Page i GAO-14-751T 

HELIUM PROGRAM

BLM’s Implementation of 

the Helium Stewardship Act 

of 2013

Statement of Anne-Marie Fennell, Director,

Natural Resources and Environment

Testimony

Before the Subcommittee on Energy 

and Mineral Resources, Committee on 

Natural Resources, House of 

Representatives

For Release on Delivery

Expected at 10:00 a.m. ET

Tuesday, July 15, 2014

GAO-14-751T

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-751T, a testimony 

before the Subcommittee on Energy and 

Mineral Resources, Committee on Natural 

Resources, House of Representatives

July 15, 2014

HELIUM PROGRAM

BLM's Implementation of the Helium Stewardship Act 

of 2013

Why GAO Did This Study

The federal government and the 

private sector use helium, a key 

nonrenewable resource, for a variety of 

purposes, including research and 

manufacturing. As of September 30,

2013, BLM was storing about 9 billion 

cubic feet of federally owned crude 

helium and almost 2 billion cubic feet 

of privately owned crude helium in an 

underground federal reserve. Helium 

produced from the reserve represents 

40 percent of the total U.S. production.

The Helium Stewardship Act of 2013 is 

intended to complete the privatization 

of the federal helium reserve in a 

competitive market fashion that 

ensures stability in the helium markets,

while protecting the interests of 

American taxpayers. It establishes a

phased process through fiscal year 

2021 to dispose of the remaining 

helium. Phase A is a transition period

of helium sales, and Phase B consists 

of auctions in addition to sales.

This testimony describes (1) BLM’s 

initial implementation of the act and 

(2) challenges, if any, BLM faces in 

implementing and incentivizing

tolling—when a helium refiner 

processes or refines another party’s 

crude helium at an agreed upon price.

GAO examined helium sales

documents and BLM’s proposed plan 

for implementing the act; visited BLM’s 

Amarillo Field Office near the reserve 

to review documents and observe the 

helium facilities; interviewed BLM and 

other Interior officials; and interviewed 

representatives from four refiners and 

four nonrefiners that participated in 

recent sales.

GAO is not making any 

recommendations in this testimony.

What GAO Found

The Department of the Interior’s (Interior) Bureau of Land Management (BLM) 

has taken a number of actions to begin implementing the Helium Stewardship 

Act of 2013, including (1) estimating volumes of helium that can be produced 

from the federal helium reserve each year, (2) preparing for and conducting 

helium sales under the act’s Phase A transition period, and (3) initiating planning 

for the act’s Phase B, which introduces a competitive auction process for crude 

helium along with continued sales. First, BLM estimated the amount of crude 

helium that can be produced from the reserve each year based on a geologic 

model. Second, under Phase A, BLM determined sale volumes, set the sale price 

and required participants to disclose certain information, among other things.

Third, BLM has begun planning for the required Phase B auction and sale of 

helium for fiscal year 2015 and a one-time sale of a portion of the helium that will 

be made available in fiscal year 2016. BLM plans to hold this auction and these 

sales in July 2014 to comply with an August 1, 2014, statutory deadline. BLM 

officials told us the agency plans to offer for auction or sale most of the helium 

estimated to be produced in fiscal year 2015 and use the remainder to meet 

federal users’ needs and to deliver privately owned helium to refiners for 

processing. However, refiners disagree with the agency’s approach, stating the 

act requires BLM to offer for auction or sale the maximum amount that it can 

produce from the reserve each year. BLM officials said they are taking this 

approach to help ensure that the agency can deliver the privately owned helium 

that remains in storage before the end of fiscal year 2021.

BLM faces challenges in implementing the act’s tolling provision and identifying 

incentives. Under the provision, refiners, as a condition of sale or auction in 

Phases A and B, are to make excess refining capacity available at commercially 

reasonable rates to certain entities. In implementing this provision, however, BLM 

faces challenges in knowing whether refiners (1) have excess refining capacity 

available and (2) if so, are offering tolling services to nonrefiners at commercially 

reasonable rates. For example, although BLM asked refiners to report excess 

refining capacity as a condition of the Phase A sales, BLM did not define the term 

“excess refining capacity” because, according to BLM officials, they were still in 

the process of interpreting the act. According to refiners GAO interviewed, they 

used different methods to calculate the excess refining capacity they reported to 

BLM. In preparation for Phase B and the fiscal year 2015 auction and sale, BLM 

has proposed a definition of excess refining capacity, although some nonrefiners 

noted that it leaves room for interpretation. Regarding rates, BLM has not defined 

or identified criteria for determining what is a commercially reasonable rate. BLM 

officials said they prefer to take a “hands off” approach, allowing the companies 

involved and the marketplace to determine what is commercially reasonable, but 

it is unclear how BLM would implement the tolling provision without a definition or 

criteria for what is commercially reasonable. Moreover, BLM officials told GAO 

that they are considering various ways to incentivize tolling by refiners, but the 

agency’s ability to create incentives is limited by the terms of existing contracts 

governing helium delivery that remain in effect through fiscal year 2015. GAO 

plans to conduct additional work after the July 2014 auction and sales on BLM’s 

implementation of the act’s tolling provision. Therefore, GAO is not making any 

recommendations at this time.

View GAO-14-751T. For more information, 

contact Anne-Marie Fennell at (202) 512-3841 

or fennella@gao.gov.
Page 1 GAO-14-751T 

Chairman Lamborn, Ranking Member Holt, and Members of the 

Subcommittee:

I am pleased to be here today to discuss the Bureau of Land 

Management’s (BLM) implementation of the Helium Stewardship Act of 

2013.1

The Helium Stewardship Act of 2013 is the third major piece of helium 

legislation enacted since 1960. During the 1960s and early 1970s, to fulfill 

the conservation objective of the Helium Act Amendments of 1960,

Enacted on October 2, 2013, the act extends the federal helium 

program—which is responsible for the conservation and sale of federally 

owned helium—to no later than September 30, 2021. 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. In 

addition, private industry uses it for medical instruments, controlled 

atmospheres used in manufacturing, and leak detection, among other 

applications. For many of its uses, helium has no substitute.

2 the 

Department of the Interior (Interior) purchased about 34 billion cubic feet 

of helium from private crude helium producers.3 Then, under the Helium 

Privatization Act of 1996, Interior was required to offer for sale all but 

600 million cubic feet of the crude helium by January 1, 2015.4

We testified twice before this Subcommittee or the Committee on Natural 

Resources on issues related to BLM’s implementation of the Helium 

Privatization Act of 1996.5

 1

Pub. L. No. 113-40, 127 Stat. 534 (2013), codified at 50 U.S.C. §§ 167-167q.

Most recently, in February 2013, we testified 

that there would likely be substantially more than 600 million cubic feet of 

crude helium remaining on January 1, 2015, since not all of the helium 

offered for sale under the act had sold. Furthermore, we raised questions 

in that testimony about the continued operation of the federal helium 

2

Pub. L. No. 86-777, 74 Stat. 918 (1960).

3

Crude helium is a gas containing approximately 50 percent to 85 percent helium.

4

Pub. L. No. 104-273, 110 Stat. 3315 (1996).

5

GAO, Helium Program: Urgent Issues Facing BLM’s Storage and Sale of Helium 

Reserves, GAO-13-351T (Washington, D.C.: Feb. 14, 2013) and Helium Program: 

Key Developments Since the Early 1990s and Future Considerations, GAO-10-700T

(Washington, D.C.: May 13, 2010).
Page 2 GAO-14-751T 

program, BLM’s sales price for crude helium, and what should be done 

with the remaining helium. The Helium Stewardship Act of 2013 was 

intended to complete the privatization of the federal helium reserve in a 

competitive market fashion that ensures stability in the helium markets 

while protecting the interests of American taxpayers, among other things.

As you know, the federal government has a reserve of crude helium near 

Amarillo, Texas, that is stored in the ground in an area of a natural gas 

field that has a naturally occurring underground structural dome. In 

addition to the federal crude helium, this reserve also holds crude helium 

that private companies have previously purchased from BLM but have not 

taken delivery of in accordance with storage contracts between the 

companies and BLM. BLM delivers crude helium from this reserve 

through a pipeline to the private companies that are connected to it. As of 

July 1, 2014, four such companies receive crude helium from BLM 

through the pipeline and refine it;6

In light of the new circumstances presented by the Helium Stewardship 

Act of 2013, my testimony today will describe (1) BLM’s initial actions to 

implement the act and (2) challenges, if any, BLM faces in implementing 

the act’s tolling provision and incentivizing tolling.

these companies are commonly 

referred to as “refiners.” Four other companies—commonly referred to as 

“nonrefiners”—have purchased relatively small volumes of crude helium 

from BLM in the past and have expressed an interest in buying larger 

volumes. The nonrefiners, however, cannot receive the crude helium 

directly because they are not connected to the pipeline. Instead, a 

nonrefiner must enter into an agreement with a refiner, so that the refiner 

can accept delivery of the crude helium and process it into pure helium on 

the nonrefiner’s behalf. The practice of a helium refiner processing or 

refining another party’s helium at an agreed upon price is referred to as 

“tolling.” The Helium Stewardship Act of 2013 contains a tolling provision 

that requires, as a condition of sale or auction, that refiners make excess 

refining capacity of helium available at commercially reasonable rates to 

certain nonrefiners.

To address these objectives, we reviewed the Helium Stewardship Act of 

2013 and documentation of BLM’s implementation of the act, including 

the helium sales conducted in January 2014 and May 2014 and the 

 6

Refined helium has a varying purity of 99.99 percent to 99.9999 percent helium.
Page 3 GAO-14-751T 

May 16, 2014, Federal Register notice on BLM’s proposed 

implementation of the act.7 We interviewed BLM officials associated with 

the helium program at BLM’s headquarters in Washington, D.C.; BLM’s 

New Mexico State Office in Santa Fe, New Mexico;8

We conducted this performance audit from May 2014 to July 2014 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.

and BLM’s Amarillo 

Field Office in Amarillo, Texas. We visited BLM’s Amarillo Field Office to 

review documentation, observe the helium facilities, and interview 

program officials. We also interviewed (1) attorneys with Interior’s Office 

of the Solicitor who work with the helium program in Washington, D.C., 

and the Southwest Regional Office in Albuquerque, New Mexico, and 

(2) officials with Interior’s Office of Minerals Evaluation who assisted BLM 

with helium pricing. In addition, we interviewed the four refiners and four 

nonrefiners that had participated in helium sales in recent years and two 

additional companies that had expressed an interest in purchasing helium 

and connecting to BLM’s pipeline. Officials with BLM’s helium program 

concurred with the information presented in this statement and provided 

technical clarifications, which we incorporated, as appropriate.

Helium is an inert element that occurs naturally in gaseous form and has 

a variety of uses because of its unique physical and chemical 

characteristics.9

 7

79 Fed. Reg. 28540 (May 16, 2014).

For example, helium has the lowest melting and boiling 

point of any element, and, as the second lightest element, gaseous 

8

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.

9

Helium in this testimony 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 

testimony. For additional information on helium-3, see GAO, Technology Assessment: 

Neutron Detectors: Alternatives to Using Helium-3, GAO-11-753 (Washington, D.C.: 

Sept. 29, 2011) and Managing Critical Isotopes: Weaknesses in DOE’s Management of 

Helium-3 Delayed the Federal Response to a Critical Supply Shortage, GAO-11-472

(Washington, D.C.: May 12, 2011).

Background
Page 4 GAO-14-751T 

helium is much lighter than air. 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 helium program is currently managed by Interior’s BLM. As of 

September 30, 2013, there were about 10.84 billion cubic feet of crude 

helium in storage—roughly 9 billion cubic feet owned by the government, 

and the rest is owned by private companies. After private companies—

refiners or nonrefiners—purchase helium from BLM and pay for it, the 

official ownership of the helium is transferred from BLM to the company 

on the first day of the month after payment is received, and it becomes 

part of the privately owned inventory in storage. BLM stores and then 

delivers the privately owned helium through the pipeline to refiners in 

accordance with the storage contracts between BLM and the private 

companies. As of July 1, 2014, BLM held storage contracts with 

10 companies: 4 refiners, 4 nonrefiners, and 2 companies that do not 

store helium in the reserve but are connected to the pipeline in order to 

transport helium from private natural gas fields to the 4 refiners also 

connected to the pipeline. According to a U.S. Geological Survey report, 

in 2013, helium produced from the reserve represented about 40 percent 

of the total estimated production of helium in the United States and about 

30 percent of the total estimated production worldwide.

The Helium Stewardship Act of 2013 significantly changed the federal 

helium program. For example, the act:

• Establishes four phases for the sale and auction of crude helium from, 

and eventual closure of, the reserve—Phase A: allocation transition; 

Phase B: auction implementation; Phase C: continued access for 

federal users; and Phase D: disposal of assets. Phase D is to be 

completed no later than September 30, 2021. 50 U.S.C. 

§§ 167d(a)-(d).

• Establishes a minimum quantity of crude helium that BLM is required 

to offer for sale or auction each fiscal year in Phases A, B, and C. 

Specifically, the amount of crude helium to be offered must be the 

lesser of (1) the quantity of crude helium offered for sale by the 
Page 5 GAO-14-751T 

Secretary of the Interior during fiscal year 201210 or (2) the maximum 

total production capacity of the federal helium system, which includes 

the pipeline.11 50 U.S.C. § 167d(f). We refer to this as the act’s 

minimum quantity requirement.

• Requires BLM to annually establish, as applicable, separate sale and 

minimum auction prices for Phase A and Phase B using, if applicable, 

and in the following order of priority: (1) the sale price of crude helium 

in BLM auctions; (2) price recommendations and disaggregated data 

from a qualified, independent third party who has no conflict of interest 

and conducted a confidential survey of qualifying domestic helium 

transactions;12 (3) the volume-weighted average price of all crude 

helium and pure helium purchased, sold, or processed by persons in 

all qualifying domestic helium transactions; or (4) the volumeweighted average cost of converting gaseous crude helium into pure 

helium. 50 U.S.C. § 167d(b)(7). We refer to this as the act’s pricesetting provision.

• Requires BLM to require all persons that have storage contracts with 

BLM for privately owned helium in the reserve to disclose, on a strictly 

confidential basis, (1) the volumes and associated prices of all crude 

and pure helium purchased, sold, or processed by persons in 

qualifying domestic helium transactions; (2) the volumes and 

associated costs of converting crude helium into pure helium; and

(3) refinery capacity and future capacity estimates. 50 U.S.C. 

§ 167d(b)(8)(A). We refer to this as the act’s disclosure requirement.

 10In fiscal year 2012, BLM offered 2.1 billion cubic feet of crude helium for sale under the 

federal helium program.

11The act defines the federal helium system as the federal helium reserve, the storage 

reservoir, the pipeline, and certain other infrastructure. 50 U.S.C. § 167(4).

12“Qualifying domestic helium transaction” means any agreement entered into or 

renegotiated agreement during the preceding 1-year period in the United States for the 

purchase or sale of at least 15 million standard cubic feet of crude or pure helium to which 

any holder of a contract with the Secretary of the Interior for the acceptance, storage, 

delivery, or redelivery of crude helium from the federal helium system is a party. 50 U.S.C. 

§ 167(10).
Page 6 GAO-14-751T 

• Establishes a condition for Phase A sales and Phase B sales and 

auctions to refiners.13 Specifically, as a condition of sale or auction to 

a refiner under Phase A sales and Phase B, the refiner must make 

excess refining capacity of helium available at commercially 

reasonable rates to persons who acquire helium from BLM after the 

act’s enactment. 50 U.S.C. § 167d(b)(8)(B). According to the act’s 

legislative history, this condition was intended to maximize 

participation in helium sales.14 The act does not define excess refining 

capacity or commercially reasonable rates. We refer to this condition 

as the act’s tolling provision.

Since the Helium Stewardship Act of 2013 was enacted in October 2013, 

BLM has taken a number of actions to begin implementing the act, 

including (1) estimating volumes of helium that can be produced from the 

reserve each fiscal year, (2) preparing for and conducting Phase A helium 

sales, and (3) initiating planning for Phase B sales and auctions.

Before BLM could determine how much helium it would sell or auction in 

each phase, the agency first estimated the volumes of crude helium that 

can be produced from storage in the reserve. As helium is produced, and 

the amounts remaining in storage continue to decrease, the helium 

becomes increasingly difficult to extract. Because of this dynamic, BLM 

used a geologic model to identify the most efficient way to produce the 

remaining helium from storage. Table 1 shows the results of BLM’s 

modeling efforts with the estimated amounts expected to be produced 

from the reserve by fiscal year, reflecting the reduced volumes that BLM 

expects will be produced over time.

 13The condition went into effect 90 days after the act’s enactment. Since all sales held 

after the act’s enactment occurred after the 90 days, refiners have been subject to the 

condition.

14S. Rep. No. 113-83, at 13 (2013).

BLM’s Initial Actions 

to Implement the 

Helium Stewardship 

Act of 2013

BLM Estimated the 

Volume of Helium That 

Can Be Produced from 

the Reserve Each Year
Page 7 GAO-14-751T 

Table 1: BLM’s Estimated Helium Production from the Reserve through Fiscal Year 

2021

Production volumes in million cubic feet

Fiscal year Helium production volume

2014 1,494.00

2015 1,320.16

2016 1,158.15

2017 997.45

2018 848.28

2019 714.43

2020 606.13

2021 537.88

Total 7,676.48

Source: Bureau of Land Management Federal Register notice, 79 Fed. Reg. 28540 (May 16, 2014). | GAO-14-751T

Note: BLM estimated that about 3.17 billion cubic feet of helium will remain in storage at the end of 

fiscal year 2021. Under the Helium Stewardship Act of 2013, Phase B ends on the date on which the 

volume of recoverable crude helium at the federal helium reserve (other than privately owned

quantities of crude helium stored temporarily at the federal helium reserve) is 3 billion cubic feet.

In comparison, BLM offered 2,100 million cubic feet of crude helium for 

sale in each of fiscal years 2012 and 2013, the same amount it had 

offered for sale annually since fiscal year 2004.

BLM has taken a number of actions to implement multiple provisions of 

the act regarding Phase A (see fig. 1). The act requires BLM to offer 

crude helium for sale in Phase A in such quantities and under such terms 

as BLM determines necessary to carry out Phase A with minimum market 

disruption, in addition to meeting the act’s minimum quantity requirement. 

Under Phase A, BLM prepared for and conducted sales by determining 

sales volumes, setting the sale price, and implementing the act’s 

disclosure requirement, among other things.

BLM’s Implementation of 

Phase A Helium Sales
Page 8 GAO-14-751T 

Figure 1: Timeline of Selected Phase A Events since Enactment of the Helium 

Stewardship Act of 2013

a

50 U.S.C. § 167d(b)(8)(A) (disclosure requirement); 50 U.S.C. § 167d(b)(8)(B) (tolling provision). 

Excess refining capacity reports responded to both the act’s disclosure requirement and tolling 

provision, and tolling activity reports responded to the act’s tolling provision. The practice of a helium 

refiner processing or refining another party’s helium at an agreed upon price is referred to as “tolling.”

BLM offered for sale a total of 610 million cubic feet of helium in two 

different Phase A sales—one in January 2014 and one in May 2014. BLM 

officials said that they did not hold the first Phase A sale until 

January 2014 because they needed time to interpret the new act and 

develop the fiscal year 2014 sale price. In the first quarter of fiscal year 

2014, BLM continued delivering helium to the refiners from their private 

storage balances. According to BLM officials, they considered limiting the 

total Phase A sales to the 400 million cubic feet sold in January 2014 so 

they could deliver more privately stored helium. However, these officials 

Volume
Page 9 GAO-14-751T 

said that after receiving comments requesting that BLM sell additional 

helium, and after considering the act’s minimum quantity requirement, 

they decided to offer for sale an additional 210 million cubic feet of helium 

in May 2014. In the two Phase A sales, four nonrefiners purchased a total 

of 61 million cubic feet of crude helium, and refiners purchased the 

remainder.

By offering 610 million cubic feet for sale in fiscal year 2014, BLM did not 

offer for sale the full volume of crude helium that BLM’s model estimated 

would be produced in fiscal year 2014. This estimated volume, 

approximately 1.5 billion cubic feet, is less than the volume of crude 

helium offered for sale in fiscal year 2012 (2.1 billion cubic feet). Under 

the act’s minimum quantity requirement, BLM must offer for sale or 

auction in fiscal year 2014 the lesser of the “maximum total production 

capacity of the federal helium system” or the amount of helium offered for 

sale in fiscal year 2012. BLM officials told us they interpreted the 

“maximum total production capacity of the federal helium system” not as 

the full volume estimated by the model to be produced from the reserve 

this fiscal year, but rather as an amount equal to the production capacity 

of the reserve after (1) meeting federal users’ needs, (2) delivering a 

percentage of privately owned helium stored in the reserve to refiners for 

processing, and (3) holding back a contingency amount for possible 

production problems (see fig. 2). These officials said this interpretation 

helps ensure that the agency can deliver the volumes of privately owned 

helium that remain in storage before the end of fiscal year 2021. Some 

refiners, however, submitted comments to BLM stating that they disagree 

with the agency’s interpretation of the act’s minimum quantity 

requirement. They said that the “maximum total production capacity of the 

federal helium system” is the amount equal to the full volume of helium 

that is estimated to be produced from the reserve for the year, minus an 

amount for federal users.
Page 10 GAO-14-751T 

Figure 2: BLM’s Proposed Apportionment of the 1.5 Billion Cubic Feet of Helium 

Estimated to Be Produced in Fiscal Year 2014

BLM set the price for the two Phase A helium sales at $95 per thousand 

cubic feet—an $11 increase over the fiscal year 2013 price—in 

December 2013. The fiscal year 2014 price increase resulted from a 

November 2012 recommendation from Interior’s Office of Inspector 

General that BLM implement a new helium pricing process by the end of 

2013 to ensure a fair return on the sale of helium.15

 15Department of the Interior, Office of Inspector General, Bureau of Land Management’s 

Helium Program, C-IN-MOA-0010-2011 (Washington, D.C.: Nov. 9, 2012).

In response, BLM 

worked with Interior’s Office of Minerals Evaluation to contract for a study 

on helium prices. The study was completed on October 15, 2013. The 

price increase was based largely on the results of this study. BLM officials 

told us that they used the study in setting the price for the Phase A sales 

Price
Page 11 GAO-14-751T 

because they believed it satisfied both the Office of Inspector General’s 

recommendation and the recently enacted price-setting provision.16

BLM required companies making offers in the Phase A sales to fulfill the 

act’s disclosure requirement, in addition to requiring the refiners to report 

their excess refining capacity. BLM communicated these requirements in 

its announcements for the Phase A sales. By implementing the act’s 

disclosure requirement in this manner, however, BLM did not receive 

information from all 10 storage contract holders since 2 companies did 

not participate in the sales. BLM officials told us they had not realized that 

the act required them to obtain this information from the 2 storage 

contract holders that did not participate in the sales. BLM and other 

Interior officials said that they plan to explore what storage contract 

holders that do not participate in sales or auctions are statutorily required 

to disclose.17 BLM officials told us that the companies making offers in the 

Phase A sales submitted the requested volume and pricing information, 

and BLM publicly disclosed that the refiners reported, in aggregate, a total 

of 50 million cubic feet of excess refining capacity available for the last 

8 months of fiscal year 2014 (February 2014 through September 2014), 

an amount less than the 61 million cubic feet purchased by nonrefiners.

BLM has started the process of determining how it will implement 

Phase B, which introduces a competitive auction process for crude helium 

along with continued sales. In addition to the act’s minimum quantity 

requirement, the act requires BLM to offer crude helium for sale in 

 16The study was initiated before the act’s enactment and was not designed to satisfy the 

price-setting provision’s requirements for a survey. Nevertheless, the study was 

conducted by a company long involved in the helium business with current clients that 

include helium companies, and it was not limited to “qualifying domestic helium 

transactions.” In contrast, the act requires the Secretary of the Interior to establish pricing 

by using, if applicable, “[p]rice recommendations and disaggregated data from a qualified, 

independent third party who has no conflict of interest” and who conducts a confidential 

survey of qualifying domestic helium transactions. 50 U.S.C. § 167d(b)(7)(B). Further, we 

were unable to verify whether all relevant qualifying domestic helium transactions were 

included in the study because the company did not provide us with the underlying 

confidential survey data used to prepare the study.

17Under the Paperwork Reduction Act, the Director of the Office of Management and 

Budget must review and approve agencies’ proposed collections of information from 10 or 

more entities. BLM has not submitted an information collection proposal to the Office of 

Management and Budget for the act’s disclosure requirement but is exploring who is 

required to disclose information.

Information Disclosure

BLM’s Planning for 

Phase B Helium 

Sales and Auctions
Page 12 GAO-14-751T 

Phase B under such terms and conditions as the agency determines are 

necessary to maximize total recovery of helium from the federal helium 

reserve over the long term; to manage crude helium sales according to 

the agency’s ability to extract and produce helium from the reserve; to 

carry out Phase B with minimum market disruption; and maximize the 

total financial return to the taxpayer, among other things.

BLM is in the process of planning for the required (1) Phase B auction of 

a portion of the helium that will be produced in fiscal year 2015, 

(2) Phase B sale of a portion of the helium that will be produced in fiscal 

year 2015, and (3) Phase B advanced one-time sale of a portion of the 

helium that will be produced in fiscal year 2016.18 BLM published its 

proposed implementation plan for the auction and sales in the Federal 

Register on May 16, 2014,19 for a 30-day comment period, and BLM is 

planning to hold the auction and sales in late July 2014 to comply with the 

August 1, 2014, statutory deadline. BLM officials said they planned to 

publish the final implementation plan in the Federal Register in midJuly 2014. Until the final plan is published, BLM’s proposed 

implementation is tentative. Similar to Phase A, for the Phase B fiscal 

year 2015 auction and sale, as well as the fiscal year 2016 one-time sale, 

BLM is making decisions about helium volumes available for sale and 

auction, setting the sale price, and implementing the act’s disclosure 

requirement.20

 18For 2014, the act requires two sales and an auction to occur before August 1. 

Specifically, the act only permits one auction, followed by one sale which must occur no 

later than August 1. 50 U.S.C. § 167d(b)(12). In addition, the act requires a one-time sale 

of helium from the amounts available in fiscal year 2016 that must also occur no later than 

August 1, 2014. 50 U.S.C. § 167d(b)(13)(A).

19The proposed implementation plan was published in the Federal Register as a Notice of 

Proposed Action rather than as a Notice of Proposed Rulemaking. BLM officials indicated 

that they purposefully limited the scope of the notice in an effort to avoid triggering the 

need for a rulemaking. The officials stated that a rulemaking would take at least 

18 months, and they needed something in place in early July 2014 (about 9 months after 

enactment) to meet the act’s August 1, 2014, deadline for the first Phase B auction and 

sales. At least one refiner submitted comments to BLM stating that the agency’s Notice of 

Proposed Action contains actions that need to be subject to notice and comment 

rulemaking.

20According to BLM officials, the information that they expect will be included in the final 

notice regarding projected volumes that will be made available for sale or auction for fiscal 

years 2016 through 2021, excluding the fiscal year 2016 one-time sale, are for planning 

purposes only.
Page 13 GAO-14-751T 

As was the case with the volumes of helium made available for sale in 

Phase A, BLM plans to offer a total amount of helium for sale or auction 

each year in Phase B that would be less than the annual total helium 

production amounts shown in table 1. BLM officials told us they are 

continuing this approach based on the agency’s interpretation of the act’s 

multiple requirements for Phase B, including the minimum quantity 

requirement. Specifically, for fiscal year 2015, BLM officials told us they 

will offer for sale or auction 928 million cubic feet of the 1.3 billion cubic 

feet that is estimated to be produced from the reserve, and to use the 

remaining production capacity to accommodate federal users’ needs and 

deliver a percentage of the privately owned helium stored in the reserve 

(see table 2).21 For the fiscal year 2016 one-time sale, BLM proposed to 

offer 250 million cubic feet of helium.22

Table 2: BLM’s Phase B Helium Volumes for Auction, Sale, and Private Delivery for 

Fiscal Year 2015

Volumes in million cubic feet

Helium recipients Volume

Sale to refiners 835

Auction to refiners and nonrefiners 93

Subtotal 928

Federal users 160

Private storage delivery 232

Total estimated production 1,320

Source: GAO analysis of Bureau of Land Management data. | GAO-14-751T

In its proposed implementation plan, BLM stated its intent to auction 

10 percent of the 928 million cubic feet that BLM will make available for 

 21The Federal Register notice proposed withholding a contingency amount in Phase B for 

possible production problems, as was done in the Phase A sales. According to BLM 

officials, in response to public comments they received on the proposed implementation 

plan, the final implementation plan will not include a withholding of a contingency amount 

from the volumes available for auction and sale for fiscal year 2015 because they 

determined it was unnecessary.

22The act requires that the volume of helium sold in the fiscal year 2016 one-time sale be 

at least 250 million cubic feet and be made available consistent with the required Phase B 

auction quantity. 50 U.S.C. § 167d(b)(13)(B).

Volume
Page 14 GAO-14-751T 

fiscal year 2015 to qualified bidders, including refiners and nonrefiners.23

In Phase B, BLM is generally required to auction an increasing amount of 

the helium made available for each fiscal year, beginning with helium 

available for fiscal year 2015. Specifically, for fiscal year 2015, BLM is 

required to auction 10 percent of the total volume of crude helium made 

available for that fiscal year, but the agency is authorized to adjust that 

quantity in certain circumstances.24

BLM’s proposed plan includes making Phase B sale volumes available 

only to refiners, which is a departure from BLM’s prior practice, including 

for Phase A. In the past, sale volumes were divided into two portions, one 

offered to refiners and one offered first to nonrefiners.

BLM officials told us they decided not 

to adjust the auction amount for fiscal year 2015 to minimize potential 

market disruption.

25

 23The act defines a qualified bidder as a person the Secretary of the Interior determines is 

seeking to purchase helium for their own use, refining, or redelivery to users. The term 

“qualified bidder” does not include a person who was previously determined to be a 

qualified bidder if the Secretary determines that the person did not meet the requirements 

of a qualified bidder under the act. 50 U.S.C. § 167(9).

With the 

introduction of auctions in Phase B, BLM has proposed to divide the total 

helium made available each year into two different portions—a sale 

volume available only to refiners and an auction volume available to all 

qualified bidders, including, but not limited to, nonrefiners. Some 

nonrefiners have raised a concern about this approach since they would 

no longer be permitted to purchase any of the helium that will be offered 

24The act generally requires BLM to auction off an increasing amount of the helium made 

available each fiscal year, beginning with 10 percent in fiscal year 2015 and increasing by 

an additional 15 percentage points annually through fiscal year 2019, with 100 percent 

being auctioned in fiscal year 2020. However, the act contains a safety valve, which 

allows BLM to adjust the quantity of helium auctioned downward or upward if certain 

conditions are met. Specifically, BLM is authorized to auction less helium if BLM 

determines it is necessary to minimize market disruptions that pose a threat to the 

economic well-being of the country after submitting a written justification to the Senate 

Committee on Energy and Natural Resources and the House Committee on Natural 

Resources. BLM is authorized to auction more helium if BLM determines it is necessary to 

increase participation in crude helium auctions or returns to the taxpayer.

25For example, in the January and May 2014 sales, BLM offered 10 percent of the total 

volume of helium that it made available for sale to the nonrefiners, while the refiners were 

offered 90 percent of the total volume, excluding helium for federal users. If the 

nonrefiners had requested volumes that were less than 10 percent of the total volume of 

helium, the excess helium would then be offered to refiners. Prior to fiscal year 2014, one 

portion was offered only to refiners and the other portion was offered to all qualified 

bidders.
Page 15 GAO-14-751T 

for sale. As a result, they stated, fewer nonrefiners are likely to end up 

purchasing federal helium because they may be outbid in the auction by 

the refiners. The act does not contain language specifying which parties 

are eligible to participate in the Phase B sales but, according to BLM 

officials, the act intended to have the auctions replace the portion of the 

sales that were previously available to nonrefiners.

BLM’s proposed implementation plan also includes a calculation of the 

minimum auction price for fiscal year 2015 and a formula for calculating 

the sales price for fiscal year 2015 and the fiscal year 2016 one-time sale. 

BLM officials told us they did not have time to contract for a market 

survey of relevant domestic transactions by an independent third party to 

inform these prices, one of the options provided for in the act’s pricesetting provision. As a result, BLM is basing its minimum auction price on 

the fiscal year 2014 sales price, adjusted for inflation. BLM’s price for the 

fiscal year 2015 sale and the fiscal year 2016 one-time sale is based on 

the adjusted fiscal year 2014 sales price as well, but it also takes the 

average auction price into account. BLM officials told us they do not 

intend to use this approach in the future to set prices but, rather, they plan 

to contract for an independent market survey to inform the prices for the 

sale and auction of the remaining fiscal year 2016 helium.

In its May 2014 Federal Register notice, BLM did not directly address how 

it will implement the act’s disclosure requirement for the fiscal year 2015 

sale and auction and fiscal year 2016 one-time sale. However, BLM 

officials told us they intend to follow procedures similar to those used for 

the Phase A sales, that is, having only sale and auction participants 

respond to the act’s disclosure requirement.

Price

Information Disclosure
Page 16 GAO-14-751T 

BLM faces challenges in implementing the act’s tolling provision and 

incentivizing tolling. The tolling provision was intended, according to a 

relevant Senate committee report, to maximize participation in helium 

sales in Phases A and B. Without a way to have helium refined, there 

would be less or no interest in purchasing helium by nonrefiners. As of 

May 1, 2014, refiners had agreed to toll about one-quarter of the crude 

helium purchased by nonrefiners in the January 2014 Phase A sale.26

The Helium Stewardship Act of 2013 provides that refiners, as a condition 

of sale or auction, make excess refining capacity available at 

commercially reasonable rates to certain entities. In implementing this 

provision, however, BLM faces challenges in knowing whether refiners 

(1) have excess refining capacity available and (2) if so, are offering 

tolling services to nonrefiners at commercially reasonable rates.

In implementing the act’s tolling provision, BLM faces the challenge of 

verifying whether the refiners have excess refining capacity available. 

Although BLM asked refiners to report excess refining capacity in 

January 2014 as part of the Phase A sales, BLM did not define the term 

“excess refining capacity” because, according to BLM officials, they were 

still in the process of interpreting the act. Moreover, BLM did not request 

information regarding how refiners determined their excess refining 

capacity or supporting documentation. By not defining excess refining 

capacity, or asking how the refiners calculated it, BLM does not know how 

the refiners calculated the amounts they reported and whether the four 

refiners calculated those amounts in the same way. In advance of the 

January 2014 Phase A sale, refiners reported a total of 50 million cubic 

feet of excess refining capacity for the last 8 months of fiscal year 2014. 

BLM officials and some nonrefiners told us they questioned why refiners 

would have so little excess refining capacity available when BLM had 

announced it would produce and deliver a few hundred million cubic feet 

less federal helium during fiscal year 2014 than it had produced and 

 26BLM officials told us that BLM has not requested information from nonrefiners on the 

status of tolling the helium they purchased in the May 2014 Phase A sale since it is too 

soon after the sale to confirm whether tolling has occurred. These officials said they plan 

to request that refiners report information about the volumes of helium they tolled during 

all of fiscal year 2014 by September 30, 2014.

BLM Faces 

Challenges in 

Implementing the 

Act’s Tolling Provision 

and Incentivizing 

Tolling

BLM’s Challenges in 

Implementing the 

Tolling Provision

Excess Refining Capacity
Page 17 GAO-14-751T 

delivered—and that refiners had processed—during fiscal year 2013. 

However, refiners reported multiple reasons why they had limited excess 

capacity, including that plants connected to the pipeline also process 

crude helium from privately owned natural gas deposits.

In our interviews with refiners, they described different methods for 

calculating the excess refining capacity that they reported to BLM. For 

example, some refiners used formulas that accounted for multiple 

variables, including seasonality, interruptions, supply, total refining 

capacity, and existing contracts, while others used simpler formulas. 

Moreover, it is unclear whether BLM expected refiners to include refining 

plants or units that are currently nonoperational but that could become 

operational later in the year in their calculations of total refining capacity.

In preparation for Phase B and the fiscal year 2015 auction and sale, 

BLM officials said they are taking steps to improve their ability to 

determine whether refiners have accurately reported excess refining 

capacity. BLM posted a data collection form on its website on 

June 2, 2014, for refiners to use when reporting excess refining capacity; 

the form includes a definition of excess refining capacity. The form 

provides guidance on how BLM expects refiners to report excess refining 

capacity, but some nonrefiners commented to BLM that this definition 

leaves room for different interpretations. For example, BLM asks refiners 

to report “planned demand” for the applicable fiscal year in order to 

determine excess capacity. BLM, however, does not make clear whether 

such demand should already be under contract or just anticipated at the 

time its form is submitted. BLM also is requiring refiners to certify the 

accuracy of their reports of excess refining capacity on this form and to 

update it within 2 weeks if the reported data vary by 10 percent at any 

time. If a refiner fails to report excess refining capacity or to update BLM 

when the data change, BLM is proposing to bar that refiner from 

participation in helium auctions and/or sales. However, BLM has not 

specified for how long or from which auctions or sales such a refiner 

would be barred. We plan to conduct additional work after the July 2014 

auction and sales on BLM’s efforts to obtain excess refining capacity data 

from refiners using its data collection form. Therefore, we are not making 

any recommendations at this time.

BLM is also challenged in determining whether refiners that reported 

having excess refining capacity are offering tolling services at 

“commercially reasonable rates,” as required by the act. BLM did not 

define commercially reasonable rates for Phase A or identify criteria it 

would use to evaluate offered rates. As a result, BLM officials told us they 

Commercially Reasonable 

Rates
Page 18 GAO-14-751T 

did not make determinations of whether the rates offered by refiners in 

Phase A were commercially reasonable. Moreover, BLM officials told us 

they do not intend to define commercially reasonable rates or identify 

criteria for evaluating such rates for the upcoming July 2014 Phase B

auction and sales. Until BLM identifies criteria or a definition of what 

constitutes a commercially reasonable rate, it is unclear how BLM would 

implement the tolling provision, if necessary.

BLM officials told us they are not planning on defining commercially 

reasonable rates because it is more appropriate for the companies or a 

court to make that determination. BLM officials said they do not have 

complete information about the full spectrum of refiners’ costs that are 

included in their tolling rates. Also, these officials said that refiners and 

nonrefiners are interpreting what is a commercially reasonable rate 

differently and that the officials are hesitant to be drawn into that dispute. 

BLM officials told us they would have a hard time finding that a rate was 

not reasonable if the parties involved agreed to it. These officials said 

they received multiple comments from refiners, nonrefiners, and helium 

end users that support BLM’s “hands-off” approach to determining what is 

a commercially reasonable rate. However, some of the nonrefiners we 

interviewed said that they would like BLM to be more involved in setting a 

commercially reasonable rate. We plan to conduct additional work after 

the July 2014 auction and sales on BLM’s implementation of the tolling 

provision. Therefore, we are not making any recommendations at this 

time.

BLM officials told us that they are considering a variety of ways of 

delivering helium in Phase B that would incentivize refiners to toll. 

However, the agency’s ability to create incentives is restricted by the 

terms of existing storage contracts that predate the act and remain in 

effect until September 30, 2015. Under the existing contracts—which the 

act does not affect or diminish—BLM’s delivery of helium through the 

pipeline is based on the refining capacities of the four refiners in 2000. 

For example, if BLM delivered 100 million cubic feet of helium into the 

pipeline over the course of a month, that amount would be divided among 

the refiners per the allocations determined by their 2000 refining 

capacities (see table 3).

BLM Faces Challenges 

Finding Ways to 

Incentivize Tolling
Page 19 GAO-14-751T 

Table 3: Example of Refiners’ Allocations and Delivery through the Helium Pipeline 

Based on 2000 Refining Capacities

Sample allocations in million cubic feet

Refiner

Pipeline allocation 

percentage

Sample allocation of 

100 million cubic feet of 

helium available for delivery

1 36% 36 

2 34% 34 

3 26% 26 

4 4% 4 

Source: GAO analysis of Bureau of Land Management data. | GAO-14-751T

Therefore, for nonrefiners to actually receive helium they have purchased 

from BLM, one or more of the refiners’ allocations would need to be 

reduced so it could be delivered.27

In planning for the fiscal year 2015 auction and sale, BLM officials told us 

they considered various ways to address this delivery issue within the 

confines of the existing storage contracts. In its May 16, 2014, Federal 

Register notice, BLM proposed reducing the total volume of helium that is 

subject to the delivery allocations. This approach could allow BLM to 

deliver any helium that nonrefiners purchased at auction separately from 

helium that is subject to the allocations. Under this approach, tolling could 

represent an opportunity for refiners to receive helium they otherwise 

would not be receiving. BLM and other Interior officials told us they 

believe the existing storage contracts provide the flexibility to BLM to 

make such adjustments. At least one refiner, however, has notified BLM 

This directly reduces the amount of 

helium that could be delivered to a refiner for its own use, potentially 

meaning lost revenue for that refiner. Some of the refiners we spoke with 

said this reduction in the volume of helium they would receive is a 

significant reason why they have been reluctant or unable to toll.

 27This is the case regardless of whether the nonrefiner purchasing the helium needs the 

helium to be tolled. For example, one representative from a nonrefiner we interviewed said 

the company is interested in building a new refinery on the pipeline and therefore would 

refine its own helium (and may be willing to toll for others). However, this company may 

not be able to receive delivery of the gas it may purchase in the fiscal year 2015 auction 

until after the existing storage contracts expire because of the contracts’ delivery 

allocations.
Page 20 GAO-14-751T 

that it finds that BLM’s interpretation violates the act and the terms of the 

current storage contract.

Although potentially significant for fiscal year 2015, the challenges posed 

by the existing storage contracts may be reduced under certain market 

conditions. Specifically, BLM officials noted that the disincentive may be 

moot if refiners are not interested in receiving their full allocation of helium 

each month. For example, although the refiners have used their full 

allocations since fiscal year 2010, according to BLM officials, some 

refiners recently notified BLM that they are reducing their requested 

monthly delivery amounts from the pipeline because additional helium 

supplies have become available from other, private sources in other 

locations in the world. According to these officials, these conditions could 

make tolling more likely because, if refiners were accepting less helium 

from the federal system for their own use, they could have excess refining 

capacity available in their plants on the pipeline. At least one nonrefiner 

told us, however, that the availability of the additional supplies from other

sources means they are not interested in having their federal helium 

tolled.28

Furthermore, this challenge could be alleviated when new storage 

contracts are signed. BLM officials told us they plan to begin developing 

the terms of new storage contracts, and these contracts will go into effect 

in fiscal year 2016. These officials said they can modify the delivery 

allocations in the new contracts so that delivery of nonrefiners’ helium 

does not result in a reduction of a refiner’s delivered volume and instead

would represent an opportunity for the refiner to accept delivery of helium 

it otherwise would not have received.

However, even with an incentive from BLM, refiners’ and nonrefiners’

conflicting interests will make it challenging for tolling to occur. BLM

officials said that, even if refiners report having excess refining capacity, 

and that capacity is offered at commercially reasonable rates, the parties 

may still have difficulty finding mutually agreeable terms for delivering the 

refined helium. These officials said a major reason why more tolling has 

 28One advantage of the federal helium system is that it provides an opportunity for 

companies to store their purchased helium for delivery at a later date. The BLM reserve is 

unique in its ability to store helium. According to BLM officials, companies that purchase 

crude helium from private sources must generally accept delivery of that helium when it is 

produced or pay for it anyway.
Page 21 GAO-14-751T 

not occurred is that refiners and nonrefiners disagree over delivery terms. 

For example, some nonrefiners told us they are looking for some 

assurance of when and how much refined helium the refiners will deliver 

to them in certain months. Such an agreement might specify an overall 

volume to be tolled spread out over a number of months. These 

nonrefiners said they need some predictability so they can meet 

contractual obligations with their customers. However, some refiners said 

they cannot offer predictable volumes to nonrefiners, both because of 

existing obligations to their own customers and because their supplies are 

subject to interruptions that occur in the federal helium system, such as 

unexpected plant shutdowns. Some of these refiners told us they would 

offer to toll for nonrefiners as capacity comes available, but some of the 

nonrefiners we interviewed said that they are typically unable to use 

helium offered on short notice, in part because they need to secure 

commitments to provide refined helium in advance in order to satisfy their 

existing contracts.

Chairman Lamborn, Ranking Member Holt, and Members of the 

Subcommittee, this completes my prepared statement. I would be 

pleased to answer any questions that you may have at this time.

If you or your staff members have any questions about this testimony, 

please contact me at (202) 512-3841 or fennella@gao.gov. Contact 

points for our Offices of Congressional Relations and Public Affairs may 

be found on the last page of this statement. Other individuals who made 

key contributions to this testimony include Jeff Malcolm (Assistant 

Director), Cheryl Arvidson, Carol Bray, Juli Digate, Leslie Kaas Pollock, 

and Jeanette Soares.

GAO Contact and 

Staff 

Acknowledgments

(361570)
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