When it Comes to Ending the Federal Helium Reserve, Congress Is Full of Hot Air | Citizens Against Government Waste

When it Comes to Ending the Federal Helium Reserve, Congress Is Full of Hot Air

The WasteWatcher

Turn back the clocks to 1914, when the U.S. government considered using blimps as military aircraft.  It was the beginning of World War 1, and helium, a nonrenewable resource extracted from natural gas first discovered by French astronomer Pierre Janssen in 1868, had become a hot commodity.  As the second-most-abundant element in the universe after hydrogen, the Navy was also attracted to the possibility of using this lighter-than-air gas in military weaponry and devices.  

In 1925, the federal government created the Federal Helium Reserve (FHR) out of a giant, abandoned salt mine located 12 miles northwest of Amarillo, Texas.  Known today as the Cliffside facility, or Bush Dome Reservoir, it expanded to supply a record 84 percent of the world’s demand for helium in 2004 and today supplies more than 40 percent.  

In the 1950s, helium became an important source of coolant for airships during both the Space Race and the Cold War.  In the Helium Acts of 1960, Congress created incentives for natural gas producers to sell their supply of helium to the reserve.  The law required that the price of any helium sales be sufficient to cover all of the program’s costs, including interest on the program’s debt.  The Bureau of Mines, now the Bureau of Land Management (BLM), increased helium production and storage at the Cliffside facility by arranging for five private plants to be constructed along a 425-mile pipeline that runs from Cliffside to Bushton, Kansas.

Over the intervening decades, helium has been a vital element in everything from testing rocket engines, to the manufacture of flat-screen televisions and MRI machines, to the inflation of party balloons.   

In 1996, Congress passed the Helium Privatization Act of 1996.  The law was intended to put an end to the government’s 70-year odyssey of buying, storing, and refining helium by selling off all but 600 million cubic feet of the 1 billion cubic feet it had in reserve by 2015.  The crude gas was to be sold on a straight-line basis at a robust price in order to repay the taxpayers for the debt incurred through purchasing the helium for the reserve, and additional proceeds were to be used reduce the budget deficit.  Since the reserve had accumulated $1.4 billion in debt, this was a tall order.

As the deadline for the reserve to cease operations on October 7, 2013 approached, Congress passed the Helium Stewardship Act of 2013 (HSA), which aimed to “amend the Helium [Privatization] Act to complete the privatization of the Federal Helium Reserve in a competitive market fashion that ensures stability in the helium markets while protecting the interest of the American taxpayers.”  The law established an auction system for helium sales and mandated that all property, equipment, and interest in the FHR be disposed of by September 30, 2021.  While the BLM claims that this plan ensures that “the agency properly and efficiently fulfills the Congressional mandate,” the latest shenanigans by the agency should make taxpayers nervous. 

Provisions in both the 1996 and the 2013 laws have produced conflicting results and unintended consequences; the BLM has been told to both sell the helium at prices that won’t disrupt the markets, but also to maximize revenues to taxpayers.  It is a reminder of how inept the government is at reading markets and a confirmation that the helium reserve must move more quickly toward a fully functioning private market.

On September 24, 2013, the Council for Citizens Against Government Waste (CCAGW), issued a statement in opposition to the HSA, pointing to certain provisions in the bill that would impose new bureaucratic requirements and regulations to benefit special political interests and projects, and generate unnecessary, costly red tape surrounding the closure of the helium reserve. 

Although the HSA presumes a financial return for U.S. taxpayers through the implementation of a 100 percent auction process, the provisions of the bill will end up being more expensive to implement than if Congress had simply left the current law unchanged. 

According to an April 5, 2013 Congressional Budget Office report, the HSA will cost $11 million over the 2014-2015 period, and generate less government revenue than the current program.  If the previous law had been left untouched, the FHP would have harvested $150 million in revenue for American taxpayers in 2014 alone. 

On July 30, 2014, the BLM held its first live auction under the HSA, selling nearly 92 million cubic feet (MCF) of the reserves’ 1.0 billion cubic feet of helium that could be produced this year for a price of $14.9 million.  After the final bids were made, BLM Amarillo Field Manager Robert Jolley boasted to auctioneers that the “taxpayers benefited greatly from this activity.”  Taxpayers might want to wait before they break out the balloons. 

While the price of BLM crude helium increased from $95 per MCF in fiscal year (FY) 2014 to an average price of $157 per MCF for the 92 MCF that was auctioned off, what should be more concerning is the helium the BLM did not put up for sale.  The auction only made 7 percent of the total volume of helium available for purchase.  The HSA requires BLM to auction 10 percent of its helium this year; if the agency had done so and sold 130 MCF, taxpayers would have garnered about $19 million instead of $14.9 million. 

The BLM is also planning to sell, in a non-auction format, more than 450 MCF less helium than it is required to do under the law and will therefore miss an opportunity to earn more than $450 million this year.   

Congress should demand to know why the BLM is foregoing so much revenue.  Whether the BLM is dragging its feet to keep the reserve open longer to please the parochial interests of bureaucrats, or Congress is simply full of hot air, one thing remains certain: until a commonsense framework for winding down the Federal Helium Reserve is finally enacted, taxpayers will certainly be on the losing end.  

- Alexandra Booze

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