H.R. 527: Responsible Helium Administration and Stewardship Act

H.R. 527

Responsible Helium Administration and Stewardship Act

Date
April 25, 2013 (113th Congress, 1st Session)

Staff Contact
Communications

Floor Situation

On Thursday, April 25, 2013, the House will begin consideration of H.R. 527, the Responsible Helium Administration and Stewardship Act, under a rule.  H.R. 527 was introduced on February 6, 2013 by Rep. Doc Hastings (R-WA) and was referred to the House Natural Resources Committee, which held a markup and reported the bill by a voice vote.

Bill Summary

H.R. 527 amends the Helium Act to prevent the closure of the Federal Helium Reserve, which is scheduled to close by October 2013.  The bill privatizes the Reserve by implementing a competitive market-based cost structure.  Specifically, H.R. 527 directs the Secretary of the Interior (Secretary) to offer for sale crude helium for federal, medical, scientific, and commercial uses by dividing the sales into three phases over the next decade until the Helium Reserve is depleted.

During the first phase, which is limited to a one year period following the bill’s enactment, the Reserve will continue operating under current law. 

During the second phase, a new sale and pricing structure is implemented to maximize the return on sales, and continues until such time that 3 billion cubic feet of crude helium remains in the Reserve.  The Secretary is directed to conduct at least two auctions per fiscal year during the second phase, and is required to set a minimum sale price for the auctions by taking a confidential survey of current market crude helium prices and a review of auction prices.  H.R. 527 allows the Secretary to change the minimum sales price for crude helium under certain circumstances.  The bill also limits the volume of crude helium that can be purchased by any one bidder. 

The third phase begins at such time that 3 billion cubic feet of helium remains in the Reserve.  After that time, the remaining crude helium will then be provided solely for federal users and researchers.  The final phase continues until the recoverable helium in the Reserve is finally expended.  H.R. 527 directs all the funds received under the measure to go to the Helium Production Fund.  In addition, the bill identifies the authorized uses of the Fund, which include capital investments, administrative costs, and maintenance of the Reserve.  H.R. 527 requires that excess funds be directed to the general fund of the Treasury.

H.R. 527 also directs the Secretary to publicize on the Internet information regarding the current refining capacity of the Reserve, and to receive any applications for new refining capacity on the Reserve pipeline.  To facilitate the distribution of information along the supply chain, H.R. 527 also directs the Bureau of Land Management (BLM) to establish a real-time reporting process to provide data that will affect the helium industry, including annual maintenance schedules, dates and durations of planned shutdowns, the anticipated impact on the helium supply, and any efforts being taken to minimize that impact.

H.R. 527 directs the Secretary to work with state geological surveys to conduct a national helium gas assessment and to complete an assessment of trends in global demand for helium.  Additionally, H.R. 527 directs coordinated research on the extraction and refining of the isotope helium-3 from crude helium, which can be used for national defense and clean energy development.

Background

In 1925, Congress created the Federal Helium Reserve to ensure a supply of helium sufficient to meet national defense needs.  From 1929 to 1960, the federal government was the only domestic producer of helium.[1]  Federal demand for helium increased during World War II and the following years, prompting Congress to amend the Helium Act to incentivize private natural gas producers to strip helium from natural gas and sell it to the federal government.[2]  The Secretary of the Interior was authorized to borrow money from the Treasury to purchase the helium and pump it into the Reserve.  In the following decades, however, more than $1.3 billion in debt was accrued to purchase helium and construct the Reserve and the necessary pipeline, and the vast supply of helium began to outweigh the federal demand.[3]  Congress responded by passing the Helium Privatization Act of 1996 (Public Law 104-273), which aimed to transition the federal government from an active helium purchaser and producer to simply an operator of the Reserve and pipeline system.  The measure ordered the sale of all but 600 million cubic feet of the remaining helium in the Reserve by 2015 to recover the accumulated debt.[4]

 

The pricing formula set forth in the 1996 law was based on the minimum amount needed to repay the $1.3 billion owed to the Treasury, rather than on market prices.[5]  As such, users had no incentive to preserve helium, recover it, or search for new sources.  BLM will be able to pay off the debt sooner than expected without selling off all of the helium.  When the debt is paid off, which is predicted to occur in October 2013, the Reserve will close with helium still remaining in the Reserve and no way to access it.[6]  This will result in a 30 percent reduction in the global helium supply, affecting a number of high-tech manufacturing, medical, and national defense efforts.  Without new domestic sources of helium available, U.S. industries will be forced to look overseas to other helium supplying countries such as Algeria, Qatar, and Russia.[7] 

 

Further, the 1996 legislation did not adequately conform to free market principles and inadvertently created a monopoly system where the largest beneficiaries of the federal helium were a small number of refiners who received annual allotments of helium at prices significantly below market value.[8]  

 

H.R. 527 would address the impending closure of the Reserve later this year by allowing it to continue supplying helium while also reforming our nation’s helium policy.  In reforming the program, H.R. 527 applies free-market principles to the sale of helium from the Reserve, ensuring its continued operation while providing American taxpayers with a more transparent and fairer return on the public’s resources.



[1] House Natural Resources Committee Report 113-042 at 8.

[2] Id. at 9.

[3] Id.

[4] Id.

[5] Id. at 10.

[6] Id.

[7] Id.

[8] Id.

Cost

According to the CBO, “enacting H.R. 527 would increase net offsetting receipts (a credit against direct spending) by $340 million over the 2014-2023 period; therefore, pay-as-you-go procedures apply.  In addition, CBO estimates that completing the assessments and additional reports required under the bill would cost $11 million over the 2014-2023 period . . . .”  Enacting H.R. 527 would not affect revenues.  For more information, see CBO’s cost estimate on H.R. 527.

Amendments

1. Representatives Collins (R-GA), Scott (R-GA) Amendment # 3 – amendment ensures that excess funds are used to reduce the annual Federal budget deficit.

2. Representatives Dent (R-PA), Higgins (D-NY), Esty (D-CT) Amendment # 5 – amendment seeks to ensure the continued supply of helium for end users while requiring the Bureau of Land Management (BLM) to honor existing contracts for the supply and delivery of helium.  Affirms that the federal government will honor existing contracts that are set to expire October 1, 2015.

3. Representative Holt (D-NJ) Amendment #4 – amendment considers the long-term future of the Federal Helium Reserve by requiring an assessment of how closing the Federal Helium Reserve could influence helium availability, including options for insuring a reliable helium supply in coming decades.

4. Representative Thornberry (R-TX) Amendment #2 – amendment affirms the authority of the Secretary of the Interior to allow private entities to connect to and store helium in the Federal Helium Reserve for an appropriate fee.