Chances for helium bill floating away
What’s going on with helium?
The Federal Helium Reserve, which supplies about half of U.S. demand, will turn off the taps on October 7th, 2013 unless Congress acts quickly to pass legislation to keep it up and running. The impact on the U.S. economy is expected to be immediate and immense, with price spikes and disruptive shortages for medical imaging (which uses a quarter of the supply), semiconductor manufacturing, scientific research, and children’s birthday parties.
How did we get here?
In 1960 the Reserve started borrowing money to cover its operations, but by the mid-90s it was in over a billion dollars of debt from construction and helium purchases. At the time, the private sector was selling helium cheaply and demand was moderate. So Congress decided to start a going-out-of-business sale at the Reserve to pay off the debts and get the government out of the helium supply game. The Reserve’s supply dominance allowed Congress to fix a price high enough to pay off the debt in a reasonable amount of time, and the plan became law in the 1996 Helium Privatization Act.
Unfortunately, the helium market has been far from inert since then. The tech boom led to more industrial demand in areas such as optical fiber manufacturing, and foreign demand has grown sharply since 2000. Helium prices from private sources, which began well below the federal price, drifted upward under pressure from the new demand. In 2007 private prices hit the federal price fixed in 1996, which then became the de-facto price of helium for the entire market.
In October, the Reserve will have paid off its debts and will no longer be legally allowed to operate, though it will contain plenty of helium. The combination of halved supply and the removal of the federally fixed price is the cause of the impending crisis of sharp price jumps and supply shortages -- the “helium cliff.”
What’s the solution?
A fix for the situation seems like it shouldn’t be a heavy lift. The National Academies published a report in 2010 that suggested keeping the Reserve open with changes that put the market on a glide-path to full privatization over the long term, including market-based pricing, improved reservoir management, and a program to protect critical users, like researchers, from potential price shocks. In addition to achieving Congress’s original aim of eventually shutting down the Reserve, the continued sales would generate $500 million in revenue, and the private sector would have time to build more capacity. A classic win-win-win.
These ideas have even found bipartisan support on the Hill, and there are two bills making their way through Congress. Though they differ in the details, both bills would keep the Reserve open for the next decade while transitioning to a fully private market. The House passed its version, H.R. 527, last April. Thanks in part to the noble work of several generations of Congressional Science Fellows in the Senate, a helium bill was introduced last year, and an updated version, S. 783, passed the Energy Committee this year. Unfortunately it has not been brought to the floor for a full vote, a necessary step before the two bills are reconciled and become law. With time on the floor at a premium when the Senate returns in September, it’s anyone’s guess as to whether Congress can act to finish up this bipartisan plan and keep the nation from falling off the “cliff.”
Photo by Kasuga Huang downloaded from the Wikipedia Commons, under a Creative Commons Attribution 2.0 Generic lisence. http://en.wikipedia.org/wiki/File:Modern_3T_MRI.JPG
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