New US rules on helium sales said to stifle competition

first_imgNew rules on selling off a U.S. government cache of helium aren’t working as planned, a congressional panel learned today. A 2013 law designed to increase competition may actually be stifling it, according to witnesses. The law has also failed to stabilize the market price of a resource that is indispensable for many types of technology and scientific research, scientists say.The Helium Stewardship Act aimed to establish a competitive market for federal helium, which accounts for more than 40% of U.S. supply, by phasing in an auction instead of simply having the U.S. Bureau of Land Management (BLM) sell it for a fixed price. But the number of companies buying from the reserve fell last year from eight to four.That drop led Representative Doug Lamborn (R–CO), chair of the energy and mineral resources panel of the Committee on Natural Resources in the U.S. House of Representatives, to declare at today’s hearing that “the first year of the BLM’s implementation [of the law] has been a failure.” But other members drew the opposite conclusion, noting that the portion of gas sold at auction went for a much higher price than BLM set for the rest of last year’s sales. “Why are we upset that the companies that were willing to pay the most for the gas won?” asked subcommittee member Representative Don Beyer (D–VA). 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Countrycenter_img Click to view the privacy policy. Required fields are indicated by an asterisk (*) Helium has unique properties that make it irreplaceable for some applications. For example, helium is the only element that won’t freeze, making liquid helium indispensable for reaching temperatures near absolute zero. That’s key for cooling the magnets of MRI machines and for myriad types of physics research. Starting in the 1960s, the United States accumulated a vast reserve of crude helium—a byproduct of natural gas drilling—storing 1 trillion liters of gas underground in a natural geological formation near Amarillo, Texas. However, in 1996, Congress passed the Helium Privatization Act, which ordered BLM to sell the helium reserve.Those sales proved problematic. The 1996 law instructed BLM to sell the helium at a constant rate and at a price that would recoup the $1.3 billion that the government had spent accumulating it. But that approach was holding down the market price of helium and encouraging waste, concluded a 2010 report from the National Academies’ National Research Council. What’s more, BLM had a mandate to continue the sales only until it had recouped the government’s investment. That would have occurred in September 2013, with roughly 370 billion liters still in the ground.So Congress passed the 2013 act, and last year 10% of BLM’s helium sales were through auction. But the change didn’t broaden the market as hoped.More than a dozen companies sell refined helium. But only four of them have refineries connected to the federal helium reserve. So nonrefiners who buy federal helium must work out a “tolling” deal to get one of the refiners to process it. In the past, BLM had reserved 10% of helium for fixed-price “non-allocated” sales to nonrefiners, four of whom bought helium in 2013. But with that helium now on sale to the highest bidder, two of the refiners bought it all, shutting out the nine nonrefiners at the auction.Refiners were apparently willing to pay a premium to block entry by the nonrefining companies. At auction, the winning bidders paid an average of $5.69 per kiloliter of gas, 52% more than the fixed price for the 90% of the helium that BLM sold to refiners in so-called allocated sales, Anne-Marie Fennell of the Government Accounting Office testified.Whether such a tactic is fair depends on whom you ask. Refiners essentially gamed the system, said David Joyner, president of Air Liquide Helium America Inc. of Houston, Texas, which doesn’t do its own refining. “The auction was set up to fail from the start,” he said. In particular, he said, nonrefiners were effectively discouraged from bidding because BLM has not enforced provisions of the law requiring refiners to set a reasonable price. Joyner wants BLM to maintain the sales for nonrefiners in addition to the auction sales, which Lamborn says is what the law intended.The general manager for global helium at Air Products & Chemicals Inc. in Allentown, Pennsylvania—which bought 78% of the auctioned helium—sees it differently. “The auction last year did exactly what the [2013] act intend, obtain a market price for helium,” said Walter Nelson, whose company also refines helium. Nelson said that if nonrefiners don’t like the price set by refiners they should simply invest in their own refineries. However, experts say that’s unlikely to happen, given that the reserve is likely to close in 6 years.Its closure will likely make a bad situation worse for scientists, says William Halperin, a physicist at Northwestern University in Evanston, Illinois. Researchers are already being battered by price volatility, he testified. For example, Halperin told ScienceInsider that he pays about $6.50 per liter of liquid helium, whereas some of his colleagues have to pay as much at $40 per liter of liquid helium. Halperin told the committee that he would like to know why the range is so great. Such volatility, he said, is likely to get worse when the federal reserve in Amarillo, Texas, closes: It is the only place in the world where helium can be stockpiled to provide a buffer against supply fluctuations. “This subcommittee should consider possible legislative fixes to keep the helium reserve open beyond 2021,” he testified at the hearing.The next BLM auction is planned for 18 August. According to the law, that auction should account for 20% of BLM sales in 2015.last_img

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