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The Impact of Selling the Federal Helium Reserve
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.