an efficient or responsible reservoir management plan. If the reserve continues to be so managed, a national, essentially nonrenewable resource of increasing importance to research, industry, and national security will be dissipated.

FINDINGS AND RECOMMENDATIONS

Specific Recommendations for Immediate Improvements

To address these issues, the committee first lays out three specific recommendations for improving the federal helium program: changing the methods for pricing the helium being sold, committing more resources to managing the physical facilities at the Federal Helium Reserve, and providing assistance for small-scale scientists by expanding the sales program for government users to include them and promoting conservation and reuse by these users.

Pricing Mechanism

The 1996 Act set minimum selling prices, adjusted for inflation, for crude helium held by the BLM such that the sale of that helium at those prices would generate sufficient revenue to repay the federal government for what it originally spent to purchase the helium and to build the supporting infrastructure, plus interest. BLM has elected to sell its helium at those minimum prices. At the time of the 1996 Act, the minimum selling price was almost double the price being paid for privately owned crude helium. A market that had been stable for several decades prior to the sell-off of federally owned helium, experiencing neither drastic price increases nor shortages of supply,3 began to change after BLM started to sell its crude helium. Almost immediately, privately sourced crude helium prices began to rise, and those prices continued to steadily increase so that they now meet or exceed BLM’s price, and many of the sales contracts for private helium expressly tie future selling prices to BLM’s price. Thus this legislatively set price for federally owned helium is now setting the price for crude helium, and there is no assurance that this price has any relationship to the current market value of that helium.

To the extent BLM’s price is lower than the price the market would otherwise set for crude helium, this pricing mechanism could have several negative consequences: (1) it could lead to inaccurate market signals, increased consumption, and accelerated depletion of the Federal Helium Reserve; (2) it could retard efforts to conserve and develop alternative sources of crude helium; (3) it could result in transfers of taxpayer assets to private purchasers at below-market values—that is,

3

NRC, The Impact of Selling the Federal Helium Reserve (Washington, D.C.: National Academy Press, 2000), page 9.



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