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The Impact of Selling the Federal Helium Reserve (2000)

Chapter: Executive Summary

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Suggested Citation:"Executive Summary." National Research Council. 2000. The Impact of Selling the Federal Helium Reserve. Washington, DC: The National Academies Press. doi: 10.17226/9860.
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Executive Summary

BACKGROUND

The Helium Privatization Act of 1996 (P.L. 104-273) directs the Department of the Interior to begin liquidating the U.S. Federal Helium Reserve by 2005 in a manner consistent with ''minimum market disruption" and at a price given by a formula specified in the act. It also mandates that the Department of the Interior "enter into appropriate arrangements with the National Academy of Sciences to study and report on whether such disposal of helium reserves will have a substantial adverse effect on U.S. scientific, technical, biomedical, or national security interests."

This report is the product of that mandate. To provide context, the committee has examined the helium market and the helium industry as a whole to determine how helium users would be affected under various scenarios for selling the reserve within the act's constraints.

The Federal Helium Reserve, the Bush Dome reservoir, and the Cliffside facility are mentioned throughout this report. It is important to recognize that they are distinct entities. The Federal Helium Reserve is the federally owned crude helium gas that currently resides in the Bush Dome reservoir. The Cliffside facility includes the storage facility on the Bush Dome reservoir and the associated buildings and pipeline.

IMPACT OF THE LEGISLATION

The helium community is currently enjoying an extended period of stability. Since the mid-1980s, there have been no drastic increases in the price of helium and no shortages of supply. The industry has consistently been emphasizing conservation. All the companies on the Bureau of Land Management (BLM) pipeline store their excess crude helium in the Bush Dome reservoir, and their net storage has led to the accumulation of a private stockpile of approximately 4 billion standard cubic feet (scf), equivalent to 110 million standard cubic meters (scm).

Suggested Citation:"Executive Summary." National Research Council. 2000. The Impact of Selling the Federal Helium Reserve. Washington, DC: The National Academies Press. doi: 10.17226/9860.
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The price of helium will probably remain stable through at least 2010. The price established by the Helium Privatization Act for sales from the Federal Helium Reserve is approximately 25 percent above the current commercial price for crude helium. For this reason and because all helium refiners on the BLM pipeline have long-term take-or-pay contracts with producers of crude helium, it is highly unlikely that the refining industry will buy and use gas from the Federal Helium Reserve rather than from private stockpiles or cheaper commercial suppliers.

Once the private reserves are exhausted, however, refiners will have no realistic option other than to begin purchasing the crude available from the Federal Helium Reserve. (The only other source is more production, and production is driven by the demand for natural gas, not the demand for helium.) Nevertheless, under various plausible supply-demand scenarios, private industry will not need to purchase the entire Federal Helium Reserve to meet demand through 2020.

As the Hugoton-Panhandle gas fields are depleted and the Reserve is exploited, the price of crude helium will increase. However, because transportation and purification costs account for a large portion of the price of refined helium, an increase of 25 percent in the price of crude helium would probably increase the price of pure helium by only 8 to 10 percent.

Finding: Based on the information assembled for this report, the committee believes that the Helium Privatization Act of 1996 will not have a substantial impact on helium users.

FOLLOW-ON ACTIVITIES AND RECOMMENDATIONS

Although the committee does not believe the legislation will have a substantial impact over the next two decades, it recommends consideration of a number of research programs and follow-on studies. These will ensure that the legislation has no adverse long-term (beyond 2020) effects, and that sufficient supplies of helium will continue to be available after 2020 to satisfy the needs of known and potential users.

Reviews of the Helium Industry

First, the committee recommends that future reviews of the helium industry be commissioned by BLM either (1) in response to drastic increases or decreases in helium capacity or use or (2) regularly, every 5 or 10 years. The BLM should assist this review by improving its methods for tracking helium capacity and use. The following recommended improvements will help ensure the timely identification of important shifts in the industry:

  • Develop and implement a consistent and credible taxonomy of helium uses.

  • Develop and implement better methods for tracking the international helium market.

  • Report helium reserves using the natural gas industry's classification scheme.

Suggested Citation:"Executive Summary." National Research Council. 2000. The Impact of Selling the Federal Helium Reserve. Washington, DC: The National Academies Press. doi: 10.17226/9860.
×

Study of the Depletion of the Reserve

Second, the committee recommends that the BLM study the adequacy of the Bush Dome reservoir as the reserves are depleted. Specific study tasks that should be considered include the following:

  • Determine the optimal size of a federal stockpile of crude helium.

  • Develop models of gas extraction at the Bush Dome reservoir to predict the helium content of future extracted gas.

  • Determine whether the quantity of gas that remains in the Bush Dome reservoir will be adequate to meet future federal needs in the event of a temporary drop in private production.

  • Reassess the pricing structure for the storage of helium at the Cliffside facility so that it more accurately reflects the value of the facility.

Research and Development

Finally, the committee recommends that the Department of the Interior conduct research and development to ensure the continued supply of helium into the future. Goals should include (1) new geological models and exploration technologies, (2) improved helium storage systems, and (3) enhanced technologies to conserve, recycle, and eventually replace helium. The following specific tasks should be considered:

  • Determine the geological characteristics and processes that permit the formation of helium-rich gas fields and develop methodologies and databases to assist in the discovery of these fields.

  • Identify potential sites for natural storage facilities to permit the establishment of new facilities near future major helium producers and to allow an increase in the storage and conservation capabilities of helium users.

  • Develop economic models for the extraction and storage of joint-product, nonrenewable resources the production of one of which is dominated by supply and demand for the other.

  • Incrementally improve the efficiency of technologies that currently depend on helium and develop alternative technologies that do not require helium

Suggested Citation:"Executive Summary." National Research Council. 2000. The Impact of Selling the Federal Helium Reserve. Washington, DC: The National Academies Press. doi: 10.17226/9860.
×
Page 1
Suggested Citation:"Executive Summary." National Research Council. 2000. The Impact of Selling the Federal Helium Reserve. Washington, DC: The National Academies Press. doi: 10.17226/9860.
×
Page 2
Suggested Citation:"Executive Summary." National Research Council. 2000. The Impact of Selling the Federal Helium Reserve. Washington, DC: The National Academies Press. doi: 10.17226/9860.
×
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The Helium Privatization Act of 1996 (P.L. 104-273) directs the Department of the Interior to begin liquidating the U.S. Federal Helium Reserve by 2005 in a manner consistent with "minimum market disruption" and at a price given by a formula specified in the act. It also mandates that the Department of the Interior "enter into appropriate arrangements with the National Academy of Sciences to study and report on whether such disposal of helium reserves will have a substantial adverse effect on U.S. scientific, technical, biomedical, or national security interests."

This report is the product of that mandate. To provide context, the committee has examined the helium market and the helium industry as a whole to determine how helium users would be affected under various scenarios for selling the reserve within the act's constraints.

The Federal Helium Reserve, the Bush Dome reservoir, and the Cliffside facility are mentioned throughout this report. It is important to recognize that they are distinct entities. The Federal Helium Reserve is federally owned crude helium gas that currently resides in the Bush Dome reservoir. The Cliffside facility includes the storage facility on the Bush Dome reservoir and the associated buildings pipeline.

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