Overall, as will be discussed in Chapter 5, the domestic industry appears to be stable and contributes to realistic conservation, especially by using the Bush Dome reservoir as a flywheel. It is not unreasonable to believe that proximity to the Cliffside facility and the size of the helium-bearing natural gas reserves (to be discussed in Chapter 4) will weight heavily in the overall assessment of helium privatization and the impacts it may have.

HELIUM PRIVATIZATION ACT OF 1996

The Helium Privatization Act of 1996 (P.L. 104-273) was signed by President Clinton on October 9, 1996. The act basically mandated that BLM (1) terminate its production and sale of Grade A helium (i.e., 99.995 percent helium or better) by April 9, 1998, which has been done; (2) dispose of all helium production, refining, and sales-related assets within 24 months of closure of the BLM helium refining plant, which has not yet been accomplished, and (3) sell all of the Federal Helium Reserve of crude helium in excess of 0.6 billion scf (17 million scm), which is awaiting the publication of this report and the consequent actions of the secretary of the Interior.

The legislation directs the secretary of the Interior to commence offering for sale, on a straight-line basis, approximately 30.5 billion scf (850 million scm) of the Federal Helium Reserve at any time before January 1, 2005, and to complete offering it for sale not later than January 1, 2015. Furthermore, the act determines a price by dividing the helium program's total debt (about $1.4 billion) by the volume of crude helium in storage. According to the Congressional Research Service, this would establish a selling price of approximately $43 per thousand scf ($1.50 per scm), which is roughly 25 percent higher than the current commercial price of crude helium. The act goes on to use this price as the basis for minimum acceptable bids. Potential problems stem from the pace and price of sales that the act contemplates. The Congressional Research Service points out that straight-line sales of the stored helium, even if begun in 1997, would amount to about 20 percent of current annual consumption. If the sales did not begin until 2005, such sales would amount to more than 40 percent of current domestic consumption. The meaning of the term ''straight-line sales" is also not clear. Would, for example, unsold helium from the first year's offer for sale have to be added to the second year's offer? If this were to happen, BLM might find itself near the end of the 10-year sale period with most of its crude helium still on hand. In short, P.L. 104-273's setting of rigid prices and sales volumes could work against the sale of the reserve, or it could attract potential buyers convinced that the asking price must eventually rise.

Some of the crude helium currently residing in the Federal Helium Reserve is already being sold. The legislation stipulates that all pure helium bought by government agencies must derive from government-owned crude helium. Since BLM's refining facilities are being surplused in response to the Helium Privatization Act of 1996, BLM is required to sell the crude helium to private refiners, which then purify the material for sale to the government agencies. The price used for the crude helium is the higher one stipulated by the legislation, which means that government agencies are paying more than the price of commercially available pure helium. Because there is a net storage of privately owned helium, the effect of these transactions is the sale of a portion of the federal reserve to private industry.

As stated at the beginning of this chapter, the legislation requires the government to continue to operate the Cliffside gas field storage system, including the storage field itself and the



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