THE IMPACT OF SELLING THE FEDERAL HELIUM RESERVE

Committee on the Impact of Selling the Federal Helium Reserve

Board on Physics and Astronomy

Commission on Physical Sciences, Mathematics, and Applications

National Materials Advisory Board

Commission on Engineering and Technical Systems

National Research Council

NATIONAL ACADEMY PRESS
Washington D.C.



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The Impact of Selling the Federal Helium Reserve THE IMPACT OF SELLING THE FEDERAL HELIUM RESERVE Committee on the Impact of Selling the Federal Helium Reserve Board on Physics and Astronomy Commission on Physical Sciences, Mathematics, and Applications National Materials Advisory Board Commission on Engineering and Technical Systems National Research Council NATIONAL ACADEMY PRESS Washington D.C.

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The Impact of Selling the Federal Helium Reserve NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This study by the Board on Physics and Astronomy and the National Materials Advisory Board was conducted under contract number 1422-N66-C98-3002 with the Department of the Interior. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organization or agency that provided support for the project. International Standard Book Number 0-309-07038-4 Copyright 2000 by the National Academy of Sciences. All rights reserved. Available in limited numbers from: Board on Physics and Astronomy 2101 Constitution Avenue, NW Washington, D.C. 20418 202-334-3520 Printed in the United States of America.

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The Impact of Selling the Federal Helium Reserve THE NATIONAL ACADEMIES National Academy of Sciences National Academy of Engineering Institute of Medicine National Research Council The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. William A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. William A. Wulf are chairman and vice chairman, respectively, of the National Research Council.

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The Impact of Selling the Federal Helium Reserve COMMITTEE ON THE IMPACT OF SELLING THE FEDERAL HELIUM RESERVE ROBERT RAY BEEBE, Tucson, Arizona, Co-chair JOHN D. REPPY, Cornell University, Co-chair ALLEN M. GOLDMAN, University of Minnesota HERBERT R. LANDER, Boeing/Rocketdyne MOLLY K. MACAULEY, Resources for the Future MARK A. MILLER, University of Texas at Austin ADAM Z. ROSE, Pennsylvania State University THOMAS A. SIEWERT, National Institute of Standards and Technology ROBERT M. WEISSKOFF, EPIX Medical, Inc. DONALD C. SHAPERO, Study Director ROBERT M. EHRENREICH, Senior Program Officer (until February 26, 1999) KEVIN D. AYLESWORTH, Program Officer (as of September 7, 1998) DANIEL F. MORGAN, Program Officer Liaison Representatives ROBERT DOYLE, U.S. Department of the Interior, Bureau of Land Management, Washington, D.C. TIMOTHY SPISAK, U.S. Department of the Interior, Bureau of Land Management, Amarillo, Texas MICHELLE J. CHAVEZ, U.S. Department of the Interior, Bureau of Land Management, Amarillo, Texas

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The Impact of Selling the Federal Helium Reserve BOARD ON PHYSICS AND ASTRONOMY ROBERT C. DYNES, University of California at San Diego, Chair ROBERT C. RICHARDSON, Cornell University, Vice Chair STEVEN CHU, Stanford University VAL FITCH, Princeton University IVAR GIAEVER, Rensselaer Polytechnic Institute RICHARD D. HAZELTINE, University of Texas at Austin JOHN HUCHRA, Harvard-Smithsonian Center for Astrophysics JOHN C. MATHER, NASA Goddard Space Flight Center R.G. HAMISH ROBERTSON, University of Washington JOSEPH H. TAYLOR, Princeton University KATHLEEN TAYLOR, General Motors Research and Development Center J. ANTHONY TYSON, Lucent Technologies GEORGE WHITESIDES, Harvard University DONALD C. SHAPERO, Director ROBERT L. RIEMER, Associate Director KEVIN D. AYLESWORTH, Program Officer (through October 15, 1999) JOEL PARRIOTT, Program Officer SARAH CHOUDHURY, Project Associate SYLVIA TURNER, Staff Assistant

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The Impact of Selling the Federal Helium Reserve NATIONAL MATERIALS ADVISORY BOARD EDGAR A. STARKE, JR., University of Virginia, Chair JESSE (JACK) BEAUCHAMP, California Institute of Technology FRANCIS DISALVO, Cornell University EARL DOWELL, Duke University EDWARD C. DOWLING, Cleveland Cliffs, Inc. THOMAS EAGAR, Massachusetts Institute of Technology ANTHONY G. EVANS, Princeton University ALASTAIR M. GLASS, Lucent Technologies MARTIN E. GLICKSMAN, Rensselaer Polytechnic Institute JOHN A.S. GREEN, Aluminum Association, Inc. SIEGFRIED S. HECKER, Los Alamos National Laboratory JOHN H. HOPPS, JR., Morehouse College MICHAEL JAFFEE, Rutgers University SYLVIA M. JOHNSON, SRI International SHEILA F. KIA, General Motors Research and Development Center LISA KLEIN, Rutgers University HARRY LIPSITT, Wright State University (emeritus) ALAN G. MILLER, Boeing Commercial Airplane Group ROBERT C. PFAHL, JR., Motorola JULIA PHILLIPS, Sandia National Laboratories KENNETH L. REIFSNIDER, Virginia Polytechnic Institute and State University JAMES WAGNER, Case Western Reserve University JULIA WEERTMAN, Northwestern University BILL G.W. YEE, Pratt & Whitney RICHARD CHAIT, Director THOMAS E. MUNNS, Associate Director MARLENE CROWELL, Financial Analyst CHARLES HACH, Program Officer LOIS LOBO, Research Assistant DANIEL MORGAN, Senior Program Officer AIDA NEEL, Senior Project Assistant JANICE PRISCO, Senior Project Assistant JOHN RASMUSSEN, Senior Program Officer BONNIE SCARBOROUGH, Program Officer PAT WILLIAMS, Senior Project Assistant

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The Impact of Selling the Federal Helium Reserve COMMISSION ON PHYSICAL SCIENCES, MATHEMATICS, AND APPLICATIONS PETER M. BANKS, Veridian ERIM International, Inc., Co-chair W. CARL LINEBERGER, University of Colorado, Co-chair WILLIAM F. BALLHAUS, JR., Lockheed Martin Corporation SHIRLEY CHIANG, University of California, Davis MARSHALL H. COHEN, California Institute of Technology RONALD G. DOUGLAS, Texas A&M University SAMUEL H. FULLER, Analog Devices, Inc. JERRY P. GOLLUB, Haverford College MICHAEL F. GOODCHILD, University of California, Santa Barbara MARTHA HAYNES, Cornell University WESLEY T. HUNTRESS, JR., Carnegie Institution CAROL M. JANTZEN, Westinghouse Savannah River Company PAUL G. KAMINSKI, Technovation, Inc. KENNETH H. KELLER, University of Minnesota JOHN R. KREICK, Sanders, a Lockheed Martin Company (retired) MARSHA I. LESTER, University of Pennsylvania DUSA M. McDUFF, State University of New York at Stony Brook JANET L. NORWOOD, Former Commissioner, U.S. Bureau of Labor Statistics M. ELISABETH PATÉ-CORNELL, Stanford University NICHOLAS P. SAMIOS, Brookhaven National Laboratory ROBERT J. SPINRAD, Xerox PARC (retired) NORMAN METZGER, Executive Director (through July 1999) MYRON F. UMAN, Acting Executive Director (from August 1999)

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The Impact of Selling the Federal Helium Reserve COMMISSION ON ENGINEERING AND TECHNICAL SYSTEMS W. DALE COMPTON, Purdue University, Chair ELEANOR BAUM, The Cooper Union for the Advancement of Science and Art RUTH M. DAVIS, Pymatuning Group, Inc. E. GAIL DE PLANQUE, Potomac, Maryland NORMAN A. GJOSTEIN, University of Michigan at Dearborn HENRY J. HATCH, American Society of Civil Engineers STUART L. KNOOP, Oudens and Knoop, Architects, PC NANCY G. LEVESON, Massachusetts Institute of Technology CORA B. MARRETT, University of Massachusetts at Amherst ROBERT M. NEREM, Georgia Institute of Technology LAWRENCE T. PAPAY, SAIC BRADFORD W. PARKINSON, Stanford University BARRY M. TROST, Stanford University JAMES C. WILLIAMS, Ohio State University RONALD W. YATES, U.S. Air Force (retired) DOUGLAS C. BAUER, Executive Director DENNIS I. CHAMOT, Deputy Executive Director

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The Impact of Selling the Federal Helium Reserve Preface In 1996 the U.S. Congress passed the Helium Privatization Act (P.L. 104-273), which ordered the Department of the Interior to begin liquidating the U.S. Federal Helium Reserve by 2005 in a manner consistent with "minimum market disruption" and at a price given by a formula specified in the act. Helium is a rare and nonrenewable resource, however, with many properties critical to a number of important technologies in the commercial, military, and fundamental scientific research sectors. Unlike ordinary goods and services that can be produced virtually forever, every unit of helium that is produced and consumed today will eventually escape Earth's atmosphere and become one less unit available for use tomorrow. The prospect of liquidating the U.S. Federal Helium Reserve is thus a matter of great concern in the commercial, academic, and government sectors. In response to this concern, the Helium Privatization Act also mandated, in Section 8, that the Department of the Interior "enter into appropriate arrangements with the National Academy of Sciences to study and report on whether such disposal of helium reserves will have a substantial adverse effect on U.S. scientific, technical, biomedical, or national security interests." This report is the product of that mandate and was conducted by a committee, the Committee on the Impact of Selling the Federal Helium Reserve, convened under the auspices of the Board on Physics and Astronomy and the National Materials Advisory Board of the National Research Council (NRC), which is the operating arm of the National Academy of Sciences and the National Academy of Engineering. Nine committee members (none of whom are in the helium supply business) were carefully selected by the NRC to provide a suitable range of expertise and an appropriate balance of experience in helium usage, helium-based research and development, and resource economics. To provide a meaningful context for this effort, the committee examined the helium market and the helium industry as a whole, in order to determine how the users of helium would be affected under various scenarios for selling off the reserve within the constraints set forth in the pertinent legislation. The committee did not assess the pricing

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The Impact of Selling the Federal Helium Reserve strategy spelled out in the legislation because that issue lies outside of its charge. Specifically, the committee's task incorporated the following elements: Identify the major current applications of helium in the scientific, technical, biomedical, and national security communities. Determine how much helium each consumes and of what purity. Assess whether these applications are likely to grow or shrink over the next 10 to 20 years. Identify any important new uses of helium that can be foreseen over the same period in the user communities being considered. Identify any alternatives to the current use of helium in each application above, including conservation, recycling, the use of different purity grades of helium, and the substitution of other materials or other technologies. Examine how the above users currently pay for the helium. Assess the flexibility of the funding sources and the price sensitivity of the demand for the various uses. Assess the current and projected U.S. market for refined helium, including worldwide helium demand by industrial and other users as well as the users identified above. Examine the availability and reliability of worldwide supply, technical opportunities to increase that supply (e.g., improved recovery), and the relationships among supply, demand, and market price. Assess the economic implications of the sales method prescribed in the legislation. Develop several scenarios for how the federal helium reserve might be sold, including both full and partial privatization and considering various approaches to the sale, such as futures, incentives, and market timing. Under each scenario, determine the likely impact on the cost and availability of helium for the scientific, technical, biomedical, and national security uses examined above. Under each scenario for price and availability, assess how access to helium would be affected for users in these communities. Synthesize the results of all the above to assess the impact of the sale of the reserve on helium users in the scientific, technical, biomedical, and national security communities. Present several options for accomplishing the sale, with an analysis of each option's advantages and disadvantages for the user communities being considered. Suggest ways in which the federal government or others could mitigate any adverse impacts that are identified for each option, by financial mechanisms, by advancing the technology for helium production, recovery, conservation, and recycling, or by other means. To accomplish its task, the committee collected information from four main sources: A site visit by several committee members to the Federal Helium Reserve in Amarillo, Texas, including an extensive briefing session from the technical staff, an inspection of the reserve facilities, and a town forum, in which members of the local community could make statements and ask questions of the committee members; Meetings by several committee members with helium industry personnel, including a site visit to the ExxonMobil facilities in southern Wyoming;

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The Impact of Selling the Federal Helium Reserve A supplier workshop, in which members of the Helium Advisory Committee of the Compressed Gas Institute briefed the committee on the nature of the helium gas fields, the private helium extraction and purification industries, and the private helium distribution industry; and A user workshop, in which representatives of the major users of helium briefed the committee on such areas as fuel-tank purging, leak detection, welding, production of fiber-optic cable, nuclear power generation, magnetic resonance imaging, and fundamental scientific research. The fundamental scientific research session was organized by the American Physical Society. In each of the cases, the committee permitted the main communities to organize their own briefing sessions. The agendas of the four meetings of the committee, the third of which included the user's workshop, are presented in Appendix A. The committee's deliberations are organized in six chapters. Chapter 1 provides an overview of the properties that make helium unique and a history of helium's discovery and usage. Chapter 2 details the contents of the federal legislation and the capabilities of the U.S. Federal Helium Reserve in Amarillo, Texas. Chapters 3 and 4 provide overviews of helium demand and supply respectively. The economics of the helium market are reviewed in Chapter 5, and the committee's findings and recommendations concerning the potential long-term consequences of the sale of the Federal Helium Reserve are discussed in Chapter 6. Robert Ray Beebe and John D. Reppy, Co-chairs Committee on the Impact of Selling the Federal Helium Reserve

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The Impact of Selling the Federal Helium Reserve Acknowledgments The committee would like to thank the following people for their support of this project and for ensuring that the committee had prompt access to all of the information it required: Robert Doyle of the Department of the Interior's Bureau of Land Management (BLM), Timothy Spisak of BLM, Carl T. Johnson, president of the Compressed Gas Association, and Robert Park of the American Physical Society. The committee would also like to thank Arthur Francis of AWF Consulting, who provided comprehensive briefings and valuable insight into the history and development of the Federal Helium Reserve. Thanks are also due to the following people for providing briefings and/or insight into this study: Morris Aizenman, National Science Foundation; Tim Brennan, University of Maryland; D. Allan Bromley, Yale University; Terry Byrd, Bureau of Mines; Phillip Eckels, General Electric; Tom Elam, NASA; Robyn Faifer, Kelly AFB; David Farson, Ohio State University; Gary Ferguson, Oxford Instruments; Douglas Finnemore, Iowa State University; Henry Galpin, Pioneer National Resources USA; Don Gubser, Naval Research Laboratory; Michael Harrison, Brookhaven National Laboratory; Mark Haynes, General Atomics; Siu-Ping Hong, Lucent Technologies; George Hyde, ExxonMobil Company; Peter Koch, State University of New York at Stony Brook; Phil Kornbluth, BOC Gases; Thane Kraus, Ridgeway Petroleum; William Moyer, Air Products and Chemicals, Inc.; Gerald Nalepa, Air Liquide America Corporation; Douglas Osheroff, Stanford University; John Pilot, Intel; Douglas Rasch, ExxonMobil Company; Claus Rode, Jefferson Laboratory; Ron Sager, Quantum Design; Sharon Saupp, Praxair, Inc.; Hans Schneider-Muntau, Florida State University; Eric Stangeland, Boeing; Barbara Stauder, Praxair, Inc.; Elie Trak, Hypres Digital Electronics; Scott Walston, GE Aircraft Engines; David Wolff, MG Industries. The committee also thanks BPA staff members Kevin Aylesworth and Donald Shapero and National Materials Advisory Board staff members Robert Ehrenreich and Daniel Morgan. Finally, the co-chairs of the committee thank the committee members for their dedication and patience during the course of this study. It could not have been completed without their diligence and goodwill.

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The Impact of Selling the Federal Helium Reserve Acknowledgment of Reviewers These proceedings have been reviewed by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Research Council's (NRC's) Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the authors and the NRC in making the published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The contents of the review comments and the draft manuscript remain confidential to protect the integrity of the deliberative process. The committee wishes to thank the following individuals for their participation in the review of this report: P.W. Anderson, Princeton University, Edward Dowling, Cleveland Cliffs, Inc., Howard Hart, General Electric (retired), Larry Lake, University of Texas at Austin, J. Ross Macdonald, University of North Carolina (emeritus), William D. Nordhaus, Yale University, Doug Osheroff, Stanford University, Christopher Sims, Princeton University, and John Tilton, Colorado School of Mines. Although the individuals listed above have provided many constructive comments and suggestions, the responsibility for the final content of this report rests solely with the authoring committee and the NRC.

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The Impact of Selling the Federal Helium Reserve Contents     EXECUTIVE SUMMARY   1     OVERVIEW   4 1   PROPERTIES AND HISTORY   14     Uniqueness of Helium,   14     History of Helium Usage,   15 2   U.S. FEDERAL HELIUM RESERVE AND THE HELIUM PRIVATIZATION ACT   19     Federal and Private Helium Facilities and Capacities,   19     Federal Helium Facilities,   19     Private Helium Facilities,   22     Helium Privatization Act of 1996,   24 3   USES OF HELIUM   26     Inadequacy of Data on Helium Use,   27     Current Uses,   28     Cryogenics,   28     Magnetic Resonance Imaging,   28     Semiconductor Processing,   29     Large-Scale Fundamental Research Requiring Helium Temperatures,   29     Small-Scale Fundamental Research Requiring Helium Temperatures,   30     Pressurizing and Purging,   32     Welding,   32     Arc Welding,   33     Laser Processing,   33     Atmospheric Control,   34     Optical Fiber Manufacture,   34     Plasma-Arc Coating,   35     Plasma-Arc Melting,   35     Heat Treatment,   35     Leak Detection,   35

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The Impact of Selling the Federal Helium Reserve     Breathing Mixtures   36     Lifting   36     Other Uses of Helium   36     Potential Future Uses   37     Magnetic Levitation   37     Superconducting Magnetic Energy Storage   37     Energy Conversion Systems   37     Cryogenic Wind Tunnels   38     Superconducting Electronics   39 4   HELIUM SUPPLY, PRESENT AND FUTURE   40     Separation Technologies   41     Crude Helium Extraction from Natural Gas   41     Purification   41     Helium Reserves and Resources   42     Categories of Helium Reserves and Resources   43     Future Helium Supply   44 5   ECONOMICS OF THE HELIUM MARKET   49     Factors Affecting the Helium Market   49     The Effect of a Fixed Federal Sales Price   50     Economics of Helium Storage   52 6   IMPACT OF THE IMPLEMENTATION OF THE HELIUM PRIVATIZATION ACT   55     Impact of the Legislation   55     Follow-On Activities and Recommendations   57     Studies   58     Research   59     BIBLIOGRAPHY   61     APPENDIXES   63     A Agendas for Meetings of the Committee on the Impact of Selling the Federal Helium Reserve   65     B Helium Privatization Act of 1996   70     C Biographical Sketches of Committee Members   78     D List of Acronyms and Definitions   80