be allowed to control this delivery 
volume for their own captive interests. The Refiners would then have a 
commercial interest to engage in tolling agreements for these ancillary 
volumes and receive appropriate tolling fees for the service.
    Finally, it is important to note that this arrangement is modeled 
on the existing and successful federal in-kind program which allows 
federal users to receive bids for their needs from a variety of 
sources. This program has linked product from the Reserve with delivery 
allocations on the Federal Helium Pipeline and, accordingly, the system 
has worked in the way it was intended. I would urge the Committee to 
look at this example and ensure that the broader access and greater 
competition sought by S. 783 can be similarly successful.
                                 ______
                                 
     Response of Walter L. Nelson to Question From Senator Barrasso
    Question 1. In your written testimony, you state that: ``[H]elium 
supplies will continue to remain tight until new helium production 
begins in Algeria, Qatar, and. . . Wyoming later this year.'' You 
explain that projects in Algeria, Qatar, and Wyoming will collectively 
increase global helium supply by as much as 24 percent. However, you go 
on to say that: ``new sources of helium will still be required to 
offset BLM supply declines over the next 10 years and beyond.'' Would 
you elaborate on the importance of developing alternative supplies of 
helium, such as those in Wyoming?
    Answer. Part 1) Global helium demand growth rates are expected to 
be within the historical range of 3-5% per year going forward. At these 
growth rates, approximately 200 million cubic feet per year of new 
helium volume will be required each year. In addition, the BLM supply 
is declining approximately 18% per year, and commercial sales of BLM 
helium will end by 2020. New helium source volumes of approximately 200 
million cubic feet per year must also be brought on-stream each year 
(globally) in order to replace the declining BLM volumes--in total 
approximately 400 million cubic feet per year of new helium volume will 
be needed each year to satisfy forecasted demand. The announced helium 
projects in Algeria, Qatar and Wyoming will collectively add 
approximately 1.8 billion cubic feet of helium into the market later 
this year. These new announced helium supply volumes will more than 
satisfy global demand for the next five to seven years through 2020, 
after which time additional helium volumes will be required if global 
demand continues at the similar rates.
    Part 2) The LaBarge and Riley Ridge fields in WY contain the 
largest proved and unproved helium reserves in the United States other 
than the Hugoton field in and near the Texas panhandle. ExxonMobil is 
currently producing approximately 1.3 billion cubic feet per year from 
LaBarge, and at these rates the LaBarge field could continue to produce 
helium for decades. According to BLM and NAS reports, the Riley Ridge 
area of Wyoming is also estimated to contain large volumes of helium. 
This helium is contained in low-quality natural gas that is not 
currently being produced. Denbury Resources is expected to start-up a 
new natural gas processing plant on Riley Ridge later this year, and 
that plant will produce approximately 200 million cubic feet per year 
of helium. The Denbury plant is expected to double its rates by 2017. 
The Riley Ridge field is potentially large enough to support a doubling 
or tripling of the expected Denbury helium production in the future if 
the CO2-rich gas is exploited for enhanced oil recovery 
(EOR). Like the LaBarge field, Riley Ridge could potentially produce 
helium for many decades.
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

APPENDIX A.--Individual Company Statements of Airgas, Inc., Air Liquide 
               Helium America, Inc., and Matheson Tri-Gas
                       statement of airgas, inc.
    Helium is a vitally important strategic resource with numerous 
scientific, manufacturing, and industrial applications. The United 
States taxpayer-owned Federal Helium Reserve currently provides over 40 
percent of the domestic supply and roughly 30 percent of the global 
supply, and therefore must continue to operate in order to avoid a 
significant market disruption. The recently introduced ``Helium 
Stewardship Act of 2013'' (the ``Act'') takes some important steps to 
address many seriously-needed changes to the operation of the Reserve. 
As the largest domestic distributor of helium in the U.S., Airgas, Inc. 
believes that with some revisions to promote more meaningful access and 
competition, the bill can be strengthened to provide for a more stable 
supply of the resource and an improved return to the taxpayer.
    Founded in 1982 and headquartered in Radnor, Pennsylvania, Airgas 
operates the largest domestic infrastructure and supply chain for 
delivering helium in the United States, with more than 80,000 customers 
accounting for 22 percent of the domestic market. We are therefore in a 
unique position to attest to both the vital role that this limited 
resource plays in our economy, and the disruptive effects that the 
current sales regime is having on our customers. Along with Air Liquide 
and Matheson Tri-Gas, we are considered the ``non-refiners'' in this 
debate, and together we supply roughly 40 percent of the domestic 
helium market. Therefore, our interest in this legislation is profound 
and our ability to compete on a level playing field is critical to the 
security and improved stability of supply for the end-use community.
    Before addressing the new legislation, it is important to 
understand how the current situation developed and why the sales regime 
must be overhauled. As the Committee knows well, the Helium 
Privatization Act of 1996 established a pricing mechanism based on debt 
repayment instead of the commodity's market value, and a sales 
construct whereby the taxpayer-owned crude helium can effectively only 
enter the marketplace after first being allocated to one of the four 
companies (one of which has contracted its output to one of the 
refiners) with pre-existing refining facilities on the BLM pipeline. 
Taken together, the manufactured price and the restricted access to the 
resource created a warped situation and the domestic end user community 
and the U.S. taxpayer are suffering the negative supply and pricing 
consequences.
    In reviewing operations of the Reserve, a 2010 report from the 
National Academy of Sciences' (NAS) National Research Council (NRC) 
stated, ``The managers of the Reserve should shift to a market-based 
pricing policy to improve the exploitation of this important national 
asset.''\1\ The report goes on to state, ``[h]owever, one complicating 
factor is that before federally owned helium can be used, it must be 
refined, and the refining capacity linked to the Reserve is owned by 
four companies. The committee believes that market-based pricing of 
crude helium from the Reserve will require that purchasers other than 
those four companies have access to refining capacity linked to the 
Reserve.''\2\
---------------------------------------------------------------------------
    \1\ Committee on Understanding the Impact of Selling the Helium 
Reserve; National Materials Advisory Board; National Research Council; 
National Academy of Sciences. 2010. ``Selling the Nation's Helium 
Reserve.'' Page 8.
    \2\ Ibid.
---------------------------------------------------------------------------
    We applaud the authors of the recently introduced Act for agreeing 
with the National Academy addressing the serious inequities resident in 
the current BLM Federal Helium Reserve Sales Program. In particular, we 
appreciate the effort to provide increased access for non-refiners, the 
vitally important transparency provisions, and the recognition that 
mandatory tolling services are a requirement for any alternative sales 
regime to be effective.
    However, as a general proposition, we are concerned that this Act 
adopts a number of anti-competitive, refiner-friendly provisions that 
more than likely will cause the bill's most important goals to go 
unrealized. Recognizing the fact that, as of the most recently 
published BLM Storage Information, there are 12,374,626,000 cubic feet 
of helium in storage of which 10,819,156,000 cubic feet (about 88 
percent) is taxpayer-owned and 1,505,486,000 cubic feet (about 12 
percent) is privately owned and that helium is being removed from 
storage at the rate of approximately 2 billion cubic feet per year, the 
combination of (i) delaying implementation of Phase B until October 1, 
2014, (ii) providing for a painfully slow ramp up in the amount of 
helium available for purchase by qualified bidders (10 percent 
beginning October 1, 2014 increasing by 10 percentage points each year 
thereafter), and (iii) requiring refiners to refine for others only to 
the extent they have ``excess refining capacity'', means that by the 
time non-refiners are given meaningful access to the taxpayer-owned 
helium, little if any of that helium will remain to be purchased and 
the goal of facilitating a competitive market-based sales regime will 
go unachieved.
    With those challenges in mind, we offer the following 
recommendations which we believe will enable the Act's good ideas and 
intentions to become real world, market-driven solutions.
                         sales of crude helium
    Regrettably, as currently constructed, the Phase A Allocation 
Transition will not facilitate meaningful access or competition for the 
helium resources. Though we do not understand the interest in 
continuing a preferential allocation regime which has benefited only 
three companies at the expense of the rest of the industry (and the 
end-users), we have nonetheless sought to make recommended changes 
within the confines of the legislation's structure. Presumably, the 
idea of a transition is to bring fairness, competition, and market 
forces into play over a time frame that is least disruptive to the 
market. Unfortunately, a drawn out transition with limited access to 
minimal volumes for a declining resource is effectively no transition 
at all and instead represents a continuance of the status quo.
    The bill proposes that the auction mechanism not begin until 
October 1, 2014. In the absence of any changes to the current 
allocation methodology, between now and then another 2 to 3 billion 
cubic feet of helium will be allocated to the refiners. That leaves 
only 4-5 billion cubic feet (allowing for the 3 billion cubic feet 
reserved for Federal Users) available for disbursement under the new 
regime contemplated in the Act. Given the reduced volumes, and 
considering that with every reduction in volume there is a reduction in 
pressure and a commensurate increased difficulty in extracting future 
molecules, the Phase A Allocation should end much sooner and the 
transition to the auction period should be accelerated.
    Regarding the auction, we believe a fair and effective bill would 
facilitate a regime more reflective of the domestic market-share, 
wherein 50 percent of the auctioned volumes would be reserved for the 
refiners, and the other 50 percent would be auctioned off to qualified 
participants other than the refiners. Any available amounts not 
acquired by the refiners would be available to non-refiners and after 
the non-refiners auction, any remaining amounts would again be made 
available to the refiners. Keeping in mind that the refiners have 
benefited greatly through the years thanks to their guaranteed 
allocation, it should not be too much to ask that a percentage of the 
available resource reflecting the rest of the marketplace be subject to 
meaningful competition between parties other than the refiners who will 
nonetheless continue to receive a guaranteed set-aside.
    Given the limited and diminishing resources, it is vitally 
important to make available significant volumes of helium as early in 
the process as possible, otherwise the goal of achieving market reform 
will not be realized. We believe that such a program will enable fair 
competition, rigorous participation, a superior return to the taxpayer, 
and a vastly improved security of supply for domestic end-users.
                    conditional tolling requirement
    We applaud the sponsors of the Act for supporting the National 
Academy's recommendation to facilitate the availability of tolling 
services for the non-refiners. In the absence of such a requirement, 
all alternative regimes to the current status quo will fail because of 
the inability of non-refiners to secure tolling agreements on a 
commercially reasonable and non-discriminatory basis.
    Unfortunately, we believe the current language in the bill will 
allow the refiners to avoid providing services to non-refiners by 
claiming they do not have excess refining capacity. Therefore, we 
believe that as a condition of sale to a refiner, the refiner must make 
sufficient refining capacity of helium available to non-refiner parties 
prevailing in auctions under terms that are just, reasonable and non-
discriminatory (both commercially and with respect to the operational 
delivery of helium to non-refiners) The specifics of how to define 
sufficient capacity could be relegated to BLM rulemaking, but one 
option would be to define it as a percentage of a refiner's refining 
capacity that is not less than the percentage of its capacity 
represented by the helium it purchases from the BLM. For example, if a 
refiner's BLM purchases of helium represent 20 percent of its capacity, 
that refiner should make at least 20 percent of its capacity available 
to non-refiners.
    We believe strongly that in the absence of a strengthened (and more 
operationally representative) definition of available/sufficient 
refining capacity, the auction mechanism will not be effective and a 
primary goal of the legislation will go unmet.
                               contracts
    As currently written, the bill extends special treatment to some of 
the BLM contracts held by the refiners. Not only would such treatment 
disregard the legal conditions resident in each contract related to 
contingencies based upon requisite congressional authorizations and 
appropriations, but it would also gut the intent of the legislation to 
create a fairer, more competitive, and more transparent federal helium 
sales regime. A similar provision was overwhelmingly rejected by the 
full House of Representatives, and we steadfastly oppose any attempt to 
include such detrimental and anti-competitive language.
             helium purchase limit and removal from storage
    Lastly, we believe a new paragraph should be added to Section 5 to 
direct that no winning bidder may purchase more than 30 percent in the 
aggregate of the helium sold at an annual auction and to require that 
such helium be promptly removed from storage. This will further 
facilitate competition, prevent hoarding, and ensure that the end-use 
community has the ability to compete and choose from among a more 
diverse group of qualified suppliers.
    For nearly two decades the helium industry, the end-use community, 
and the taxpayer have suffered under a monopolistic regime that led to 
supply shortages and market distortions. The ``Helium Stewardship Act 
of 2013'' is a commendable attempt to correct a fatally flawed 
privatization process from 17 years ago and we applaud the sponsors' 
efforts to right a wrong. With the addition of our recommended changes, 
we believe the Act will succeed in achieving its goals of fairness, 
competition, and an improved return to the taxpayer. Given the 
opportunity to compete for the nation's helium resources, Airgas, along 
with others in the industry who are currently excluded from the 
process, will readily participate in the auction and potentially invest 
in new capital projects associated with the open market; and, by de-
linking the Reserve helium from the artificial pricing mechanism, 
Congress can unlock additional investment in private sector helium 
development which is otherwise reluctant to engage in a distorted 
market. If Airgas is successful in competing for some of the nation's 
helium resources, its domestic packaged helium supply chain would be 
able to more fully meet the requirements of U.S. businesses.
    By increasing market competition, allowing commercial forces to 
take root, and enabling private sector judgments to spur economic 
development and greater investment, an amended version of the Helium 
Stewardship Act of 2013 will greatly benefit the industry, the end-user 
community, and the American taxpayer.
 statement of david joyner, president, air liquide helium america, inc.
    Chairman Wyden, Ranking Member Murkowski, and Members of the 
Committee, I appreciate the opportunity to testify today on S. 783: The 
Helium Stewardship Act of 2013 and generally on issues relating to the 
domestic helium industry and the Federal Helium Reserve. My name is 
David Joyner, and I am the President of Air Liquide Helium America, 
Inc., the helium company for American Air Liquide, one of the Nation's 
leading industrial and medical gas companies. Headquartered in Houston, 
Texas, Air Liquide has over 5,000 U.S. employees in more than 200 
locations throughout the country. For decades, Air Liquide has offered 
industrial and medical gases and related services to the Nation's 
largest industries including manufacturing, electronics and healthcare. 
As a company, Air Liquide is focused on technological innovation to 
help make our Nation's manufacturing and industrial sectors more 
efficient, environmentally friendly and productive.
    I have been with Air Liquide working in the industrial gas sector 
for over twenty years, most recently as President of Air Liquide Helium 
America. In this role, I have gained an appreciation for the 
complexities of the helium market as well as the importance of helium 
to a variety of end-users. At the outset, I want to commend and thank 
you all for your hard work and that of your staff in considering this 
important issue and in crafting legislation to extend the operation of 
the Federal Helium Reserve. It is Air Liquide's highest priority to 
assist you in continuing the operation of the Federal Helium Reserve in 
a manner that creates a stable and reliable helium supply capable of 
supporting the needs of end-users as well as providing an appropriate 
and reliable return on a Federal resource for U.S. taxpayers.
    Air Liquide is a major supplier of refined helium in the United 
States and globally to customers that range from companies on the 
cutting edge of the electronics industry to health researchers, 
automotive suppliers, laboratories and manufacturing facilities all 
over the world. When Congress passed the 1996 Helium Privatization Act 
(the 1996 Act), it was expected that the supply of crude helium in the 
Federal Helium Reserve would last until 2015 and the Act along with any 
associated contracts would end. It is now possible that the Federal 
Helium Reserve's supply of helium could last much longer if properly 
managed. Despite the amount of remaining helium, the funding mechanism 
in the current law could lead to the closure of the Federal Helium 
Reserve in the Fall of 2013. This closure would effectively take close 
to a third of the global supply and half of the domestic supply of 
helium offline, creating shortages and substantially increasing the 
cost of helium for end-users. Accordingly, your actions on this 
legislation are critically important as Congress must act in order to 
ensure access to the helium remaining in the Federal Helium Reserve.
    A stable supply of helium is important to our Nation's economy as 
it is a vital component in products ranging from magnetic resonance 
imaging (MRI) machines to airbags for the automotive sector. Helium is 
also important to our Nation's security as it is used in a variety of 
military and defense surveillance programs. Finally, the reliability of 
our helium supply is important for the Nation's research efforts such 
as those being undertaken at our Nation's national laboratories and at 
our own Delaware Research and Technology Center. These important 
efforts would be threatened by any sustained shortage in the domestic 
helium supply, particularly one that can be largely avoided by 
responsible management practices.
    As we work together to extend the operation of the Reserve, it is 
also important to consider what changes can be made to create a more 
open and competitive helium market that would improve reliability and 
benefit end-users. To that end, I would like to focus on two specific 
issues as S. 783 is considered: (1) accessibility; and (2) global price 
impact and qualified bidders.
 i. increasing access and creating a more competitive and transparent 
                    market for federal crude helium
A. Background on the Federal Helium Reserve
    As the Committee is aware, the helium stored at the Federal Helium 
Reserve and sold to private industry is ``crude'' helium which must 
first be separated from natural gas and then refined (i.e. ``tolled'') 
into liquid before it is transported to other facilities around the 
country for additional processing and then on to end-users. The process 
resulting in refined helium involves the BLM separating the crude 
helium from the natural gas in the Federal Helium Reserve, transporting 
the crude helium from the Federal Helium Reserve through the Helium 
Pipeline--a system that runs through Kansas, Oklahoma, and Texas--to 
one of six refining facilities that are located on the pipeline. These 
six refining facilities are owned by just four\3\ companies and were 
established by those companies in the last century to take advantage of 
privately-owned crude helium supplies. In fact, these refineries were 
built up to 31 years before the 1996 Act and prior to any expectation 
of a future government decision to sell crude helium from the Federal 
Helium Reserve to private industry. Nevertheless, with the enactment of 
the 1996 Act and the resulting use of the federal government's 
infrastructure to sell crude helium from the Reserve, these companies 
gained the unexpected windfall advantage of controlling access to the 
public's stockpile of crude helium due to their preexisting refineries.
---------------------------------------------------------------------------
    \3\ While there are four companies who operate refineries on the 
federal pipeline, one of those refiners solely supplies one of the 
other three companies. Effectively, there are three companies who 
operate refineries on the federal pipeline.
---------------------------------------------------------------------------
B. Air Liqude Supports Conditional Tolling Agreements
    Air Liquide is a so-called ``non-refiner'' on the BLM system and, 
as such, we must contract with the Refiners--who are also our 
competitors in the sales market--to be able to distribute any helium 
purchased from the BLM. Without such ``tolling'' contracts, non-
refiners are effectively prohibited from utilizing the BLM source. In 
recent years, the BLM has contractually committed 94 percent of the 
captive deliverable volumes to these refineries. The remaining six 
percent has been allocated in equal shares to refiners and non-refiners 
to bid upon, however, since the refining capacity is captive to these 
refineries and tolling for other private bidders is solely at a 
refiner's discretion, the existing helium refiners have effective 
control over the remaining six percent of helium capacity and an 
additional market advantage that was surely not envisioned by the 1996 
Act. Moreover, any amount of crude helium that remains unsold reverts 
back to the refiners for purchase--another disincentive for the four 
companies to provide tolling services.
    This current system's drawbacks were noted by the National Research 
Council's 2010 report, Selling the Nation's Helium Reserve, (the ``NRC 
2010 Report'') which stated: ``given that refining the helium must take 
place at one of the facilities connected to the Helium Pipeline, the 
limited number of potential processors of federally owned crude helium 
place significant restrictions on alternatives to the current sale 
procedures being followed by BLM.''\4\
---------------------------------------------------------------------------
    \4\ Selling the Nation's Helium Reserve, National Research Council: 
Committee on Understanding the Impact of Selling the Helium Reserve, 
The National Academies Press (2010).
---------------------------------------------------------------------------
    Proof that this system does not promote a competitive market can be 
seen in the fact that, in the last five years, Air Liquide has been the 
only non-refiner to purchase any amount of the six percent allocation. 
The consequences of the situation described above have important 
implications for end-users of helium. Adopting a more market-based 
approach was recommended by the NRC 2010 Report which stated the 
following:

          The Bureau of Land Management (BLM) should adopt policies 
        that open its crude helium sales to a broader array of buyers 
        and make the process for establishing the selling price of 
        crude helium from the Federal Helium Reserve more transparent. 
        Such policies are likely to require that BLM negotiate with the 
        companies owning helium refining facilities connected to the 
        Helium Pipeline the conditions under which unused refining 
        capacity at those facilities will be made available to all 
        buyers of federally owned crude helium, thereby allowing them 
        to process the crude helium they purchase into refined helium 
        for commercial sale.\5\
---------------------------------------------------------------------------
    \5\ Id. at 8.

    Utilizing this approach would result in a more accurate and 
transparent BLM system and would benefit consumers by increasing the 
number of suppliers competing for the business of federal users and 
open market users with helium from the BLM. In an analogous situation, 
the United States has recognized the benefits of opening privately 
owned interstate pipeline capacity to the market in the natural gas 
industry where ownership of transportation capacity rights is held 
separate from ownership of the actual gas pipeline.\6\ Noting the 
impact this system has had on the domestic market, the report states: 
``[u]nbundling of capacity rights from facility ownership makes it 
possible for a producer to access markets through a competitive bid for 
pipeline capacity.''\7\ Arguably, ``[i]f such a regulatory structure 
were not in place. . .shale gas developments would not have occurred at 
their recent pace.''\8\
---------------------------------------------------------------------------
    \6\ Shale Gas and U.S. National Security, Kenneth B. Medlock, et 
al., James A. Baker III Institute for Public Policy (July 2011).
    \7\ Id. at 12.
    \8\ Id.
---------------------------------------------------------------------------
    We greatly appreciate the efforts of Members of this Committee and 
Committee staff to meet the goal of increasing access to federal helium 
in S. 783. In particular, we fully support the conditional tolling 
provision that requires participants in the federal helium auction to 
provide tolling services for parties that purchase federal crude 
helium. By ensuring that tolling services are available to non-
refiners, the market for federal helium will be more competitive and 
provide a better return for the U.S. taxpayer.
C. Allowing an Intervening Year of 100 percent Allocation to Refiners 
        is Antithetical to the Goals of S. 783
    While these steps are crucial, we remain concerned that S. 783 
would allow the current allocation system to remain in place for 
another year and that significant portions of the federal helium supply 
will remain captive to the same four companies for even longer. It is 
our strong view that actions should be taken immediately to increase 
access to federal helium and, in turn, increase returns for U.S. 
taxpayers.
    First, if, as currently drafted, the open auction system is not put 
in place for another year, it is imperative that, in the intervening 
year, the current allocation system employed by the BLM must be 
modified to ensure greater access. In our view, the current six percent 
that is allocated by BLM for non-refiners should be exclusive for non-
refiners and immediately raised by a significant enough margin to 
stimulate participation by a greater number of parties; thereby 
creating the robust market for taxpayer helium that the bill seeks. 
Another year of 100 percent allocation to four companies is 
antithetical to the goals supported in this legislation and would again 
postpone any benefits that would accrue to U.S. taxpayers and end-users 
by increasing competition and access.
    Second, once the open auction process starts, it is our view that 
the percentage subject to the auction should be measurably higher than 
the current 10 percent in the bill. While Air Liquide would not presume 
to set this percentage, we agree with others in the industry who have 
advocated for increased access.
    Failure to make these changes to the allocation system would 
obviate much of the bill's goals for increased competition and greater 
returns for taxpayers. There is simply no reason for Congress to allow 
four companies to gain one more year of near-total dominance over the 
market.
             ii. global price impacts and qualified bidders
    We commend the Committee's efforts to include methodology that can 
achieve a more accurate minimum price for BLM crude. As the parties 
work towards achieving the most appropriate return to the U.S. 
taxpayer, we also ask the Committee to be cognizant of the impact that 
future changes to the BLM posted crude price will have on the global 
helium market. As Air Liquide has previously testified, a predictable, 
repeatable and verifiable BLM crude price will carry lasting, 
stabilizing effects for not only the domestic but also the global 
helium community. By maintaining a posted sales price based upon real 
market data as stipulated in S. 783, a standard market-based index will 
be maintained in the global marketplace. This index will not be 
distorted by short-term auction style bids that are unprecedented in 
the industry and not reflective of the long-term market price at other 
sources in the U.S. and worldwide.
    Air Liquide's goal is to ensure a stable and reliable supply of 
helium for end-users. Accordingly, as S. 783 opens up access to federal 
crude helium for more bidders, we also recommend ensuring that only 
persons with an infrastructure capable of accepting and delivering vast 
quantities of helium (we have recommended a minimum threshold of 
750,000 standard cubic feet delivery increments and prorated 10,000,000 
standard cubic feet quarterly lots) be allowed to participate in the 
auction process. Doing so allows the BLM to manage its sales of federal 
crude helium effectively and efficiently while ensuring that the 
broadest base of end-users will be able to rely on a broader base of 
bidders to service their helium needs.
    Air Liquide appreciates the Committee's attention to this important 
issue and supports the goal of ensuring the continuing viability of the 
Nation's helium supply. We believe the changes to the current system 
are achievable without disrupting supply and would do much to add 
competition to the market and benefit consumers. I thank the Committee 
for inviting me to testify, and I would be pleased to answer any 
questions you may have.
   statement of kevin lynch, senior vice president, matheson tri-gas
    Mr. Chairman and Members of the Committee, thank you for allowing 
Matheson Tri-Gas to share its views on the Helium Stewardship Act of 
2013.
    Founded in New Jersey in 1927, Matheson Tri-Gas is a global leader 
in the industrial gases industry.
    Today, Matheson is a subsidiary of Tokyo-based Taiyo Nippon Sanso 
Corporation, which is the fifth largest industrial gases company in the 
world. Matheson has helium operations within the U.S. in Wyoming, 
Texas, Nebraska, California, Florida, and Pennsylvania, and we have 
retail locations in 40 states. We are the sixth-largest supplier of 
helium within the US, and globally.
    Matheson is a ``Non-Refiner'' of helium--meaning that we do not 
have a helium purification plant connected to the BLM crude helium 
pipeline system. Instead, we receive our refined helium through 
transactions with private parties that that are unconnected to the 
Federal Helium Reserve or the BLM Pipeline.
    Therefore, while we are a significant player in the global helium 
industry, our interests in the debate over the fate of the helium in 
the Federal Helium Reserve are slightly different from those of some of 
the organizations represented at the hearing. Of course, like all 
industrial gases companies, we are concerned about global helium 
supply, and as a good corporate citizen we want a fair and efficient 
helium market worldwide. However, the fortunes of our company are not 
tied so directly to the continued operation of the Federal Helium 
Reserve and the Pipeline System.
    Matheson supports the core principles embodied in the oral 
testimony of David Joyner of American Air Liquide, who is presenting 
the shared views of the three major non-refiners of helium in the U.S. 
While we are competitors in the industry, Matheson, American Air 
Liquide and Airgas all agree on the need to extend the operations of 
the BLM Pipeline and Reserve, to increase access to federal crude 
helium and to improve the transparency of BLM helium operations.
    We are hopeful that the Helium Stewardship Act of 2013 will help us 
achieve these important goals.
    As you know, today the operation of the Federal Helium Reserve and 
BLM Pipeline System is governed by provisions set out in the Helium 
Privatization Act of 1996.
    The 1996 Act has largely achieved its purpose of selling down the 
Federal stockpile of crude helium, and it has by and large created 
conditions of stability and predictability in the helium market. On the 
negative side, the global helium market has developed considerably 
since the passage of the 1996 Act. Shortages have pushed crude helium 
prices up globally, and the BLM's method for pricing its sales of crude 
helium has become detached from global market conditions. The 1996 Act 
has resulted in the existence of a cost advantage for the four 
companies buying crude helium from the Federal Helium Reserve for 
purification in their refining facilities along the pipeline. This 
represents a significant cost advantage by these helium Refiners, and a 
significant disadvantage for their competitors. Worse, it means that 
the American taxpayer is shortchanged as well.
    With the legislative authority in the 1996 Helium Privatization Act 
about to sunset later this year, Congress has a chance to ensure that 
sales from the Federal Helium Reserve are conducted in a fair and 
efficient manner following the passage of new legislation. Since the 
BLM Pipeline System supports two-thirds of world supply with nearly a 
third of global helium supply coming directly from the Federal Helium 
Reserve, the new legislation enacted this year will have a profound 
effect on the global helium industry for at least the rest of the 
decade.
    As introduced, the Helium Stewardship Act goes a long way towards 
correcting long-standing inequalities and distortions in the helium 
marketplace. We support many aspects of the legislation as introduced, 
and we recommend a number of adjustments and points of clarification in 
order to improve the bill's workability and results.
                                auctions
    We agree with the general approach taken in the bill to draw down 
the helium remaining in the Reserve--an allocated sale to the Refiners 
at pre-set prices, and an unallocated sale via auction to non-refiners 
and other potential buyers. The auction provision in particular will 
dramatically increase access to the Federal crude helium stockpile, and 
we agree substantially with the structured, gradual approach to the 
auctions themselves. In the first year, the amount to be auctioned in 
the unallocated sale would be 10 percent of the total volume available 
in the Reserve.
    While the provisions in the bill to gradually increase the amount 
to be auctioned in the unallocated sale are helpful, we would suggest 
an overall cap be placed on the amount to be auctioned. A cap on 
maximum auction volume as a percentage of total volume in the range of 
20 percent to 30 percent would be optimum.
    An auction of this amount would provide increased access, aid in 
price-discovery, and yet maintain a high degree of stability in price 
and supply volume by ensuring that Refiners have predictable access to 
the majority of supply. This will aid long-term planning by suppliers 
and customers alike.
    Matheson would not support an auction of an amount greater than 40 
percent of the total volume. We believe auctions on that scale would 
create too much supply uncertainty in the helium market place.
                                tolling
    Of course, if the auction provisions in the bill are to have any 
practical effect, the bill must include unambiguous incentives for 
tolling by the Refiners at reasonable market rates. It does little good 
for a non-refiner to acquire federal helium at auction if the Refiners 
refuse to refine the crude helium through workable tolling 
arrangements.
    Matheson's views on this topic have been shaped from our own 
unhappy experience with third-party tolling. In 2007, Matheson 
successfully purchased crude helium from the Federal Helium Reserve. In 
2009, we subsequently attempted to purchase tolling services from all 
of the helium Refiners. We received ``NO BID'' replies from each. 
Therefore, the crude helium that we purchased six years ago still sits 
in the Federal Helium Reserve and on Matheson's Balance Sheet as an 
unutilized asset today. Our unsuccessful attempt to secure third-party 
tolling is what gave rise to our decision in January, 2010 to file a 
``Petition for Rule Making'' with the U.S. Department of Interior.
    In order to strengthen the tolling provisions in the bill, we 
recommend there be an explicit distinction between refining for end 
customers and refining for Non-Refiner Resellers.
    The goal of achieving greater access to the federal crude helium 
stockpile and increasing competition in the helium market is primarily 
achieved by increasing access to helium by parties equipped, 
experienced, and qualified to supply helium to end customers, but who 
have heretofore been blocked from access to BLM crude helium supply 
because they do not have helium refining plants connected to the BLM 
crude helium pipeline. That describes non-refiners of helium, not end 
users of helium.
    We are concerned, however, that Refiners may satisfy their 
requirements to provide tolling to third-parties by making commercial 
agreements to ``toll'' for large end users. Such agreements are likely 
to include the supply of helium ISO containers, transportation 
services, and other services that are customarily found in contracts 
covering sales of helium to end customers. In effect, Refiners will 
simply be selling pure helium to end users, and their total profits 
will likely be very similar to the profits they make on traditional 
sales, as the scope of services supplied will likely be very similar. 
Refiners will claim to be ``tolling'' for these end users, when in fact 
they will be merely selling refined helium to them as they normally 
would. They would merely designate a portion of that normal transaction 
as ``tolling'' in order to satisfy their requirements under this bill.
    If such is the case, the price charged to an end user for tolling 
becomes a fairly meaningless reference price, as tolling may be bundled 
with other services. Therefore, the provision in the bill requiring 
tolling at ``commercially reasonable rates'' is weakened, or perhaps 
even counter-productive to the goal of increasing access to the federal 
crude helium reserve by Non-refiners.
    Non-refiners who intend to re-sell pure helium must make a profit, 
and they must provide other services to end customers that also have 
resulting costs. If the benchmark for ``commercially reasonable rates'' 
includes rates that end customers are willing to pay for tolling under 
a bundled offering of tolling and other services, the benchmark may be 
set at such a level that Non-refiners are effectively priced out of the 
market for tolling services.
    We therefore recommend that the requirement for tolling be 
specifically written as an explicit requirement to toll for qualified 
Non-Refining Resellers of helium who own and maintain adequate 
facilities and equipment to meet delivery schedules and quality 
standards for delivery to end-users.
    As an alternative to that approach, the bill could empower the 
Secretary of the Interior to establish explicitly the ``reasonable 
commercial rates'' for required tolling services. This could be done by 
calculating the average cost of refining crude helium by the refining 
plants connected to the BLM pipeline, and allowing reasonable profit 
margins for such services provided by the Refiners.
    Additionally, each Refiner who tolls for third parties who buy 
helium from the BLM should be allocated additional pipeline deliveries 
on a 1:1 volume basis with any tolling services it provides, in order 
to be ``kept whole'' on its non-tolling volumes. If not handled 
properly, there is a possibility that Refiners will be ``punished'' by 
having the net volume of crude made available to them for resale to 
their end customers reduced by the amount they toll. This is a basic 
fairness provision, to ensure that Refiners that do agree to legitimate 
tolling for non-refiners will not be disadvantaged.
                                pricing
    The bill requires that a minimum price for BLM crude helium be 
established through a survey of Qualifying Domestic Transactions. 
Significant improvements have been made in this area between the 
release of the discussion draft on March 22 and the introduction of the 
bill itself on April 23. In particular, we are pleased that prices for 
auctions will be established annually, and that the definition of 
Qualified Domestic Transactions includes transactions that are newly 
entered into or renegotiated during the prior twelve-month period.
    We are also pleased that older helium royalties have been excluded 
from the survey of qualified transactions. Older agreements that 
include prices agreed to several years beforehand, with formulaic price 
adjustments to old prices, will distort the picture of current market 
price.
    We also recommend a clarification by defining ``bulk liquid 
helium'' sales as sales of liquid helium in container loads with a 
nominal capacity of 11,000 gallons or more, in order to be clear that 
the price comparison excludes large volume sales of tube trailers, 
cylinders, or dewars, which carry additional costs, covered by higher 
prices.
    To ensure that the transactions being captured in the survey are 
all large transactions occurring at similar levels in the supply chain 
with similar cost and profit structures, we suggest one of two options:

   Increase the threshold for qualifying transactions to 75 
        mmscf, from 20 mmscf; or
   Add clarifying language to the price determination 
        guidelines to adjust prices occurring at different levels in 
        the supply chain to account for average cost and profit 
        differentials in order to ``normalize'' such prices back to the 
        original wholesale transactions.
                              transparency
    We also strongly support more transparency in the way information 
is shared between BLM and industry stakeholders. Information on resale, 
pricing and storage, for example, is of value to all market 
participants. It should be made available to all industry participants 
at the same time it is made available to the helium Refiners. Today, 
important data is made available to the Refiners well before the rest 
of the industry, thus giving those companies yet another advantage over 
their industry competitors.
    We applaud the provisions of the bill that call for timely posting 
by BLM of important industry information online, and we are pleased 
that the bill directs the BLM to establish regular reporting processes 
on major issues affecting the Reserve and Pipeline, and that this 
information be shared with all stakeholders in the helium industry and 
not just a favored few.
             additional points of comment and clarification
    Fees.--Section 5.a. refers to the setting of fees to reflect the 
economic value of services provided. This is broad language. It will be 
helpful for market participants to understand what it implies in terms 
of pricing. Ideally, a standard schedule of prices for such services 
will be provided in advance of any federal crude helium auctions.
    Storage.--Section 5.c. refers to the increasing of storage fees 
over time to encourage withdrawal of stored helium. Matheson's view is 
that this provision exists to discourage hoarding of crude helium 
purchased from the BLM. Accordingly, such increases in storage fees 
should not apply to any crude helium sourced from private sellers and 
stored within the BLM system. And, again, we believe that a schedule of 
such fees and how the increase over time should be published well in 
advance of any federal crude helium auctions.
    Minimum quantities.--We interpret Section 6.e to mean that the 
Secretary will endeavor to offer for sale each year approximately 2 
bscf of crude helium, or whatever is the maximum volume available, 
given the condition of the federal crude helium storage and delivery 
system. Given our understanding of approximately 11 bscf in storage as 
of October 31, 2012 and the target minimum level of 3 bscf, this 
intention implies that crude helium sales to non-federal users will 
terminate around October 31, 2016. If that is the case, we recommend 
that the Secretary be given flexibility to decrease the amount of crude 
helium offered for sale in order to prolong sales of crude helium to 
non-federal users.
    End-of-life issues.--Some consideration should be given to how to 
account for and pay for crude helium purchased from the BLM. There is a 
possibility that as the BLM crude helium stockpile is further depleted, 
it may reach a point at which although there is nominally 3 bscf or 
more in storage, the crude helium storage and delivery system will no 
longer be capable of extracting crude helium and delivering to users 
who have already purchased it. If that proves to be the case, will the 
BLM reimburse buyers for ``stranded'' crude helium in their accounts? 
Or, should the payment mechanism be changed such that buyers only pay 
for BLM-supplied crude helium when it is metered through a refining 
plant, to prevent the problem of having paid for ``stranded'' helium? 
While that would not solve the problem of a ``surprise'' loss of 
expected volume, it would at least solve the problem of a buyer having 
paid the federal government money for helium he will never actually 
take delivery of.
    In summary, Matheson believes the Helium Stewardship Act of 2013 
provides a very useful framework for conducting the federal 
government's crude helium program into the future. Some positive 
changes were made to the bill prior to its introduction last month, and 
we believe that a handful of other important changes will make it an 
even stronger legislative product. We would be happy to continue 
discussing and exploring various aspects of the bill as it moves 
through the committee process in the weeks ahead.
              APPENDIX B.--Joint Letter from Non-Refiners
                                                    April 25, 2013.

Hon. Doc Hastings,
Chairman, House Natural Resources Committee, 1203 Longworth House 
        Office Building, Washington, DC.
Hon. Edward Markey,
Ranking Member, House Natural Resources Committee, 2108 Rayburn House 
        Office Building, Washington, DC.
Re: Opposition to the Dent Amendment to H.R. 527, the Responsible 
Helium Administration and Stewardship Act

    Dear Chairman Hastings and Ranking Member Markey:

    We the undersigned--Air Gas, American Air Liquide, and Matheson 
Trigas (``Non-Refiners'')--write to express our concerns about the 
amendment being offered by Rep. Charlie Dent (R-PA). Collectively, we 
serve a substantial portion of the end-user market in the U.S. While 
our companies have differing views on the various provisions of H.R. 
527, we are united in our opposition to the Dent amendment. We strongly 
urge its defeat.
    Under current law, three large companies (the helium ``Refiners'') 
have almost exclusive access to the helium in the Federal Helium 
Reserve. Since new legislation is needed in order for the Federal 
Helium Reserve and pipeline to continue operations, H.R. 527 makes 
changes that would open up access to the Reserve, thereby increasing 
market forces and increasing the return to the U.S. taxpayer on the 
helium sold from the Reserve. The Dent amendment, on the other hand, 
perpetuates the status quo, giving the three Refiners a continuing 
distorted market advantage over others in the industry that would not 
exist in a free market. It undermines the goals we all share--ensuring 
a stable and reliable helium supply, increasing access to the Federal 
Helium Reserve, and providing an appropriate return to the U.S. 
taxpayer on a taxpayer-owned resource.
    The Dent amendment is very broadly worded and gives the Refiners 
far greater protections than currently provided for in their existing 
contracts with BLM. By strengthening these contracts and perpetuating 
them for years to come, the Dent amendment essentially renders 
meaningless H.R. 527 because the contracts--as extended by this 
language--will largely prevent BLM from delivering product to anyone 
other than Refiners. Thus, even if a Non-Refiner could purchase crude 
helium in an auction, the Non-Refiner will not be able to take 
delivery.
    By strengthening and extending these contracts for many years into 
the future, the Dent amendment leaves in place the same anti-
competitive system that the DOI Inspector General determined in 2008 
potentially cost taxpayers more than $100 million.
    For the same reasons, even expressly limiting the Dent amendment to 
the 2015 contracts should be rejected. Any delayed implementation of 
H.R. 527--which already contains a grace period--provides more time to 
draw down the taxpayer-owned resource by the same three companies who 
have enjoyed almost exclusive access for nearly 20 years and reduces 
the return to U.S. taxpayers.
    Through the 1996 Helium Privatization Act which governs the 
operation of the Reserve and pipeline system today, Congress intended 
the Federal Helium Reserve to end in 2014. Therefore, Refiners had no 
expectation that contracts would run beyond that date. Moreover, the 
BLM standard contract states that contract performance is contingent 
upon acts of Congress. The Dent amendment perpetuates the closed market 
that has benefitted the Refiners for many years at the expense of the 
American taxpayer. This is antithetical to the open access and market 
transparency goals of the bill, as well as the recommendations of 
numerous studies by the General Accounting Office and the National 
Academy of Sciences.
    For these reasons, we urge the defeat of the Dent amendment.
            Sincerely,
                                                    Airgas,
                                      American Air Liquide,
                                           Matheson Trigas.
                                 ______
                                 
  Statement of Craig Wood, President, Gases and Welding Distributors 
                      Association, Inc., Doral, FL
    Mr. Chairman and Members of the Committee:
    The Gases and Welding Distributors Association (``GAWDA'') is a 
national trade association representing the interests of some 500 
companies that distribute compressed and liquefied gases and related 
welding equipment, and includes some 300 additional companies that 
supply products or services to the gases and welding industry. GAWDA 
distributor members sell a variety of products, including helium, 
oxygen, argon, nitrogen and carbon dioxide, as well as specialty gases 
and mixtures, to customers involved in manufacturing, construction, 
welding, research, health care, and biomedical engineering.
    Most GAWDA members are small businesses. Approximately 85 percent 
of GAWDA distributors have less than $10 million in annual gross 
revenue, so they have limited leverage in negotiating supply agreements 
for products. In the vast majority of cases, GAWDA distributors will 
contract exclusively with a single manufacturer (or in the case of 
helium, a refiner) for a comprehensive menu of gas products. The 
contract generally will provide all of the distributor's needs for all 
of those gases.
    In addition, the distributor will generally contract with its 
customers in an exclusive ``requirements'' arrangement to supply all of 
the customer's needs for a variety of gases as well. A small 
distributor might have a couple of dozen contracts to supply helium and 
other gases to customers, while a large distributor might have several 
hundred or more of these requirements contracts.
    The GAWDA distributor will typically purchase bulk helium in 
gaseous form from a refiner; the distributor will then repackage the 
helium into compressed gas cylinders and deliver them to customers for 
their use.
    GAWDA appreciates the efforts that the committee has made to 
develop legislation to complete the privatization of the Federal Helium 
Reserve outside of Amarillo, Texas. We understand the urgency of 
reauthorizing the sale of helium by the Bureau of Land Management by 
October of this year to keep the program from expiring, and GAWDA does 
not want the domestic supply of helium, which amounts to some 50 
percent of the U.S. domestic supply and 30 percent of the entire world 
supply, to go untapped.
    GAWDA also understands that the BLM has not obtained market rates 
of return for the sales of helium to date, and we appreciate that the 
federal government should earn an appropriate return for the sale of 
this asset in the marketplace. We agree that any revision to the BLM 
sales program should include a structure to generate market pricing for 
crude helium to refiners, and GAWDA does not oppose the provisions in 
S. 783 to develop a truly market-based pricing mechanism.
    GAWDA distributors are concerned, however, about the impact of any 
legislation on the stability of the existing market for helium, 
particularly as they affect the ability to meet contractual obligations 
for product supply. For example, GAWDA members are concerned that a 
quarterly or periodic auction approach as envisioned in H.R. 527 will 
interfere with current contracts between refiners and distributors, and 
between distributors and their end user customers.
    By establishing a periodic auction mechanism under which any party 
may bid, at least for certain tranches of product, the House bill would 
set up a spot market for helium. Under H.R. 527, if an established 
refiner is not able to secure all of the crude helium that it requires 
to meet the supply obligations set out in its contracts, then some 
distributor customers will receive less than their contractual 
allotments of helium, or perhaps none at all. The distributor will be 
forced to seek other sources of supply, presumably only if a force 
majeure clause in the agreement allows the distributor to obtain 
replacement product from another supplier.
    But the contracts between distributors and gas suppliers are 
exclusive for all of the gas products together, and it is difficult to 
predict how a disruption in the ability to supply the required amounts 
of helium in one quarter will affect the distributor's contractual 
obligation to purchase, and the manufacturer's contractual obligation 
to sell, all of the other gases contemplated in the agreement.
    Similarly, the distributor unable to obtain all of its requirements 
for helium in a quarter in turn could end up defaulting on its 
contracts to supply helium to its customers. The distributor's 
customers might be forced to seek alternative supplies of helium for at 
least part of their needs for that period, and to pay above market 
prices to the winning auction bidder(s) to ensure a continuous supply 
of product. This also raises questions of the effect on the contractual 
obligations to sell and purchase the other gases in the contracts.
    The same scenario could be replayed each time when the auction is 
renewed. Refiners, distributors and end users will not know which 
parties will have adequate supplies of helium to meet existing 
contractual demands. This will generate legal questions about contract 
default, partial product allocations, mitigation of damages, and 
obligations to cure, as well as commercial questions about which 
parties may be able to meet supply obligations on a consistent basis. 
The distributor will have to resolve these issues with each customer 
for that auction period; when another auction takes place, and 
different sales volumes of helium are awarded by BLM to new bidders, 
the distributors will have to go through the same legal and commercial 
exercise to ensure that each of their customers will receive enough 
product to meet its requirements.
    An unreliable product stream for helium will make it difficult for 
any distributor to entertain long-term, exclusive supply arrangements 
with customers that foster stable commercial relations and support 
economic growth.
    In contrast to the House approach, S. 783 would establish a gradual 
transition to an auction mechanism. The current allocation system 
between the BLM and refiners would remain in place until October 1, 
2014, and the following year ten percent of the available crude helium 
sold from the reserve would be held at auction. Each year an additional 
tem percent of the available crude product would be added to the 
auction. GAWDA believes this gradual transition to an broader auction 
is a better approach; it will allow refiners, distributors and end 
users greater certainty about supply in the near term, while developing 
a more market-based mechanism in the longer term.
    GAWDA fears that an unstable auction mechanism affecting upwards 
half of the domestic U.S. helium supply could create havoc not merely 
for refiners and distributors, but also for the industries that rely 
heavily on helium as a component of their operations. Health care 
providers, manufacturers of semiconductors and other high tech 
products, metal fabricators, universities and other research 
facilities, and even party balloon suppliers, will no longer have a 
consistent and stable source of helium from their distributors.
    As this legislation moves forward, and particularly in conference, 
GAWDA asks that the committee consider its potential disruptive effect 
on the markets for both crude and refined helium and the end users that 
rely on this product. We support the committee's efforts to pass 
legislation this year to continue the sale of the Federal Helium 
Reserve, and at fair market prices, and we favor the gradual transition 
to an auction approach as outlined in S. 783 to encourage a 
sufficiently reliable supply of helium for the U.S. economy.
                                 ______
                                 
  Statement of Scott Kaltrider, Vice President, Business Management & 
                          Helium Praxair, Inc.
    Praxair appreciates the opportunity to add to the discussion 
regarding the Helium Stewardship Act of 2013 (HSA). The HSA is 
necessary legislation to prevent a profound disruption in the global 
helium market, which will severely impact consumers, scientists, and 
employers. Praxair applauds the work of Chairman Ron Wyden (D-WA) and 
Ranking Member Lisa Murkowski (R-AK) to introduce this important piece 
of legislation.
    Praxair, Inc., is the largest industrial gas company in North and 
South America and one of the largest worldwide. Praxair is 
headquartered in Danbury, CT and employs approximately 10,000 people in 
more than 500 facilities across the United States. The company 
manufactures, sells, and distributes atmospheric, process, and 
specialty gases. Praxair products, services, and technologies bring 
productivity and environmental benefits to a wide range of industries 
including aerospace, chemicals, food and beverage, electronics, 
healthcare, manufacturing, and metals among others. We have operations, 
employees, or customers in nearly every state represented on this 
Committee.
    Praxair has been in the helium business for nearly 100 years 
serving both private and federal government users. We supplied the 
helium used by NASA to launch space shuttles into orbit, the helium-
oxygen breathing mixtures used by Navy sailors while performing deep-
dive operations, and the helium used by the Air Force each time a Delta 
4-Heavy is launched to provide our intelligence community with the 
information necessary to protect our citizens.
    Our long-term planning coupled with investments in a robust supply 
chain and a diverse set of crude and refined helium sources have made 
us a world leader in refined helium production and distribution. We 
have about $500 million invested in plants and equipment required to 
access, process, refine, and deliver to market helium sourced from the 
Federal Reserve operated by the Bureau of Land Management (BLM).
    Praxair's written comments identify the positive aspects of the 
legislation as well as areas where we believe modifications should be 
considered.
i. overall the hsa implements a thoughtful approach to re-authorization 
                     of the federal helium program
    There is unanimous agreement that the Federal Helium Program must 
be re-authorized. There is also a consensus that the re-authorization 
must satisfy two important goals: (1) obtain fair market value for 
federally sourced crude helium and (2) do so in a transparent mechanism 
that will avoid disrupting the helium supply chain.
    Meeting these two objectives, however, is more difficult than it 
would seem at first impression and Praxair commends Chairman Wyden and 
Ranking Member Murkowski for crafting a proposal that will provide 
continued access to the Federal Reserve while industry continues to 
develop new helium supplies. As discussed in greater detail below, the 
HSA protects the stability of the helium supply chain, avoids 
entanglements with existing contracts, and respects private property 
rights.
A. The HSA's Phased-In Auction Promotes Market Stability
    The HSA creates a new phased-in crude helium auction while 
preserving aspects of the current allocation system. This is a wise 
approach. We are concerned that a more aggressive initial auction will 
cause substantial disruption in the global helium supply chain. For 
example, HR 527, which was recently passed in the House of 
Representatives, contains an immediate 100-percent semi-annual auction. 
We believe that such an auction replaces the current predictability in 
supply with significant uncertainty. Under a 100-percent semi-annual 
auction, no supplier of refined helium would know the quantity of 
helium they would have from one six-month period to the next. As a 
result, it would be impossible for suppliers, including Praxair and 
others, to enter the long-term supply contracts our customers current 
have and demand. Without long-term supply contracts, end-users would be 
subjected to a perpetual spot market.
    In recognizing the potential of this serious problem, the HSA 
avoids this type of supply-chain disruption through its phased-in 
auction. By preserving non-auctioned allotments of crude helium, U.S. 
end-users who are supplied by the three leading suppliers of helium 
that built refineries connected to the Federal Helium Reserve will have 
the confidence in their supply necessary to continue to operate 
reliably and competitively on a global basis. This framework 
successfully satisfies one of the two goals mentioned above.
B. The HSA's Pricing Structure Promotes Price Stability and Provides 
        Fair Return to the U.S. Taxpayer
    In recognizing the importance of obtaining fair market value for 
federally sourced crude helium, the HSA uses the result of the phased-
in auction as one data point to price the remaining allocated crude 
helium. A variety of other data points are also used in order to 
determine the best price, including data collected from ``qualifying 
domestic helium transactions'' that will be treated as confidential by 
the Secretary.
    This approach provides a safeguard in the event an auction fails to 
generate interest or robust bidding. We believe that it is possible 
that a large auction or the 100-percent auction, as contemplated in the 
HR 527, may not have the positive result many expect. While it is true 
that current demand is outpacing supply, new supplies will be coming on 
line in the near-term. For example, a project is currently underway in 
Qatar, which, when completed, will be the largest helium production 
facility in the world. Parties purchasing from Qatar will be doing so 
under ``take-or-pay'' contracts and will be contractually required to 
purchase from this source before going to another source, including the 
Federal Helium Reserve. This development may reduce demand for 
federally-sourced crude helium resulting in a less robust auction and, 
therefore, may actually reduce revenues.
C. The HSA Recognizes the Importance of Respecting Existing Contracts 
        Between the Federal Government and Private Companies
    Various privately negotiated contracts exist between private 
entities, such as Praxair, and the U.S. government that extend beyond 
2014. These contracts include agreements to store crude helium in the 
reserve, to use federally-owned pipelines, and to lease a privately 
owned helium enrichment unit. Unilaterally terminating these agreements 
by enacting conflicting legislation would raise serious legal issues.
    The HSA's ``Existing Agreements'' provision recognizes this 
important reality and we strongly ask the Committee to resist any 
suggestion to remove it. Praxair has made significant investments and 
business plans based on our expectations that are guaranteed in these 
contracts. We take great pride in honoring our agreements, and expect 
the U.S. Government to do the same.
D. The Committee Should Resist Any Effort to Create a Stronger 
        ``Tolling'' Mandate
    The HSA includes a provision which makes ``as a condition of sale 
or auction to a refiner . . . the refiner must make excess refining 
capacity of helium available at commercially reasonable rates'' to 
those prevailing at auction that do not have similar refining 
capability.
    While we do not support this provision and continue to question its 
legality, we strongly encourage this Committee to reject arguments to 
change this provision to mandate that refiners, such as Praxair, 
reserve ``sufficient refining capacity'' to others who do not have such 
capacity.
    Praxair along with the other refiners took financial risk to invest 
in building refining capacity connected to the reserve that has, in 
turn, created a successful public-private partnership to transform 
federally-sourced crude helium into product usable by our nation's 
leading manufacturers and researchers. In addition, the Praxair 
refineries that purify federally-sourced crude also receive helium from 
multiple other private sources. As a result, our ``excess refining'' 
capacity is influenced by the volume of helium that is produced by 
these private sources that we are contractually obligated to purchase. 
Serious legal issues would arise in the event that a ``tolling 
mandate'' were to interfere with our ability to accept privately-
sourced helium.
 ii. the hsa can be improved by revisiting provisions contained in the 
                        earlier discussion draft
    Two important provisions that were contained in the Discussion 
Draft were modified in the HSA, as introduced. We respectfully request 
the Committee to review the following comments and revisit these 
provisions.
A. The Discussion Draft's ``Existing Storage'' Provision
    The crude helium currently stored at the Federal Helium Reserve 
consists of both Federally-owned helium as well as helium owned by 
private refiners that has not yet been delivered. Any reform to the 
Federal Helium Program must take into account this reality and ensure 
that these owners have timely access to their property.
    Section 5(e) of the HSA Discussion Draft recognized this important 
issue and included the following provision:

          (e) EXISTING STORAGE.--Any helium in storage as of the date 
        of enactment of the Helium Stewardship Act of 2013 shall 
        receive priority pipeline access, except that the helium shall 
        not have priority over helium intended for Federal users.

    This provision was unfortunately not included in the HSA, as 
introduced.
    A recent legal analysis of HR 527, the Responsible Helium 
Administration and Stewardship Act of 2013 prepared by Cooper & Kirk, 
PLLC concluded that any delay in owners' ability to access their helium 
stored in the Federal Helium Reserve would implicate the Takings Clause 
of the Fifth Amendment of the U.S. Constitution, and stated in relevant 
part:

                  The proposed statute has the potential of 
                effectuating a taking by denying the refiners access, 
                for an indefinite period of time, to the helium they 
                store in the Reserve. Refiners have stored helium in 
                the government's reservoir since the 1980s. Natural gas 
                extractors and helium refiners enter into contracts 
                under which the helium refiners are entitled to the 
                helium released during the natural gas extraction 
                process. The refiners are obligated to pay for this 
                helium, even if they cannot use it immediately. The 
                refiners' only options are to refine and sell the 
                helium, store it, or vent it. Rather than wasting any 
                excess helium, the refiners store it in the Reserve. 
                This helium is the refiners' property, and the 
                government is merely storing it. Praxair, for example, 
                still holds legal title to the helium it stores, 
                continues to pay property taxes on the appraised value 
                of the stored helium, and has a contractual right to 
                have BLM redeliver its helium.

                  To the extent that [the HSA] makes it impossible for 
                the pipeline to be used for any purpose other than for 
                [new] helium sold . . . it is possible that the United 
                States might temporarily confiscate the refiners' 
                property without just compensation. As of the end 2012, 
                Praxair had millions of dollars of helium stored in the 
                Reserve. Congress should ensure that helium stored in 
                the Reserve is accessible to its rightful owners.

    Considering the foregoing, the ``Existing Storage'' provision 
contained in the HSA Discussion Draft should be re-inserted so that 
constitutional property rights are respected and the Federal government 
is not exposed to significant liability.
B. The Discussion Draft's ``Safety Valve'' Provision
    The HSA Discussion Draft contained a ``Safety Valve'' provision 
that gave the Secretary the discretion to decrease the annual auction 
percentage, but instructed the Secretary to notify Congress in the 
event he wished to increase the auction percentage. The HSA, as 
introduced, however, flipped these requirements. Under the current 
version, the Secretary has open discretion to increase the auction 
percentage, but must notify Congress in the event that he wishes to 
decrease the percentage.
    This asymmetrical approach seems to send a clear message to the 
Secretary that he should think twice before decreasing the auction 
percentage, but that he is free to raise the percentage as he sees fit. 
This approach communicates a convoluted message to the Secretary. In 
our perspective, the Secretary should have the same discretion to 
either increase or decrease the auction percentage.
  iii. the hsa should define ``qualified bidder'' to avoid stranding 
                                 helium
    In order to participate in the HSA's proposed annual auction, a 
party must be certified as a ``qualified bidder.'' This term is defined 
as ``a person the Secretary determines is seeking to purchase helium 
for their own use, refining, or redelivery to users.'' While this 
definition is sufficiently narrow to exclude speculators and alike, it 
remains broad enough to cover entities that may wish to bid for helium, 
but lack the necessary capabilities to take possession of the product 
once it has been refined. For example, specially engineered cryogenic 
containers as well as a trucking fleet are required to move helium from 
one of the refineries to its next destination--either a site for 
consumption or a location where that bulk product will be divided into 
yet smaller cylinders. Industrial gas companies, such as Praxair, have 
made these essential and capital intensive investments to ensure that 
its customers' helium needs are timely met. Without this capability, a 
winning bidder's helium may remain stranded, which could negatively 
impact the helium supply chain depending on the volume stranded.
    While we disagree with many of the conclusions and recommendations 
contained in the ``non-refiners'' respective written statements, we 
agree that additional limiting language should be inserted into HSA's 
definition of ``qualified bidder'' to avoid stranded helium or, at the 
least, significant delays while a winning bidder arranges logistics. 
Such language could include limiting the auction to those who are 
seeking helium for refining and/or redelivery.
iv. private helium development and sourcing post closure of the federal 
                             helium reserve
    The current helium supply-demand imbalance will improve in the 
coming months and, moreover, the global industrial gas industry is well 
positioned to meet refined helium demands once private helium sales 
from the Federal Reserve end. Private helium development is not about 
pricing, it is about timing. Private and foreign government development 
of helium sources is timed to coincide with the closure of the Federal 
Reserve.
    The global industrial gas industry has made substantial investments 
in expanding global helium capacity with substantial additional 
increases in global capacity scheduled to come on line in the second 
half of the year. Since the 1990s when the 1996 Helium Privatization 
Act was enacted, an additional 50% of global helium supplies have been 
brought online, largely from projects in the United States, North 
Africa, and the Middle East. The recent supply-demand imbalance has 
resulted because demand has outpaced industry's ability to bring new 
projects online while existing sources have experienced unexpected 
supply disruptions.
    Nevertheless, there are new helium projects, in the United States 
and abroad, that are scheduled to come online or are currently being 
developed. About 30% of the current global helium supply will be 
starting up in the next 6-12 months. Praxair has and will continue to 
invest tens of millions of dollars in the United States to develop 
additional helium supply, including securing lease rights to develop 
new sources. In addition, L'Air Liquide S.A., a French multinational 
company, has rights to about 50% of the new sources coming online that 
have been developed by foreign governments.
                             v. conclusion
    We thank the Committee for considering our views. The HSA is a good 
starting point for discussion and we are confident that with the types 
of modifications outlined above we will have a product that can be 
supported by all stakeholders.
                                 ______
                                 
    Statement of Shane Schulz, Director of Government Affairs, QEP 
                            Resources, Inc.
    Chairman Wyden, Senator Murkowski and members of the Committee, 
thank you for the opportunity to provide written testimony on S. 783, 
Helium Stewardship Act of 2013. My name is Shane Schulz and I am the 
Director of Government Affairs for QEP Resources, Inc (``QEP''). QEP is 
a leading independent natural gas and crude oil exploration and 
production company headquartered in Denver, Colorado. We have oil and 
gas operations in the Rockies which include large acreage positions on 
federal lands. QEP also gathers, compresses, treats, and processes 
natural gas.
    I manage legislative and regulatory policy matters for QEP, 
including tracking S. 783, the helium legislation you are working on in 
your committee. I appreciate the amount of time and hard work you have 
put into this legislation. Helium is a vital resource for America's 
high tech manufacturers including its use in MRI machines and 
semiconductors. It is also a resource for certain welding practices and 
is of strategic importance for the Department of Defense and the space 
program.
    At QEP, we welcome the language in S. 783 that helps ensure more 
price transparency. This includes ensuring the BLM does not sell helium 
below market value and artificially depresses helium prices. Those 
practices can discourage producers from developing new supplies of 
helium. However, Congress can and must do more to ensure and encourage 
the development of future supplies of helium.
    Helium end-users are very concerned about the continued sufficient 
supply of helium, not only in the short-term but also in the long-term. 
We can appreciate their concern. A constant alarm by many of the end-
users is what will happen to helium markets when the Federal Helium 
Reserve winds down and where will the future long-term supply be 
sourced. We applaud the work of the authors of this legislation, but we 
believe this bill could do more to promote long-term production of 
helium from the U.S. helium resource base.
    Rather than importing helium from abroad, potentially from hostile 
governments, we should look to develop our helium reserves here in the 
U.S. The U.S. does have significant helium reserves, much of it is 
within the federal mineral estate. As referenced by several witnesses 
at the May 7th hearing, Wyoming has substantial helium reserves. Other 
areas in the West that may contain potential helium reserves include 
the Four Corners area and certain locations in Utah. These areas 
include large amounts of federal mineral and surface estate which in 
most cases is managed by the BLM.
    Congress can and should do more to provide regulatory certainty for 
natural gas producers that want to invest new capital 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 these 
activities are subject to the National Environmental Policy Act (NEPA) 
prior to approval for exploration and production activities on federal 
lands. NEPA invites public comment and participation that is important, 
but the process as administered by BLM currently 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 several years.
    A company and its investors need to know federal agencies will 
permit helium projects in a timely manner and have the staffing 
resources to do so. We encourage you to include language which would 
help send positive signals to the agencies as well as the companies 
that are looking at producing helium. Such signals should suggest 
helium projects will be recognized as a priority when it comes to 
development on public lands. Congress can draw upon a number of 
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, 
but we are suggesting you provide for the dedication and prioritization 
of resources to insure helium related projects are brought online in a 
timely fashion.
    We recognize the focus of this bill is to deal with the responsible 
draw-down of the Federal Helium Reserve but we believe this is a 
perfect opportunity to help send signals to the private sector to help 
bring more helium supply online. We encourage you to look for 
opportunities to help promote production of helium where you can, and 
one of those areas is on federal lands.
    It is important to note increased helium production on federal 
lands would do more than address the helium shortage. Helium production 
from federal lands also creates additional revenue to the federal 
government because helium producers pay the federal government the 
equivalent of a royalty to produce and sell helium from federal lands. 
That is an extra benefit along with increased supply that should not be 
ignored. Helium production from federal lands can grow with the right 
prices signals and a smart regulatory structure in place. Often times 
helium is part of a gas steam that needs processed and treated which 
adds to the complexity and capital intensive nature of helium related 
projects. Regulatory certainty helps remove some of the risk involved 
in developing some of these projects. Natural gas producers, like QEP, 
stand ready and willing to help develop our helium reserves.
    Thank you for the opportunity to provide written testimony on S. 
783. We encourage you to take this opportunity to also help promote 
long-term supplies of helium while working on the reauthorization of 
the Helium Reserve. I, along with others at QEP, welcome further 
questions and discussion about helium production and the federal 
government's role in helping meet future helium needs.


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