surplused and will continue to be available for the storage of both privately owned crude helium and the 0.6 billion scf (0.017 billion scm) of crude helium that the federal government is mandated to maintain. Thus the current approach to helium conservation will not change in any way that would force private industry to use the crude gas currently contained by the Federal Helium Reserve.

It should be noted, however, that some of the Reserve will be sold during this period for consumption by federal agencies. The Helium Privatization Act mandates that all pure helium used by federal agencies must derive from the crude helium stored in the Federal Reserve. Federal consumption of helium is modest, about 0.2 billion scf (5.5 million scm) per year. Since the price for crude helium mandated by the act is higher than commercial prices, the price paid by the federal government will be higher than the price in the commercial market.

Net private storage of helium at the Cliffside field will probably cease within the next 10 years, for two reasons. First, demand for helium will probably continue to rise somewhat over the next few years, so helium refining will increase to satisfy user needs. Second, the Hugoton-Panhandle gas fields are becoming depleted, meaning that less privately produced crude helium will be available for the plants on the BLM pipeline. To remain in business and satisfy demand, the refining companies on the pipeline will first exploit their private stockpiles at the Cliffside facility. Once these private stockpiles are exhausted, the companies 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.) The quantity of crude helium drawn will increase, and refiners will become more and more dependent on this resource. Assuming no dramatic changes in the production and use of helium, however, the Federal Helium Reserve will still last for about 20 years or more, meaning that the federal target of 0.6 bcf will not be attained until approximately 2020 or 2025.

Some changes will occur in the helium industry during the period in which the Federal Helium Reserve is being exploited, but the overall industry will probably remain stable. Although the release of the reserve will probably keep the price of crude helium lower than if no release occurs, there may be a slight increase in the price of refined helium. As the Hugoton-Panhandle gas fields are depleted and the Federal Helium Reserve is exploited, the price of crude helium will rise to the congressionally mandated price. A large portion of the price of refined helium comes from the cost of purifying and transporting the pure gas, however, so a rise of 25 percent in the price of crude helium would probably increase the price of pure helium by only 8 to 10 percent, which is not likely to have a dramatic impact on helium users. A second possible change resulting from the rise in price might be the emergence of investor interest in purchasing helium for speculation, although it is questionable whether the price of helium will rise sufficiently to make it more attractive to speculators than other investments. Even if it does, however, because long-term storage of crude helium is currently possible only at the Cliffside facility, any such investors would eventually have to sell their resources to the refining companies on the BLM pipeline, so the material would remain available.

The only remaining question about the legislation is whether its implementation will result in the repayment of the debt to the Treasury within the stipulated time period. The committee believes that it is unlikely that the Federal Helium Reserve will be sold, and the debt repaid, by 2015, since sales of the stockpile to nonfederal users will probably not begin until about 2010 or 2015. However, the impact on helium users of a failure to repay the debt is likely to be small, because the debt is carried by our entire society.



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