Summary of Hearings on Mining, Mapping, Soils and Other Surface/Subsurface Issues
- February 14, 2013: House Committee on Natural Resources Oversight Hearing on "The Past, Present and Future of the Federal Helium Program" and Legislative Hearing on H.R. 527
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House Committee on Natural Resources Oversight Hearing on "The Past, Present and Future of the Federal Helium Program" and Legislative Hearing on H.R. 527
February 14, 2013
Deputy Assistant Director, Minerals and Realty Management, Bureau of Land Management, Department of the Interior
Director, National Resources and Environment, U.S. Government Accountability Office
Assistant Inspector General for Audits, Inspections, and Evaluations, U.S. Department of the Interior
VP of Procurement, Micron Technology
Director, Strategic Planning & Analysis for Optical Fiber, Corning Incorporated
President, Helium & Balloons Across America
Dr. Sam Aronson
Vice President, APS Physics
President, Air Liquide Helium America, Inc.
Division President – Gases Production, Airgas, Inc.
Senior Vice President, Specialty Gases & Helium, Matheson Tri-Gas
Director, Sourcing & Supply Chain, Air Products and Chemicals, Inc.
Head Global Helium Source Development, Linde North America
Vice President, Business Management and Helium, Praxair, Inc.
Committee Members Present:
Doc Hastings (R-WA), Chairman
Edward Markey (D-MA), Ranking Member
Doug Lamborn (R-CO)
Robert Wittman (R-VA)
Glenn Thompson (R-PA)
Cynthia Lummis (R-WY)
Raul Labrador (R-ID)
Steve Daines (R-MT)
Rush Holt (D-NJ)
Colleen Hanabusa (D-HI)
Raul Ruiz (D-CA)
Alan Lowenthal (D-CA)
Matthew Cartwright (D-PA)
On February 14, 2013, the House Committee on Natural Resources held a hearing to receive testimony evaluating domestic helium demand and the role and future of the Federal Helium Reserve in the domestic market. They examined the potential impacts of closing the Reserve on scientific, technical, medical, and defense industries and discussed the details of the bipartisan bill titled the Responsible Helium Administration and Stewardship Act (H.R. 527). Developed by Committee Chairman Doc Hastings (R-WA) and Ranking Member Edward Markey (D-MA), H.R. 527 will keep the Reserve open until nearly all the helium is sold, raise prices closer to market value, open the sale of helium to more than just a few companies by implementing a semiannual auction, improve transparency, and prevent supply disruptions. The bill will require studies of international and domestic helium resources as well as the development of domestic and global helium demand forecasts, domestic helium use accounts, and assessments and research into the extraction and refining of the isotope helium-3 and the viability of creating a facility to separate the isotope helium-3.
Chairman Hastings began his opening statement declaring, “Helium plays a large role in our daily lives and 21st century economy. Life-saving MRI machines, high-tech manufacturing, and national defense operations are all dependent on helium.” He outlined the Reserve’s history and current challenges noting that following the Helium Preservation Act of 1996 (HPA, P.L. 104-273), the Bureau of Land Management (BLM) was authorized to sell the helium supply until the Reserve’s debt was paid. The BLM sold the helium at “severely less than market prices,” damaging incentive for “future resource development, conservation, and investment in research for alternatives.” The debt is set to be paid in October and the Reserve will close ahead of the predicted closure date, cutting off a third of the global helium supply.
In his opening statement, Ranking Member Markey stated that for many applications, there is “no replacement for helium” and the Reserve provides half of the domestic helium supply. In addition to concerns over Reserve closure in October, he noted that even if the Reserve remains open, “at current withdrawal rates, we have only five to seven years before the helium…is largely gone.” He indicated that H.R. 527 is consistent with the National Research Council’s (NRC) recommendations in their 2010 report “Selling the Nation’s Helium Reserves.” He also mentioned the “artificially low price” of helium and the need to create incentive for developing private helium sources. Regarding helium auctions, Markey stated, “I believe open and competitive markets are the best way to ensure fairness, stability, and a fair return to American taxpayers.”
Tim Spisak, deputy assistant director of Minerals and Realty Management at the BLM, testified that the NRC report concluded “that the HPA mandated sell-off [of federal helium] is negatively impacting the needs of both current and future users of helium in the United States.” He outlined the historical development and management of the Reserve and faulty assumptions and predictions made regarding its operation. The NRC report referred to the helium market as “more volatile than expected” and noted that the requirement to sell “nearly all of the Reserve by 2015 could pose a threat to the availability of this resource for future U.S. scientific, technical, biomedical, and national security users of helium.” The Reserve is responsible for 42 percent of the domestic and 35 percent of the global supply of crude helium. In 1996, the Reserve held 30.5 billion standard cubic feet (scf) of helium and BLM was allowed to sell off all but 600 million scf. Spisak noted that “Federal agencies purchased $10.3 million of helium” for “operations and/or research” in fiscal year (FY) 2012. Spisak voiced BLM’s support for the “goals” of H.R. 527. He expressed approval of the “set of phased authorities for the BLM’s management of the Reserve” as facilitating the “exit of the Federal government from the broader helium market.”
In his testimony, Director of National Resources and Environment for the U.S. Government Accountability Office Daniel Garcia-Diaz reminded the committee that helium is a “nonrenewable natural resource” that the “federal government uses…for, among other things, the space program, national security applications, and scientific research” and “for many of its uses, helium has no substitute.” He laid out three issues facing BLM’s helium program. The first dealt with funding beyond 2013. Since the HPA “requires that all program revenues be returned to the treasury upon repayment of the program’s debt,” without extending revenues or appropriating discretionary funding, the Reserve “may have to undertake an orderly shutdown.” He argued that the question of funding must be addressed, “otherwise the risk of a major disruption in the supply of helium looms in an already stressed market.” Second, he noted the need to determine the price at which to sell the crude helium so that BLM gets a “fair” return and no longer sells it below market value. He acknowledged BLM’s 2011 policy of increasing prices for non-governmental agencies, but noted that “while the new system results in higher prices, it is not a market based system.” Third, he noted the need for clarification of the helium programs “future objectives.” Although HPA required the sale of almost the entire Reserve by 2015, BLM has only been able to sell 79 percent and “will have significantly more in storage than the target” amount. Garcia-Diaz said this raised questions of how this excess will be used.
Kimberly Elmore, Assistant Inspector General for Audits, Inspections, and Evaluations at the U.S. Department of the Interior, stated in her testimony that her “audit team concluded that BLM was not charging market value prices [when selling Reserve helium] and that there were no policies in place dealing specifically with sales to non-governmental customers.” She noted that BLM prices were set based on operating costs and debt repayment, and were adjusted based on “inflation and changes in the programs operating costs” leaving prices well below market value. She cited a 2011 article that revealed price rates from non-governmental helium producers increased to be “nearly three times greater than BLM over the past decade.” Her team indicated a need to “develop a process to identify the fair market value price” and establish “formal procedures” to avoid “fraud, waste and mismanagement” for selling helium to non-governmental buyers, 90 percent of BLM’s buyers. Elmore claimed that by increasing the value of the helium inventory by 25 percent, BLM would gain $250 million in helium revenue. She noted these improvements are “critical” as “high technology uses have led to a rapid rise in helium demand in recent years.”
In the question and answer session for the first panel, Rush Holt (D-NJ) brought up the problem that a “number of federal helium users are seeing deliveries delayed” and are receiving reduced amounts of helium. He cited the fact that Argonne National Laboratory is “receiving only 70 percent of its allocation [and] Oak Ridge [National Laboratory] only 60 percent of its allocation.” He asked about the source of these delays and reductions as well as how to ensure the Reserve meets federal demands first. Spisak stated that the HPA gives “priority” to federal helium needs, “targeted primarily” at users such as the National Aeronautics and Space Administration (NASA), the Department of Defense, and the Department of Energy (DOE). However, he explained that “companies still have a means to adjust what they deliver based on what helium they can acquire, refine, and sell.” He stated that smaller deliveries stem from the natural reduction in pressure and resulting reduced flow rate at the Reserve. He stated that it would be “within Congress’s purview” to make federal users such as NASA and DOE’s national labs a “clear priority.”
Hastings asked about the discrepancies between the low price at which BLM sells crude helium and the high market price at which refined helium is sold. Spisak noted that there are significant costs involved in refining and the two prices cannot be directly compared. When asked if the auction mechanism laid out in H.R. 527 would offer a “way to catch up,” Garcia-Diaz responded that auctions were a good way to “introduce a more market-based” than formula-driven price. Steve Daines (R-MT) requested elaboration on whether the BLM tracks refined prices compared to its crude price. Spisak stated that BLM tracks it in a limited capacity and looks at the U.S. Geological Survey’s Minerals Commodity Summaries. Holt inquired of Elmore, could BLM get “the ability to determine market price”? Elmore responded that BLM can get that ability through the Office of Minerals Evaluation in the Department of the Interior which has “economists and geologists on staff...to help develop market value.”
Raul Ruiz (D-CA) inquired about the fate of “high-tech manufacturing in the U.S. and researchers working on cutting edge applications relating to energy, national security, and telecommunications” if no legislation was passed to keep the Reserve open. Garcia-Diaz stated that he had not examined the implications of not passing a law, but given the share of helium the Reserve contributes to the market (over 40 percent domestically and over 30 percent globally) it “would have a very big impact and would cut across all of those industries.” Elmore agreed stating that losing the Reserve’s supply would result in too great of a demand and not enough helium.
Daines remarked that “one day the reservoir will dry up” and asked if there are “other domestic sources of helium.” Spisek responded that there are several other sources and some are “producing from federal mineral estate.” He outlined the process by which BLM enters “into a contract that authorizes the company to recover that helium and…provide…a kind of royalty to the government for that sale.” Although helium can be recovered if there is three-tenth of a percent in extracted natural gas, Spisek stated without a high enough percent, recovery was not economical.
The witnesses from the second panel represented the end use industries utilizing refined helium. Testimony was heard from Rodney Morgan, vice president of procurement at Micron Technology; Brad Boersen, director of strategic planning and analysis for optical fiber at Corning Incorporated; Gary Page, president of Helium & Balloons Across America; and Dr. Sam Aronson, vice president of APS Physics. These witnesses provided examples of the wide range of products and services reliant upon helium. Morgan stated that “all US users of helium have had to struggle through reduced helium deliveries” and “a delay of even a few days could slow production.” He indicated that H.R. 527 was a “significant step forward” but may offer “uncertainties” regarding long term contracts. Boersen noted support of the H.R. 527’s provisions for a “one year transition period” and increased transparency; however, he also expressed concern over the auction system, stating, “We believe fewer auctions minimize uncertainty of supply.” Page expressed concern over currently not being able to properly supply all of his customers as well as not being able to receive helium from auctions due to a “lack of access to infrastructure.”
Aronson is also the former director of the Brookhaven National Laboratory and his testimony focused on uses of helium in research and the impact of reduced supply on researchers and national labs. He brought up a 1995 statement from the Council of the American Physical Society urging “that measures be adopted that will both conserve and enhance the nation's helium reserves. Failure to do so would not only be wasteful, but would be economically and technologically short-sighted.” He listed some research applications requiring helium and stressed the necessity of helium as a coolant for “accelerators…and research magnets” as well as detectors used in particle physics, astronomy, and military defense systems. He stated, “If researchers cannot obtain helium due to supply or pricing constraints, they must shut down their experiments.” He mentioned the “in-kind program” for obtaining helium and the need to “ensure that small Federal grantees are explicitly eligible for such priority access and pricing.” There is also a need, according to Aronson, for the DOE “to examine the R&D opportunities to increase the efficiency of helium capture at the well-head or during liquefaction.”
During the question and answer section for the second panel, Aronson indicated that Brookhaven National Lab had experience helium shortages. Holt asked if the Reserve should give “priority access for certain kinds of users” such as federal labs. Aronson expressed “hope [that the] priority access that federal users and federal grantees currently have…would continue.” Holt also brought up the fact that “we didn’t foresee” the new technology requiring helium and requested a prediction on the nature of future demands and the market’s ability to “address that demand.” Aronson stated, “I can’t tell you what the landscape of high-tech applications will be 20 years from now but I’m certain that the fundamental research that we’re doing will be necessary to get us there.” Liquid helium, he noted, is a necessary component for continued basic research including research into “technologies that could replace the need for liquid helium in cooling.”
The third panel was comprised of three witnesses from the helium distribution sector and three from the refining sector. The distributors were David Joyner, president of Air Liquide Helium America Inc.; Tom Thoman, division president of gases production at Airgas Inc.; and Kevin Lynch, senior vice president of specialty gases and helium at Matheson Tri-Gas. The refiners were Walter Nelson, director of sourcing and supply chain at Air Products and Chemicals, Inc.; Nick Haines, head of global helium source development at Linde North America; and Scott Kaltrider, vice president of business management and helium at Praxair, Inc. Distributors and refiners reacted to H.R. 527 with a mixture of approval for increased transparency and concern over the semiannual auction of the helium. Lynch noted that the auction “will create conditions of great uncertainty in terms of helium price and availability.” Nelson summed up the objections stating, “a 100 percent auction represents a major change from the status quo, and introduces tremendous risk for our customers. Today, helium customers know that helium will be delivered when they need it. In a 100 percent auction world, all bets are off…If [companies] could not know, from one half year to the next, where their helium would be coming from, they could not develop predictable business plans.”
Opening statements, witness testimonies and an archived webcast of the hearing can be found on the Committee’s web site.
Contributed by Wilson Bonner, Geoscience Policy staff; Kimberley Corwin 2013 AAPG/AGI Spring Intern.
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Last updated on
February 26, 2013