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Summary 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 on 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,1 managed by the Bureau of Land Management 1 The Federal Helium Reserve (also referred to here as the Helium Reserve or the Reserve) consists of (1) a naturally occurring underground structural dome near Amarillo, Texas, where federally owned 

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selling n at i o n ’ s h e l i u m r e s e rv e  the (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 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 10 to 15 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 (and some privately owned) crude helium is stored (the Bush Dome Reservoir); (2) an extensive helium pipeline system running through Kansas, Oklahoma, and Texas that connects crude helium extraction plants with one another, with helium refining facilities, and with the Bush Dome Reservoir (the “Helium Pipeline”); and (3) various wells, pumps, and related equipment used to pressurize crude helium, to store and withdraw it from the Bush Dome Reservoir, and to operate other parts of the Federal Helium Reserve. As of this writing in late 2009, the Federal Helium Reserve contained slightly more than 18 billion cubic feet of federally owned helium, with a value of approximately $1.2 billion using BLM’s current posted price of $64.75 per thousand cubic feet. 2As discussed more fully in the section of Chapter 1 entitled “Review of the 2000 Report’s Conclu - sions,” the 1996 Act called for an Academy study to determine if such disposal would have a sub- stantial adverse effect on U.S. interests. That study, The Impact of Selling the Federal Helium Resere, 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.

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summary  an efficient or responsible reservoir management plan. If the reserve continues to be so managed, a national, essentially nonrenewable resource of increasing impor- tance 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 recommenda- tions for improving the federal helium program: changing the methods for pric- ing 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 inter- est. 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. 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 conse- quences: (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, 3 NRC, The Impact of Selling the Federal Helium Resere ( Washington, D.C.: National Academy Press, 2000), page 9.

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selling n at i o n ’ s h e l i u m r e s e rv e  the 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 complicat- ing 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 refin- ing 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 refin- ing 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 Resere 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 4 The law directs that crude helium from the Reserve be offered for sale in such amounts as may be necessary to dispose of all helium in excess of 600,000,000 cubic feet on a straight-line basis between January 1, 2005 and January 1, 2015. Although BLM has offered helium for sale in the amounts required by the 1996 Act, not all such helium has been purchased and as a consequence significant amounts of federally owned helium will remain in the Federal Reserve after January 1, 2015. This is discussed in more detail in Chapter 5 in the section entitled “Sell-Down of Crude Helium Pursuant to 1996 Act.”

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summary  encroachment of water from nearby aquifers and connected reservoirs, and pro- mote the efficient drainage and recovery of the resource gas in place. Recommendation. The BLM should develop and implement a long-term plan that incorporates appropriate technology and operating practices for delivering crude helium from the Federal Helium 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 sup- ply 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 experi- enced here. The grants typically are for 2 or 3 years 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 con- tracts that might at least partially reduce the risk of significant price increases and shortages. Further, if BLM implements the market-based pricing mechanism rec- ommended 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 program5—operated by BLM for the sale of helium to 5 The in-kind program is discussed in more detail in Chapter 5 in the section entitled “In-Kind Program of Crude Helium Distribution.”

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selling n at i o n ’ s h e l i u m r e s e rv e 0 the 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. 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 Admin- istration, 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 6As 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).

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summary  effects of supply and price disruptions for the U.S. research community not cur- rently 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 infor- mation 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 reser- voirs throughout the world, including raw data, methodology, and economic assessment that would allow the classification of reserves contained in spe- cific 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, the 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.

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selling n at i o n ’ s h e l i u m r e s e rv e  the 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 inves- tigate the feasibility of extending the Helium Pipeline to other fields with deposits of commercially available helium as a way of prolonging the pro- ductive life of the Federal Helium Reserve and the refining facilities con- nected 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 com- mittees, should commission a study to determine the best method of deliver- ing 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

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summary  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 fed- eral 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 the issues go well beyond the reserve management responsibilities of BLM.