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Selling the Nation’s Helium Reserve Executive Summary Helium has long been the subject of public policy deliberation and management, largely because of its many strategic uses and its unusual source—it is a derived product of natural gas and its market has several anomalous characteristics. Shortly after sources of 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 1960s, helium’s strategic value in cold war efforts was reflected in policies that resulted in the accumulation of a large reserve of helium owned by the federal government. 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 2015 at prices sufficient to repay the federal government for its outlays associated with the helium program.1 The present report assesses whether the interests of the United States have been well served by the 1996 Act and, in particular, whether selling off the helium reserve “has had any adverse effect on U.S. scientific, technical, biomedical, and national security users of helium.” 2 1 Although the 1996 Act directs that substantially all federally owned helium be sold by 2015, sales efforts to date have fallen short of the act’s directive, and significant amounts of helium will remain after the mandated sell-off deadline. This presents its own set of issues, which are briefly discussed at the end of the Executive Summary. 2 Statement of task—see Appendix A.
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Selling the Nation’s Helium Reserve In response to its charge, the committee finds 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 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. The amount of federally owned helium being sold is enormous: it is currently equivalent to approximately one-half of U.S. helium needs and almost one-third of global demand. One consequence is that the price of federally owned helium, which is set not by current market conditions but by the terms of the 1996 Act, dominates, if not actually controls, the price for crude helium worldwide. The committee recommends 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. The remaining conclusions and recommendations consist of steps to help properly manage
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Selling the Nation’s Helium Reserve the helium reserve and to develop and implement a plan that would protect this important national resource. 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.
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