FEDERAL HEUUM PROGRAM 

OVERSIGHT HEARING 

BEFORE THE 

SUBCOMMITTEE ON 

ENERGY .AND MINERAL RESOURCES 

OF THE 

COMMITTEE ON 

NATURAL RESOURCES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRD CONGRESS 

FIRST SESSION 

ON 

THE ADMINISTRATION OF THE FEDERAL HELIUM PROGRAM 

HEARING HELD IN WASHINGTON, DC 

MAY 20, 1993 

Serial No. 103-26 

Printed for the use of the Committee on Natural Resources 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON: 1993 

For sale by the U.S. Govemment Printing Office 

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 

ISBN 0-16-041607-8 
COMMITTEE ON NATURAL RESOURCES 

GEORGE MILLER, California, ChairmanPHILIP R. SHARP, Indiana DON YOUNG, Alaska, 

EDWARD J. MARKEY, Massachusetts Rt.m.lcing Republican Member 

AUSTIN J. MURPHY, Pennsylvania JAMES V. HANSEN, Utah 

NICK JOE RAHALL II, West Virginia BARBARA F. VUCANOVICH, Nevada 

BRUCE F. VENTO, Minnei!Ota ELTON GALLEGLY, California 

PAT WILLIAMS, Montana ROBERT F. SMITH, Oregon 

RON DE LUGO, Virgin Ialande CRAIG THOMAS, Wyoming • 

SAM GEJDENSON, Connecticut JOHN J. DUNCAN, JR., Tennessee 

RICHARD H. LEHMAN, California JOEL HEFLEY, Colorado 

BILL RICHARDSON, New Mexico JOHN T. DOOLITTLE, California 

PETER A. DEFAZIO, Oregon WAYNE ALLARD, Colorado 

ENI F.H. FALEOMAVAEGA, American RICHARD H. BAKER, Louisiana 

Samoa KEN CALVERT, California 

TIM JOHNSON, South Dakota SCOTT MciNNIS, Colorado 

LARRY LAROCCO, Idaho RICHARD W. POMBO, California 

NEIL ABERCROMBIE, Hawaii JAY DICKEY, Arkanaaa 

CALVIN M. DOOLEY, Californi~ 

CARLOS A. ROMERO-BARCELO, Puerto 

Rico 

KARAN ENGLISH, Arizona 

KAREN SHEPHERD, Utah 

NATHAN DEAL, Georgia 

MAURICE D. HINCHEY, New York 

ROBERT A. UNDERWOOD, Guam 

HOWARD L. BERMAN, California 

LANE EVANS, Illinois 

PATSY T. MINK, Hawaii 

THOMAS J. BARLOW III, Kentucky 

THOMAS M. BARRETl', Wiaronsin 

JOHN LAWRENCE, Staff Director 

RICHARD MELTZER, Ckn.eral CouMel DANIEL VAL KlsH, Republican Staff Director 

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES 

RICHARD H. LEHMAN, California, Chairman 

PHILIP R. SHARP, Indiana BARBARA F. VUCANOVICH, Nevada, 

AUSTIN J. MURPHY, Pennsylvania Ranking Republican Member 

EDWARD J. MARKEY, Muaachusetta CRAIG THOMAS, Wyoming 

NICK JOE RAHALL II, Weat Virginia JOHN T. DOOLITTLE, California 

LARRY LAROCCO, Idaho WAYNE ALLARD, Colorado 

NATHAN DEAL, Georgia SCOTT MciNNIS, Colorado 

PETER A. DEFAZIO, Oregon RICHARD W. POMBO, California 

THOMAS J. BARLOW Ill, Kentucky 

DEBORAH VON HOFFMANN LANZONE, Staff Director 

LAUREN ScH.ARFMAN, Cleric 

CHlUSTOPHER KEARNEY, Republican Consultant on Energy 
CONTENTS 

Hearing held: May 20, 1993 ................................................................................... . Member statements: 

Hon. Richard H. Lehman ................................................................................ . Witness statements: 

Hon. Bill Sarpalius, a Representative in Congress from the State of 

Texas ............................................................................................................. . Panel consisting of: 

James Duffus III, Director, Natural Resources Management Issues, 

Resources, Community, and Economic Development Division, General Accounting Office, accompanied by Charles S. Cotton, Assistant Director in Charge for Natural Resources Management Issues, 

and Leonard W. Ellis, Assignment Manager ...................................... . 

Jo~~~r ~.1.~.~~~: .. ~~.~~ .. ~.~~~~ .. ~~~~.~: .. ~.~~~.~~.~ .. ~: .. ~~~ Dr. Hermann Enzer, Acting Director, U.S. Bureau of Mines, Department of the Interior, accompanied by Armond Sonnek, Assistant 

Director for Helium Operations, and Dale Bippus, General ManBon. ~ri~:P~~~c~~~~~ ~;:;~~~:aii~~ .. i~ .. c~~g;~~ .. r;~~··ih'~··s~t;; .. ~r California ..................................................................................................... .. Carl Johnson, chairman, Helium Advisory Council, and president of Compressed Gas Association, accompanied by Art Francis and Gary Caesar 

of Prax Air; Dennis Fagerstone of Mesa, Inc.; Phil Kornbluth of Airco 

Gases; and Ben Reinoelh of Air Products & Chemicals, Inc .................... . 

(III) 

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46 

56 

THE ADMINISTBATION OF THE FEDERAL 

HELIUM PROGRAM 

THURSDA~MAY2~1003 

HOUSE OF REPRESENTATIVES, 

COMMI'ITEE ON NATURAL RESOURCES, 

SUBCOMMI'ITEE ON ENERGY AND MINERAL RESOURCES, 

Washington, DC. 

The Subcommittee met at 10:00 a.m. in Room 1324 of the Long- worth House Office Building, the Hon. Richard H. Lehman, Chairman of the Subcommittee, presiding. 

STATEMENT OF BON. RICHARD H. LEHMAN 

Chairman LEHMAN. The Subcommittee will come to order. The 

Subcommittee is meeting today to conduct an oversight hearing on 

the Federal Helium Program administered by the Bureau of Mines 

in the Department of Interior. 

While most people may associate helium with balloons and 

blimps, it is also used in the space shuttle program, in Starwars 

research, for cryogenics and magnetic resonance imaging. The federal fovernment got involved in producing helium during World 

War when the Army and Nayy became interested in using it for 

dirigibles, more commonly known as blimps. Congress then passed the Helium Act of 1925, which created the 

Federal Helium Program. Later, concerns that helium supplies 

were ta:pering off prompted Congress to replace the 1925 Act with 

the Hehum Act amendments of 1960, which set out the program 

we are considering today. The 1960 Act was intended to conserve helium and to supply the 

current and foreseeable future needs of the federal government. The law authorizes the Secretarr, of the Interior to buy helium 

from :private supplies and store 1t for use by the federal government m federally owned plants and related storage facilities. 

The Act also encouraged private industry to participate in helium 

recovery, as previously the federal government had been the only domestic helium producer. During the 1960s, the Bureau of Mines contracted with private 

companies to supply helium to the federal government. To finance 

purchases, the Bureau of Mines borrowed $252 million from the 

Treasury, intending that future sales would recover the loan. 

Due to several factors, including the emergence of the private helium industry, which was able to sell helium at lower prices than 

the federal government, this debt and the attendant interests have 

never been repaid. 

(1) 
2 

Currently, 32 billion cubic feet of helium is stockpiled in an underground dome northwest of Amarillo, Texas. Meanwhile, the helium debt has risen to $1.4 billion, most of which is interest. 

Although required to refund this debt by 1995, there is no prospect of repayment. According to a 1992 report by the GAO, many of the conditions which prompted Congress to act in 1960 have 

changed. 

For example, a strong private helium industry has emerged that 

could meet federal need in the absence of the federal program. Both the GAO and the Inspector General of the Department of the 

Interior have supported reform of the Helium Program. 

In light of such recommendations, and in consideration of several 

bills pending before this Subcommittee which would modify or 

eliminate the program, not to mention calls from public interest 

groups such as the Taxpayers Union to sell off the program, it is 

appropriate that the Subcommittee take a good, hard look at the 

Federal Helium Program to determine whether it remains a viable, 

necessary function for the federal establishment. 

Today, we will hear testimony from the GAO, the Acting Inspector General of the Department of the Interior, the Bureau of Mmes 

and representatives of the Helium Advisory Council who will 

present the industry perspective. 

It is my intention that in the coming months the Subcommittee 

will sort through the information and misinformation surrounding the program and come up with a solution that addresses the federal government's need for helium, the program's debt and the 

interrelationship of the program with the United States economy. 

I look forward to a very lively and spirited discussion this morning. We have a number of witnesses and we have three members 

who also asked to testify. 

Is Mr. Inglis here? He's not here. Mr. Cox wants to testify a little 

later. 

At this time, then, I will call on Bill Sarpalius from Texas, who 

is directly impacted by this, having a facility in his district. And, 

I've given him permission to sit with the Committee this morning. The gentleman from Texas is recognized. 

STATEMENT OF HON. BILL SARPALIUS, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF TEXAS 

Mr. SARPALIUS. Thank you, Mr. Chairman. 

Mr. Chairman, I appreciate you and the members of this Committee taking the time to listen to the testimony and consider the 

different proposals that are before you. 

I am submitting written testimony and would request that it be 

entered into the record. 

Chairman LEHMAN. Without objection. 

Mr. SARPALIUS. Much attention has been focused on the Helium 

Program with claims that it is no longer needed and that it is a 

growing burden on the taxpayers. Neither of these charges is valid. 

Bureau of Mines' testimony shows that the federal helium program has assured a constant supply of helium to agencies with helium needs. Space shuttle support and uses of helium by government laboratories establish a long-term need for helium. 
a 

Private helium producers store their product at the government facility at Cliffside. I have with me a GAO study which recommended in October of 1992 that the debt be cancelled and stated 

that cancellation of the debt would not adversely affect the federal 

budget since the interest is a paper transaction. 

Mr. Chairman, back in 1960 the federal government invested 

$252 million to purchase helium. Today1 that helium is worth-it's 

guesstimated approximately close to a Dillion dollars. It has been 

a good investment. 

But, over that period of time, as interest has!one up and down 

for the t>ast 30 years, 33 years, we have foun ourselves with a 

$1.3 billion interest note. Under GAO's recommendations, there is 

no possible way that we can ever pay that note off'. 

We filed legislation yesterday that asks for the federal government to forgive the $1.3 billion interest that we have on that. And, 

as I stated earlier, the GAO report has indicated that it would have 

no effect at all as far as how 1t affects the budget of this country. 

I look forward to hearing some of the testimony from some of the 

other members that have legislation, as well as from the Bureau 

of Mines and the other people that are here to testify. But, I would 

hope that you would look at our legislation very strong!y. It does 

follow the recommendations of the General Accounting Office. 

Thank you. 

[Prepared statement of Mr. Sarpalius follows.] 
4 

Testimony of Rep. Bill Sarpalius before the SUbc~ttee on Energy and Mineral Resources 

Kay 20, 1993 

Chairman Lehman, I would like to thank you and all the Members 

of the Subcommittee on Energy and Mineral Resources for the 

opportunity to express my strong support for the United States 

Bureau of Mines Federal Helium Operations. 

In a fervent search for fiscal savings, some of my colleagues have sought to terminate the Federal helium program with claims 

that it is no longer relevant and that it constitutes a growing 

fiscal burden on the taxpayer because of the $1.3 billion debt 

owed to the Treasury. Neither of these claims is valid. 

As testimony submitted by the Bureau of Mines shows, the 

Federal helium program has assured a constant supply of helium 

to Federal agencies with helium needs. Space shuttle support and cryogenic uses of helium by government laboratories 

establish the fundamental and enduring relevance of the 

government program. 

In addition, the Federal helium program has fostered private 

helium production by allowing private companies to store their excess crude helium in the Bureau's storage facility at 

Cliffside. Private sector helium recovery is dependent upon 

seasonal swings in natural gas production, so in order to assure a steady supply for the market, excess crude helium is 

stored for a fee at Cliffside. Last year, one-third of the 

world's supply of helium was redelivered from the government 

operated storage field. 

Regarding the debt, the General Accounting Office (GAO) in 

October 1992 recommended that the debt be cancelled and stated 

" ••• cancellation of the helium program's debt would not 

adversely affect the federal budget because the debt consists 

of outlays that have already been appropriated and interest 

that is a paper transaction, not an outlay." 

I believe some reform in the helium program is warranted. 

Certainly, GAO findings identify the true character of the $1.3 

billion debt. Since the program began with a commitment to 

repay funds borrowed to purchase helium, I believe that 

commitment sho~ld be honored. Accordingly, I have introduced 

legislation to forgive the interest accrued on the debt to date 

and to require the helium program to repay the $252 million 

principal to the Federal Treasury with revenues from helium 

sales. The legislation also prohibits further interest from 

being charged. The program receives no appropriation and 

returns from $7 to $10 million per year to the Treasury. Debt 

retirement can be attained if compound interest which has 

accrued to more than $1 billion is forgiven. 

Again, Mr. Chairman and Members of the Subcommittee, thank you 

for the opportunity to show an example of a government program 

that meets the demands of government agencies and returns money 

to the Treasury each year. I am proud to show my support for 

the Federal Helium Program. 
5 

Chairman LEHMAN. Thank you very much. And, I certainly look 

forward to working with you on this issue as we go forward here. 

PANEL CONSISTING OF JAMES DUFFUS m, DIRECTOR, NATU· 

RAL RESOURCES MANAGEMENT ISSUES, RESOURCES, COM· 

MUNITY, AND ECONOMIC DEVELOPMENT DMSION, GEN· 

ERAL ACCOUNTING OFFICE, ACCOMPANIED BY CHARLES S. 

CO'rl'ON, ASSISTANT DIRECTOR IN CHARGE FOR NATURAL 

RESOURCES MANAGEMENT ISSUES, AND LEONARD W. ELLIS, 

ASSIGNMENT MANAGER; JOYCE N. FLEISCHMAN, ACTING IN· 

SPECTOR GENERAL, DEPARTMENT OF THE INTERIOR; AND 

DR. HERMANN ENZER, ACTING DIRECTOR, U.S. BUREAU OF 

MINES, DEPARTMENT OF THE INTERIOR, ACCOMPANIED BY 

ARMOND SONNEK, ASSISTANT DIRECTOR FOR HELIUM OP· 

ERATIONS, AND DALE BIPPUS, GENERAL MANAGER, HELIUM 

FIELD OPERATIONS 

Chairman LEHMAN. At this time, there being no other members 

here right now, we will call the panel up. And, what I would like 

to do, with Mr. Enzer's permission, is to invite him up with the 

first panel, if we can, if we have enough seats, and we will take 

everyone together here, Panels I and II. 

That will be Mr. James Duffus, III, Ms. Joyce Fleischman and 

then Dr. Hermann Enzer. Okay. 

We will put each of your complete statements and any attendant 

material you have to that in the record, without objection. And, I 

will ask you to summarize your statements. 

STATEMENT OF JAMES DUFFUS m 

We will proceed, starting with Mr. Duffus. 

Mr. DUFFUS. Thank you, Mr. Chairman. I will summarize my 

statement and submit the complete statement for the record. 

We are pleased to be here today for the Subcommittee's oversight hearing on the Helium Act of 1960. My remarks will be based on 

our October 30, 1992.J. report on meeting federal needs for helium. 

In summary, Mr. uhairman, our work has shown three things. First, the Department of the Interior's Bureau of Mines has acted 

to meet the Act's objectives. Second, the Helium Program debt, 

which overshadows meanin~ debate on the merits of the program, could be cancelled Wlthout adversely affecting the federal bud~et. And, third, a reassessment of the objectives of the Helium 

Act 1s needed. 

With respect to the Helium Program debt, there have been su~­

gestions that the Helium Program should be abolished, because 1t 

has incurred a $1.3 billion debt that is costly to the taxpayers. 

However, this is not the case, because the Helium Program debt 

has no adverse effect on the federal budget. The 1960 Act required that the program's net capital and retained earnings, valued at about $40 million plus subsequent program borrowing from the U.S. Treasury, which totaled about $252 

million, be established as debt in the Helium Fund. This fund is 

used to account for the program's revenues and expenses. The Act required that this debt, plus interest, be repaid to the 

Treasury by 1995 from helium sales revenues. Since 1960, the debt 

in the Helium Fund has grown to about $1.3 billion of which more 
6 

than $1 billion is interest which is accruing at a rate of over $100 

million a year since fiscal year 1991. 

However, none of this debt represents current outlays by the fed· 

eral government. The $40 million for net capital and retained earnings was a valuation of the program's assets in 1960. It represents 

the value of the appropriations that were recorded in the federal 

budget since 1925 to meet federal needs for helium at a time when 

there was no private helium industry. 

The $252 million was used in the 1960s and 1970s to purchase 

and store helium to achieve the Act's conservation objective. These 

appropriations were also recorded in the federal budget as outlays 

in the years in which the funds were expended. 

Finally, the $1 billion in interest is not, nor has it ever been, an 

outlay by the federal government. Rather, it is merely a paper 

transaction that has no effect on the federal budget or on tax· 

payers. 

Purchasing such a large inventory of raw material and covering 

that cost, plus interest, with revenues from routine opeations is not 

normal business practice. However, the Bureau could have, and 

still can, cover these costs and repay the program debt by 1995 by 

charging federal agencies with major requirements for helium a 

high enough price. 

These agencies, by law, would have no choice but to pay the 

higher price if they continue to purchase helium. This would not 

adversely affect the overall federal budget because increased 

agency appropriations would offset increased Bureau revenues, 

making it a "wash transaction." 

A simpler alternative, in our view, for eliminating the Helium 

Program's debt, which we recommended in our 1992 report, would 

be to cancel it. Eliminating the debt would allow the Bureau's program to be evaluated in terms of meeting its actual operating expenses. ' 

However, continuation of the program with its debt cancelled 

could undercut private refined helium prices and adversely affect 

the private helium refining industry unless further actions are 

taken. One alternative would be to eliminate competition between 

the Bureau and the private helium refining industry by requiring 

that the Bureau meet all federal needs but be prohibited from selling to non-federal customers. 

Finally, Mr. Chairman, a reassessment of the objectives of the 

Helium Act is needed. In addition to deciding what to do about the 

Helium Program debt, we believe that the Congress needs to assess 

the Act's objectives in light of changes that have occurred since the 

Act was passed in 1960. 

Any revisions to the Act, however, should be carefully evaluated 

because the Act's objectives are interrelated. A change to one could 

affect another, and any changes may affect the federal budget and 

the total cost of supplying helium to the U.S. economy. 

In 1960, the Bureau was the sole producer of refined helium, but 

now the private helium industry supplies almost 90 percent of refined U.S. helium and could meet federal needs for helium if there 

were no Bureau program. Also, there was concern in 1960 that helium conservation was necessary to ensure federal needs could be 
7 

met. But now the Bureau has enough helium in storage to meet 

federal needs until at least the year 2070. 

Before changing the Act to address changes that have occurred, 

consideration must be given to the interrelationship of the Act's objectives. For example, a decision about increasing, holding, using or 

selling the federal helium inventory will affect the federal budget 

and the private helium industry differently. 

A decision to sell the federal helium inventory would generate 

revenues for the federal government, but the sale would probably 

drive the private crude helium industry out of business. On the 

other hand, holding the federally owned inventory incurs an opportunity cost of foregoing revenues to the federal government. 

If holding the inventory occurs at the same time that federal purchases of helium are shifted from the Bureau to private industry, 

the total cost of supplying helium to the U.S. economy increases because of the need for new private investment in helium production 

capacity. 

In summary, how to meet federal needs for helium is a public 

policy decision that should consider many issues. We believe that 

the Congress should reassess the objectives of the Helium Act of 

1960 in order to decide how best to meet federal needs for helium. 

Such a decision should not only consider the effects of changes 

that have occurred since the Act was passed but also the interrelationship of the Act's objectives and the effect on the federal 

budget and the total cost of supplying helium to the U.S. economy. 

However, we believe that the debate should not focus on the debt 

associated with the Helium Program because it does not adversely 

affect the federal budget and should be cancelled. 

Thank you, Mr. Chairman. 

[Prepared statement of Mr. Duffus follows.] 
GAO 

For Rclease on Delivery 

Expoctedat 

lll:OOa.m .• EDT 

Thursday 

May20, 19'13 

GAOtr -RCE0..9344 

8 

United States General Accounting Office 

Testimony 

Before the Subcommittee on Energy and 

Mineral Resources, 

Committee on Natural Resources. 

House of Representatives 

MINERAL RESOURCES 

Meeting Federal Needs 

for Helium 

James Duffus lll, Director, 

Natural Resources Management Issues 

Resources. Community. and Economic 

Development Division 
9 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today for the Subcommittee's oversight 

hearing on the Helium Act of 1960. My remarks will be based on our 

October 30, 1992, report on meeting federal needs for helium.' 

In summary, Mr. Chairman, our work has shown three things. 

First, the Department of the Interior's Bureau of Mines has acted 

to meet the act's objectives. Second, the helium program debt, 

which overshadows meaningful debate on the merits of the program, 

could be canceled without adversely affecting the federal budget. 

And third, a reassessment of the objectives of the helium act is 

needed. Before discussing the results of our work in more detail, 

would like to provide some background on the helium program. 

BACKGRQUNO 

Helium is an element that occurs naturally in gaseous form. 

It is recovered from certain natural gas fields, and in the United 

States most of those fields are located in Kansas, Oklahoma, Texas, 

and Wyoming. Helium is separated from natural gas and stored in a 

concentrated form- - referred to as crude helium--until it goes 

through the final refining process. The federal government uses 

helium, in among other things, the space program, weapons systems, 

and superconductivity research. For example, helium is used to 

purge the fuel tanks and lines of the space shuttle. 

The Helium Act of 1960 was passed in response to growing 

federal needs for helium, especially for the space program, and 

concern that the nation's helium reserves were being rapidly 

depleted as helium was vented into the atmosphere by natural gas 

producers. The 1960 act authorizes Interior to conserve, buy, 

'Mineral Resources: Meetina Federal Needs for Helium (GAO/RCED93-1, Oct. 30, 1992). 
10 

store, produce, and sell helium to meet federal and other needs. 

In addition, the act requires that federal agencies purchase their 

major requirements for helium from the Bureau of Mines. The 

objectives of the act are to (1) conserve helium for future use, 

(2) provide a sustained supply of helium sufficient for essential 

government activities, and (3) foster and encourage individual 

enterprise in the development and distribution of helium. 

In 1991, u.s. refined helium production was about 3.1 billion 

cubic feet, of which the Bureau supplied about 350 million cubic 

feet (about 11 percent). The Bureau's helium production and 

storage facilities are located near Amarillo, Texas. The remaining 

89 percent of refined helium was produced by the private helium 

industry that has developed since 1960. 

BUREAU OF MINES HAS ACTED TO MEET 

THE ACT'S OBJECTIVES 

The Bureau has acted to meet the objectives of the 1960 act. 

First, to conserve helium, the Bureau purchased, produced, and 

stored helium that would otherwise have been vented into the 

atmosphere during natural gas production. When the Bureau ceased 

helium purchases in 1973, the Secretary of the Interior determined 

that the federal helium inventory would meet federal needs for at 

least 30 years. As of September 30, 1992, the Bureau estimated 

that, at the current rate of use, the 32.3 billion cubic feet of 

helium remaining in storage would last until at least 2070. 

Second, to provide helium for essential government activities, the 

Bureau has satisfied federal needs for helium~ Finally, to foster 

and encourage individual enterprise in helium, the Bureau's helium 

purchases and other actions encouraged crude helium production and 

the development of a private helium-refining industry. 

2 
11 

FEDERAL 8UDGET NOT ADVERSELY 

AFFECTED BY BUREAU HELIUM PRQGRAM DEBT 

Now I would like to discuss the helium program debt, which we 

believe overshadows meaningful debate on how to meet federal needs 

for helium. There have been suggestions that the helium program 

should be abolished because it has incurred a $1.3 billion debt 

that is costly to the taxpayers. However, this is not the case 

because the helium program debt has no adverse effect on the 

federal budget. 

The 1960 act required that the program's net capital and 

retained earnings, valued at about $40 million, plus subsequent 

program borrowing from the u.s. Treasury, which totaled about $252 

million, be established as debt in the Helium Fund. This fund is 

used to account for the program's revenues and expenses. The act 

required that this debt, plus interest, be repaid to the u.s. 

Treasury by 1995 from helium sales revenues. Since 1960, the debt 

in the Helium Fund has grown to about $1.3 billion, of which more 

than $1 billion is interest that had been accruing at a rate of 

over $100 million a year as of fiscal year 1991. 

However, none of this debt represents current outlays by the 

federal government. The $40 million for net capital and retained 

earnings was a valuation of the program's assets in 1960. It 

represents the value of appropriations that were recorded in the 

federal budget since 1925 to meet federal needs for helium at a 

time when there was no private helium industry. The $252 million 

was used in the 1960s and 1970s to purchase and store helium to 

achieve the act's conservation objective. These appropriations 

were also recorded in the federal budget as outlays in the years in 

which the funds were expended. Finally, the $1 billion in interest 

is not, nor has it ever been, an outlay by the federal government. 

Rather, it is merely a paper transaction that has no effect on the 

federal budget or on taxpayers. 

3 
12 

Purchasing such a large inventory of raw material and covering 

that cost, plus interest, with revenues from routine operations is 

not normal business practice. However 1 the Bureau could have, and 

still can, cover these costs and repay the program debt by 1995 by 

charging federal agencies with major requirements for helium a high 

enough price. Those agencies, by law, would have no choice but to 

pay the higher price if they continue to purchase helium. This 

would not adversely affect the overall federal budget because 

increased agency appropriations would offset increased Bureau 

revenues, making it a .. wash transaction ... 

We believe that a simpler alternative for eliminating the 

helium program's debt, which we recommended in our 1992 report, 

would be to cancel it. Eliminating the debt would allow the 

Bureau's helium program to be evaluated in terms of meeting its 

actual operating expenses. However, continuation of the program 

with its debt cancelled could undercut private refined helium 

prices and adversely affect the private helium-refining industry 

unless further actions are taken. One alternative would be to 

eliminate competition between the Bureau and the private heliumrefining industry by requiring that the Bureau meet all federal 

needs but be prohibited from selling to nonfederal customers. 

A REASSESSMENT OF THE OBJECTIVES 

OF THE HELIUM ACT IS NEEpED 

we believe that in addition to deciding what to do about the 

helium program debt, the Congress should reassess the act's 

objectives in light of changes that have occurred since the act was 

passed in 1960. However, any revisions to the act should be 

carefully evaluated because the act's objectives are interrelated. 

A change to one objective could affect another, and any changes may 

affect the federal budget and the total cost of supplying helium to 

the u.s. economy. 

4 
13 

In 1960, the Bureau was the sole producer of refined helium, 

but now a private helium industry supplies almost 90 percent of 

refined u.s. helium and could meet federal needs for helium if 

there were no Bureau program. Also, in 1960 there was concern that 

helium conservation was necessary to ensure that federal needs 

could be met, but now the Bureau has enough helium in/storage to 

meet federal needs until at least 2070. 

However, before changing the act to address changes that have 

occurred, consideration must be given to the interrelationship of 

the act's objectives. For example, a decision about increasing, 

holding, using, or selling the federal helium inventory will affect 

the federal budget and the private helium industry differently. A 

decision to sell the federal helium inventory would generate 

revenues for the federal government, but the sale would probably 

drive the private crude helium industry out of business. On the 

other hand, holding the federally owned helium inventory incurs an 

opportunity cost of foregoing revenues to the federal government. 

If holding the inventory occurs at the same time that federal 

purchases of helium are shifted from the Bureau to private 

industry, the total cost of supplying helium to the u.s. economy 

increases because of the need for new private investment in helium 

production capacity. 

In summary, Mr. Chairman, how to meet federal needs for helium 

is a public policy decision that should consider many issues. We 

believe that the Congress should reassess the objectives of the 

Helium Act of 1960 in order to decide how to meet federal needs for 

helium. Such a decision should consider not only the effects of 

changes that have occurred since the act was passed in 1960 but 

also the interrelationship of the act's objectives and the effect 

on the federal budget and the total cost of supplying helium to the 

u.s. economy. We believe, however, that the debate should not 

5 

72-662 - 93 - 2 
14 

focua oft the debt uaociated with the heliua proqr .. beeauae it 

doea ftOt adveraely affect the federal budget and ahould be 

canceled. 

Mr. Cheir.an, thia c:onc:ludea _,. atat-nt. We will be happy 

to •-r uy qu-tiona that you or other ~r• of the 

S~tt- -Y have. 

(140214) 

' 
15 

Chairman LEHMAN. Thank you very much. 

Ms. Fleischman. 

STATEMENT OF JOYCE N. FLEISCHMAN 

Ms. FLEISCHMAN. Good morning, Mr. Chairman and members of 

the Subcommittee. I am pleased to appear before you today to discuss the Bureau of Mines Helium Program. The Office of Inspector General has performed only two recent 

audits specifically addressing the Bureau's helium operations. In 

our 1991 audit, we reported that private companies that distribute 

Bureau helium to non-federal users were not complying with all 

applicable rules governing helium distribution, because the Bureau 

of Mines had not adequately monitored and controlled the helium 

distribution program. 

Although required to pay the fovemment a $5 per thousand 

cubic foot fee on their non-federa helium sales, distributors had 

never paid this fee. As a result, in 1989 and 1990, the Bureau did 

not collect helium fees of approximately $293 thousand and $4 73 

thousand, respectively. 

We made four recommendations to improve procedures for collecting and assessing the fees and to strengthen the controls for 

monitoring the sale of helium. The Bureau responded to us by eliminating the requirement for payment of the $5 per thousand 

cubic foot fee. 

In our earlier audit in 1984, we reported that the primary objectives of the Helium Act of 1960 had been met. But, the probability 

that the Bureau of Mines could repay the Treasury for funds borrowed to finance the Helium Program was remote at best. 

Accordingly, at that time, we recommended that the Bureau submit legislation to write off the Treasury debt. The Bureau responded that it would submit recommendations, which would include options for resolving the Treasury debt, to the House Committee on Appropriations. Neither auuit report addressed the issue of whether the Bureau 

should continue the Helium Program as it was currently constituted. However, our recently completed evaluation of the Bureau's financial statements and accompanying performance report and our analysis of the GAO's review and the Bureau's own 1988 

contracted study of the program have led us to conclude that it is 

not necessary for the Bureau of Mines to continue its present role 

in the Helium Program. Before discussing our views on this matter, I would like to provide the Committee with a brief overview of the history of the program, which should help clarify the reasons for its current financial 

condition. 

The Helium Act of 1960 required the Bureau of Mines to acquire and conserve helium for future years to ensure a sufficient supply 

to meet federal needs. To accomplish that objective and provide 

start up funds for the program, Congress authorized the Bureau to 

borrow funds from the U.S. Treasury which were to be repaid by 

1995 through revenues from helium sales. 

From 1967 throu~h 1973, the Bureau borrowed $37 million to acquire helium facilities and an additional $252 million to acquire helium reserves for storage at the Cliffside facility in Texas. However, 
16 

the Helium Program has obviously not generated sufficient reve--

nues to repay this debt primarily because of the emergence of a 

viable helium industry outside the U.S. Government that was able 

to sell helium at a lower ~~;e than Bureau sales. 

Although the program generated annual net revenues of ap--

proximately $8 million, these revenues have covered only a portion 

of the annual interest costs and none of the principal. For example, 

debt repayments from the Helium Program were $9.4 million in 

1992, while interest costs for that year were $66.5 million. As a re--

sult, the Bureau's debt to the Treasury has grown each year and 

is now approximately $1.3 billion. 

One option for reducing the Bureau's debt to the Treasury would 

be to require the Bureau's primary customers, which are federal 

agencies such as NASA, the Air Force and others, to pay correspondingly higher costs. This would result in no net eff~ct to the 

Treasury, as the GAO has pointed out. 

Another option, of course, would be to cancel the debt which is 

based on the original loans made to the Bureau plus interest on the 

loans. While this appears to be a viable solution, cancelling the 

debt could precipitate a change in the Bureau's pricing structure 

for helium. 

Theoretically, the Bureau could reduce its price, which would 

have a significant adverse impact on the helium industry. The 

question thus remains as to what degree, if any, should the federal 

government continue to be in the helium business. 

The Act was intended to conserve helium to ensure that there 

would be an adequate supply for future government use. However, 

helium is now much more plentiful than was anticipated in 1960 

and more easily extracted than when the Congress established the 

Federal Helium Program. 

The Bureau, as GAO stated, now has approximately 32 billion 

cubic feet of helium reserves at the Cliffside facility. That represents approximately a 50 year supply for federal needs. 

Furthermore, in 1988, the Bureau studied the situation and estimated that the total known helium reserves in the United States 

were approximately 268 billion cubic feet or reserves sufficient to 

meet the next 176 years of United States demand at 1986 levels. 

The Act was also intended to foster and encourage private enterprise in the development and distribution of helium. They have accomplished that goal. 

Finally, the Act was to provide a sustained supply of helium necessary for essential government activities. The Bureau has met federal needs for helium since 1960. 

And, according to the Bureau's 1988 study, the private helium 

sector has developed its own highly efficient helium production and 

distribution operations and can now also meet the government's helium needs. 

Since the objectives of the 1960 Act have been met and private 

industry has developed the capability to satisfy helium requirements, the question arises as to whether there is still an overriding 

need for the federal government to operate the Helium Program as 

it currently does. We believe that it is time for this policy question 

to be addressed. 
17 

And, although we have not performed specific audit work to 

allow us to recommend a particular course of action, there are several alternatives to continued federal operation of the Helium Program. These alternatives have been studied by the Bureau. 

All of these indicate long-term financial benefit to the Treasury. 

For example, elimination of the Helium Program by the Bureau of 

Mines would reduce federal employment, resulting in a savings of 

approximately $10 million annually. 

According to the Bureau's 1988 study, elimination of the program 

would also produce revenues resulting from the disposal of the federal processing and distribution facilities. However, as the GAO 

has pointed out, that option has some impact potentially on the industry. 

They also estimated that if they were sold, the assets would be 

sold primarily for their salvage value, bringing in approximately 

$11 million. 

We agree with the GAO. All of the alternatives available present 

disturbing questions with issues that need to be addressed because 

of the potential impact on the private sector. 

That concludes my prepared statement. I would be happy to answer any questions. 

Chairman LEHMAN. Thank you very much. Dr. Enzer. 

STATEMENT OF DR. HERMANN ENZER 

Mr. ENZER. Mr. Chairman, members of the Subcommittee, I will, 

as you requested, briefly describe the testimony that we are submitting for the record. 

Chairman LEHMAN. That's appreciated. And, without objection, 

we will put your complete testimony in the record. 

Mr. ENZER. I have with me, Mr. Chairman, Mr. Armond Sonnek, 

who is our Assistant Director for Helium Operations. And, we also 

asked our General Manager, Dale Bippus, who is back there, the 

General Manager of our Helium Field Operations, to be here so 

that we can answer any questions that you may have. 

Mr. Chairman, the Department of the Interior appreciates the 

opportunity to use this oversight hearing to report on the Federal 

Helium Program and to describe to the Subcommittee the program's relevance, administration and financing. The current statutory authority for the program resides in the Helium Act Amendments of 1960, which assigns to the Secretary of the Interior responsibilities to conserve helium, to produce helium primarily for 

essential government activities and to promote the development of 

a private helium industry. 

Since 1925, the Federal Helium Program has been the responsibility of the Bureau of Mines. We have worked in this area for 

a long time, Mr. Chairman. 

Primarily to meet the needs of federal agencies, the Bureau operates crude helium storage and refinery facilities and a 425 mile 

pipeline. We brought along a few boards for you to look at. 

The first board shows the pipeline and the facilities that are attached to the pipeline. All of these are private facilities except the 

Bureau of Mines' facility at the Exelllocation in Texas. 
18 

And, the second board, Mr. Chairman, shows you the Exell facil· 

ity. I don't know what you see there except for a lot of buildings, but that's what it looks like. 

Because of changes in the helium market subsequent to the 1960 

Act, several issues relating to the future of the Helium Program 

and the accumulated debt need to be resolved. I am merely reem· 

phasizing what has already been said by Mr. Duffus and Ms. 

Fleischman. 

The 1960 Act directed the Secretary to purchase and store helium for future government use. Under the Act, the federal agen- cies are re9:uired to purchase all major helium requirements from 

the Bureaus helium stocks. 

We have an assured supply of helium for the foreseeable future, 

as you just heard. That supply can last, depending on the rate of 

consumption, between 50 and 80 years. 

There are 32 billion cubic feet of helium stored in .the ground in 

a reservoir. This is a picture of a reservoir. It shows three wells. 

And, I should point out, Mr. Chairman, that this is a rather 

unique reservoir. It has excellent properties of porosity, permeability. It is sealed at the right places. 

But, again it is a reservoir. And, if it were not maintained prop· 

erly, the gas over time would just migrate elsewhere. 

Here is the areal extent of the reservoir. And, we have the stor· 

age rights in the beige shaded area. And, this is where the Cliffside 

field is located. 

To finance the crude helium purchase program, the Bureau was 

given authority in the 1960 Act to borrow from the Treasury Department instead of receiving direct appropriations. The Act further provided that the Bureau should repay any debt over a period of 25 years. And, there is an extension provision in the Act of 10 

years. The Act envisioned that the Bureau's Helium Program should be 

self-supporting by establishing a selling price that would cover all 

costs, mcludirig the costs of long-term storage and debt amortization. Debt service was to be calculated at compound interest rates. 

Prior to the Act, the Bureau was the only source of helium for 

federal and private helium customers. And, it sold helium for 

$15.50 per thousand cubic feet. 

We have here a sketch of the historic price developed by the Bureau of Mines. As you can see, our price was flat for a long period 

of time. We kept it at $35 for a long period of time. We have hadwe increased the price recently, and I will mention that a little 

later on. 

The green line describes the price charged by industry, Mr. 

Chairman. 

The price increase of $35 stimulated the develo_pment of a private 

industry. In fact, we have been very successful in accomplishing 

this objective of the Act, Mr. Chairman. 

The private industry, at that time, very quickly captured most of 

the sales that the Bureau had to private customers. And, we today supply primarily our federal customers and some private customers, but relatively little of that. 

In view of this substantial erosion in the Bureau's customer base, 

Bureau sales and revenues fell far short of expectations. Moreover, 
19 

the cost of the debt service began to increase rapidly as interest 

rates rose well above the three and three-quarters percent rate pro- jected earlier. AB a result, a total debt of about $1.3 billion has accumulated 

based on the principal of about $300 million and a debt portion of 

abouf $1 billion. 

The Act had, as I just mentioned, as one of its objectives the pro- motion of private industry. And, this private industry today supplies 90 percent of the total demand in the helium market. 

We, the Bureau of Mines, Mr. Chairman, are at the bottom. We 

are these red segments. 

The domestic demand is represented by the blue bars. And, exports, which have grown rapidly, are represented by the green por- tions of these bars. 

So, as you can see, the demand in the market has grown relatively rapidly. The demand in the private market has grown at 

around seven percent or so. 

Bureau demand has been relatively constant. It has grown at two 

to three percent annually. 

I was going to discuss the debt situation, but you have mentioned 

it, Mr. Chairman. Mr. Sarpalius has addressed it. And, Mr. Duffus 

has summarized it very well. I don't think I need to go over this 

again. 

And, I also was going to mention or refer to the report by the 

General Accounting Office. And, once again, Mr. Duffus has summarized that far better than I can do. And, I don't have to spend 

our time on that one. 

Let me just mention the pricing that I referred to earlier, namely that we increased our price in 1991 from $37.50 to $55 per thousand cubic feet. This new price approximates, to some extent, the 

long run replacement cost of helium. I want to make that point, because this has some importance. 

AB a result of this price increase, Bureau sales have dropped from nearly 400 million cubic feet in 1990 to 326 million cubic feet 

in 1992. However, our revenues have increased from $28 million in 

1990 to $32 million in 1992. 

What this means in economics is that helium is a relative inelastic commodity. And, however, as a result of this, what has hap- pened is that it has enabled us to increase the debt service payments to the Treasury, which were $9.4 million in 1992 and which 

increased-we have already made a payment of about $10 million 

this fiscal year. 

This concludes my summary, Mr. Chairman. And, I will be 

pleased to answer any questions that you may have. 

[Prepared statement of Dr. Enzer and related graphics material 

follow:J 
20 

Statemeat of 

Dr. Bemwm Eazer 

ActiDc Director, U.S. Bureau of Mioes 

Deputmeat of the IDterior 

before the 

Subcommittee oa FDeqy and MiDeral Resources 

Bouse Committee on Natural Resources 

May ZO,l993 

Mr. Chairman and Members of the Subcommittee: 

The Department of the Interior appreciates the opportunity to usc this oversight 

hearing to report on the Fedml Helium Program and to discuss with the Subcommittee the· 

program's relevance; administral:ion and financing. Current statutory authority for the 

program resides in the Helium Act Amendments of 1960, Public law &6-m, which assigns 

to the Seaefary of the Interior responsibilities to conserve helium, to produce helium 

primarily for essential government activities, and to p!:OIIIOie the development of a private 

helium industry. Since 192S, the Feder.al Helium Program has been the responsibility of the 

U.S. Bureau of Mines. Primarily to meet Federal agencies' needs, the Bureau operates 

crude helium storage and minery facilities and a 425-mile pipeline. Because of changes in 

the helium market subsequent to the 1960 Act, several issues relating to the future of the 

helium program and the accumulated debt need to be resolved. 

The 1960 Act di.rected the Secretary to purchase and store helium for future 

government usc. Under the Act, Federal agencies are required to purchase all major helium 

requirements from the Bureau helium stocks. The Bureau has an assured supply of helium 

which at present government consumption rates should last more than 80 years. Some 32 

billion cubic feet (Bet) of helium is stored underground in a natural gas field that is used as a 

helium reservoir. To finance the crude helium purchase program, the Bureau was given 

authority in the 1960 Act to borrow from the Treasury Department instead of receiving di.rect 

appropriations. The 1960 Act further provided the Bureau a period of 25 years to pay back 

the capital investment, and the $40 million net worth debt for assets acquired prior to 1960. 

Under the 1960 Act, the Bureau's helium program was intended to be self-supporting 

by establishing a selling price that would cover all costs including the costs of long-term 

storage and debt amortization. Debt service was to be calculated at compound interest rates. 

Prior to the Act, the Bureau was the only source of supply for Federal and private helium 

customers and it sold helium for S1S.SO per thousand cubic feet (Met). In 1961, the 

Bureau's price was increased to $35 per Mcf in order to pay for the new helium conservation 

program over 2S years and thereby comply with the 1960 Act. This price increase 

stimulated rapid development of private sector helium production which captured Bureau 

sales to the private sector as private sector prices were well below the $35 per Mcf charged 

by the Bureau. Thus, the Bureau indi.rectly met one of the goals of the 1960 Act - to 

promote development of a private helium industry. Federal customers continued to purchase 

helium from the Bureau as required by the 1960 Act. In view of this substantial erosion in 
2 

the Bureau's customer base and interest rates that were well above the 3.75 percent rate 

forecast, Bureau sales and revenues fell far short of expectations. As a result, a total debt of 

about $1.3 billion has accumulated based on a total principal of $288 million and $1 billion 

in unpaid interest charges. Total helium debt service costs were about $66 millon in fiscal 

year 1992. The debt issue will be addtessed separately from the Government's role in 

helium production. 

Background 

Helium is an inert gas with unique properties. It is used in large quantities in space, 

defense, and advanced energy systems. Uses include: shielded arc welding, breathing 

mixtures for deep sea diving, medical purposes, pressuring and purging fuel tanks and 

vessels in the space program, controlled atmospheres for growing crystals for transistors, 

heat transfer mediums for nuclear power generators, lifting gas, leak detection, cryogenic 

refrigerators, chromatography, and applications in superconductivity. In certain uses, there 

are no currently available substitutes that can approximate the perfonnance characteristics of 

helium. The U.S. demand for helium has increased 8.8 percent annually since 1972, 

although growth has been highly cyclical and driven by one or two major applications. 

Because helium is extracted from natural gas, the production of natural gas and its 

economics influence helium supply. 

The U.S. Bureau of Mines' role in helium matters dates back to World War I when 

the military became interested in using helium as a lifting gas for military dirigibles and 

contacted the Bureau because of its natural gas expertise. The Federal Helium Program was 

officially assigned to the Bureau by the Congress pursuant to the Helium Act of 1925. In 

1929, the Bureau's Amarillo, Texas, facility was built and began helium production. In 

1937, a provision was enacted allowing sales by the Government for medical and other 

commercial uses. During World War n, demand increased and four more small Government 

helium plants were built. 

New teclmology increased helium demand in the 1950's. At the same time, 

dwindling natural gas supplies in the Hugoton-Panhandle Field, the only large helium reserve 

then known, aroused concerns that without conservation no economic source of helium wonld 

remain. Unti11960, the U.S. Bureau of Mines supplied nearly 100 percent of both public 

and private needs for helium. 

In 1960, Congress replaced the 1925 Act with a new statute that established an active 

Federal role in the purchase and storage of large quantities of crude helium for long-term 

Federal needs. Congress sought to ensure that a long-term source of helium would be 

available to satisfy present and future needs. Purchases for helium cOnservation were made 

under 22-year supply contracts with private natural gas companies, which added crude 

helium extraction capabilities to their existing gas processing facilities. Four companies built 

72-662 - 93 - 3 
22 

five crude helium plants. The Bureau constructed a high-pressure pipeline to transport the 

helium from Bushton, Kansas, and intermediate points, to the Bureau-owned Cliffside Field 

near Amarillo, Texas, for storage. 

3 

After passage of the 1960 Act, a Federal price increase stimulated the emergence and 

growth of a vigorous private refined helium industry. Today, private industry supplies 

approximately 90% of the refined helium market, 3.3 Bcf annually, including exports. In 

1991, 10 companies owned and operated helium plants producing crude helium, pure helium, 

or both. 

Customers 

The 1960 Act specifies that the Federal agencies will buy their major helium needs 

from the Secretary of the Interior. Direct helium purchases by the Department of Defense 

(DOD), the National Aeronautics and Space Administration (NASA), the Department of 

Energy (DOE), and the National Weather Service constitute most of the Bureau's Grade-A, 

refmed, helium sales. The remaining helium sales to Federal agencies are made through 

contract distributors, who purchase equivalent volumes of helium from the Bureau as 

described in the Code of Federal Regulations (30 CPR 602). Some of the contract 

distributors also have General Services Administration helium supply contracts. Distribution 

costs under these contracts are generally more economical for the Federal installations 

because a local contractor's existing distribution system is used rather than the Government's 

more distant source of supply. 

We believe that the current Federal Helium Program is satisfying Federal customer 

needs. The General Accounting Office agreed with that opinion in its October 1992 report. 

For example, NASA space shuttle missions have required the delivery of more than 48 

million cubic feet of government-owned-and-purified helium so far in fiscal year 1993 to 

purge and then recharge shuttle fuel tanks. More than 170 railroad tank cars and six 

highway trailer units filled with gaseous helium have left the government's Amarillo, Texas 

helium facilities for the Kennedy Space Center during this period in response to orders, some 

of which were filled within one day. 

Bureau sales to the Federal agencies or their contractors totaled 350 million cubic feet 

(MMcf) in fiscal year 1991 and 326 MMcf in fiscal year 1992. Of these amounts, direct 

sales to Federal agencies such as NASA totalled 212 MMcf in fiscal year 1991, and 221 

MMcf in fiscal year 1992. For the first half of fiscal year 1993 direct sales are running 

slightly ahead of the sales a year ago. 
23 

HeUum Operations 

The Federal Helium Program, includes the production, conservation, sale and 

distribution of helium and involves the management of helium program facilities and 

resources to: 

a. Meet the current helium demand of all Federal agencies. This includes 

operation, utilization, and maintenance of helium plants and shipping 

containers (high-pressure cylinders, semitrailers, railway tank cars, liquid 

helium dewars, and liquid helium semitrailers) for the production and 

distribution of helium to those agencies. 

4 

b. Meet the foreseeable future helium requirements of essential Government 

programs. This includes operation, utilization, and maintenance of natural gas 

and helium storage fields and gas gathering, metering, transportation, and 

injection well systems for the conservation and storage of helium and heliumgas mixtures. 

c. Conduct investigations and evaluations for improving aspects of the helium 

program. This includes the development of more efficient methods for 

producing, distributing, conserving, and storing helium, and the improvement 

of techniques for locating natural gasfields and evaluating their helium content 

for inclusion in the U.S. helium resource base. 

The Bureau currently owns one helium plant and the Cliffside storage reservoir in 

Texas, and related pipelines in Texas, Oklahoma, and Kansas. 

Determining that new reserves of helium had been located and that the storage 

requirements of the 1960 Act had been met, the Department in 1971 terminated the supply 

contracts. Later, private industry was allowed to use the Cliffside Field for storage of its 

excess crude helium for a fee and continues to use the storage system. The Cliffside 

reservoir thus contains crude helium purchased under contract by the Bureau and privately 

owned helium stored under contract. Excess crude helium production of private industry 

extracted from natural gas is stored and then returned as needed to the owners for 

purification and sale to satisfy private industry demand. 

In fiscal year 1992, obligations of the Federal Helium Program amounted to $19.3 

million and revenues totaled $32 million. Net revenues provided for a debt service payment 

of $9.4 million in fiscal year 1992. Full-time employee (FfE) utilization was approximately 

220. During that year, 868 million cubic feet (MMcf) of private helium were delivered to 

the Bureau's storage system and 704 MMcf were withdrawn for a net increase of 164 MMcf. 

Together with the withdrawal of approximately 300 MMcf for Government use, one-third of 

the world's demand for helium was redelivered from the government-operated storage field. 
24 

5 

Bon-owing Authority 

In 1960, the Congress provided borrowing authority which was not to exceed $47.5 

million per year. Eventually, $252 million was borrowed to purchase helium. An 

underlying premise of the 1960 Act was the expectation that helium sales by the Bureau 

would eventually make the program self-supporting. In 1961, in order to comply with the 

1960 Act's requirement to finance the helium conservation program, the Secretary raised the 

Bureau's pure helium selling price from $15.50 per Mcf to $35.00 per Mcf. 

Price and Competition 

'This price was based upon a sales volume forecast for the total demand for U.S. 

helium. That volume failed to materialize. Although the price increase did meet the 1960 

Act's goal of stimulating the development of a private refined helium industry, the private 

sector effectively undercut Government helium sales to the private market by selling helium 

below government prices. 

Debt Cost 

The cost of borrowing increased substantially above the 3. 75 pm:ent interest rate 

projected in 1960. Therefore, because of: (l) significant shortfalls in market volumes 

primarily due to a much greater participation by private industry than anticipated, and (2) 

signific:andy higher interest rates, debt service payments were not met as envisioned under 

the Act. 

The continued loss of sales to the private helium industry caused the helium program 

to suffer severe shortfalls of revenue that requin:d borrowing from the Treasury duri.IB the 

1960's and early 1970's. Through 1m, approximately $252 million was borrowed to meet 

the payment requirements under the 22-year supply contracts. In 1971, the conservation 

contracts were tenninated. Although revenues generated have been sufficient to CCJVa' 

openUing costs, the program bas generated only a relatively small amount (about $67 million) 

over the last 30 years, to amortize the debt. The result is that the debt bas crown to about 

$1.3 billion. 

The Bureau, the Department of the Interior, and others have been concerned about 

this debt for many years, and provided testimony in 1969 that debt growth was becoming a 

financial bmden. 
25 

Recently, the following actions have been taken to address the helium debt: 

o In 1985, the Secretary of the Interior signed a Secretarial Issue Document seeking to 

amend the Helium Act to eliminate all or some of the debt. 

o The budgets for the Department of the Interior from fiscal year 1988 to fiscal year 

1991 assumed the sale of certain helium assets and debt cancellation. However, 

appropriation statutes for the Department of the Interior beginning in fiscal year 1988 

have banned the closure of any operating helium facility. 

o In 1989 the Secretary of the Interior sent to the Congress a legislative proposal to 

phase out the Federal Helium Program and cancel the debt. This proposal was 

introduced as H.R. 2541 in 1989, but no action was taken on it by the former 

Subcommittee on Mining and Natural Resources. 

o The Chairman, Subcommittee on Mining and Natural Resources, requested in 1990 

that the General Accounting Office study the Federal Helium Program and report on, 

among other things, whether the Program debt in the Helium Fund should be 

cancelled or repaid. The report, "Meeting Federal Needs for Helium, • issued in 

October 1992, recommends that the debt be cancelled. The report states that this 

action would not adversely affect the Federal budget because the debt consists of 

outlays that have already been appropriated and of interest that is a paper transaction, 

not an outlay. 

o In fiscal year 1992 and fiscal year 1993 President's budgets, the Bureau of Mines 

proposed to allow Federal helium customers to purchase helium from the private 

sector. Authorizing language to amend the 1960 Act for this purpose was sent to the 

Congress, but no action was taken on it. 

In 1991, the Bureau increased the price of helium by 47 percent to $55 per Mcf for 

the Federal agencies. The new price approximates the current replacement cost of helium. 

As a result of the price increase, Bureau sales have dropped from 393 million cubic feet in 

1990, to 350 million cubic feet in 1991, and to 326 million cubic feet in 1992. However, 

revenues have increased from $28.2 million in 1990, to $29.5 million in 1991, and to $32 

million in 1992. A repayment of $9.4 million was made to the Treasury in fiscal year 1992 

and a $10 million repayment has been made in the current fiscal year for debt retirement. 

Mr. Chairman, this concludes my prepared remarks. I would be pleased to respond 

to any questions from the Subcommittee. 

6 
26 

Graphics to accompany the statement of 

Dr. Hermann Enzer 

Acting Director, U.S. Bureau of Mines 

Department of the Interior 

before the 

Subcommittee on Energy and Mineral Resources 

House Committee on Natural Resources 

May 20, 1993 
WYOMING 

\l 

A ~x~o~ ~~fEK 

COLORADO 

-··-··-··-··-··-··-··-··-

NEW MEXICO 

KEY e Private O"ude helium 

.A. Private O"ade-A helium 

I 

( 

co 

8LJ"eou of Mines 

U.S. Bureau of Mines 

Pipelines 

Helium-bearing 

natural gas fields 

HELIUM INDUSTRY SYS

Nitrotec 

CUFFSIDE <>TndAt:>o:: 

U.S. Bureau of 

TEXAS 
28 
l--BiTREAU&-PRIVATi~:-GA-SEOU

60~------------------

50 

b 40 

::! 

~ 

* 1 30 ·-

w 

~ 

a:: 

Q_ 20 

10 

Bureau price 

(Federal Agencies) 

Private sector price (Est.) 

o~~_w~~WL~~~~

1960 1965 

1970 1975 

CALENDAR YE
30 
31 

GOVERNMENT OWNED RIGHTS IN CLIFFSIDE GAS FIELD 
. ... .. -- --·--·-----· ---- -----· ·····-·-· -·- " " . ·--· --· . .. - -·-· . -··-- . ····-

HELIUM OPERATIONS P

(Net Worth and Bor

!.1';0(· ~~~~

_.; i. PRINt' IP"-l ··· t-11'1 • PR

lo !IH fF! f_O:i i ·-I·IW • ll

L--------------

I,Ykl 

:~ .':'!!/) 

~-1) :'") 

.:!1):~1 

.:r){; 

0 11il --· 196 1 1964 1967 1970 1973 1976 1

fiSCAL rEAR 
FEDERAL AGENC

(Total FY-92 Federal Agency sal

DOE DIRECT 3.9% 

DOE 602 

NOAA 0.2% 

OTHER 2.7% 
U.S. HELIUM IN HELIUM-RI

WYOMING 49% 

(Total measured reserves = .<!48

January 1991 

OTHER 
35 

<! 

' ~ I 

;:1 

' lf i.f- lW :::' u " u.J 

UJ C1 CJ:: 

Q_ Q__ w 
HELIUM PROGRAM FINAN

l() 

z 

Q 

_, 

_j 

~ 

40 

30 

I 20 I/"! 

~ _, 

0 

0 

10 

0 

(Operating Cost, Capital, & t'unds t

FUNDS TO TREASURY 

(Repayments + fund bul 

CAPITAL 

OPERATING COST 

(Excludes reimbursable freight) 

1980 1981 1982 1985 1984 1985 1986 

f'I' .. C 1\L \ t 
37 

Chairman LEHMAN. Thank you very much. And, let me say that 

I appreciate all of the testimony and the work that each of you has 

done on this issue. 

Mr. Duffus, first of all, let's be real clear here on the financial 

situation which you state has kind of clouded the whole issue and 

overshadowed the discussion of the substantive issues here. 

Does whether or not the Bureau of Mines pays off this debt make 

any difference at all in the financial picture as far as the deficit 

is concerned? 

Mr. DUFFUS. No, it does not, Mr. Chairman. What we have said 

is that there are two components of the $1.3 billion debt, of which 

more than $1 billion is interest. 

Forty million dollars, as Ms. Fleischman said and as we have reported, represents a valuation of the program's assets in 1960. 

The funds were appropriated and recorded as outlays in the 

years in which they were expended. So, the check has already been 

written for that $40 million, so to speak. 

And, $252 million in the 1960s and 1970s that was used to buy 

the inventory also represented appropriations that were recorded 

as outlays in the years in which they were expended. So, the check 

also has been written for that $252 million. 

That leaves the $1 billion in interest that the government owes 

itself. 

We are saying that's simply a paper transaction. It's taking 

money out of one pocket and putting it in another pocket. So, it 

really has no affect on the federal budget. 

Therefore, we feel that the program debt should be cancelled and 

that the focus should be on the program's objectives and how to 

best meet the federal needs for helium. But, we feel that you need 

to set aside the debt question. 

And, the simple way, in our view, is to cancel the debt. 

Chairman LEHMAN. Well, did past appropriations for the Helium 

Program contribute to the deficit? 

Mr. DUFFUS. Yes. When appropriations are made and outlays 

occur and you are in a deficit situation, you are going to increase 

the debt. On the other hand, if you are in a surplus situation you 

are going to decrease the surplus that could be used against future 

deficits. 

Chairman LEHMAN. Now, I understand that in your report you 

do not specifically recommend that the program be terminated. 

However, you also don't recommend that we keep it. 

Do you have a position on that? 

Mr. DUFFUS. The way we came out in our report was that we believe it's a public policy decision. We believe that the Congress 

should decide. 

What we have pointed out, though, is that, first of all, the Congress needs to reassess the Act's objectives. In our view, and as 

others have pointed out at this table today, the Bureau has met the 

objectives of the Helium Act of 1960. 

So, the Congress needs to decide if it wants to keep these objectives and say, "That's what we want to do." 

If, on the other hand, the Congress decides that the objectives 

should be changed, then a program can be designed to meet those 

objectives. 
38 

Chairman LEHMAN. Okay. 

Mr. ENZER. Mr. Chairman, would you permit me to make two 

points in connection to the question you asked? 

Chairman LEHMAN. Certainly. 

Mr. ENZER. Two things, I think. One of them is I think I should 

stress and bring to your attention that the Department of the Interior has started-has tried for many years to present the debt situation to Congress. I have testimony here of an Assistant Secretary 

of the Interior to a Subcommittee. 

And, let me just read it. It is very brief. He is, in this excerpt, 

responding to a question. And, he is saying, "Yes, Senator Allard," . . . , again, this is in 1969, "when the Helium Program was 

put into effect in 1960-61, it was expected at that time that the 

Helium Program would start paying out by 1971. And, it would 

have if it had followed the curve as shown on the chart. However, 

as mentioned in the testimony, beginning in 1966, there came a 

rapid drop off in the use of helium and now we find ourselves in 

the most precarious state that we have ever been in." 

And, so because it did not follow the expected use, we are not up 

to speed and, consequently, we are not able to pay out. And, we 

have testified over the years before various committees that the 

debt situation is getting serious and should be dealt with. 

The second comment that I would like to make, Mr. Chairman, 

is that the alternative to the debt would have been that the Bureau 

of Mines would have ratcheted up its price from $35 to, say, $120. 

And, you, Congress, would have appropriated this sum of money 

annually to our customers. 

So, the alternative of having a debt, of this size that is, so to 

speak, staring us in the face, would have been that gradually you 

would have, through appropriations, appropriated the similar 

amounts of money. So, you know, it would not have made too much 

difference. One situation is as we have it now where you have all 

of it in one block; and, the other one would have been where over 

time Congress would have appropriated appropriate amounts of 

money to the federal customers that we serve. 

Chairman LEHMAN. Mr. Duffus, the federal government, the Bureau of Mines I guess, charges $55 per thousand cubic feet. I understand the private industry price is $45 

Would the federal budget realize-would it benefit from purchasing it instead from the private side? 

Mr. DUFFUS. No. I think it would have a opposite effect. 

Mr. Chairman, I was remiss earlier by not mentioning that I 

have with me today Mr. Cotton and Mr. Ellis. Mr. Cotton is an Assistant Director who worked on our October 1992 helium report. 

Mr. Ellis was the Assignment Manager. They are here to assist in 

answering detailed questions. Getting back to your question, Mr. Chairman, we believe it would 

have the opposite effect. Right now, the federal government's outlay for the Bureau's program is represented by the recovery of their 

operating costs, which is currently $37.50. 

If the federal agencies were to purchase from the private market 

at the $45 dollar price, there would be an additional outlay of 

$7 .50. So, it would not have a beneficial effect on the budget. 
39 

Chairman LEHMAN. Ms. Fleischman, do you agree with the recommendations of the GAO in their recent report? 

Ms. FLEISCHMAN. Yes. We have read the GAO report which, I 

must say, I thought was extremely well done and very thorough. 

The GAO is right, it seems to me. Obviously, there is a public 

policy decision to be made here. 

Depending on which alternative the Congress settles upon, it 

must consider what the effect will be on the private sector and potentially on the budget of the United States. And, I don't disagree 

at all with GAO on the subject of the debt. 

I think-! mean, when you start tossing around figures in billions, that tends to cloud the issue at any time. But, he's right. I 

mean, this is a debt that we owe to ourselves. We created it ourselves. We owe it to ourselves. So, it really is not the issue, the 

public policy issue. 

The public policy issue is what do you do with the Helium Program. And, that is a determination that Congress can only make. 

But, we do agree with GAO, yes. 

Chairman LEHMAN. The former IG, Mr. Richards, recommended 

eliminating the program. That's not your position? 

Ms. J.4"'LEISCHMAN. I think that having read the GAO report-! 

don't know whether Mr. Richards had read this or not. But, I think 

having read that and looking at all of the analysis that GAO has 

made of the effects or the potential effects of the various alternatives that I would have to conclude that if Congress decides-! 

mean, Congress obviously can decide to eliminate the program and 

that's fine. It's up to Congress. 

But, it does need to consider all of the potential effects on the 

private helium industry. Chairman LEHMAN. Thank you very much. One other question of 

Dr. Enzer. 

How does the Bureau set the price for helium? 

Mr. ENZER. This is not an easy question to answer, Mr. Chairman. But, let me try. 

The helium market is a market that is dominated by relatively 

few suppliers. So, there is-it's not a market like a market for refrigerators or for bread. 

And, the helium price is not publicly published in newspapers or 

something like that. But, we have been in the helium business for 

a long time, so we do know what the prices are that are being 

charged in the private helium market. 

The long-term replacement cost of helium-we estimate that the 

long-term replacement cost of helium is between $45 and $55. As 

we just heard, the price in the private market is around $45 right 

now at the lower end of this interval that I just mentioned. 

What the Bureau tries to do is to take the market price, the $45 

and add a premium to that price of between $5 and $10 so that 

we do somewhat discourage sales by the Bureau of Mines or deter 

purchases by private customers from the Bureau of Mines because, 

as you have heard several times, the primary intent of the legislation is to promote a private industry. And, we do not want to follow 

a pricing policy that jeopardizes the position of the helium industry. 
40 

We haven't always followed that in recent years, as you saw from 

this board we had. We followed it for a long period of time, but we 

have gotten back in this last price increase to this gap. The gap right now is about $10. 

So, in general, this is how we try to price federal helium. 

Chairman LEHMAN. Thank you. Mr. Thomas. 

Mr. THOMAS. Thank you very much, Mr. Chairman. I would like 

to ask a few questions, I guess. 

I certainly am not an expert in this nor do I have any, personal interests particularly. But, I must tell you that I am a little astounded at what I am hearing in terms of the value of money in 

this project. Would you, Ms. Fleischman-in this business that we owe ourselves, I don't understand that. I guess you could say that about 

the federal debt, couldn't you? If you have a capital asset and you are in business and you can 

dispose of that asset for $250 million, then you could replace something you are borrowing now with the $250 million, couldn't you? Ms. FLEISCHMAN. Yes. Technically, that is right. Mr. THOMAS. Well, why do you say that we owe ourselves and 

there is no value in this asset? 

Ms. FLEISCHMAN. I did not say that there is no value in the 

asset. I said that when you consider the debt-and the interest 

debt, in particular, is a debt that we owe to ourselves, we created 

ourselves. 

Mr. THOMAS. Well, what's the difference between this one and 

any other debt we owe ourselves in the federal government? Ms. FLEISCHMAN. I think, to a certain extent, it would matter as 

to how the debt was created and what the debt was for. 

Mr. THoMAS. It doesn't matter when you go into the market. 

Ms. FLEISCHMAN. I'm not an economist and I'm not-I'm sorry? 

Mr. THOMAS. It doesn't matter when you go into the marketplace and have to finance the federal debt. 

Ms. FLEISCHMAN. Well, I have to tell you, Mr. Thomas, that I am 

not an economist and I am not an expert on the public debt. Perhaps GAO would be better able to answer your question here. 

But, I think that it does make a difference as to how the debt 

was created and what the debt was for. 

Mr. THOMAS. All right. Let me ask Mr. Duffus. You say that it 

doesn't have any impact on the budget. Let's assume for a moment that this is an asset that has value. 

You would agree to that, wouldn't you? 

Mr. DUFFUS. Yes. I agree with that. 

Mr. THOMAS. If you dispose of the asset and replace some money 

we are now borrowing because we owe trillions and could reduce 

the cost that we are now paying for money we don't have, how can 

you say it doesn't in:tpact the budget? Mr. DUFFUS. Well, when we talk about the asset, we need to 

have some understan~ of what we are talking about. The $252 

million or the $300 million of the $1.3 billion would be the asset 

and the other component would be the interest. 

Mr. THoMAS. Yes. 

Mr. DUFFUS. Okay. I would like to ask Mr. Cotton, Mr. Thomas, 

to assist in the response. 
41 

Mr. THOMAS. Okay. 

Mr. CO'ITON. The big difference between this program and other 

types of federal outlays is the fact that the people who are buying 

from the Bureau are other federal agencies. So, if you need a thousand cubic feet of helium and you are appropriated $55 then, in essence, you are paying the Bureau $37.50, which is their operating 

expenses to produce that helium, and then you are taking what is 

left over, which is $17.50, and you are turning it back to the federal government. 

So, in effect, the Congress is appropriating money to, say, NASA 

for its space program which they are giving to the Bureau. The Bureau is taking out its operating costs and returning the rest to--

Mr. THOMAS. But, it would cost more to buy it than if you went 

in the marketplace. 

Mr. CO'ITON. Well, it doesn't, in the fact that the Bureau's operating expenses, which are $37.50 and not $55--

Mr. THOMAS. But, if you didn't have the program you wouldn't 

have any operating expenses. I don't mean to argue with you, but 

the real issue here is whether or not this is a kind of reasonable 

government program. 

Mr. COTTON. Yes. But, let me just make one more point. 

You would not get rid ofNASNs needs for helium. So, you would 

still have to appropriate and expend funds to meet those needs. 

Mr. THOMAS. Sure. Okay. 

Mr. CO'ITON. Right now, you would be paying the private industry $45 for the same thing that you could buy from the Bureau for 

$37.50. 

Mr. THoMAS. Well, that isn't true. You just said it's $55. 

Mr. COTTON. Because the difference between $37.50 and $55--

Mr. THOMAS. Okay. If you used that reasoning, we ought not to 

have any private industry at all. We ought to have a government 

Pl'()gram to provide all the needs of the federal government. 

Would tb.at--

Mr. COTTON. And, that is, in essence, what is happening right 

now, because private industry is meeting private needs and the 

federal government is meeting federal needs. 

Mr. THOMAS. So, we ought to expand that to other needs of the 

federal government. 

Mr. COTTON. It depends upon cost efficiencies, for one thing. 

Mr. THOMAS. It doesn"t for me. It depends on a philosophy. And, 

I don't agree with that philosophy doing this. 

I think this is a program that you take a look at and say, "Is this 

something that needs to be done because it isn't done somewhere 

else? Have times changed in 30 years?" 

Have you ever recommended, Doctor, that the helium program be 

terminated? 

Mr. ENZER. I have not, Mr. Chairman. I am an Acting Director 

right now. 

But, the Bureau of Mines--

Mr. THoMAS. I don't mean you personally. I mean, the agency. 

Mr. ENZER. Well, let me respond this way. We are in the process 

of preparing an options paper for the Department. 
42 

One of the options is what you just mentioned, namely that the 

program be discontinued as a federal program and the helium supplies be provided in the future from the private market. 

Mr. THOMAS. Let me ask. Why would it take 30 years to come 

to that conclusion? 

Mr. ENZER. I don't think it has taken 30 years, Mr. Thomas. 

Mr. THOMAS. ~enty? 

Mr. ENZER. No, no. It hasn't taken 20 years. It's-to follow up 

what Mr. Duffus said, Congress, when it passed the Act in 1960, 

had certain expectations about the future technological development and what amounts of helium might be needed. But, bygones 

are bygones. 

We are sitting here now with helium in this reservoir. And, the 

question is, "How do we handle that in the future?" 

Mr. THoMAS. I understand that. 

Mr. ENZER. And, if you look at it-let me follow up on the calculation. If you look at it, at the costs that might be involved of 

running the program as it is right now or shifting over to having 

private industry supply it, from a fiscal point of view there 

wouldn't be much difference. 

So, then the question would be, "What would the government do 

with the 32 billion cubic feet of helium it has in the storage facility and how do we approach this?" 

Mr. THOMAS. I understand. And, you know, obviously there are 

lots of details. 

But, there is a basic issue involved here, it seems to me. And, 

the basic issue is, is there a need for this government program to 

continue. · And, that's a question you can ask of most any government program and should. There is no discipline in the government to stop anything. There is in the private sector. 

When you don't make a buck, you go out of business. When the 

government doesn't make a buck, it goes on. And, you simply ask 

for more tax money. And, that's really what is the case here. 

Why didn't you charge what it costs to pay the interest on the 

money, the $125? 

Mr. ENZER. As-I do not know, Mr. Thomas, why the past pricing 

decisions were made. Again, the effect-the end effect wouldn't 

have been too different. 

We would have charged $100 per thousand cubic feet instead of 

$35. 

Mr. THOMAS. Right. Mr. ENZER. You would have appropriated $100. We would have 

been able to pay the interest. And, perhaps in retrospect, that is 

what should have--

Mr. THoMAS. Let me tell you something else that would have 

happened. The agencies would have said, ''We don't want to do this 

anymore," because they would have had to pay what it costs for 

you to--

Mr. ENZER. They would have had to pay except to say, Mr. 

Chairman, that for the major uses helium 1s put, the total cost, for 

example, of a space shot is large. And, the amount of helium that 

NASA uses, for example, is a relatively small amount even if it 

were to cost $100. 
43 

But, you are quite right. The agency's customers probably would 

have complained. 

Mr. THOMAS. And, certainly, you know, I am not critical of you. 

I know each of you didn't establish this program. 

But, I am critical of this kind of an operation that just seems to 

go on when things change. I don't mean to pick on it particularly, 

but, it is clearly an example of something that somebody should 

have changed a long time ago. The agency will say, ''Well, Congress 

said this," and I'm sure that Congress will say, ''Well, why didn't 

you tell us," and, you know, all that sort of stuff. 

But, the fact is that you have to have some discipline in it. And, 

the price is normally part of it. 

Thank you, Mr. Chairman. 

Chairman LEHMAN. Thank you very much. And, we will let the 

gentleman from Texas ask questions, if he would like, as well. 

Mr. SARPALIUS. Mr. Thomas, I would like to explain a few things 

on this that might be of interest to you. If this interest was forgiven-and, Mr. Duffus, you can clarify or tell me if I'm wrongthat from that point on, this operation actually makes money for 

the federal government. It's one of the few projects we have that 

makes money for the taxpayers. It makes somewhere from $7 to 

$12 million a year. 

But, the reason you don't show that is because of the interest 

that has been added on to this debt since 1960. We've never been 

responsible on addressing that interest debt. 

It is paperwork within the government. And, we didn't go out 

and borrow money for this. It just accumulated since 1960. 

And, if the debt is forgiven, we would have an operation here 

that employs around 250 people. We are encouraging the private 

sector. We are helping create, you know, hundreds of jobs from that 

perspective. 

It's a good operation. The only problem is the interest that we 

have on that note right now. And, that is what we are trying to 

correct with this legislation. 

Mr. THOMAS. Would the gentleman yield? 

Mr. SARPALIUS. Sure. 

Mr. THOMAS. I understand that. I guess I don't agree with it entirely. 

You know, that money came from somewhere. And, it has been 

an awfully long time since the federal government had $250 million 

they didn't have to borrow to invest in something. So, it's legitimate to have that. 

The other is a philosophical issue. And, that is, you know, why 

should we be doing it in the federal government if you can do it 

outside. 

You are hiring 200 people to do this. There is a plant that they 

don't do the same things in Wyoming where they hire eight. 

I would have a hunch that, you know, there are some differences. 

So, I understand what you are saying, Mr. Sarpalius. 

But, I guess I hate to see us manipulate the financing of it to 

justify the continuation of a program that, at least, arguably 

doesn't need to be there at all. 

Mr. SARPALIUS. I respect your opinion. But, I just feel differently. 
44 

Chairman LEHMAN. Let me ask just a couple of more questions. The IG said, in response to criticism, that the Bureau of Mines was 

not collecting a required $5 surcharge for helium sold to private 

purchasers. And, the Bureau rescinded the requirement to collect 

that fee. 

According to the IG, that fee would have raised $800 thousand 

over two years. Dr. Enzer, how do you justify abandoning that fee? 

Mr. ENZER. Mr. Chairman, the fee was initially established to 

add to the gap that I described before between the private £~~= and the price that we charged to federal agencies. It was some · that we thought we wanted to do. 

We have a Solicitor's opinion that told us that we could not collect that fee even if we wanted to. And, we have recently abandoned charging the fee, because we would like to take· care of it in 

our future pricing policy. 

Once again, the purpose originally was to have a premium, a 

positive premium, between market price and the Bureau of Mines' 

price to discourage purchases by the private sector from the Bureau of Mines. 

And, as I mentioned earlier, our gap right now is $10. And, if 

this program continues, we will have a pricing policy in place to ensure that there always is at least a gap of $5 between market price 

and Bureau price. So, we are doing-we are carrying out the intent of this fee by 

a different mechanism. 

Chairman LEHMAN. Also, is there a royalty collected for helium 

on federal lands? 

Mr. ENZER. Yes, sir, there is. The receipts currently are approxi- mately $5 million or so for royalties received from helium that is 

owned by the federal government. 

Mr. SONNEK. Could I correct that in one way? 

Mr. ENZER. Go ahead. 

Chairman LEHMAN. Certainly. 

Mr. SONNEK. That is not considered a royalty. We entered into 

a contract with Exxon, and that is a fee that we collect from Exxon. 

We do collect a royalty on certain fields where natural gas is 

owned by the government. And, if there is a royalty payment, we 

may get one-eighth of that. 

But, the Exxon contract is a fee, not a royalty. Chairman LEHMAN. Again, what is the difference between a royalty and a fee? 

Mr. SoNNEK. A fee, as far as I am concemed, was something that 

was negotiated with Exxon when we entered into contract with 

them. 

Mr. ENZER. The end effect is the same, Mr. Chairman. There are 

receipts to the federal government from helium that the federal 

government owns. 

And, that amounts to about $5 million annually. The $5 million 

would continue to accrue even if the Bureau's Helium Program 

were to be terminated. 

Chairman LEHMAN. So, even if we closed down the plant in 

Texas, that would continue? 

Mr. ENZER. Yes. 
45 

Chairman LEHMAN. Also, you know, there has been some talk 

and, indeed, one of the bills would sell the federal helium reserves 

here. How much money would that generate? 

Mr. ENZER. I do not know, Mr. Chairman. I just-I have no good 

sense. And, I have not found anybody else who has a good sense. 

But, my best guess is that if it were sold all at once we probably 

would not get much more than 10 cents on a dollar. But, again that 

is just a subjective guess. I do not know. 

If it's sold gradually over time, presumably we would get much 

more. But, we have-as I say, I have not found anybody who knows 

how much money we would get for that. 

One can make some calculations. One can make some assumptions about the future market prices, about the future growth of 

helium demand. 

And, if you wish, we can do some analysis in this area and send 

you some calculations. But, right now I don't have any good sense 

of what we could get for that. 

Chairman LEHMAN. Mr. Duffus" 

Mr. DUFFUS. I would just add that when you talk about selling 

the inventory, another thing to keep in mind is that if you sell it 

too quickly it would most likely put the private crude helium industry out of business. And, if you sold it gradually over time, because 

it is so large, then it would probably have little effect, at least in 

the short term, in reducing the budget deficit. 

They are two other considerations that I think need to be kept 

in mind. 

Chairman LEHMAN. If this were 1960 all over again, or if we 

were establishing how we were going to get helium to federal agencies today that needed it, would you go about it this way? 

Mr. DUFFUS. Would I go about it this way? Well, maybe my colleagues could offer something along those lines. 

Chairman LEHMAN. What I am getting at, is there a national interest served here by having the federal government own--

Mr. DUFFUS. Well, most certainly, when it was created there was 

a national interest to be served. And, as we have pointed out, a lot 

of changes have occurred. And, the objectives of the Act have been 

met. 

And, so if the Congress decides that it wants to continue to meet 

those objectives, then fine. But, the national needs have been met. 

The Bureau has met the agencies' major requirements for helium. They have fostered a private industry. And, they have conserved helium. 

Those were the three objectives of the 1960 Act. They have been 

met. 

So, where do we go from here? We are not recommending where 

you go from here. But, we are saying if you are going to go from 

here to a different place, then you need to realize that there are 

trade-offs, alternatives, impacts and interrelationships among program objectives so that when you do make decisions to go in a different direction you have to keep these in mind. 

Chairman LEHMAN. Thank you. And, let me ask Dr. Enzer one 

other question. 

Industry believes that they can transport helium cheaper than 

the Bureau can. How do you respond to that? 
46 

Mr. ENZER. Would you respond? 

Mr. SONNEK. Private industry provides most of their helium as 

liquid, in liquid, over-the-road semi-trailers. Probably your question 

relates to the fact that a lot of our helium is shipped, particularly 

to the Cape, in railroad tank cars. These are in use because we 

have had these for some 30 or 40 years. 

I am not sure how much cheaper this might be or higher costs. 

But, a study was made. 

We do know that if NASA was to go from our inventory using 

the tank cars that they would have a cost of, oh, $6, $7, $8 million 

to go to equipment that would allow them to use the liquid helium. 

Dale, can you respond to that any further? 

Mr. BIPPUS. The only thing I would add is that we do transport 

our product as a gas. Therefore, we don't incur the additional cost 

of liquefaction. 

But, they are correct in saying that it is cheaper. But, we would 

have had to buy additional containers. So, we stayed with the gas 

system. 

Chairman LEHMAN. Thank you very much. Are there any other 

questions from members of the panel? 

Mr. Thomas? 

Mr. THOMAS. No. 

Chairman LEHMAN. Mr. Sarpalius? 

Mr. SARPALIUS. No, thank you. 

Chairman LEHMAN. I want to thank each of you for excellent testimony today and for all of your cooperation. We appreciate it. 

Is Mr. Cox in the room? Let's bring Congressman Cox out and 

let him make a statement. And, then we will proceed to the industry panel. 

And, we will reserve for members of the Committee the right to 

submit questions and ask you to respond to them if you could. 

Mr. DUFFUS. I would be happy to. 

Chairman LEHMAN. Thank ybu. Congressman Cox, welcome to 

the Committee. We appreciate your being here today. 

And, we will put your entire testimony and anything you have 

accompanying it in the record and allow you to proceed. 

STATEMENT OF HON. CHRISTOPHER COX. A REPRESENTATIVE 

IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. Cox. Thank you very much, Mr. Chairman. Even though I 

have not been present in the room, I have been just beyond the 

wall listening over the speaker system to the testimony thus far. 

And, I have found it fascinating. Some of it I agree with. Other, 

I do not. 

Let me explain why I am here today. I appreciate the opportunity to testify, of course, on the need to reform or preferably to 

eliminate the national helium reserve. 

I've got a letter with me that was written just a few months ago 

by the Director of the Bureau of Mines, T.S. Ary. I would like to 

quote from his letter, because it summarizes my purpose as well. 

"The government should not be competing with the private sector 

in the helium business or in any other area where the private sector is capable of satisfying the country's needs." 
47 

Mr. Ary also pointed out that at the present time an act of Congress requires government agencies who purchase or use helium to 

purchase it from the U.S. Bureau of Mines operations. AB Director 

of the Bureau of Mines, he worked to break the federal govern- ment's monopoly. 

Now, he says in his letter that you might be asking: 

"If the Director of the Bureau of Mines, which operates this 

thing, has made such recommendations, why hasn't something 

been done?" His answer is in his letter. ''The answer is Con@:ess. 

Congress has prohibited the USBM from selling its helium facilities 

and/or reducing the number of personnel who operate them in 

Amarillo, Texas." 

Mr. Chairman, the national helium reserve is a federal program whose time has come and gone. It is the worst kind of governmental anachronism, a program without a clearly identifiable mission, a program that private industry could do more effectively, a 

program that is $1.4 billion in debt and going further into debt 

each year. 

In his book, Parliament of Whores, P.G. O'Rourke said, "The Helium Program is amazingly stupid even by government standards." 

The 39 Republicans and Democrats who have co-sponsored my legislation to privatize the national helium reserve agree. 

AB you know, Mr. Chairman, the federal government has produced helium since 1929 and was virtually the sole domestic supplier until the time of the Helium Act in 1960. The Act established 

the federal helium stockpile in case of a national emergency. 

It requires other federal agencies such as NASA and DOD to 

purchase helium from the Bureau of Mines. Mistakenly believing 

that all known sources of helium in the United States had been 

discovered, Congress in 1960 authorized the Bureau of Mines to 

buy helium from private suppliers. 

No private suppliers ensted at the time. But, the Bureau of 

Mines fully expected them to materialize in response to this new 

market. 

To make sure that they did, the federal government more than 

doubled the price of helium overnight. The Bureau of Mines took 

$100 million of its own capital, borrowed an additional $252 million 

and began to escalate helium production. 

The Bureau was supposed to sell enough helium to private and 

public customers to pay off the money borrowed from the Treasury 

within 25 years. Obviously, Mr. Chairman, this didn't happen. 

Private producers of helium attracted by the higher prices discovered that they could extract and refine helium more efficiently than 

the government. The rapid expansion of private industry's ability 

to produce helium guaranteed that the federal government 

wouldn't be able to recoup its losses from the original loan. Which 

brings us to the present. . AB the Congress determines how best to get the federal government out of its current predicament, several facts bear repeating. 

Under the Helium Act, the original debt of $252 million and accrued interest are to be repaid to the Treasury by 1995 from helium sales. With interest, the national helium reserve is currently 

in debt $1.4 billion and losses amount to an additional $120 million 

from interest each year. 
48 

Now, I listened to the testimony from GAO, which suggested that 

perhaps we might ignore this debt. Dr. Enzer, from the Bureau of 

Mines, said, "Let bygones be bygones." This is a neat trick, if I may 

say so, simply to ipore a $1.4 billion debt. 

Many concerns m America could make money if they could simply ignore their debt and the interest burden that goes with it. But, 

this debt is, in fact, owed to the American taxpayers and it is 

backed up by assets. 

Normally, a borrower who has assets and defaults on its loan is 

required, if the lender is secured, to liquidate those assets in payment of the debt. That's precisely the position that the taxpayers stand in right now. 

The government's helium operations, we are told, might makeCongressman Sarpalius mentioned this-$7 million or so a year. 

Most of that money, the majority of it, comes from royalties paid by private producers on their own production. 

Exxon, for example, pays $4 million of that amount itself. This 

operation isn't making money. It's losing money. Private firms now account for 90 percent of the nation's helium 

sales, which last year totalled over $300 million. This is of enormous significance, the size of this market, because the United 

States itself produces 90 percent of the world's supply. We don't 

need the federal government to do this. 

Mr. Chairman, my bill would repeal the Helium Act of 1960 and, 

thereby, get the federal government out of the helium business altogether. The bill directs the Secretary of the Interior to sell the 

helium production facilities and other equipment acquired by the 

federal government over the years to produce helium. 

It also directs the Secretary to sell, and to use the language of 

the bill, "or otherwise dispose of the helium reserve." But, in order 

to ensure a stable price for helium producers, the transfer to private management will not result in the immediate or even near 

term sale of this helium into the marketplace. The bill explicitly requires the transfer to maintain the orderlx 

conduct of markets. Obviously, selling a nine year world supply all 

at once would not do that. 

Finally, and most importantly, all proceeds of the national helium reserve will go to discharge this debt. And, it may not be allocated for any other purpose. Let me say one final word. The GAO said, in response to your question, Mr. Chairman, that a transaction such as this would 

have no effect on the budget because it's inter-bud~etary. 

I say nonsense. What we are doing is liquidating an asset, acquiring funds from outside the government and paying down debt 

with it. 

Mexico has done this very profitably by privatizing assets. They have privatized their state-owned airlines and banks. They are 

even privatizing wastewater treatment facilities right now. 

And, because they have used the proceeds from sales of assets to 

pay down long-term debt, they have likewise reduced their interest 

carry. As a result, Mexico was this past year able to produce its 

first balanced budget in memory. We could do the same thing by wisely getting rid of our unneeded federal assets and using the 

money to discharge debt. 
49 

That is what this is all about. It has a direct and dramatic impact on our national budget. 

So, I think this is the time for Congress to act. Let's see to it that 

helium extraction floats back to where it belongs, to the private 

sector. Ma>'be we can do something about our federal budget de:fi· 

cit, which ts blimped out. 

Thank you, Mr. Chairman. 

[Prepared statement of Mr. Cox follows:] 
50 

TESTIMONY OF 

'rliB HONORABLE Cl!RJ:S'l'OPDR COX 

BEFORE THB 

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES 

MAY 20, 1993 

ON 

THE FUTURE OF THE NATIONAL HELIUM RESERVE 

Mr. Chairman, and members of the Subcommittee: 

I appreciate the opportunity to testify before the 

Subcommittee today on the need to reform--or, preferably, 

eliminate--the National Helium Reserve. 

Mr. Chairman, the National Helium Reserve is simply a 

federal program whose time has come and gone. It is the worst 

kind of governmental anachronism: a program without a clearly 

identifiable mission, a program that private industry could do 

more effectively, a program that is $1.4 billion in debt and 

going further into debt each year. In his book Parliament of 

~. humorist P.J. O'Rourke said, "The helium program is 

amazingly stupid, even by government standards.• President 

Reagan, President Bush, the National Taxpayers Union, the 
51 

Heritage Foundation, Citizens Against Government Waste, and the 

39 Republicans and Democrats who have sponsored my bill to 

privatize the National Helium Reserve agree. 

As you know, Mr. Chairman, the federal government has 

produced helium since 1929 and was virtually the sole domestic 

supplier until 1960. Mistakenly believing that all known sources 

of helium in the United States had been discovered, Congress in 

1960 authorized the Bureau of Mines to buy helium from private 

suppliers for conservation. The Act established a federal helium 

stockpile in case of a national emergency, and required other 

federal agencies, such as the National Aeronautics and Space 

Administration and the Defense Department, to purchase helium 

from the Bureau of Mines. 

While no private suppliers existed at the time, Mr. 

Chairman, the Bureau of Mines fully expected them to materialize 

in response to this new market. To make sure that they did, the 
52 

federal government more than doubled the price of helium 

overnight. The Bureau of Mines took $100 million of its own 

capital, borrowed an additional $252 million, and began to 

escalate helium production and conservation. The Bureau was 

supposed to sell enough helium to public and private customers to 

pay off the money borrowed from the Treasury within 25 years. 

Put simply, Mr. Chairman, this hasn't happened. Private 

producers of helium, attracted by the higher prices, discovered 

they could extract and refine helium more efficiently than the 

government. The rapid expansion of private industry's ability to 

extract helium guaranteed that the federal government wouldn't be 

able to recoup its losses from the original loan. 

Which brings us to the present, Mr. Chairman. As the 

Congress determines how best to get the federal government out of 

its current predicament, several facts bear repeating: 
o Under the Helium Act of 1960, the original debt of $252 

million and accrued interest are to be repaid to the 

Treasury by 1995 from helium sales. With interest, the 

National Helium Reserve is currently in debt $1.4 

billion, and loses and additional $120 million on 

interest each year. 

o Private firms now account for 90t of the nation's 

helium sales, which last year totaled over $300 

million. 

o The federal stockpile currently contains 35 billion 

cubic feet of helium. At our present rate of use, Mr. 

Chairman, this would last the United States well over 

100 years. 

Mr. Chairman, my bill, H.R. 1552, would repeal the Helium 

Act of 1960, thereby getting the federal government ~ of the 
helium business altogether. The bill directs the Secretary of 

the Interior to sell the helium production facilities and other 

equipment acquired by the federal government over the years to 

produce helium. It directs the Secretary to sell, at the best 

possible terms available to the United States, the actual helium 

reserve. In order to ensure a stable price for helium producers, 

this sale will be conducted at the discretion of the Secretary of 

the Interior and in a manner consistent with the orderly conduct 

of commercial helium markets. Finally, and most importantly, all 

proceeds of the sale of the National Helium Reserve will go 

exclusively to the retirement of federal debt, and may not be 

obligated or expended for any other purpose. 

Mr. Chairman, the National Taxpayers Union has estimated 

that taking these steps will save the taxpayers $1.72 billion. 

Let's return some measure of fiscal sanity to our federal budget, 

Mr. Chairman. The Congress must take steps this year to see to 

it that helium extraction floats back to where it belongs--the 
55 

private sector. 
56 

Chairman LEHMAN. Thank you very much, Mr. Cox. Any ques- tions, Mr. Thomas? 

Mr. THOMAS. No, Mr. Chairman. 

Chairman LEHMAN. We appreciate your testimony. And, we look 

forward to working with you over the next few weeks. We are going 

to pursue this matter. 

Mr. Cox. Thank you very much, Mr. Chairman. 

Chairman LEHMAN. Thank you. We will now have the representatives of the helium industry. 

We have Mr. Carl Johnson, the Chairman of the Helium Advisory Council and the President of the Compressed Gas Association, 

with the people accompanying him. 

STATEMENT OF CARL JOHNSON, CHAIRMAN, HELIUM ADVISORY COUNCU. AND PRESIDENT OF COMPRESSED GAS ASSOCIATION, ACCOMPANIED BY ART FRANCIS AND GARY 

CAESAR OF PRAX AIR; DENNIS FAGERSTONE OF MESA, INC.; 

PHIL KORNBLUTH OF AIRCO GASES; AND BEN REINOELH OF 

AIR PRODUCTS AND CHEMICALS, INC. 

Mr. JOHNSON. Mr. Chairman, thank you. I have with me Art 

Francis of Prax Air, Dennis Fagerstone of Mesa, Incorporated, Phil 

Kornbluth of Airco Gases, and Ben Reinoelh of Air Products and 

Chemicals, Incorporated. 

I am Chairman of the Helium Advisory Council, which is a national organization comprised of the leading companies involved in 

the extraction and refinement of helium and marketing of that to 

the private sector. The HAC operates as a sub-group of the Compressed Gas Association, an organization of more than 220 members who manufacture and distribute gases, cryogenic liquids and 

related.products really throughout the world. 

The HAC was created to serve as a forum for industry views. 

And, we would like to address the privatization issues and the debt 

forgiveness issues. 

We appreciate being invited to this hearing. And, I have a statement that has several charts and descriptive materials attached 

with it. 

Chairman LEHMAN. Without objection, we will include that in the 

record. 

Mr. JOHNSON. Thank you. I will try to summarize my statement. 

But, I want to start out by saying that we believe that the Helium Act was in the national interests and that the expenditures 

were well conceived and executed. Our main concerns relate to the 

fact that the world's richest supply of helium from the Hugoton field of natural gas is being produced and only about 50 percent of 

that helium is being recovered at this point. The other thing that is important to realize is that around the 

first part of the next century, that production is about to fall off. 

And, there will not be enough production of helium from that field 

to supply the demand that is expected as the demand grows. And, as you know, helium is used for many instances for which 

there is no substitute. And, that use is growing. The other factor is that you don't produce helium just to produce 

helium. It is only produced when it is in conjunction with some 
57 

other economically viable produced gas, either carbon-dioxide or 

natural gas. 

The HAC has considered the alternatives that we have been talking about here today and has several recommendations that I 

would like to outline. First, do not sell the helium reserve. 

Because the federal reserve is about 33 billion cubic feet or more 

than nine timet the current world demand for helium, a sale would 

devastate the current helium market and result in the loss of a lot 

of helium that could be claimed from the Hugoton and other fields. 

Point Number 2. The Bureau of Mines should continue to store 

for the future the government-owned crude helium now in the Cliffside field. Maintenance of the federal helium reserve will encourage 

additional private industry investment to recover helium from natural gas now going to the market. And, additional helium conservation will insure our future supply of helium when these currently 

producing helium rich natural gas fields are depleted.· 

Point Number 3. The Bureau of Mines should continue to operate 

the pipeline and storage systems associated with the Cliffside field 

near Amarillo, Texas. The helium pipeline and storage system are 

an integral part of the private helium industry and are essential 

to more than 10 helium extraction/refining facilities which depend 

on these facilities for the transportation and storage of crude helium. Operations of the pipeline and storage system can be made 

financially viable, if they are not now, by establishing proper user 

fees. 

Point Number 4. The U.S. Bureau of Mines should discontinue 

the sale of helium to the private helium market. Federal helium 

pricing policies in the past have frustrated investment in private 

helium recovery and refining facilities and are beginning to do so 

again. 

The 1960 Helium Act provided that the federal helium activity 

be created to conserve helium and to supply federal and other helium needs. The private helium industry is prepared to meet all the 

demand for helium, including the demand for U.S. government 

agencies. 

With the private helium industry now fully capable of satisfying 

the U.S. demand for helium, the HAC believes it is now appropriate for the Bureau of Mines to withdraw from helium production 

and marketing activities, to discontinue its competition with the 

private sector. 

Point Number 5. The recently completed GAO report, Meeting 

Federal Needs for Helium, suggested that government agencies 

would pay a higher price for helium if they were supplied by the 

private industry instead ofthe U.S. Bureau of Mines. The HAC disagrees with this suggestion and contends that the efficiency of the 

private helium industry's helium transportation network would result in savings to the government agencies. 

Point Number 6. The helium debt is an instrument necessary to 

value helium at a level which encourages conservation of this valuable and scarce commodity. If the Bureau of Mines is no longer engaged in the production and marketing of helium, the HAC believes 

that the debt could be forgiven. 
58 

If the Bureau of Mines continues to produce and market helium, 

some market pricing mechanism must be established before the helium debt is forgiven. 

In conclusion, the Helium Advisory Council believes that there is 

a federal role in managing the helium reserve but that the Bureau 

of Mines should no longer participate in the production and sale of 

helium. 

Former Representative John Rhodes of Arizona stated, as a part of the record when the Helium Act was debated in 1960, "The fact 

that helium is of vital importance to the national defense justifies 

a conservation program, but it does not justify an exclusive government operation of the whole helium industry. Private enterprise is 

just as capable of supplying helium to the government for defense 

needs as 1t is any other commodity. Private enterprise is equally capable of providing helium for the expanding non-military market. 

And, I see no reason why it should not do so. From what I am able 

to learn, there are adequate sources of helium available to supply both military and non-military requirements. If the same kind of 

thinking were used in the :production of oil, the federal government would own the nation's entire oil industry." 

We are looking forward to working with you and the Committee 

to address the concerns raised by this hearing. We have also met 

with Representative Sarpalius and Representative Inglis and others who have introduced legislation affecting the U.S. helium interests. 

From those meetings, we believe that there is a desire to work 

together to find a solution to these problems and concerns. Compromise does not come easily, but we are optimistic that we can 

work with these proposals and that we can develop a solution that 

will satisfy these concerns. 

Thank you. [Prepared statement of Mr. Johnson and related documents follow:] 
59 

IIELwM ADVISOilY COVNCIL 

BI:JORE'I'HE 

HOUSE NATURALREsomlCES COMMI'ITEI!: 

SVBCOMMlTI'EE ON 

ENERGY AND MINi:RAL REsoURCES 

MAYZ0,1993 
HAC Testimony 

MaylO, 1993 

60 

Pagel 

Mr. Chainnan, my name is Carl Johnson. I am Chairman of the Helium Advisory Council (HAC) 

which is a national organization comprised of many of the leading companies engaged in the 

helium business, including the production, extraction, refining, marketing and distribution sectors 

of the industry. HAC operates as a sub-group of the Compressed Gas Association, an 

organization of more than 220 member companies whn manufacture, distnbute, supply and 

transport gases, cryogenic liquids and related products around the world. Created to serve as a 

forum for industry views, HAC has worked to develop a constructive response to proposals to 

privatize aspects of the helium operations administered by Bureau of Mines. 

Thank you for inviting us to speak at this hearing. 

Helium is a unique material with properties that make it essential to a growing number of critical 

uses in medicine, high tech manufacturing, space exploration and research. For most of these 

uses, there is no substitute for helium. The U. S. consumption of helium is about 700/o ofthe 

world consumption. (See charts I & 2.) 

The U.S. produces about 900/o of the world's helium supply. Helium is found in association with 

natural gas. However, not all natural gas contains helium. The principal helium sources at 

present are the Hugoton and Panhandle fields in the mid-continent region of the United States. 

(See chart 3.) 

World demand for helium has grown at a compounded annual rate of more than 9% since 1972 

and is expected to continue to grow for the foreseeable future. (See chart 4.) At the same time, 

the world's richest helium source, natural gas from the Hugoton and Panhandle fields, is being 

depleted so that in the very early part of the next century, the helium produced from these fields 

will no longer be able to keep up with the demand. (See chart 5.) 

Recently, several proposals have been ~de to require the Federal Government to sell the Federal 

Helium Reserve and associated equipment as a part of deficit reduction. Legislation has been 

introduced in the House of'Representatives requiring the sale of all federal helium assets. At the 

same time, others are advocating forgiveness of the debt created in establishing the Federal 

Helium Reserve. 

The HAC has considered these alternatives and offers the following recommendations and 

conunents: 

I. Do not seU the Federal Helium Reserve. Because the Federal Helium Reserve is about 33 

BCF, or more than 9 times the current annual world demand for helium, a sale of the 

Helium Reserve could devastate the current helium market. Proceeds from the sale of the 

Federal Helium Reserve will result in recovering only a fraction of the present market 

value of the helium. If the reserves are sold, extraction of helium from natural gas 

currently being produced will cease, and further investment in helium recovery will not 

happen. A!l a result, significant supplies of economically recoverable helium will be 

forever lost as the natural gas from these helium rich fields is produced. 
HAC Testimony 

May 20,1993 

61 

Pagel 

2. The U.S. Bureau ofMines should continue to store for the future the government-owned 

crude helium now in the Cliffside Field. Maintenance of the Federal Helium Reserve will 

encourage additional private industry investment to recover helium from natural gas now 

going to market. Additional helium conservation will insure our future supply of helium 

when these currently producing helium-bearing natural gas sources are depleted. 

3. The U.S. Bureau ofMines should continue to operate the pipeline and storage systems 

associated with the Cliffside Field near Amarillo, Texas. The helium pipeline and storage 

system are an integral part of the private helium industry and are essential to more than ten 

helium extraction/refining facilities which depend on these facilities for transportation and 

storage of crude helium. Operations of the pipeline and storage system can be made 

financially viable by establishing appropriate user fees. 

4. The U.S. Bureau ofMines should discontinue the sale of helium into the private helium 

market. Federal helium pricing policies in the past have frustrated investment in private 

helium recovery/refining facilities and are doing so again. The 1960 Helium Act provided 

that the Federal Helium Activity be created to conserve helium and to supply federal and 

other helium needs. The private helium industry is prepared to meet all of the demand for 

helium, including the demand from the U.S. government agencies. With the private 

helium industry now fully capable of satisfYing the U.S. demand for helium, the HAC 

believes it is now appropriate for the Bureau of Mines to withdraw from helium 

production and marketing activities to discontinue its competition with the private sector. 

5. The recently completed GAO report, "Meeting Federal Needs for Helium," suggested that 

government agencies would pay a higher price for helium if they were supplied by private 

industry instead of the U.S. Bureau ofMines. The HAC disagrees with this suggestion 

and contends that the efficiency of the private helium industry's helium transportation 

network would result in savings to the government agencies. 

6. The helium debt is an instrument necessary to value federal helium at a level which 

encourages conservation of this valuable and scarce commodity. If the Bureau of Mines is 

no longer engaged in production and marketing helium, the HAC believes the debt can be 

forgiven. If the Bureau of Mines continues producing and marketing helium, some market 

pricing mechanism must be established before the helium debt is forgiven. 

In conclusion, the Helium Advisory Council believes that there is a federal role in managing the 

helium reserve, but that Bureau of Mines should no longer participate in the production and sale 

of helium. Former representative John Rhodes (R-AZ) said, as part of the official record when 

the Helium Act was debated in 1960: 

"The fact that helium is of vital importance to the national defense justifies a 

conservation program, but it does not justify an exclusive Government operation 

of the whole helium industry. Private enterprise is just as capable of supplying 

helium to the Government for defense needs as it is any other commodity. Private 

enterprise is equally capable of providing helium for the expanding non-military 
HAC Testimony 

May20, 1993 

62 

Page4 

market, and I see no reason why it should not do so. From what I am able to 

learn, there are adequate sources of helium available to supply both military and 

non-military requirements. If the same kind of thinking were used in the 

production of oil, the Federal Government would own the nation's entire oil 

industry.• 

We look forward to working with you to assure a sound policy for managing this critical and 

scarce resource so that future generations wiD also have the necessary helium to satisfy their 

needs. 
Lll1U{'!' 1 

HELIUM APPLICATIONS 

MARKET USE 

DIVING 

He I 02 MIXTURE 

INDUSTRIAL 

CHROMATOGRAPHY 

LIFTING GAS 

PRESSURIZING & PURGING 

LEAK DETECTION 

PROTECTIVE ATMOSPHERE 

WELDING 

METALS REFINING 

RESEARCH 

SUPERCONDUCTIVITY 

HIGH TECHNOLOGY 

COMPUTERS 

FIBER OPTICS 

LASERS 

MAGNETIC RESONANCE IMAGING 

MAGNETIC SEPARATION 

SPACE PROGRAM 

NUCLEAR 

HEAT TRANSFER MEDIUM 

PRESSURE 

PROPERT

INERTNESS I LO

INERTNESS 

LOW DENSITY 

INERTNESS 

SMALL MOLEC

INERTNESS 

INERTNESS 

INERTNESS 

LOW BOILING 

LOW BOILING 

INERTNESS 

THERMAL CON

LOW BOILING 

LOW BOILING 

INERTNESS 

THERMAL CON

INERTNESS 
CIJART 2 

1990 u.s. HELIUM M

RESEARCH & SUPERCONDUCTIVITY 

MAGNETIC RESONANCE IMAGING 

WELDING 

CONTROLLED ATMOSPHERE 

CHROMATOGRAPHY 

LEAK DETECTION 

LIFTING GAS 

BREATHING ATMOSPHERE 

U.S. FEDERAL GOVERNMENT 

TOTAL U.S. MARKET 

TOTAL WORLDWIDE 

U.S. CONSUMPTION 
CHART 3 

U. S. BUREAU OF MINES, PRIVATE IN

CONSERVATION PROGRAM HELIUM P

I J ... J I 

G 

·.IW. ····. · .. •LABARGE (EXXON) 

=-

l I ' 

'{jfJ'' 

UTAH 

41 

MOAB (UNOCAL) 

REDROCK4i 

(SHUTDOWN) 

NAVAJO A 

(SHUTDOWN) 

COLORADO 

SUNFLOWER (KN I=Ni:Rr.v• 

JA YHA WK (TRIDENT) 

SAT ANT 

GREENWOOD 

DUMAS lt'I11LL1t":> 

CLIFFSIDE STORAGE FIELD 

ARIZONA I NEW MEXICO AMARILLO 
CJIART 4 

TOTAL WORLDWIDE HEL

1972 - 1992 

c: 3 

<( 

w 

LL> 

oc: 

w (/) a. 2 

ziOw 

::iw 

-ILL 

002 1 

m 

::» 

0 

0 

,~--~-~-----f] 

~AGR 9.3% 

72 74 76 78 80 82 84 

MAY 1993 
CHART 5 

SUPPLY AND DEMAND FO

IIELIUM FROM TilE MID-CO

6,000 .-----------------

~ 4,000 

~f ~ ~3.000 z::ii 

~; au. 

oo 

g: 2,000 

1,000 

.:::==~~~-~---~=~

-------------------------------------------

QLL~--L-J--L --L-~~_L_J_L_~-

1991 1993 1995 1997 1999 2001 2003 

1992 1994 1996 1998 2000 2002 

SOURCE: U.S. BU
68 

1725JEFFERSONDAVlSHWY. • ARUNGTON,VA222Q2-4102 • (703)412-{)900 • FAX(703)412-0128 

November21,1988 

HELIUM ADVISORY COUNCIL 

POSITION STATEMENT 

1. Oplimum use of helium for the benefit of society requires continued participation of both 

· government and private industry. Efficient routine supply to users should he the primary 

role of industry, while asslll1UlCC of continued availability in an emergency should be the 

primary role of govcmmcnt. 

2. Government owned crude helium sbould be provided to industry as required to salisfy 

emergency needs. The government's price of crude helium in an ~ situation 

should be high enough to provide industry with an incentive to extract helium from 

current natural gas prodUCiion and_ to develop new helium sources while low enough to 

provide an economic reserve of crude helhun. The Department of the Interior should 

develop a crude helium pricing mechanism which will generate prices consistent with 

these objectives. 

3. The Bureau of Mines pipeline is a key component of the opetalions of the helium 

producer/marketers and is an essential part of the helium storage system. The 

govcmmcnt sbould ensure nondiscrlminato and cqualat(:Css to the system. 

4. The Bureau of Mines opetational plans should hold in reserve a significant portion of its 

plant and transport equipment capacity to meet peak requirements, interruptions in 

normal supply sources, and other short term emergencies. Government pricing for 

refined bellum and related services abould be adjusted at leut annually by an appropriate 

mechanism whkh is able to approximate me IIIIUbt value. 

S. The Bureau of Mines abould contioue to monitor bellum sources and continue as a "clearing bouse" of information. 

6. The requirement that federal agencies purchase refined helium front the Secretary of 

Interior should be discontinued. After an appropriate transition period, private industry 

will be fully capable of satisfying all federal agency needs. 
69 

1725JEFFERSONOAVISHWY. • AAUNGTON,VA22202-4102 • (703)412-0900 • FAX(703)412-0128 

Helium Advisory Council 

Membership 

Air Products and Chemicals, Inc. 

AIRCOGases 

Exxon 

Mesa, Inc. 

MG Industries 

Panhandle Eastern 

Praxair, Inc. 
70 

Chairman LEHMAN. Thank you very much. I appreciate that very good testimony. 

And, let me just say-I was just talking to Mr. Thomas here as 

well-after hearing the testimony this morning, I don't really buy, 

at least at this stage and based on what I have heard, the argument that there is an impact here on the federal debt. 

I think GAO is right. We are just moving the peanut shells 

around. 

But, I am concerned about the policy questions here, whether or 

not the federal government has any business at this point in time 

being in this business. And, I would just like to pursue some facets 

of that with you. 

Could the federal government exit itself here without seriously disrupting the industry? 

Mr. JOHNSON. We believe it could, provided that the helium reserve was not part of that disposal program. Chairman LEHMAN. And, could you elaborate on that, what you 

mean by that? 

Mr. JOHNSON. Well, perhaps one of the industry experts might be better suited to that. 

Chairman LEHMAN. I take it what you mean is if we start dumping our helium out there, it will have an adverse impact. But, I 

would like to have that for the record. 

Mr. JoHNSON. That's correct. Dennis, would you like to take 

that? 

Mr. FAGERSTONE. Yes. I will address that question, Mr. Chairman. 

We, at Mesa, have recently entered into the extraction of crude 

helium from the Hugoton Panhandle fields. And, part of what has 

driven our investment and entry into the business has been the expanded demand and improved prices. And, as I say, we have just started within the last couple of 

months producing crude helium from our gas in the West Panhandle field. And, if the crude helium reserve were sold and prices for both refined and crude helium dropped as a result of that glut 

on the market, it would basically invalidate our in,vestment and 

certainly discourage us from any further production or further participation in the business. 

Chairman LEHMAN. In effect here, we have a Helium Program where we are keeping the market where it is by not letting in all 

of those resources out there. 

Mr. JOHNSON. Mr. Chairman, Mr. Phil Kornbluth of Airco Gases 

would like to respond to that, too. 

Chairman LEHMAN. Fine. 

Mr. KORNBLUTH. I think we would like to draw a parallel to the 

sort of strategic reserve of oil, for instance. I mean, we do think it's 

an appropriate activity for the government to maintain a strategic 

reserve. In the case of helium, the pipeline and storage system is 

an integral part of the strategic reserve. 

But, we don't think that production and marketing are appropriate activities for the Bureau of Mines. 

Chairman LEHMAN. And, how would you-maybe somebody could 

answer this for me. How would you compare the costs for the production of helium in private versus public? 
71 

Mr. JOHNSON. Ben, do you want to answer that one? 

Mr. REINOELH. Yes, sir. 

Chairman LEHMAN. I mean, do you argue that in the private sector you can produce it cheaper? 

Mr. REINOELH. Yes, we can. I think you've got to put in perspec- tive the fact that we are producing liquid versus gas. And, there 

is an incremental higher cost to produce liquid. 

But, overall, as an example, at a plant that is equivalent to the 

size of the Exell plant, we are producing 450 million cubic foot a 

year with 14 people as liquid at a cost that is less than $37.50. 

And, the Exell plant is producing approximately 300 to 400 million 

with many, many more people. I don't know the exact number, but 

it's probably somewhere around 60 to 70. 

Mr. FRANCIS. I would like to add a little to that. There is an inherent difference between the Bureau of Mines' helium activity and 

the activities of all of the private industry. 

We are primarily producers of other products. Helium is a very 

small part of our total operations. We produce oxygen, nitrogen, hydrogen and other gases. 

And, the natural gas part of the industry that extracts helium 

produces propane, butane, ethylene and other valuable products 

out of their natural gas liquids extraction plants. 

These operations, which are ahundred times larger than the helium operations that are associated with them, produce the technical advantages and operational advantages that make private 

production, extraction, purification, liquefaction, transport and distribution of helium by the private industry inherently less expensive than the Bureau of Mines' helium activity, because it is a oneproduct, one, little industry that is not associated with anything 

else that gives it any technical advantage. 

We can do anything that the Bureau does. And, we can do it 

cheaper because of the fact that we get synergism from the other 

products that the industry also ha,ndles. 

Thank you. 

Chairman LEHMAN. Thank you. Let me yield briefly to Mr. 

Thomas, who is going to have to leave. 

Mr. THOMAS. Thank you, Mr. Chairman. Let me say, first, I appreciate you having this hearing. It's a subject that we need to talk 

about. 

And, I understand what you are saying about dumping all of this 

on the market and what it would do there. So, it seems to me that 

we need to find a way to handle it appropriately, if we can. 

I guess I would some time like to talk to you a little more about 

the pipeline and so on. That may be a responsibility you all have 

to take on. 

After all, you do that in the rest of the industry. And, there is 

no particular reason why you need to depend on that facility here 

as far as I know. Maybe there is. 

In any event, thank you, Mr. Chairman. And, I would like to pursue it with you further. 

Thank you. 

Chairman LEHMAN. We will. And, I have a few more questions. 

Did you want to respond to Mr. Thomas? 
72 

Mr. JOHNSON. I want to say that we would very much like to 

meet with you and talk with you about it, Mr. Thomas. 

Mr. THOMAS. Fine. 

Chairman LEHMAN. Mr. Johnson, why don't you also, for the 

record, describe the helium industry and how many companies are 

involved and what kind of revenues does it generate? 

Mr. JOHNSON. I think that I would prefer someone else to answer 

that on the panel, since I am notChairman LEHMAN. Sure. We just want the answer. 

Mr. JOHNSON [continuing]. In the industry. Who would feel best 

to respond? 

Do you want to respond to that, Ben? 

Mr. REINOELH. The total helium industry is a world-wide industry. And, the majority of the product, about 95 percent, comes from 

the United States through the year 1992. - It's a small industry, as you compare it to industrial gases. It's 

approximately maybe 500 million world-wide. In the U.S., it would 

be two-thirds of that, roughly and approximately 300 million. 

Chairman LEHMAN. Does the United States export helium? 

Mr. REINOELH. The United States has been the source of all the 

world's helium until very recently. And, through 1992, the growth 

rate has been a little over nine percent and it has Just about all 

come from the United States except for a small plant m Poland. 

Chairman LEHMAN. Is helium cheaper here than in foreign countries? 

Mr. REINOELH. Helium in foreign countries is higher priced simply because there is a distribution cost to get it there. 

Chairman LEHMAN. Sure. 

Mr. REINOELH. It is being moved as liquid. It is approximately 

40 _percent higher. Chairman LEHMAN. Now, NASA is a major user of helium. And, 

there has been some indication that periodically NASA needs vast 

amounts of the gas and there is a question as to whether or not 

that would be readily available in the private sector. 

How would you address that? 

Mr. REINOELH. The statement was made earlier, and the comparison was made, about cost to NASA. The question, the first 

J>art, is that we are comparing gas to liquid. The Bureau has gas. 

We move liquid. There is no question in my mind that private industry can handle NASA more efficiently at the Cape than the Bureau. And, let 

me just cite why. It's about 3, 780 miles down to the Cape. Take it by rail, the ap- proximate cost is just slightly under $6 thousand per shipment. That would equate to about $21 a thousand to move the gas that 

you are pricing at the Bureau at $55, about $20 to move it down 

there. That would give you about $75. 

Now, if the wholesale price for liquid, as they have quoted, is $45 

for the private sector, moving it as liquid to Cape Kennedy would 

cost about $6. And, it could be moved much more efficiently. As far as the different investments, a delta investment that was 

also stat1b ~tust don't believe that that investment would be needed. So, I · we can serve any government requirement as efficiently and at a competitive price--
73 

Chairman LEHMAN. And, in the volume necessary? Mr. R.EINOELH. Pardon me, sir? 

Chairman LEHMAN. And, in the volume necessary? 

Mr. REINOELH. And, in the volume necessary. 

Chairman LEHMAN. Okay. Then, to get back to--

Mr. REINOELH. And, as reliable, too. 

Chairman LEHMAN. Okay. I asked earlier the differential on 

transportation costs, because I know you say that you can do it 

cheaper. You heard the response. 

Mr. REINOELH. It's about $14 a thousand difference, I think, 

roughly. 

Chairman LEHMAN. And, that includes the cost that you have to 

li uify it? 1\fr. REINOELH. Well, I assume, in the $45 the cost would be in 

for liquefaction, yes, sir. 

Chairman LEHMAN. If-how much of the helium do you think we 

could sell at today's prices? 

Mr. JOHNSON. Of the reserve? 

Chairman LEHMAN. RiJlht. 

Mr. KORNBLUTH. Our ieeling is that at most perhaps one BCF or 

at most two BCF out of the 32 or 33 BCF in storage. That represents less than five percent of the total reserve. 

You know, the problem in selling the reserve is that all of the 

companies currently involved in helium refining have long-term contractually guaranteed sources of supply. So, we don't need it. 

So, if we were to buy it or if any of the companies sitting here 

were to buy it, we would just be storing it for future-you know, 

long-term in the future needs. We really have no economic reason 

to do that. 

The only folks who might buy it would be potential new entrants 

to the business. I might want to point out that those folks tend to 

be foreign companies. 

So, we would end up selling the national reserve of helium to the 

Japanese or somebody. 

Mr. JOHNSON. Mr. Chairman, Gary Caesar, if I may, I would ask 

if he could res_pond to that, too. 

Chairman LEHMAN. Certainly. Would you state your name for 

the record so we can get it here and your title? 

Mr. CAESAR. Gary Caesar, with Prax Air, Incorporated. Mr. 

Chairman, our main concem with the potential sale of the helium 

reserves is one more of conservation than an~ else. 

One of the attachments to the testimony that we have submitted 

is a chart which depicts the decline of available helium from what 

we call the mid-continent part of the United States where the Bureau of Mines' operation and pipeline system is located and where 

the 10 current extraction facilities are today. 

With the potential sale of the Bureau's or the United States' helium reserves, what we envision is the displacement of those reserves and the use of those reserves to supply current market demand. While in the meantime, natural gas production will continue 

and the gas reserves of the fields in the nud-continent will deplete such that around the year 2000 or 2005 there may be the potential 

that when we have depleted the theoretical recoverable reserves 

from the Cliffside storage field operated by the Bureau of Mines 
74 

that there will be insufficient helium from the balance of the midcontinent gas supplies to supply the entire industry including the 

United States' demand. 

It is our position that we recommend the conservation of helium 

by stopping the current depletion of the Cliffside reserves in supplying federal requirements and maintain them for future genera- tions' use beyond the year 2000 which, in effect, will also then 

allow us to build more extraction facilities to recover the helium 

which currently is not being extracted from natural gas which is 

flowing out of the mid-continent reserve. The chart depicts that 

nearly 50 percent of all the natural gas produced in that area of 

the country is not having its helium extracted. 

In today's situation where the Bureau of Mines provides a viable 

economic alternative to supply, we have a very difficult time investing new capital in extraction of that gas. And, in effect, what we 

envision is the loss of that helium for future generations. So, it's our contention and our recommendation that while the reserves have value today, they will be best served for the public in 

the future and should be held and maintained at some fashion by the U.S. government. 

Mr. FRANCis. I would like to add to that a little bit, if I could. 

Chairman LEHMAN. Certainly. Proceed. 

Mr. FRANCIS. Of all the helium ever discovered in the United 

States, all of the economically extractable helium, it's above threetenths of a percent, two-thirds of it is gone. It's gone because the 

helium was associated with fuel gas and the fuel gas was produced for fuel use. 

Out of that, 80 percent of that helium that was contained was 

lost to no good purpose. Eleven percent has been used by human 

beings for good and sufficient reasons, producing goods and services 

that people enjoy. The other nine percent represents the amount 

that is in storage today. The whole point here is that helium being a byproduct, you cannot control its future use by simply allowing it to be used as people need it, because the helium is going to be gone because people need 

something else, which is the fuel gas. And, the strategy for a reasonable society is to attempt to hold as much helium in the ground in connection with reserves that do not need to be produced for any 

other purpose and use for current needs those gases that are going 

to be produced for their fuel content. And, that's exactly what we 

are asking for. 

The helium that is in storage in Cliffside does not have to be 

used for anything but its helium content. It is not associated with 

fuel gas that is going to be produced to meet fuel users' needs. 

Mr. KORNBLUTH. Just one other comment, if I may, briefly clarify 

a statement I made previously. Chairman LEHMAN. Sure. 

Mr. KoRNBLUTH. When I stated that one or perha:ps two BCF of 

the reserve could be sold, I specifically was refernng to sold at 

market-at or near market prices. The entire reserve could be sold, 

clearly, but it would almost have to be given away to find a home 

for it because it would have to be stored in inventory for such a 

long period of time that our estimate is that perhaps five cents on 

the dollar could be realized, maybe 10 cents at most. 
75 

Chairman LEHMAN. Okay. Let me ask you. What is the market 

value at today's prices of that helium that the federal government 

has in Texas? 

Mr. KORNBLUTH. Just to peg a round number on it, you might 

say something like $25 per MCF, perhaps $30 on the high side. 

But, that's a-the point was made earlier that there is no spot 

market for crude helium. 

This is crude helium, by the way, that I am referring to. The helium that the government has is crude helium. That's the relevant 

pricing. 

Chairman LEHMAN. And, that was at spot, about $600 million? 

Mr. KORNBLUTH. I think at market, what is $25 times 30 BCF? 

Yeah, $750 million. There is no way the government could realize 

a number resembling that by selling it or dumping it essentially. 

It would be, you know, 5 or 10 cents on the dollar. 

Chairman LEHMAN. But, you could let it out on to the market 

gradually. 

Mr. KORNBLUTH. The only possible way to let it to the market 

would be very gradually. 

Chairman LEHMAN. Go ahead, Mr. Reinoelh. 

Mr. REINOELH. Mr. Chairman, I just want to make one other 

point. There is certainly a question of jobs here. 

And, since 1991, I've made some calculations of what private industry has done. Basically, we have put over $200 million in this 

business of refining and recovering helium. 

We have added approximately 104 jobs. That does not include 

the distribution jobs. The product is moved from that area of the 

country where the demand is very light to the east coast, the west 

coast or around the world with sleeper teams. That is probably another 50 people. 

So, we have added jobs. And, we have added investment. And, 

I understand that there are jobs at stake in Amarillo and would 

sympathize with that position. 

But, we really believe that the conservation of helium now is important; and, secondly, that private industry is ready to step in and 

put more investment as the growth of helium continues. And, I 

think it will. 

Chairman LEHMAN. I want to thank you very much. I appreciate 

your testimony. 

It has been excellent. And, I look forward to working with you 

over the next few weeks as we move forward here. 

Thank you. And, the hearing is adjourned. 

[The hearing is adjourned at 11:43 a.m., Thursday, May 20, 

1993.] 

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