Chances Rise for Extension of Federal Helium Reserve
After an auction, remaining reserves will be solely for use of the government while corporations hunt for what they need on the private market.
May 20, 2013 - 12:02 am
WASHINGTON – The chances of preserving the endangered Federal Helium Reserve appear to be rising as quickly as, well, a helium-filled balloon.
The Senate Energy and Natural Resources Committee this month began consideration of bipartisan legislation bent on extending reserve operations beyond its scheduled termination date of early October.
The plan, offered by Sen. Ron Wyden (D-Ore.), the panel chairman, and Sen. Lisa Murkowski (R-Alaska), the ranking member, creates a schedule to auction off helium for commercial purposes until the reserves fall to 3 billion cubic feet – a period expected to extend five to six years. Thereafter, the remaining reserves will be designated solely for use of the federal government while corporations hunt for what they need on the private market.
Wyden said the legislation was developed to provide “an orderly phase out of the commercial use of the Federal Helium Reserve while preventing the disruption of the helium supply chain upon which major parts of the U.S. economy depend.”
Helium, he said, represents “a critical resource for a number of key sectors of our economy,” including use as a coolant for MRI machines, in semiconductor manufacturing, and in fiber optics manufacturing, research, and development. The element, lighter than air and number two on the periodic table, also is used to pressurize and purge piping systems, to detect leaks, in specialized welds, and to improve breathing mixtures for deep sea diving.
The Federal Helium Reserve was created in 1925 to offer a steady supply of the gas for dirigibles used in the nation’s defense. Later, in the 1950s, the helium was used by NASA as a coolant in space exploration projects.
The reserve’s Cliffside Storage Facility, operated by the Bureau of Land Management, is located about 12 miles outside of Amarillo, Texas, because of its proximity to natural gas fields in southwest Kansas, Texas, and Oklahoma that contain unusually high levels of helium.
In 1996, Congress moved to get out of the helium business, adopting legislation to abolish the reserve and open helium to market forces as soon as the $1.37 billion invested in the program could be recouped. As of Sept. 30, 2012, the U.S. Treasury has received $1.33 billion from the program. The remaining $44 million will be deposited by the end of the current fiscal year. At that point, under current law, the private market is supposed to step forward and replace the reserve.
But should the reserve close as planned, the U.S. faces the prospect of losing 40 percent of its helium at a time when demand is rising. The House already voted 394-1 last month to extend the program and the Senate is expected to follow suit.
Wyden acknowledged that “there simply are no practical alternatives to replacing that supply today” and they “ought to give all parties the additional time needed to establish alternative sources of helium.”
The Helium Stewardship Act carries the support of most industries that rely on helium. Walter Nelson, director of helium sourcing and supply chain for Air Products and Chemicals Inc., said the package maximizes the return on investment for American taxpayers while simultaneously ensuring the availability of helium without disrupting the supply chain.
“Significant new sources are coming online but there have been repeated delays,” Nelson told the committee. “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 stable source of supply.”
The current economic environment “calls for level-headed reforms that are phased in incrementally,” Nelson said. “That is exactly the approach you have taken.”
But David Joyner, president of Air Liquide Helium America, Inc., speaking on behalf of his company as well as Airgas, Inc. and Matheson Tri-Gas, Inc., argued that Congress should begin auctioning off the reserve sooner than the 2014 date specified in the legislation. His groups maintain the bidding can be held within 180 days of the legislation’s enactment.
Air Liquide and the other firms represented by Joyner are chafing under current conditions that have permitted a handful of firms – including Air Products – to hold “near exclusive access to the reserve for almost 20 years.” Air Products is one of four helium refining companies that purchase about 94 percent of the raw helium made available by the reserve.
“Auction of federal helium is not a complex process,” Joyner said. “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.”
Regardless, Joyner said his groups “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.”
Carolyn Duran, director of chemical risk and compliance for Intel Corp., testified that her company and the rest of the semiconductor industry “are reliant on a consistent, secure supply of helium to produce our products.”
The continued availability of helium, she said, is “absolutely necessary to prevent disruption to an already tenuous supply line of helium, a critical natural resource.”
The legislation has drawn support from the Obama administration, although the Bureau of Land Management desires additional input on some of the more technical aspects of the bill. Timothy Spisak, the bureau’s deputy assistant director of minerals and realty management, said the proposal would accomplish the original goals of “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.”