Introduction
Helium: Sources and Uses
Technical Overview of Helium Extraction & Refinement
Government Interaction in the Helium Market
The helium market is a complex one. It is a niche market of a derived product with high barriers to entry. [16] As of 2010 there were only ten refining facilities owned by eight companies in the entire United States, and only six of these, which are owned by four companies, can process the helium stored in the Bush Dome reservoir due to their exclusive access to the Federal Helium Pipeline. [16] Helium production depends almost entirely on the demand for liquid natural gas, and as such suppliers cannot easily respond to increased helium demand by ramping up production. Additionally there has traditionally been neither an effective market nor a market price for crude helium. [16] All crude helium sales proceeded through private contracts, whose terms were not made public, among a small number of crude producers and refiners. [16] The average amount of time from purification to delivery to the ultimate user for helium is 45 to 60 days, meaning that any shortage has an almost immediate impact on the user. [16] Particularly hard hit by changing prices and shortages are academic users, the length of whose grants can force a PI to decide between purchasing helium for experiments and paying graduate students to run them. [16]
As has been stated previously, the Federal Government’s involvement in the helium market began in 1917 with the creation of the Federal Helium Program. The Helium Act was amended in 1937 to allow for private sales of helium and again in 1960 to allow for long term storage in the Bush Dome Reservoir, including the purchase of helium from private suppliers. [9] By 1973, the Federal Government realized that demand was not as high as had been anticipated and ceased the purchase of helium for storage in the reservoir. [9] By 1996, the Federal Helium Program had amassed a $1.3 billion debt and was targeted by the Gingrich Congress for cost reduction. [17] The Helium Privatization Act required that the BLM cease all refining operations (crude helium production was allowed to continue) and sell down the helium in the Bush Dome Reservoir on a straight line basis from 35 billion cubic feet to 600 million cubic feet by January 1, 2015, at prices “sufficient to repay the federal government in full for its initial outlays for the helium, plus interest.” [16] These sales would continue until the lower gas limit was reached or the debt was repaid. [18] It was thought that since the price set by the BLM for crude helium was significantly higher than that of private suppliers, refiners would only purchase helium from the reserve as a last resort, and hence the BLM price would have little effect on consumers. Instead, the private crude supplier price rapidly rose to as much as 10% above the BLM level, causing refiners to purchase from the BLM more frequently than expected. [16] Additionally, as could have been anticipated with a large price increase in its stock material, the price of Grade A helium also spiked, more than tripling between 1999 and 2008. [16] The other major change that occurred to the market was in the consumption patterns of helium. While in 1995 the United States accounted for over 70% of the world demand for helium, due primarily to the shift of semiconductor and optical fiber production facilities overseas, that number has fallen below 50%, resulting in a large volume of helium exported from the country. [16]
By 2013, the BLM had recouped the $1.3 billion of debt it had incurred, even though it was now selling below market cost and still had 13.7 billion cubic feet of gas in the ground, and was required to cease sales of helium according to the 1996 Act, leading to a tremendous disruption in the market. [17] In response, Congress passed the Helium Stewardship Act of 2013 which mandated that: first, the BLM would continue to sell helium until around 2021; and second, they would hold auctions for a portion the crude helium to obtain a market price and increase competition. [18] Previously crude helium sales have been split between refiners and nonrefiners, and nonrefiners would pay a “tolling deal” to the refining companies to process their helium. [18] These auctions would start at 10% of the helium sold from the reservoir and increase in later years. [18] The first auction was held in 2014, and although it did produce a market price, it did not increase competition as Congress had hoped. [18] Only two companies purchased helium and drove the price to over 52% more than the fixed price for the remaining 90% of crude helium sold by the BLM, effectively paying a premium to block entry to non-refining helium companies. [18]