Helium is an inert element that occurs naturally in gaseous form and has a variety of uses because of its unique physical and chemical characteristics.point of any element, and, as the second lightest element, gaseous For example, helium has the lowest melting and boiling helium is much lighter than air. Certain natural gas fields contain a relatively large amount of naturally occurring helium, which can be recovered as a secondary product. The helium is separated from the natural gas and stored in a concentrated form that is referred to as crude helium because it has yet to go through the final refining process. The federal helium program is currently managed by Interior’s BLM. As of September 30, 2013, there were about 10.84 billion cubic feet of crude helium in storage—roughly 9 billion cubic feet owned by the government, and the rest is owned by private companies. After private companies— refiners or nonrefiners—purchase helium from BLM and pay for it, the official ownership of the helium is transferred from BLM to the company on the first day of the month after payment is received, and it becomes part of the privately owned inventory in storage. BLM stores and then delivers the privately owned helium through the pipeline to refiners in accordance with the storage contracts between BLM and the private companies. As of July 1, 2014, BLM held storage contracts with 10 companies: 4 refiners, 4 nonrefiners, and 2 companies that do not store helium in the reserve but are connected to the pipeline in order to transport helium from private natural gas fields to the 4 refiners also connected to the pipeline. According to a U.S. Geological Survey report, in 2013, helium produced from the reserve represented about 40 percent of the total estimated production of helium in the United States and about 30 percent of the total estimated production worldwide. The Helium Stewardship Act of 2013 significantly changed the federal helium program. For example, the act: Establishes four phases for the sale and auction of crude helium from, and eventual closure of, the reserve—Phase A: allocation transition; Phase B: auction implementation; Phase C: continued access for federal users; and Phase D: disposal of assets. Phase D is to be completed no later than September 30, 2021. 50 U.S.C. §§ 167d(a)-(d). Establishes a minimum quantity of crude helium that BLM is required to offer for sale or auction each fiscal year in Phases A, B, and C. Specifically, the amount of crude helium to be offered must be the lesser of (1) the quantity of crude helium offered for sale by the Secretary of the Interior during fiscal year 2012 or (2) the maximum total production capacity of the federal helium system, which includes the pipeline. 50 U.S.C. § 167d(f). We refer to this as the act’s minimum quantity requirement. Requires BLM to annually establish, as applicable, separate sale and minimum auction prices for Phase A and Phase B using, if applicable, and in the following order of priority: (1) the sale price of crude helium in BLM auctions; (2) price recommendations and disaggregated data from a qualified, independent third party who has no conflict of interest and conducted a confidential survey of qualifying domestic helium transactions; (3) the volume-weighted average price of all crude helium and pure helium purchased, sold, or processed by persons in all qualifying domestic helium transactions; or (4) the volume- weighted average cost of converting gaseous crude helium into pure helium. 50 U.S.C. § 167d(b)(7). We refer to this as the act’s price- setting provision. Requires BLM to require all persons that have storage contracts with BLM for privately owned helium in the reserve to disclose, on a strictly confidential basis, (1) the volumes and associated prices of all crude and pure helium purchased, sold, or processed by persons in qualifying domestic helium transactions; (2) the volumes and associated costs of converting crude helium into pure helium; and (3) refinery capacity and future capacity estimates. 50 U.S.C. § 167d(b)(8)(A). We refer to this as the act’s disclosure requirement. Establishes a condition for Phase A sales and Phase B sales and auctions to refiners. Specifically, as a condition of sale or auction to a refiner under Phase A sales and Phase B, the refiner must make excess refining capacity of helium available at commercially reasonable rates to persons who acquire helium from BLM after the act’s enactment. 50 U.S.C. § 167d(b)(8)(B). According to the act’s legislative history, this condition was intended to maximize participation in helium sales. The act does not define excess refining capacity or commercially reasonable rates. We refer to this condition as the act’s tolling provision. Since the Helium Stewardship Act of 2013 was enacted in October 2013, BLM has taken a number of actions to begin implementing the act, including (1) estimating volumes of helium that can be produced from the reserve each fiscal year, (2) preparing for and conducting Phase A helium sales, and (3) initiating planning for Phase B sales and auctions. Before BLM could determine how much helium it would sell or auction in each phase, the agency first estimated the volumes of crude helium that can be produced from storage in the reserve. As helium is produced, and the amounts remaining in storage continue to decrease, the helium becomes increasingly difficult to extract. Because of this dynamic, BLM used a geologic model to identify the most efficient way to produce the remaining helium from storage. Table 1 shows the results of BLM’s modeling efforts with the estimated amounts expected to be produced from the reserve by fiscal year, reflecting the reduced volumes that BLM expects will be produced over time. In comparison, BLM offered 2,100 million cubic feet of crude helium for sale in each of fiscal years 2012 and 2013, the same amount it had offered for sale annually since fiscal year 2004. BLM has taken a number of actions to implement multiple provisions of the act regarding Phase A (see fig. 1). The act requires BLM to offer crude helium for sale in Phase A in such quantities and under such terms as BLM determines necessary to carry out Phase A with minimum market disruption, in addition to meeting the act’s minimum quantity requirement. Under Phase A, BLM prepared for and conducted sales by determining sales volumes, setting the sale price, and implementing the act’s disclosure requirement, among other things. BLM offered for sale a total of 610 million cubic feet of helium in two different Phase A sales—one in January 2014 and one in May 2014. BLM officials said that they did not hold the first Phase A sale until January 2014 because they needed time to interpret the new act and develop the fiscal year 2014 sale price. In the first quarter of fiscal year 2014, BLM continued delivering helium to the refiners from their private storage balances. According to BLM officials, they considered limiting the total Phase A sales to the 400 million cubic feet sold in January 2014 so they could deliver more privately stored helium. However, these officials said that after receiving comments requesting that BLM sell additional helium, and after considering the act’s minimum quantity requirement, they decided to offer for sale an additional 210 million cubic feet of helium in May 2014. In the two Phase A sales, four nonrefiners purchased a total of 61 million cubic feet of crude helium, and refiners purchased the remainder. By offering 610 million cubic feet for sale in fiscal year 2014, BLM did not offer for sale the full volume of crude helium that BLM’s model estimated would be produced in fiscal year 2014. This estimated volume, approximately 1.5 billion cubic feet, is less than the volume of crude helium offered for sale in fiscal year 2012 (2.1 billion cubic feet). Under the act’s minimum quantity requirement, BLM must offer for sale or auction in fiscal year 2014 the lesser of the “maximum total production capacity of the federal helium system” or the amount of helium offered for sale in fiscal year 2012. BLM officials told us they interpreted the “maximum total production capacity of the federal helium system” not as the full volume estimated by the model to be produced from the reserve this fiscal year, but rather as an amount equal to the production capacity of the reserve after (1) meeting federal users’ needs, (2) delivering a percentage of privately owned helium stored in the reserve to refiners for processing, and (3) holding back a contingency amount for possible production problems (see fig. 2). These officials said this interpretation helps ensure that the agency can deliver the volumes of privately owned helium that remain in storage before the end of fiscal year 2021. Some refiners, however, submitted comments to BLM stating that they disagree with the agency’s interpretation of the act’s minimum quantity requirement. They said that the “maximum total production capacity of the federal helium system” is the amount equal to the full volume of helium that is estimated to be produced from the reserve for the year, minus an amount for federal users. BLM set the price for the two Phase A helium sales at $95 per thousand cubic feet—an $11 increase over the fiscal year 2013 price—in December 2013. The fiscal year 2014 price increase resulted from a November 2012 recommendation from Interior’s Office of Inspector General that BLM implement a new helium pricing process by the end of 2013 to ensure a fair return on the sale of helium. In response, BLM worked with Interior’s Office of Minerals Evaluation to contract for a study on helium prices. The study was completed on October 15, 2013. The price increase was based largely on the results of this study. BLM officials told us that they used the study in setting the price for the Phase A sales because they believed it satisfied both the Office of Inspector General’s recommendation and the recently enacted price-setting provision. BLM required companies making offers in the Phase A sales to fulfill the act’s disclosure requirement, in addition to requiring the refiners to report their excess refining capacity. BLM communicated these requirements in its announcements for the Phase A sales. By implementing the act’s disclosure requirement in this manner, however, BLM did not receive information from all 10 storage contract holders since 2 companies did not participate in the sales. BLM officials told us they had not realized that the act required them to obtain this information from the 2 storage contract holders that did not participate in the sales. BLM and other Interior officials said that they plan to explore what storage contract holders that do not participate in sales or auctions are statutorily required to disclose. Phase A sales submitted the requested volume and pricing information, and BLM publicly disclosed that the refiners reported, in aggregate, a total of 50 million cubic feet of excess refining capacity available for the last 8 months of fiscal year 2014 (February 2014 through September 2014), an amount less than the 61 million cubic feet purchased by nonrefiners. Under the Paperwork Reduction Act, the Director of the Office of Management and Budget must review and approve agencies’ proposed collections of information from 10 or more entities. BLM has not submitted an information collection proposal to the Office of Management and Budget for the act’s disclosure requirement but is exploring who is required to disclose information. Phase B under such terms and conditions as the agency determines are necessary to maximize total recovery of helium from the federal helium reserve over the long term; to manage crude helium sales according to the agency’s ability to extract and produce helium from the reserve; to carry out Phase B with minimum market disruption; and maximize the total financial return to the taxpayer, among other things. BLM is in the process of planning for the required (1) Phase B auction of a portion of the helium that will be produced in fiscal year 2015, (2) Phase B sale of a portion of the helium that will be produced in fiscal year 2015, and (3) Phase B advanced one-time sale of a portion of the helium that will be produced in fiscal year 2016. BLM published its proposed implementation plan for the auction and sales in the Federal Register on May 16, 2014, for a 30-day comment period, and BLM is planning to hold the auction and sales in late July 2014 to comply with the August 1, 2014, statutory deadline. BLM officials said they planned to publish the final implementation plan in the Federal Register in mid- July 2014. Until the final plan is published, BLM’s proposed implementation is tentative. Similar to Phase A, for the Phase B fiscal year 2015 auction and sale, as well as the fiscal year 2016 one-time sale, BLM is making decisions about helium volumes available for sale and auction, setting the sale price, and implementing the act’s disclosure requirement. As was the case with the volumes of helium made available for sale in Phase A, BLM plans to offer a total amount of helium for sale or auction each year in Phase B that would be less than the annual total helium production amounts shown in table 1. BLM officials told us they are continuing this approach based on the agency’s interpretation of the act’s multiple requirements for Phase B, including the minimum quantity requirement. Specifically, for fiscal year 2015, BLM officials told us they will offer for sale or auction 928 million cubic feet of the 1.3 billion cubic feet that is estimated to be produced from the reserve, and to use the remaining production capacity to accommodate federal users’ needs and deliver a percentage of the privately owned helium stored in the reserve (see table 2). For the fiscal year 2016 one-time sale, BLM proposed to offer 250 million cubic feet of helium. In its proposed implementation plan, BLM stated its intent to auction 10 percent of the 928 million cubic feet that BLM will make available for fiscal year 2015 to qualified bidders, including refiners and nonrefiners. In Phase B, BLM is generally required to auction an increasing amount of the helium made available for each fiscal year, beginning with helium available for fiscal year 2015. Specifically, for fiscal year 2015, BLM is required to auction 10 percent of the total volume of crude helium made available for that fiscal year, but the agency is authorized to adjust that quantity in certain circumstances.to adjust the auction amount for fiscal year 2015 to minimize potential market disruption. BLM officials told us they decided not BLM’s proposed plan includes making Phase B sale volumes available only to refiners, which is a departure from BLM’s prior practice, including for Phase A. In the past, sale volumes were divided into two portions, one offered to refiners and one offered first to nonrefiners. With the introduction of auctions in Phase B, BLM has proposed to divide the total helium made available each year into two different portions—a sale volume available only to refiners and an auction volume available to all qualified bidders, including, but not limited to, nonrefiners. Some nonrefiners have raised a concern about this approach since they would no longer be permitted to purchase any of the helium that will be offered for sale. As a result, they stated, fewer nonrefiners are likely to end up purchasing federal helium because they may be outbid in the auction by the refiners. The act does not contain language specifying which parties are eligible to participate in the Phase B sales but, according to BLM officials, the act intended to have the auctions replace the portion of the sales that were previously available to nonrefiners. BLM’s proposed implementation plan also includes a calculation of the minimum auction price for fiscal year 2015 and a formula for calculating the sales price for fiscal year 2015 and the fiscal year 2016 one-time sale. BLM officials told us they did not have time to contract for a market survey of relevant domestic transactions by an independent third party to inform these prices, one of the options provided for in the act’s price- setting provision. As a result, BLM is basing its minimum auction price on the fiscal year 2014 sales price, adjusted for inflation. BLM’s price for the fiscal year 2015 sale and the fiscal year 2016 one-time sale is based on the adjusted fiscal year 2014 sales price as well, but it also takes the average auction price into account. BLM officials told us they do not intend to use this approach in the future to set prices but, rather, they plan to contract for an independent market survey to inform the prices for the sale and auction of the remaining fiscal year 2016 helium. In its May 2014 Federal Register notice, BLM did not directly address how it will implement the act’s disclosure requirement for the fiscal year 2015 sale and auction and fiscal year 2016 one-time sale. However, BLM officials told us they intend to follow procedures similar to those used for the Phase A sales, that is, having only sale and auction participants respond to the act’s disclosure requirement. BLM faces challenges in implementing the act’s tolling provision and incentivizing tolling. The tolling provision was intended, according to a relevant Senate committee report, to maximize participation in helium sales in Phases A and B. Without a way to have helium refined, there would be less or no interest in purchasing helium by nonrefiners. As of May 1, 2014, refiners had agreed to toll about one-quarter of the crude helium purchased by nonrefiners in the January 2014 Phase A sale. The Helium Stewardship Act of 2013 provides that refiners, as a condition of sale or auction, make excess refining capacity available at commercially reasonable rates to certain entities. In implementing this provision, however, BLM faces challenges in knowing whether refiners (1) have excess refining capacity available and (2) if so, are offering tolling services to nonrefiners at commercially reasonable rates. In implementing the act’s tolling provision, BLM faces the challenge of verifying whether the refiners have excess refining capacity available. Although BLM asked refiners to report excess refining capacity in January 2014 as part of the Phase A sales, BLM did not define the term “excess refining capacity” because, according to BLM officials, they were still in the process of interpreting the act. Moreover, BLM did not request information regarding how refiners determined their excess refining capacity or supporting documentation. By not defining excess refining capacity, or asking how the refiners calculated it, BLM does not know how the refiners calculated the amounts they reported and whether the four refiners calculated those amounts in the same way. In advance of the January 2014 Phase A sale, refiners reported a total of 50 million cubic feet of excess refining capacity for the last 8 months of fiscal year 2014. BLM officials and some nonrefiners told us they questioned why refiners would have so little excess refining capacity available when BLM had announced it would produce and deliver a few hundred million cubic feet less federal helium during fiscal year 2014 than it had produced and delivered—and that refiners had processed—during fiscal year 2013. However, refiners reported multiple reasons why they had limited excess capacity, including that plants connected to the pipeline also process crude helium from privately owned natural gas deposits. In our interviews with refiners, they described different methods for calculating the excess refining capacity that they reported to BLM. For example, some refiners used formulas that accounted for multiple variables, including seasonality, interruptions, supply, total refining capacity, and existing contracts, while others used simpler formulas. Moreover, it is unclear whether BLM expected refiners to include refining plants or units that are currently nonoperational but that could become operational later in the year in their calculations of total refining capacity. In preparation for Phase B and the fiscal year 2015 auction and sale, BLM officials said they are taking steps to improve their ability to determine whether refiners have accurately reported excess refining capacity. BLM posted a data collection form on its website on June 2, 2014, for refiners to use when reporting excess refining capacity; the form includes a definition of excess refining capacity. The form provides guidance on how BLM expects refiners to report excess refining capacity, but some nonrefiners commented to BLM that this definition leaves room for different interpretations. For example, BLM asks refiners to report “planned demand” for the applicable fiscal year in order to determine excess capacity. BLM, however, does not make clear whether such demand should already be under contract or just anticipated at the time its form is submitted. BLM also is requiring refiners to certify the accuracy of their reports of excess refining capacity on this form and to update it within 2 weeks if the reported data vary by 10 percent at any time. If a refiner fails to report excess refining capacity or to update BLM when the data change, BLM is proposing to bar that refiner from participation in helium auctions and/or sales. However, BLM has not specified for how long or from which auctions or sales such a refiner would be barred. We plan to conduct additional work after the July 2014 auction and sales on BLM’s efforts to obtain excess refining capacity data from refiners using its data collection form. Therefore, we are not making any recommendations at this time. BLM is also challenged in determining whether refiners that reported having excess refining capacity are offering tolling services at “commercially reasonable rates,” as required by the act. BLM did not define commercially reasonable rates for Phase A or identify criteria it would use to evaluate offered rates. As a result, BLM officials told us they did not make determinations of whether the rates offered by refiners in Phase A were commercially reasonable. Moreover, BLM officials told us they do not intend to define commercially reasonable rates or identify criteria for evaluating such rates for the upcoming July 2014 Phase B auction and sales. Until BLM identifies criteria or a definition of what constitutes a commercially reasonable rate, it is unclear how BLM would implement the tolling provision, if necessary. BLM officials told us they are not planning on defining commercially reasonable rates because it is more appropriate for the companies or a court to make that determination. BLM officials said they do not have complete information about the full spectrum of refiners’ costs that are included in their tolling rates. Also, these officials said that refiners and nonrefiners are interpreting what is a commercially reasonable rate differently and that the officials are hesitant to be drawn into that dispute. BLM officials told us they would have a hard time finding that a rate was not reasonable if the parties involved agreed to it. These officials said they received multiple comments from refiners, nonrefiners, and helium end users that support BLM’s “hands-off” approach to determining what is a commercially reasonable rate. However, some of the nonrefiners we interviewed said that they would like BLM to be more involved in setting a commercially reasonable rate. We plan to conduct additional work after the July 2014 auction and sales on BLM’s implementation of the tolling provision. Therefore, we are not making any recommendations at this time. BLM officials told us that they are considering a variety of ways of delivering helium in Phase B that would incentivize refiners to toll. However, the agency’s ability to create incentives is restricted by the terms of existing storage contracts that predate the act and remain in effect until September 30, 2015. Under the existing contracts—which the act does not affect or diminish—BLM’s delivery of helium through the pipeline is based on the refining capacities of the four refiners in 2000. For example, if BLM delivered 100 million cubic feet of helium into the pipeline over the course of a month, that amount would be divided among the refiners per the allocations determined by their 2000 refining capacities (see table 3). Therefore, for nonrefiners to actually receive helium they have purchased from BLM, one or more of the refiners’ allocations would need to be reduced so it could be delivered.helium that could be delivered to a refiner for its own use, potentially meaning lost revenue for that refiner. Some of the refiners we spoke with said this reduction in the volume of helium they would receive is a significant reason why they have been reluctant or unable to toll. This directly reduces the amount of In planning for the fiscal year 2015 auction and sale, BLM officials told us they considered various ways to address this delivery issue within the confines of the existing storage contracts. In its May 16, 2014, Federal Register notice, BLM proposed reducing the total volume of helium that is subject to the delivery allocations. This approach could allow BLM to deliver any helium that nonrefiners purchased at auction separately from helium that is subject to the allocations. Under this approach, tolling could represent an opportunity for refiners to receive helium they otherwise would not be receiving. BLM and other Interior officials told us they believe the existing storage contracts provide the flexibility to BLM to make such adjustments. At least one refiner, however, has notified BLM that it finds that BLM’s interpretation violates the act and the terms of the current storage contract. Although potentially significant for fiscal year 2015, the challenges posed by the existing storage contracts may be reduced under certain market conditions. Specifically, BLM officials noted that the disincentive may be moot if refiners are not interested in receiving their full allocation of helium each month. For example, although the refiners have used their full allocations since fiscal year 2010, according to BLM officials, some refiners recently notified BLM that they are reducing their requested monthly delivery amounts from the pipeline because additional helium supplies have become available from other, private sources in other locations in the world. According to these officials, these conditions could make tolling more likely because, if refiners were accepting less helium from the federal system for their own use, they could have excess refining capacity available in their plants on the pipeline. At least one nonrefiner told us, however, that the availability of the additional supplies from other sources means they are not interested in having their federal helium tolled. Furthermore, this challenge could be alleviated when new storage contracts are signed. BLM officials told us they plan to begin developing the terms of new storage contracts, and these contracts will go into effect in fiscal year 2016. These officials said they can modify the delivery allocations in the new contracts so that delivery of nonrefiners’ helium does not result in a reduction of a refiner’s delivered volume and instead would represent an opportunity for the refiner to accept delivery of helium it otherwise would not have received. However, even with an incentive from BLM, refiners’ and nonrefiners’ conflicting interests will make it challenging for tolling to occur. BLM officials said that, even if refiners report having excess refining capacity, and that capacity is offered at commercially reasonable rates, the parties may still have difficulty finding mutually agreeable terms for delivering the refined helium. These officials said a major reason why more tolling has not occurred is that refiners and nonrefiners disagree over delivery terms. For example, some nonrefiners told us they are looking for some assurance of when and how much refined helium the refiners will deliver to them in certain months. Such an agreement might specify an overall volume to be tolled spread out over a number of months. These nonrefiners said they need some predictability so they can meet contractual obligations with their customers. However, some refiners said they cannot offer predictable volumes to nonrefiners, both because of existing obligations to their own customers and because their supplies are subject to interruptions that occur in the federal helium system, such as unexpected plant shutdowns. Some of these refiners told us they would offer to toll for nonrefiners as capacity comes available, but some of the nonrefiners we interviewed said that they are typically unable to use helium offered on short notice, in part because they need to secure commitments to provide refined helium in advance in order to satisfy their existing contracts. Chairman Lamborn, Ranking Member Holt, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to answer any questions that you may have at this time. If you or your staff members have any questions about this testimony, please contact me at (202) 512-3841 or fennella@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this testimony include Jeff Malcolm (Assistant Director), Cheryl Arvidson, Carol Bray, Juli Digate, Leslie Kaas Pollock, and Jeanette Soares. 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Summary: The federal government and the private sector use helium, a key nonrenewable resource, for a variety of purposes, including research and manufacturing. As of September 30, 2013, BLM was storing about 9 billion cubic feet of federally owned crude helium and almost 2 billion cubic feet of privately owned crude helium in an underground federal reserve. Helium produced from the reserve represents 40 percent of the total U.S. production. The Helium Stewardship Act of 2013 is intended to complete the privatization of the federal helium reserve in a competitive market fashion that ensures stability in the helium markets, while protecting the interests of American taxpayers. It establishes a phased process through fiscal year 2021 to dispose of the remaining helium. Phase A is a transition period of helium sales, and Phase B consists of auctions in addition to sales. This testimony describes (1) BLM's initial implementation of the act and (2) challenges, if any, BLM faces in implementing and incentivizing tolling—when a helium refiner processes or refines another party's crude helium at an agreed upon price. GAO examined helium sales documents and BLM's proposed plan for implementing the act; visited BLM's Amarillo Field Office near the reserve to review documents and observe the helium facilities; interviewed BLM and other Interior officials; and interviewed representatives from four refiners and four nonrefiners that participated in recent sales. GAO is not making any recommendations in this testimony. The Department of the Interior's (Interior) Bureau of Land Management (BLM) has taken a number of actions to begin implementing the Helium Stewardship Act of 2013, including (1) estimating volumes of helium that can be produced from the federal helium reserve each year, (2) preparing for and conducting helium sales under the act's Phase A transition period, and (3) initiating planning for the act's Phase B, which introduces a competitive auction process for crude helium along with continued sales. First, BLM estimated the amount of crude helium that can be produced from the reserve each year based on a geologic model. Second, under Phase A, BLM determined sale volumes, set the sale price and required participants to disclose certain information, among other things. Third, BLM has begun planning for the required Phase B auction and sale of helium for fiscal year 2015 and a one-time sale of a portion of the helium that will be made available in fiscal year 2016. BLM plans to hold this auction and these sales in July 2014 to comply with an August 1, 2014, statutory deadline. BLM officials told us the agency plans to offer for auction or sale most of the helium estimated to be produced in fiscal year 2015 and use the remainder to meet federal users' needs and to deliver privately owned helium to refiners for processing. However, refiners disagree with the agency's approach, stating the act requires BLM to offer for auction or sale the maximum amount that it can produce from the reserve each year. BLM officials said they are taking this approach to help ensure that the agency can deliver the privately owned helium that remains in storage before the end of fiscal year 2021. BLM faces challenges in implementing the act's tolling provision and identifying incentives. Under the provision, refiners, as a condition of sale or auction in Phases A and B, are to make excess refining capacity available at commercially reasonable rates to certain entities. In implementing this provision, however, BLM faces challenges in knowing whether refiners (1) have excess refining capacity available and (2) if so, are offering tolling services to nonrefiners at commercially reasonable rates. For example, although BLM asked refiners to report excess refining capacity as a condition of the Phase A sales, BLM did not define the term “excess refining capacity” because, according to BLM officials, they were still in the process of interpreting the act. According to refiners GAO interviewed, they used different methods to calculate the excess refining capacity they reported to BLM. In preparation for Phase B and the fiscal year 2015 auction and sale, BLM has proposed a definition of excess refining capacity, although some nonrefiners noted that it leaves room for interpretation. Regarding rates, BLM has not defined or identified criteria for determining what is a commercially reasonable rate. BLM officials said they prefer to take a “hands off” approach, allowing the companies involved and the marketplace to determine what is commercially reasonable, but it is unclear how BLM would implement the tolling provision without a definition or criteria for what is commercially reasonable. Moreover, BLM officials told GAO that they are considering various ways to incentivize tolling by refiners, but the agency's ability to create incentives is limited by the terms of existing contracts governing helium delivery that remain in effect through fiscal year 2015. GAO plans to conduct additional work after the July 2014 auction and sales on BLM's implementation of the act's tolling provision. Therefore, GAO is not making any recommendations at this time.