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Selling the Nation’s Helium Reserve
(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.
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.