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The Impact of Selling the Federal Helium Reserve
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.
The Helium Privatization Act of 1996 requires that the secretary of the Interior, after receiving this report, consult with industry and others and then, if he believes the situation so warrants, make recommendations for legislation to mitigate the adverse impacts. In those consultations, a number of issues are likely to arise that are outside the main scope of the present study. These include concerns such as whether:
Enacting legislation to reduce the price of crude helium below commercial levels or to sell it in lots at auction could seriously destabilize the helium market by increasing the probability that a single company or individual will purchase all or most of the helium in the reserve, thus creating a helium refining monopoly;
The total supply of helium produced from wells would diminish if part of the reserve were sold before it was needed to meet the demand for helium. Under such circumstances, suppliers whose principal economic interest is methane would continue that production, forgoing the desirable conservation and storage options currently available. Helium users might also lessen their efforts to conserve and recycle helium and to develop technologies to replace helium in certain applications, even if the benefit of lower prices was relatively short-lived. On the other hand, users might experience little or no reduction in price, depending on the policies of the refiners. Furthermore, selling the reserve before the commercial price reached the "minimum acceptable" $43 per thousand scf might mean that the full debt would never be repaid. In effect, this would excuse at least a portion of the debt;
The debt repayment schedule is appropriate;
There are alternative methods for raising revenue if the government is intent on repaying the debt faster than is possible under the current legislation. For example, as stated in Chapter 2, the fees charged industry for storing helium in the BLM facility are currently calculated to offset the facility's direct operating costs and are divorced from any assessment of the economic value of the storage service. This system of setting fees may be limiting the potential income generated by the facility. The federal government might want to investigate a pricing structure that would permit slightly higher fees for helium storage. The increased income might then be used to help pay off the debt as well as to fund the development of superior technologies for location, storage, conservation, recycling, and replacement of helium; and
The preservation of a viable, unsubsidized helium industry that helps this country to excel in many areas of science, technology, and national security outweighs the method and timing of debt repayment.
Unless new light is cast on these issues during the secretary's consultations with industry and others, the committee can find no reason to recommend seeking changes in the legislation.
FOLLOW-ON ACTIVITIES AND RECOMMENDATIONS
The committee believes that the implementation of the Helium Privatization Act of 1996 will not have an adverse effect on the overall production and use of helium over the next two decades. For the long term, however, a number of research programs and follow-on studies should be