GLOBAL CHALLENGES

The Helium Gap

Joe Maglitta | Date: 03-09-10 | Comments

The flighty gas is not just for blimps, chipmunk voices and party balloons. A new federal report warns about the U.S. government�s sell-off of the world�s biggest helium reserve.

Oh buoy.

The United States is facing a �helium gap� of its own making -- with potential dire consequences for scientific, technical, biomedical and national security sectors, a recent federal report warns.

By selling off the world�s largest helium stockpile at fixed, below-market prices, the U.S. endangers its long-term access, short-changes citizens in favor of private business and distorts the global market, according to the NRC (National Research Council), a government advisory body.

From Chipmunk Voices to Chips

Over the last decade, helium use has ballooned, especially overseas, for a wide range of high-tech products: fiber optic and chip fabrication, MRI (magnetic resonance imaging) devices, rockets, weather balloons and military surveillance, to name a few.

As a result, the NRC notes, ready access to affordable supplies is critical to industry, government and academia. If the current sell-down continues, in 10 to 15 years the United States will go from the world�s biggest helium exporter to an importer from Russia and the Middle East.

Crude Helium Capacities

Source: �Selling the Nation�s Helium Reserve,� National Research Council.

�Selling off the helium reserve,� the panel concludes, �is not in the best interest of the U.S. taxpayers or the country.�

Public and Private Ownership Both Troubled

Helium reserves are a surprisingly weighty topic.
During the Cold War, helium was strategic to defense and aerospace. The United States created a 3,500-acre Federal Helium Reserve underground in Texas, with a pipeline network stretching into Oklahoma and Kansas.

But, as a recent Wall Street Journal article explains, �The Bureau of Land Management eventually accrued a debt of $1.3 billion in acquiring the helium and equipment to process it, and in 1996, the government decided to get out of the business. Congress fixed the yearly amount and price at which helium would be offered so that the debt would be paid and the helium gone by 2015.�

It�s the effects of that law -- the Helium Privatization Act of 1996 � and BLM program oversight that�s causing concern today. Here are the problems and NRC-recommended solutions:

Loss of U.S. dominance: The United States currently satisfies more than one-half of the annual U.S. demand for helium, and provides approximately one-third of the helium consumed globally each year. Many worry the United States is exiting the market at a time of global growth. Recommendation: Scrap the �straight-line� sell-down schedule to preserve reserves.

Control by �Big Helium�: At present, just four companies can process federally owned crude helium. The BMN serves as a business partner. Hmmmm. Recommendation: Open crude helium sales to more buyers, and work with processing companies to make unused refining available to new companies.

Opaque pricing: Because a handful of companies refine crude helium for retail sale, no real market or public prices exist (see above). Recommendation: Shift to a market-based pricing policy and establish a more transparent pricing exchange.

Cut-rate deals: Crude federal helium is sold to private purchasers at below-market values. The NRC says that amounts to �a taxpayer-financed subsidy for consumption of this scarce publicly owned resource� sales of federally owned crude helium could end up subsidizing exports of helium. � Recommendation: Market-rate pricing.

Buy Low, Sell High

Source: U.S. Bureau of Land Management. Latest info at:

http://minerals.usgs.gov/minerals/pubs/commodity/helium/mcs-2010-heliu.pdf

Congress may take up the matter this year. "As a nation, we can't be a scientific leader if we don't have the critical materials to do research," the Journal quotes Bart Gordon, a Tennessee Democrat who is chairman of the House Committee on Science and Technology. More than hot air? We shall see.