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Testimony: 

Before the Subcommittee on Energy and Mineral Resources, Committee on 
Natural Resources, House of Representatives: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT:
Thursday, May 13, 2010: 

Helium Program: 

Key Developments Since the Early 1990s and Future Considerations: 

Statement of Anu K. Mittal, Director: 
Natural Resources and Environment: 

GAO-10-700T: 

GAO Highlights: 

Highlights of GAO-10-700T, a testimony before the Subcommittee on 
Energy and Mineral Resources, Committee on Natural Resources, House of 
Representatives. 

Why GAO Did This Study: 

The federal government has been extensively involved in the 
production, storage, and use of helium since the early part of the 
20th Century. The federal helium program is currently managed by the 
Department of the Interior’s Bureau of Land Management (BLM). During 
the 1960s and early 1970s, Interior purchased about 34 billion cubic 
feet of crude helium for conservation purposes and to meet federal 
helium needs, such as for the space program and scientific research. 
Crude helium is a gas of 50 to 85 percent helium. While some of the 
helium was used to meet federal needs, most of it was retained in 
storage. The funds used to purchase the helium became a debt owed by 
the program. GAO reported on the management of the helium program in 
the 1990s (GAO/RCED-92-44 and GAO/RCED-93-1). 

Since GAO’s reviews of the program in the 1990s, key changes have 
affected the federal helium program and a recent report by the 
National Academy of Sciences concluded that it is time to reassess the 
program. This testimony discusses (1) GAO’s findings and 
recommendations in the early 1990s, (2) key changes that have occurred 
since the early 1990s, and (3) some of the issues facing the helium 
program in the near future. 

To address these issues, GAO reviewed prior reports, applicable laws 
and regulations, National Academy of Sciences’ reports, and BLM data. 
GAO is not making any new recommendations. 

What GAO Found: 

In 1991 and 1992, GAO reported on various aspects of the federal 
helium program including the helium debt, pricing, purity, and 
alternatives for meeting federal helium needs, and made 
recommendations to the Congress. For example, in 1992 GAO recommended 
that the Congress cancel the helium program’s debt. As of September 
1991, the debt had grown to about $1.3 billion, over $1 billion of 
which was interest that had accrued on the original debt principle of 
about $290 million. The debt was also a factor in setting the price of 
federal helium because the Helium Act Amendments of 1960 stipulated 
that the price of federal helium cover all program costs, including 
interest on the debt. In addition, in 1991, GAO recommended that 
Interior take action to preserve the purity of the helium in storage. 
GAO found that the unrestricted extraction of helium from the reserve 
was causing the purity of the crude helium to degrade faster than 
would otherwise occur, which in turn had increased the program’s 
operating costs. In 1992, GAO also recommended that the Congress 
reassess the conservation objectives of the helium program and 
consider other alternatives to meet federal helium needs. 

Since GAO’s reports in the early 1990s, two key developments—the 
Helium Privatization Act of 1996 and the construction of the Cliffside 
Helium Enrichment Unit in 2003—have caused considerable changes to the 
helium program and addressed or altered GAO’s prior concerns. 
Specifically, the 1996 act froze the program’s debt and as a result 
over half the debt has been paid off and the remainder should be paid 
off by 2015. The 1996 act also required a specific method for pricing 
helium. This along with other changes in the supply and demand for 
helium, has resulted in BLM’s price to be at or below the market 
price. Lastly, in resetting the program’s objectives, the act directed 
Interior to stop refining helium and it established a modified in-kind 
approach for meeting federal helium needs. Agencies must purchase 
helium from refiners who then purchase an equivalent amount of crude 
helium from BLM. The Cliffside Helium Enrichment Unit has addressed 
concerns about helium purity by enriching the crude helium through 
extracting excess natural gas. 

Changes in the helium market have generated concerns about the future 
availability of helium for federal and other needs. The 1996 act did 
not provide a specific direction for the federal helium program past 
2015. Some of the uncertainties facing the program include: 

* How should the helium owned by the federal government be used? BLM’s 
effort to sell off the helium in storage is going slowly and will not 
be completed by 2015; and some believe that the United States could 
become a net importer of helium within the next 10 to 15 years. 

* How will the helium program be funded after 2015? If the helium 
program’s debt is paid off by 2015, the revolving Helium Fund that is 
used to pay for the program’s day-to-day operations will be terminated. 

* At what price should BLM sell its helium? In the past, the debt has 
been a factor in the price and the price has been above the market 
price. After 2015 the debt will be paid off and the current price is 
at or below market. 

View [hyperlink, http://www.gao.gov/products/GAO-10-700T] or key 
components. For more information, contact Anu K. Mittal at (202) 512-
3841 or mittala@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to participate in this hearing to 
discuss the federal helium program currently managed by the Department 
of the Interior's (Interior) Bureau of Land Management (BLM). As you 
know, helium is an important nonrenewable natural resource that has a 
variety of uses. The federal government uses helium for, among other 
things, the space program, national security applications, and 
scientific research. For many of its uses, helium has no substitute. 

During the 1960s and early 1970s, to fulfill the conservation 
objective of the Helium Act Amendments of 1960,[Footnote 1] Interior 
purchased about 34 billion cubic feet of helium from private crude 
helium producers.[Footnote 2] In the 1990s, we reported to, and 
testified before this Subcommittee on Interior's management of the 
helium program.[Footnote 3] In May 1993, we testified that Interior 
had enough helium in storage to meet federal needs until at least 2070 
and that a reassessment of the objectives of the Helium Act was needed. 

Since our reports in the early 1990s, key changes have affected the 
federal helium program and a recent report by the National Academies' 
National Research Council concluded that it is time once again to 
reassess the program.[Footnote 4] My testimony today will (1) 
summarize the findings and recommendations from our work in the early 
1990s, (2) highlight key changes that have occurred in the areas that 
we reported on in the early 1990s, and (3) describe some of the issues 
facing BLM's helium program in the near future. 

To address these issues, we reviewed our prior reports and testimonies 
from the early 1990s. To identify key changes that have occurred in 
the areas that we reported on in the past and some of the issues 
facing BLM's helium program in the near future, we reviewed applicable 
laws and regulations, relevant studies, and data on the helium program 
from BLM and Interior's U.S. Geological Survey. In addition, we 
interviewed BLM officials associated with the helium program located 
at BLM's headquarters in Washington, D.C.; BLM's New Mexico State 
Office in Santa Fe, New Mexico;[Footnote 5] and BLM's Amarillo Field 
Office in Amarillo, Texas. To assess the reliability of data used in 
this statement, we examined the data to identify obvious errors or 
inconsistencies, interviewed knowledgeable BLM officials, and, to the 
extent possible, compared the data with other sources. We determined 
the data to be sufficiently reliable for the purposes of presenting 
overall trends. Officials with BLM's helium program concurred with the 
new information presented in this testimony and provided technical 
clarifications, which we incorporated as appropriate. 

We conducted this performance audit from April 2010 to May 2010 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

Helium is an inert element that occurs naturally in gaseous form and 
has a variety of uses (see table 1).[Footnote 6] Helium's many uses 
arise from its unique physical and chemical characteristics. For 
example, helium has the lowest melting and boiling point of any 
element and as the second lightest element, gaseous helium is much 
lighter than air. 

Table 1: Estimated Helium Uses in the United States, 2008: 

Category of use: Cryogenics; 
Examples of applications: Magnetic resonance imagining (MRI); 
Fundamental science; Industrial cryogenic processing; 
Amount used (million cubic feet): 685; 
Percentage: 32%. 

Category of use: Controlled atmospheres; 
Examples of applications: Optical fiber manufacturing; 
Semi-conductor manufacturing; 
Amount used (million cubic feet): 382; 
Percentage: 18%. 

Category of use: Pressure/purge; 
Examples of applications: Space and defense rocket purging and 
pressurizing; 
Amount used (million cubic feet): 382; 
Percentage: 18%. 

Category of use: Welding; 
Examples of applications: Metal welding; 
Amount used (million cubic feet): 285; 
Percentage: 13%. 

Category of use: Chromatography/lifting gas/heat transfer; 
Examples of applications: Chromatography; Weather balloons; 
Military reconnaissance; Heat transfer in next-generation nuclear 
reactors; Party balloons; 
Amount used (million cubic feet): 270; 
Percentage: 13%. 

Category of use: Leak detection; 
Examples of applications: Leak detection; 
Amount used (million cubic feet): 94; 
Percentage: 4%. 

Category of use: Breathing mixtures; 
Examples of applications: Commercial diving; 
Amount used (million cubic feet): 50; 
Percentage: 2%. 

Category of use: Total; 
Amount used (million cubic feet): 2,149; 
Percentage: 100%. 

Sources: U.S. Geological Survey's 2008 Minerals Yearbook and National 
Research Council. 

Note: Totals may not add because of rounding. 

[End of table] 

Certain natural gas fields contain a relatively large amount of 
naturally occurring helium, which can be recovered as a secondary 
product. The helium is separated from the natural gas and stored in a 
concentrated form that is referred to as crude helium because it has 
yet to go through the final refining process. 

The federal government has been extensively involved in the 
production, storage, and use of helium since the early part of the 
20th Century. The federal government and private sector cooperatively 
produced helium before 1925, specifically for military uses. The 
Helium Act of 1925,[Footnote 7] as amended, assigned responsibility 
for producing helium for federal users to the Department of the 
Interior's Bureau of Mines.[Footnote 8] The act provided that funds 
from helium sales be used to finance the program. From 1937 until 
1960, the Bureau of Mines was the sole producer of helium. The 1925 
act, as amended, also established a revolving fund known as the helium 
production fund for the program. Such revolving funds are used to 
finance a continuing cycle of government-owned business-type 
operations in which outlays generate receipts that are available for 
continuing operations. In the federal budget, this fund is referred to 
as the Helium Fund and it is used to account for the program's 
revenues and expenses. 

The Helium Act Amendments of 1960 stipulated that the price of federal 
helium cover all of the helium program's costs, including interest on 
the program's debt. The 1960 act required the Secretary of the 
Interior to determine a value for net capital and retained earnings 
and establish this value as debt in the Helium Fund, and to add 
subsequent program borrowings to that debt. The program's borrowings 
were authorized by subsequent appropriations acts and recorded as 
outlays in the federal budget in the years in which they were 
expended. In addition, the interest was added to the debt in the 
Helium Fund. However, the interest is simply a paper transaction, not 
a government outlay. The Bureau of Mines determined that the value of 
the program's net capital and retained earnings was about $40 million 
in 1960. Subsequent borrowings from the U.S. Treasury totaling about 
$252 million were used to purchase helium for storage. By September 
30, 1991, the debt had grown to about $1.3 billion, of which more than 
$1 billion consisted of interest because the interest accrued faster 
than the program could repay the debt. 

The government's reserve of crude helium is stored in the ground in an 
area of a natural gas field that has a naturally occurring underground 
structural dome near Amarillo, Texas. The purity of the stored crude 
helium diminishes (degrades) over time as it mixes with the natural 
gas that is present in the storage area. Moreover, when extracted at 
an excessive rate, the degradation is accelerated because the natural 
gas surrounding the helium is pulled toward the extraction wells 
faster than the helium. This causes the helium to mix with the natural 
gas more rapidly. As a result, larger volumes of the mixture of 
natural gas and helium must be extracted to obtain the needed helium. 
In addition to the government's reserve of crude helium, private 
companies that are connected to BLM's pipeline and pay a storage fee 
are also able to store and retrieve their own private crude helium 
reserves from the same storage area. 

As directed by the Congress, the National Academies' National Research 
Council reviewed the helium program and released a report in 2000 that 
evaluated changes made in the program, effects of these changes on the 
program, and several scenarios for managing the federal helium reserve 
in the future.[Footnote 9] Because of subsequent changes in price and 
availability of helium, in 2008, the National Research Council 
convened a committee to determine if the current implementation of the 
helium program was having an adverse effect on U.S. scientific, 
technical, biomedical, and national security users of helium. The 
committee reported on these effects in early 2010 and concluded that 
the current implementation of the program has adversely affected 
critical users of helium and was not in the best interest of the U.S. 
taxpayers or the country. 

GAO Reported on Helium Debt, Pricing, Purity, and Alternatives for 
Meeting Federal Helium Needs in the Early 1990s: 

Our November 1991 and October 1992 reports included findings and 
recommendations on the helium program's debt, the pricing of crude 
helium, the purity of helium in storage, and three alternatives for 
meeting federal needs for helium.[Footnote 10] 

In 1992, GAO Recommended that Congress Cancel the Debt in the Helium 
Fund: 

In October 1992, we reported that the Helium Fund debt had grown to 
about $1.3 billion, as of September 30, 1991.[Footnote 11] Section 
6(c) of the Helium Act Amendments of 1960 stipulated that (1) the 
price of federal helium should cover all of the helium program's 
costs, including interest on the program's debt; and (2) the debt 
should be repaid within 25 years, unless the Secretary of the Interior 
determines that the deadline should be extended by not more than 10 
years. With the 10 year extension, the deadline for paying off the 
debt and accumulated interest was September 13, 1995. In 1992, we 
estimated that, in order for the Bureau of Mines to repay the debt by 
the 1995 deadline, it would have to charge federal agencies with major 
requirements for helium over $3,000 per thousand cubic feet, compared 
with the 1992 price of $55. These agencies, which were required under 
section 6(a) of the 1960 act to purchase helium from the Bureau of 
Mines, would have had no choice but to pay a higher price for helium. 
We concluded that this would have no net effect on the overall federal 
budget if those agencies received additional appropriations to pay for 
helium at a higher price because the appropriations would offset the 
increased revenues to the helium program. 

Because conditions affecting the Bureau of Mines' helium program had 
changed since the Helium Act Amendments of 1960, one of the 
recommendations in our October 1992 report was that the Congress 
should consider canceling the debt in the Helium Fund. This is because 
we concluded at the time that it was no longer realistic to expect the 
agency to repay the debt by the statutory deadline of 1995, and 
canceling the debt would not adversely affect the federal budget as 
the debt consisted of outlays that had already been appropriated and 
interest that was a paper transaction. We reported that canceling the 
Helium Fund debt, however, would likely allow the Bureau of Mines to 
undercut private industry's refined helium prices, thus adversely 
affecting the private helium-refining industry. 

In 1992, GAO Found That the Federal Price for Helium Affected the 
Private Helium Industry and Identified Alternatives to Foster the 
Private Helium Industry: 

The Helium Act Amendments of 1960 also were intended to foster and 
encourage a private helium industry. In our October 1992 report, we 
found that the helium price set by the Bureau of Mines had an effect 
on the growth of the private helium industry.[Footnote 12] After the 
1960 act was passed, the Bureau of Mines' refined helium price for 
federal users rose from $15.50 per thousand cubic feet to $35 in 1961 
to cover the anticipated costs of conserving helium, which principally 
included purchasing helium for storage. This 126-percent increase in 
the federal refined helium price caused the private industry to 
believe that it could economically produce and sell refined helium. 
While private-sector prices fluctuated from a low of $21 in 1970, they 
gradually increased to $37.50 by 1983, which matched the Bureau of 
Mines' 1982 price. Over this period, the Bureau of Mines' price for 
helium continued to be higher than or equal to the private-sector 
price, and from 1983 to 1991 it appeared to act as a ceiling for 
private-sector prices. In 1991, the federal price increased to $55, 
and private-sector prices gradually increased to about $45. These 
price trends led us to conclude in 1992 that once a private helium 
refining industry had developed, it was able to successfully compete 
with the Bureau of Mines' program. 

However, in our October 1992 report, we also noted that if the 
Congress decided to cancel the Helium Fund debt then this would affect 
how the Bureau of Mines sets its helium prices and would likely allow 
it to undercut private-sector prices. Therefore, we noted that if the 
Congress decided that fostering the private helium industry was still 
an objective of the Helium Program then additional actions would be 
needed. One alternative we identified was to require the Bureau of 
Mines to price its helium comparably to private-sector prices by 
ascertaining private-sector prices and using a comparable price or by 
setting a price that covered the Bureau of Mines' capital costs, 
operating expenses, estimated costs of a normal level of inventory, 
and an industry-like rate of return on its investment. A second 
alternative was to eliminate competition by requiring that all federal 
needs be met by the Bureau of Mines but prohibiting the federal helium 
program from selling helium to nonfederal customers. 

In 1991, GAO Made a Recommendation on the Purity of the Helium in 
Storage: 

In our November 1991 report on helium purity, we found that the Bureau 
of Mines was not restricting the rate at which helium was being 
extracted from the helium reserve, causing the purity of the crude 
helium to degrade faster than would otherwise occur.[Footnote 13] We 
noted that because of this accelerated degradation, the Bureau of 
Mines was incurring additional costs to extract and refine federal 
helium.[Footnote 14] While some mixing with natural gas is inevitable, 
according to a study by the Bureau of Mines in 1989, the mixing should 
be minimized so that the crude helium's purity can be maintained at as 
high a level as possible in order to avoid higher future costs of 
extracting and refining federal helium. In our 1991 report, we 
reported that, according to Bureau of Mines' engineers, the 
accelerated degradation could be avoided by restricting total 
extractions to 3 million cubic feet of helium per day. At the Bureau 
of Mines' request, an outside petroleum engineering consulting firm 
reviewed the Bureau of Mines' engineering, geologic, and other studies 
and agreed that an extraction rate restriction of 3 million cubic feet 
per day was needed to protect the purity of the stored crude helium. 

In 1989, the Bureau of Mines decided to restrict total daily 
extractions to 3 million cubic feet but later rescinded that 
restriction after an industry association expressed concern to the 
Director of the Bureau of Mines that the restriction might adversely 
affect private companies' ability to obtain crude helium to meet their 
needs. At the time of our 1991 review, the Director told us that he 
had not reviewed the Bureau of Mines' study when making the decision 
to rescind the restriction and Bureau of Mines' engineers estimated 
that if the helium continued to be degraded at the rate it was being 
degraded at that time, the Bureau of Mines would incur additional 
costs of as much as $23.3 million in 1991 dollars to extract and 
refine federal helium from the helium reserve through the year 2050. 

In 1991, we recommended that the Bureau of Mines determine if setting 
an acceptable extraction rate was warranted and, if so, to specify 
that rate. In addition, we noted that if an extraction rate was 
specified, the Bureau of Mines should either restrict private company 
extractions or impose a charge on private companies that store helium 
in the helium reserve when their extractions exceed the established 
acceptable rate. 

In 1992, GAO Recommended That Congress Reassess the Objectives of the 
Helium Program: 

In our October 1992 report, we evaluated three alternatives for 
meeting federal needs for helium: (1) continue the Bureau of Mines' 
existing program, (2) require that all federal needs be supplied by 
private industry, and (3) allow all federal agencies to choose to 
purchase helium from the Bureau of Mines or private industry.[Footnote 
15] These three alternatives had the potential to affect the 
objectives of the Helium Act Amendments of 1960, the program's debt, 
the federal budget, and the total cost of supplying helium to the U.S. 
economy differently. For example, in 1992, we reported that the growth 
of a private industry capable of meeting federal needs created a 
competitive market where the federal helium prices directly affected 
the private industry. In this environment, if the Bureau of Mines 
priced helium to repay the Helium Fund debt by 1995, it would need to 
charge an extremely high price, which would likely drive the Bureau of 
Mines out of the helium business. On the other hand, if the debt had 
been repaid or canceled, the federal price likely would be lower than 
private prices, which could have an adverse effect on the private 
helium refining industry. We concluded that the choice among these and 
other possible alternatives was ultimately a public policy decision 
that should consider many issues. We recommended that the Congress 
reassess the act's objectives in order to decide how to meet current 
and foreseeable federal needs for helium. 

Two Key Developments Have Affected the Issues That GAO Reported on in 
the Early 1990s: 

Since our reports in the early 1990s, two key developments--the Helium 
Privatization Act of 1996 and the construction of the Cliffside Helium 
Enrichment Unit in 2003--have caused considerable changes to the 
federal helium program. These two developments addressed or altered 
the areas that we had raised concerns about in the early 1990s. 
Specifically, the Helium Privatization Act of 1996 affected helium 
debt and pricing, and it reset the program's objectives. The Cliffside 
Helium Enrichment Unit addressed the issue of helium purity in storage. 

The Helium Privatization Act of 1996 Affected the Helium Debt, 
Pricing, and the Program's Objectives: 

After our reports in the early 1990s, the Congress passed the Helium 
Privatization Act of 1996, which significantly changed the objectives 
and functions of Interior's helium program.[Footnote 16] For example, 
the 1996 act made the following key changes: 

* Interior was required to close all government-owned refined helium 
production facilities and to terminate the marketing of refined helium 
within 18 months of enactment (50 U.S.C. § 167b(b)); 

* the helium program's debt was frozen as of October 1, 1995 (50 
U.S.C. § 167d(c)); 

* Interior was required to offer for sale all but 600 million cubic 
feet of the crude helium in storage on a straight-line basis--a 
depreciation method that spreads out the cost of an asset equally over 
its lifetime--by January 1, 2015 (50 U.S.C. § 167f(a)(1)); 

* Interior was required to set sale prices to cover the crude helium 
reserve's operating costs and to produce an amount sufficient to 
reimburse the federal government for the amounts it had expended to 
purchase the stored helium. The price at which Interior sells crude 
helium was required to be equal to or greater than a formula that 
incorporates the amount of debt to be repaid divided by the volume of 
crude helium remaining in storage, with a Consumer Price Index 
adjustment (50 U.S.C. §§ 167d(c), 167f(a)(3)). Furthermore, when the 
debt is fully paid off, the revolving Helium Fund shall be terminated 
(50 U.S.C. § 167d(e)(2)(B)); 

* Interior should maintain its role in the helium storage business (50 
U.S.C. § 167b(a)); and: 

* established a modified "in-kind" program to meet federal needs for 
helium. Rather than purchasing refined helium directly from Interior, 
federal agencies were required to purchase their major helium 
requirements from persons who have entered into enforceable contracts 
to purchase an equivalent amount of crude helium from Interior (50 
U.S.C. § 167d(a)).[Footnote 17] 

These changes affected the federal helium program in various ways. For 
example, because the 1996 act effectively froze the debt at $1.37 
billion and interest no longer accrued, BLM has been able to pay off a 
large portion of its debt. As of the end of fiscal year 2010, BLM 
expects to have paid off 64 percent of the debt; it expects to pay off 
the entire debt around 2015 (see figure 1). 

Figure 1: Actual and Projected Balance of the Helium Debt, Fiscal 
Years 2003 through 2015: 

[Refer to PDF for image: line graph] 

Fiscal Year: 2003; 
Remaining debt: $1,199 million. 

Fiscal Year: 2004; 
Remaining debt: $1,139 million. 

Fiscal Year: 2005; 
Remaining debt: $1,074 million. 

Fiscal Year: 2006; 
Remaining debt: $914 million. 

Fiscal Year: 2007; 
Remaining debt: $764 million. 

Fiscal Year: 2008; 
Remaining debt: $644 million. 

Fiscal Year: 2009; 
Remaining debt: $579 million. 

Fiscal Year: 2010; 
Projected remaining debt: $519 million. 

Fiscal Year: 2011; 
Projected remaining debt: $429 million. 

Fiscal Year: 2012; 
Projected remaining debt: $309 million. 

Fiscal Year: 2013; 
Projected remaining debt: $189 million. 

Fiscal Year: 2014; 
Projected remaining debt: $89 million. 

Fiscal Year: 2015; 
Projected remaining debt: $19 million. 

Source: BLM. 

[End of figure] 

In addition, since the 1996 act required a specific method for pricing 
crude helium, the initial minimum BLM selling price for crude helium 
after the act was passed was almost double the price for private crude 
helium at that time. However, after BLM started to sell its crude 
helium according to the method specified in the act, the market price 
for crude and refined helium began to change. According to the 
National Research Council, the private sector began using the BLM 
crude price as a benchmark for establishing its price, and, as a 
result, privately sourced crude helium prices increased and now they 
meet or exceed BLM's price. Increases in the price of crude helium 
have also led to increases in the price of refined helium (see figure 
2). Refined helium prices have more than doubled from 2002 through 
2008 pursuant to demand trends. One of the factors for recent price 
increases was a disruption in helium supply from plants closing 
because of weather-related issues. Prices increased around 2007 due to 
the decline in production capacity. 

Figure 2: BLM Crude Helium Price and Grade A Price Estimates: 

[Refer to PDF for image: multiple line graph] 

Fiscal year: 2000; 
Grade A average price: $46 dollars per cubic foot; 
Crude Price: $50 dollars per cubic foot. 

Fiscal year: 2001; 
Grade A average price: $46 dollars per cubic foot; 
Crude Price: $50 dollars per cubic foot. 

Fiscal year: 2002; 
Grade A average price: $49 dollars per cubic foot; 
Crude Price: $52 dollars per cubic foot. 

Fiscal year: 2003; 
Grade A average price: $63 dollars per cubic foot; 
Crude Price: $53 dollars per cubic foot. 

Fiscal year: 2004; 
Grade A average price: $63 dollars per cubic foot; 
Crude Price: $54 dollars per cubic foot. 

Fiscal year: 2005; 
Grade A average price: $70 dollars per cubic foot; 
Crude Price: $55 dollars per cubic foot. 

Fiscal year: 2006; 
Grade A average price: $83 dollars per cubic foot; 
Crude Price: $57 dollars per cubic foot. 

Fiscal year: 2007; 
Grade A average price: $98 dollars per cubic foot; 
Crude Price: $59 dollars per cubic foot. 

Fiscal year: 2008; 
Grade A average price: $125 dollars per cubic foot; 
Crude Price: $61 dollars per cubic foot. 

Fiscal year: 2009; 
Grade A average price: $135 dollars per cubic foot; 
Crude Price: $62 dollars per cubic foot. 

Source: BLM. 

[End of figure] 

As part of the resetting of the helium program's objectives, the 1996 
act established a revised approach for meeting federal needs for 
helium. In 1998, BLM began engaging in in-kind sales to federal 
agencies. The in-kind regulations established procedures for BLM to 
sell crude helium to authorized helium supply companies and required 
federal agency buyers to purchase helium from these approved 
suppliers.[Footnote 18] Since the in-kind program started, the sales 
to federal agencies have fluctuated, primarily due to the National 
Aeronautics and Space Administration's (NASA) unique requirement for 
large volumes of helium on a sporadic basis. Total federal in-kind 
sales for fiscal year 2009 were 175.67 million cubic feet (see figure 
3). 

Figure 3: In-Kind Helium Sales by Federal Agency, Fiscal Years 1999 
through 2009: 

[Refer to PDF for image: multiple line graph] 

Fiscal year: 1999; 
Other federal agencies: 14.8 million cubic feet; 
DOE: 36.5 million cubic feet; 
Total DOD: 43.1 million cubic feet; 
NASA: 126.7 million cubic feet. 

Fiscal year: 2000; 
Other federal agencies: 27.3 million cubic feet; 
DOE: 45.2 million cubic feet; 
Total DOD: 36.0 million cubic feet; 
NASA: 126.1 million cubic feet. 

Fiscal year: 2001; 
Other federal agencies: 23.1 million cubic feet; 
DOE: 32.3 million cubic feet; 
Total DOD: 40.0 million cubic feet; 
NASA: 157.3 million cubic feet. 

Fiscal year: 2002; 
Other federal agencies: 30.5 million cubic feet; 
DOE: 26.9 million cubic feet; 
Total DOD: 32.3 million cubic feet; 
NASA: 138.8 million cubic feet. 

Fiscal year: 2003; 
Other federal agencies: 29.3 million cubic feet; 
DOE: 29.1 million cubic feet; 
Total DOD: 23.7 million cubic feet; 
NASA: 120.5 million cubic feet. 

Fiscal year: 2004; 
Other federal agencies: 40.6 million cubic feet; 
DOE: 27.8 million cubic feet; 
Total DOD: 32.1 million cubic feet; 
NASA: 119.5 million cubic feet. 

Fiscal year: 2005; 
Other federal agencies: 26.3 million cubic feet; 
DOE: 32.7 million cubic feet; 
Total DOD: 24.7 million cubic feet; 
NASA: 167.5 million cubic feet. 

Fiscal year: 2006; 
Other federal agencies: 33.6 million cubic feet; 
DOE: 22.0 million cubic feet; 
Total DOD: 24.1 million cubic feet; 
NASA: 105.8 million cubic feet. 

Fiscal year: 2007; 
Other federal agencies: 33.8 million cubic feet; 
DOE: 26.5 million cubic feet; 
Total DOD: 26.9 million cubic feet; 
NASA: 110.8 million cubic feet. 

Fiscal year: 2008; 
Other federal agencies: 35.4 million cubic feet; 
DOE: 16.4 million cubic feet; 
Total DOD: 24.0 million cubic feet; 
NASA: 131.9 million cubic feet. 

Fiscal year: 2009; 
Other federal agencies: 35.1 million cubic feet; 
DOE: 16.4 million cubic feet; 
Total DOD: 16.6 million cubic feet; 
NASA: 107.5 million cubic feet. 

Source: BLM. 

[End of figure] 

Since the act was passed, demand for helium has changed over time (see 
figure 4). Total domestic demand has generally decreased since 2001. 
The vast majority of domestic sales are made to private industries, 
with federal agencies making up about 10 percent of the sales. On the 
other hand, total foreign demand has consistently increased, and the 
amount of helium exported was approximately equal to the amount of 
helium removed from storage each year from 2000 to 2007. In 2008, the 
amount of helium exported exceeded the amount of helium removed from 
storage. 

Figure 4: Domestic Sales Compared to Exports: 

[Refer to PDF for image: multiple line graph] 

Fiscal year: 1998; 
Total exports: 1,023 million cubic feet; 
Total domestic sales: 2,573 million cubic feet. 

Fiscal year: 1999; 
Total exports: 960 million cubic feet; 
Total domestic sales: 2,881 million cubic feet. 

Fiscal year: 2000; 
Total exports: 1,219 million cubic feet; 
Total domestic sales: 3,087 million cubic feet. 

Fiscal year: 2001; 
Total exports: 1,579 million cubic feet; 
Total domestic sales: 3,329 million cubic feet. 

Fiscal year: 2002; 
Total exports: 1,436 million cubic feet; 
Total domestic sales: 3,184 million cubic feet. 

Fiscal year: 2003; 
Total exports: 1,457 million cubic feet; 
Total domestic sales: 3,163 million cubic feet. 

Fiscal year: 2004; 
Total exports: 1,566 million cubic feet; 
Total domestic sales: 3,109 million cubic feet. 

Fiscal year: 2005; 
Total exports: 1,826 million cubic feet; 
Total domestic sales: 3,110 million cubic feet. 

Fiscal year: 2006; 
Total exports: 2,071 million cubic feet; 
Total domestic sales: 2,872 million cubic feet. 

Fiscal year: 2007; 
Total exports: 2,321 million cubic feet; 
Total domestic sales: 2,619 million cubic feet. 

Fiscal year: 2008; 
Total exports: 2,396 million cubic feet; 
Total domestic sales: 2,370 million cubic feet. 

Fiscal year: 2009; 
Total exports: 2,631 million cubic feet; 
Total domestic sales: 1,693 million cubic feet. 

Sources: BLM and U.S. Census Bureau. 

[End of figure] 

The Cliffside Helium Enrichment Unit Addressed the Helium Purity Issue: 

The second key development, which has affected the helium purity issue 
that we reported on in the early 1990s, is the construction and 
operation of the Cliffside Helium Enrichment Unit. In response to 
degrading helium supplies, in 2003, Cliffside Refiners Limited 
Partnership--a consortium of private-sector refiners--designed and 
constructed an enrichment unit to produce crude helium of sufficient 
concentration and pressure for further refining. According to BLM 
officials, the total cost of building the enrichment unit was 
approximately $22 million and was paid for by the Cliffside Refiners 
Limited Partnership. BLM, in partnership with the Cliffside Refiners 
Limited Partnership, operates the unit. At full capacity, the 
enrichment unit supplies more than 6 million cubic feet per day or 2.1 
billion cubic feet per year of crude helium. The crude helium that is 
produced from this process is either sold or retained in storage, 
depending upon demand. As part of the operation, pipeline-quality 
residual natural gas is also made available for sale. In addition to 
the proceeds from the helium sales, BLM uses proceeds from the natural 
gas sales to fund the Cliffside helium operations and the remaining 
revenues are returned to the U.S. Treasury. 

According to BLM officials, the enrichment unit has allowed BLM to 
better manage the drawdown and purity of the helium in storage because 
it is able to control the wells and the helium content of the feed. 
Without the enrichment unit, BLM would have to produce from high 
helium wells first to meet purity requirements and that would have a 
detrimental effect on the purity of later production, according to 
these officials. 

The Helium Program's Direction after 2015 Is Uncertain: 

Changes in helium prices, production, and demand have generated 
concerns about the future availability of helium for the federal 
government and other critical purposes. The Helium Privatization Act 
of 1996 does not provide a specific direction for the helium program 
past 2015--less than 5 years away. As a result of these factors, there 
is uncertainty about the program's direction after 2015. Specifically: 

* How should the helium remaining in storage after 2015 be used? The 
Helium Privatization Act of 1996 required BLM to offer for sale 
substantially all of the helium in storage by January 1, 2015. While 
the required amounts have been offered for sale, only 68 percent of 
the amounts offered for sale have actually been sold (see table 2). If 
the past sales trends continue, BLM will still have significantly more 
crude helium in storage than the 600 million cubic feet target 
established in the 1996 act. In addition, the demand for helium has 
changed over time, with foreign demand outpacing domestic demand. 
According to the recent report by the National Academies' National 
Research Council, the United States could become a net importer of 
helium within the next 10 to 15 years, and the principal new sources 
of helium will be in the Middle East and Russia. Given these 
circumstances, the National Academies' report recommended that the 
Congress may want to reevaluate how the domestic crude helium reserve 
is used or conserved. It is uncertain at this point how the helium in 
storage after 2015 will be used. 

Table 2: Actual and Projected Crude Helium Sales, 2003 through 2015 (
Amounts in millions of cubic feet): 

Actual sales through March 2010: 

Fiscal year: 2003; 
Amount offered for sale: 1,640; 
Amount sold: 1,640; 
Amount not sold: 0; 
Percentage sold: 100%. 

Fiscal year: 2004; 
Amount offered for sale: 2,100; 
Amount sold: 675; 
Amount not sold: 1,425; 
Percentage sold: 32%. 

Fiscal year: 2005; 
Amount offered for sale: 2,100; 
Amount sold: 1,390; 
Amount not sold: 3,630; 
Percentage sold: 28%. 

Fiscal year: 2006; 
Amount offered for sale: 2,100; 
Amount sold: 1,565; 
Amount not sold: 535; 
Percentage sold: 75%. 

Fiscal year: 2007; 
Amount offered for sale: 2,100; 
Amount sold: 2,030; 
Amount not sold: 235; 
Percentage sold: 90%. 

Fiscal year: 2008; 
Amount offered for sale: 2,100; 
Amount sold: 1,638; 
Amount not sold: 462; 
Percentage sold: 78%. 

Fiscal year: 2009; 
Amount offered for sale: 2,100; 
Amount sold: 925; 
Amount not sold: 1,175; 
Percentage sold: 44%. 

Fiscal year: 2010 (1st half of fiscal year); 
Amount offered for sale: 1,050; 
Amount sold: 525; 
Amount not sold: 525; 
Percentage sold: 50%. 

Fiscal year: Subtotal; 
Amount offered for sale: 15,290; 
Amount sold: 10,388; 
Amount not sold: 7,987; 
Percentage sold: 68%. 

Projected sales: 

Fiscal year: 2010 (2nd half of fiscal year); 
Amount offered for sale: 1,050; 
Amount sold: 480; 
Amount not sold: 570; 
Percentage sold: 46%. 

Fiscal year: 2011; 
Amount offered for sale: 2,100; 
Amount sold: 1,600; 
Amount not sold: 500; 
Percentage sold: 76%. 

Fiscal year: 2012; 
Amount offered for sale: 2,100; 
Amount sold: 1,430; 
Amount not sold: 670; 
Percentage sold: 68%. 

Fiscal year: 2013; 
Amount offered for sale: 2,100; 
Amount sold: 1,230; 
Amount not sold: 870; 
Percentage sold: 59%. 

Fiscal year: 2014; 
Amount offered for sale: 2,100; 
Amount sold: 1,230; 
Amount not sold: 870; 
Percentage sold: 59%. 

Fiscal year: 2015 (1st quarter of fiscal year); 
Amount offered for sale: 460; 
Amount sold: 271; 
Amount not sold: 189; 
Percentage sold: 59%. 

Total: 
Amount offered for sale: 25,200; 
Amount sold: 16,629; 
Amount not sold: 11,656; 
Percentage sold: 66%. 

Source: BLM. 

[End of table] 

* How will the helium program be funded after 2015? Regardless of 
whether BLM is directed to continue selling off the crude helium in 
storage after 2015 or conserve it, there will almost certainly 
continue to be some form of a helium program after 2015. However, if 
the helium debt is paid off in 2015 as currently projected and the 
revolving helium fund is terminated, it is not clear how the 
operations of the helium program will be paid for. Currently the 
helium program does not receive any appropriated funds for its 
operations. The revenues generated by the program go into the Helium 
Fund and the program has access to those funds to pay for its day-to-
day operations. It is uncertain at this point how the helium program's 
operations will be funded after 2015. 

* At what price should BLM sell its crude helium? Since the Helium 
Privatization Act of 1996 was passed, BLM has set the price for 
federal crude helium at the minimum price required by the act. 
However, because federal crude helium reserves provide a major supply 
of crude helium, we expect BLM's prices will continue to affect 
private industry market prices for crude and refined helium. In 
addition, in recent years, the helium market has been influenced by 
other market forces as well as supply disruptions that have resulted 
in price increases. For example, in 2006, failure of a major crude 
helium enrichment unit process vessel led to unscheduled outages and 
eventually to a major plant shutdown. When BLM first set its price 
after the 1996 act, its price was estimated to be significantly higher 
than the market price, but now the reverse is true--BLM's price is 
estimated to be at or below the market price. On one hand, BLM could 
consider raising its price to ensure that the federal government is 
getting a fair market return on the sales of its assets. On the other 
hand, raising the price could potentially further erode sales. 
Furthermore, the 1996 act, like the Helium Act Amendments of 1960 
before it, tied the price to the program's operating expenses and 
debt. If the debt is paid off in 2015 as projected, the debt will no 
longer be a factor in setting helium prices. BLM officials told us 
that the 1996 act sets a minimum selling price and that the Secretary 
of the Interior has the discretion to set a higher price. BLM is 
planning to reevaluate its selling price, according to agency 
officials. As a result, it is uncertain how BLM will price its crude 
helium in the future. 

In conclusion, Mr. Chairman, there have been a number of changes in 
the market for helium since the Congress passed the Helium 
Privatization Act of 1996. As the end point for the actions that were 
required to be taken under the act come upon us in the next 5 years, 
the Congress may need to address some unresolved issues such as how to 
use the remaining helium in storage, how the helium program will 
operate once the Helium Fund expires in 2015, and how to set the price 
for the helium owned by the federal government. 

Mr. Chairman, this concludes my prepared statement. I would be pleased 
to answer any questions that you or other Members of the Subcommittee 
may have at this time. 

GAO Contact and Staff Acknowledgments: 

For further information about this testimony, please contact Anu K. 
Mittal at (202) 512-3841 or mittala@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this statement. Individuals making key contributions 
to this testimony include Jeffery D. Malcolm and Barbara Patterson, 
Assistant Directors; Carol Bray; Meredith Graves; and Caryn Kuebler. 
Also contributing to this testimony were Michele Fejfar, Jonathan 
Kucskar, and Jeremy Sebest. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 86-777, 74 Stat. 918 (1960), codified as amended at 50 
U.S.C. §§ 167-167m. 

[2] "Crude helium" is a gas containing approximately 50 to 85 percent 
helium. 

[3] GAO, Mineral Resources: Federal Helium Purity Should Be 
Maintained, [hyperlink, http://www.gao.gov/products/GAO/RCED-92-44] 
(Washington, D.C.: Nov. 8, 1991); GAO, Mineral Resources: Meeting 
Federal Needs for Helium, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-93-1] (Washington, D.C.: Oct. 30, 
1992); GAO, Mineral Resources: Meeting Federal Needs for Helium, 
[hyperlink, http://www.gao.gov/products/GAO/T-RCED-93-44] (Washington, 
D.C.: May 20, 1993); GAO, Mineral Resources: H.R. 3967 - A Bill to 
Change How Federal Needs For Refined Helium Are Met, [hyperlink, 
http://www.gao.gov/products/GAO/T-RCED-94-183] (Washington, D.C.: Apr. 
19, 1994); and GAO, Terminating Federal Helium Refining, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-95-252R] (Washington, D.C.: Aug. 
28, 1995). 

[4] National Research Council, Selling the Nation's Helium Reserve 
(Washington, D.C.: National Academies Press, prepublication copy 
released on Jan. 22, 2010). Last accessed at [hyperlink, 
http://www.nap.edu/catalog.php?record_id=12844] on April 20, 2010. 

[5] In addition to New Mexico, BLM's New Mexico State Office also has 
jurisdiction over Kansas, Oklahoma, and Texas. The helium program is 
administered by BLM's Amarillo Field Office in Amarillo, Texas. 

[6] Helium in this statement refers to helium-4, the most abundant 
naturally occurring helium isotope. Helium-3, which has its own supply 
and demand issues, is not the focus of this statement. We currently 
have an ongoing review looking into the implications of shortages in 
helium-3. 

[7] Pub. L. No. 68-544, 43 Stat. 1110 (1925), originally codified at 
50 U.S.C. § 161 et seq. These sections of the United States Code were 
completely amended, renumbered, revised, or repealed. The current 
citation is 50 U.S.C. §§ 167-167m. 

[8] The Bureau of Mines was established in 1910 and abolished in 1996. 
The helium program was transferred to BLM. 

[9] National Research Council, The Impact of Selling the Federal 
Helium Reserve (Washington, D.C.: National Academy Press, 2000). 

[10] [hyperlink, http://www.gao.gov/products/GAO/RCED-92-44] (helium 
purity); and [hyperlink, http://www.gao.gov/products/GAO/RCED-93-1] 
(helium debt, pricing, and alternatives). 

[11] [hyperlink, http://www.gao.gov/products/GAO/RCED-93-1]. 

[12] [hyperlink, http://www.gao.gov/products/GAO/RCED-93-1]. 

[13] [hyperlink, http://www.gao.gov/products/GAO/RCED-92-44]. 

[14] Refined helium has a varying purity of 99.99 percent to 99.9999 
percent helium. 

[15] [hyperlink, http://www.gao.gov/products/GAO/RCED-93-1]. 

[16] Pub. L. No. 104-273, 110 Stat. 3315 (1996), codified at 50 U.S.C. 
§§ 167-167m. 

[17] The term "person" means any individual, corporation, partnership, 
firm, association, trust, estate, public or private institution, or 
state or political subdivision thereof. 50 U.S.C. § 167(2). 

[18] 43 C.F.R. § 3195. 

[End of section] 

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