Selling the Nation's Helium Reserve (2010) / Chapter Skim
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5 Operation of the Federal Helium Reserve Facilities
5 Operation of the Federal Helium Reserve Facilities
Pages 87-112
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From page 87... ...
evaluating how effectively the Reserve has served as a flywheel, enabling more efficient use of the Bush Dome Reservoir and the refineries connected to it via the Helium Pipeline. The chapter continues by describing recent efforts to better characterize the nature and capabilities of the Bush Dome Reservoir and gives supplemental recommendations to improve those capabilities.
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From page 88... ...
The incentives caused several private oil and gas producers to enter long-term helium purchase agree ments with BOM and to build five helium extraction plants in the most promising natural gas fields in Kansas, Texas, Colorado, and Oklahoma. The existing pipeline for helium was significantly extended to link those plants, running from the Bush Dome Reservoir to Bushton, Kansas, over 400 miles away (as described in Box 1.1, its current manifestation is referred to in this report as the "Helium Pipeline")
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From page 89... ...
in the amount of helium stored in the Bush Dome Reservoir; a net negative difference constitutes a decrease (by the amount of the difference) in the amount of stored helium.
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From page 90... ...
To provide a more reliable flow of crude helium to the refineries linked to the Bush Dome Reservoir, BLM worked with the owners of the refineries to install a crude helium enrichment unit (CHEU) and related compression facilities (Figure 5.2)
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From page 91... ...
. In addition to responding to these criticisms from the Interior IG, the CRLP may need to consider further investments in facilities that can enhance long-term recov ery and reliability of access to the remaining Bush Dome Reservoir crude helium.
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From page 92... ...
Because BLM is charged with managing the large crude helium reserves in the reservoir for the benefit of current and future taxpayers, the committee includes in its discussion of BLM's operation of the Federal Helium Reserve some consideration of the complex issues in reservoir management and investment in reservoir facilities that BLM will confront very soon. It appears highly desirable to the committee that BLM's management of the Bush Dome Reservoir, like its man agement of other aspects of the Reserve, should adopt a longer-term perspective that extends well beyond the 2015 date by which the 1996 Act mandates sell-off of substantially all of the federally owned crude helium stored in the Bush Dome Reservoir.
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From page 93... ...
With the shutting down of the federal government's helium-refining facilities under the 1996 Act, the in-kind program was initiated and requires federal agencies to meet their major helium requirements by buying, "to the extent that supplies are readily available," refined helium from an authorized federal helium supplier that is under contract to pur chase an equivalent amount of crude helium from BLM.7 BLM has promulgated regulations governing such sales (43 CFR Part 3195)
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From page 94... ...
is ambiguous, it appears the language of subsection 167d(b) provides BLM sufficient leeway to fashion a program that could mitigate some of the negative consequences for academic helium users of the rising prices and periodic shortages encountered in the past.9 8 The language of the regulation does not appear to permit these small researchers to participate in the in-kind program, both because they use only small amounts of helium and because they are not contractors with the federal agencies but rather operate under grants.
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From page 95... ...
The allocated sale generally accounts for 90-96 percent of the total offering and can be bid on only by owners of the crude helium refining facilities connected to the Helium Pipeline in 2000. Bids are for volume desired.
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From page 96... ...
BLM Pricing Policy for Crude Helium The 1996 Act mandated selling off the federally owned helium at a minimum crude price of approximately $47 per Mcf, with a yearly escalation of this minimum at the rate of increase in the preceding year's consumer price index. As this report was being written, the price charged by BLM was $64.75 per Mcf.11 11Available at http://www.blm.gov/nm/st/en/prog/energy/helium/helium_operators_information/ crude_helium_price.html.
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From page 97... ...
and international crude or liquid helium pricing agreements are now tied to the BLM price. Because the BLM crude price is now comparable to or even below the price of privately owned crude helium, federally owned crude helium from the Bush Dome Reservoir is no longer serving as a backup source of crude helium, as envisioned when the Federal Helium Reserve was originally developed (a vision essentially abandoned by enactment of the 1996 Act)
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From page 98... ...
These market distortions have encouraged the extraction of crude helium from the Bush Dome Reservoir and the exploitation for private profit of this reserve by a small number of firms having refineries connected to the publicly financed Helium Pipeline. The pricing for Bush Dome crude helium could also discourage the development of alternative sources of crude helium supply, resulting in the venting of crude helium from natural gas fields in the United States and abroad.
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From page 99... ...
Figure 5.1 indicates that such fluctuations in deposits and withdrawals arguably were present for much of the period between roughly 1975 and 1996 or 1997. Since the late 1990s, how ever, refiners have largely ceased making significant deposits into the Bush Dome Reservoir.12 One reason why such deposits no longer are taking place might be because the amount of helium being produced from the natural gas fields con nected to the Helium Pipeline has been decreasing as those fields mature.
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From page 100... ...
The Helium Reserve infrastructure enables BLM to regulate deliveries of crude helium to refiners in ways that accommodate such shutdowns and avoid the loss of helium from the natural gas wells connected to the Helium Pipeline and the Bush Dome Reservoir. One way to assess the argument that the Federal Helium Reserve enhances the efficiency of crude helium recovery would be to compare the efficiency of extrac tion of crude helium (or, equivalently, the fraction of recoverable helium that is vented)
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From page 101... ...
It then considers the issues for efficient reservoir management created by the 1996 Act's mandate that the crude helium in the Bush Dome Reservoir be extracted on a straight-line basis, defying the guidance of most experts on reservoir management. Finally, the 1996 Act's failure to address how the Helium Reserve is to be managed after 2015 raises other serious issues for BLM and for the United States, which the committee discusses in the last section of this chapter.
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From page 102... ...
When the water is sufficiently close to the area in the formation open for production by a well, it may "channel" or "cone" into the well bore and may reduce or altogether eliminate the ability of the well to produce gas. BLM Contract with NITEC for Analysis of the Reseroir To develop a more sophisticated understanding of the complex dynamics of the Bush Dome Reservoir, BLM contracted with an independent consulting firm,
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From page 103... ...
NITEC Models of the Bush Dome Reseroir One of NITEC's first tasks was the development of a numerical simulation of the Bush Dome Reservoir. The main purpose of the simulation was to determine how BLM could best recover 98 percent of the federally owned helium in the reservoir, given that the helium is to be sold in equal annual volumes over 12 to 13 years pursuant to the terms of the 1996 Act.
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From page 104... ...
Figure 5.4 exemplifies the displays generated by this modeling. Neither of NITEC's models of the Bush Dome Reservoir adequately analyzed the effects of an influx of formation water into the reservoir on the quality or quantity of recoverable crude helium.17 In the opinion of the committee, the absence of such analysis is a significant deficiency in the NITEC models.
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From page 105... ...
The Bush Dome Reservoir, discovered in 1924, lacks data obtained with modern tools. In particular, modern seismic data and interpretations are not available.
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From page 106... ...
. Stabilized pressures in individual wells of the Bush Dome Reservoir were mea sured at frequent intervals.
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From page 107... ...
The 2008 alternative model restricted the vertical movement of helium -- that is, relatively lower vertical conductivity -- with the result that helium moved further into the reservoir from the injection area. The quality of historical comparisons of helium concentrations and well pressures was as good in 2008 as it had been earlier with higher vertical conductivity, so there is no basis at present for prefer ring one reservoir description over the other (Weinstein, 2008)
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From page 108... ...
model are shown in green, and Figure the original improved matches bitmap with vector type in key and on trend, particularly notable in with the 2008 model are shown in black. Changes in axes helium concentration predictions, were caused by changes in reservoir description (size and location of flow barriers and high conductivity flow paths.
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From page 109... ...
. For each of these cases, forecasts are provided for production rates obtained by operating the Helium Enrichment Unit (HEU Ops)
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From page 110... ...
If these constraints can be mitigated, targets should be more attainable, but additional runs with the simulator will be required. COMMITTEE'S SUPPLEMENTAL RECOMMENDATIONS NITEC also noted in late 2008 that the Bush Dome Reservoir faced unusu ally high demand for crude helium and suggested that a series of steps be taken to reduce limits on production and improve the quality of the crude helium being extracted.
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From page 111... ...
Fewer horizontal wells, placed strategically, could be a better alternative from the standpoint of both economics and dependable spare capacity in the Bush Dome Reservoir. Nor do NITEC's proposals provide any spare capacity, which could be needed if old wells in the field have mechanical problems, if water influx increases and causes productivity problems, or if the forecasts are simply overoptimistic because of incorrect details in the reservoir description.
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From page 112... ...
As noted elsewhere, the progres sive exhaustion of non-Bush Dome sources of crude helium in the Hugoton field also means that maintaining refinery capacity for the next decade or more poses additional challenges for which responses must be developed very soon. The issues raised by the high probability that the Bush Dome Reservoir will contain significantly more than 600 MMcf by 2015 and by the possibility that the Helium Reserve's debt may not be retired before 2015 go well beyond the study charge to this committee.
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