The world is experiencing a shortage of helium-3, a rare isotope of helium with applications in homeland security, national security, medicine, industry, and science. Federal officials have testified that the shortage is acute and, unless alternatives are found, will affect federal investments in homeland security, scientific research, and other areas. Scientists have expressed concern that the shortage may threaten certain fields of research. This report discusses the nature of the shortage; federal actions undertaken so far to address it; current and potential sources of helium-3 and options for increasing the supply; current and projected uses of helium-3 and options for reducing the demand; and options for allocating the supply if it continues to fall short of demand. Helium-3 is an isotope of helium, an inert, nontoxic, nonradioactive gas. Most helium is helium-4. The natural abundance of helium-3, as a fraction of all helium, is very small: only about 1.37 parts per million. Rather than rely on natural abundance, the federal government manufactures helium-3 through nuclear decay of tritium, a radioactive isotope of hydrogen. By far the most common source of helium-3 in the United States is the U.S. nuclear weapons program, of which it is a byproduct. The federal government produces tritium for use in nuclear warheads. Tritium decays into helium-3. This means that the tritium needs of the nuclear weapons program, not demand for helium-3 itself, determine the amount of helium-3 produced. Helium-3 has properties that currently make it in high demand. Like all helium, helium-3 is nontoxic. Helium-3 also absorbs neutrons. This property has resulted in its widespread use for neutron detection. Neutron detection is a key component of applications in national and homeland security, industry, and science. For example, the federal government uses radiation portal monitors and other neutron detectors at the U.S. border to prevent smuggling of nuclear and radiological material, and the oil and gas industry uses neutron detectors for well logging. Another property that has increased demand for helium-3 in recent years is the ability to polarize its nucleus. For example, magnetic resonance imaging (MRI) can take advantage of this property to enable real-time visualization of a patient's lung capacity and capability. Finally, helium-3 has unique cryogenic properties. Low-temperature physicists use a mixture of helium-3 and helium-4 to achieve temperatures just a few thousandths of a degree above absolute zero (millikelvins). At temperatures below 2.5 millikelvin, helium-3 becomes a superfluid. Helium-3 does not trade in the marketplace as many materials do. It is produced as a byproduct of nuclear weapons maintenance and, in the United States, is then accumulated in a stockpile from which supplies are either transferred directly to other agencies or sold publicly at auction. The U.S. producer of helium-3 is the National Nuclear Security Administration (NNSA) of the Department of Energy (DOE). The seller for the public auctions is the DOE Office of Isotope Production and Research. Although public, the helium-3 auction process has not necessarily been competitive. Most auction sales have been to just two companies: Spectra Gases, Inc., now part of the Linde Group, and GE Reuter Stokes, Inc. Many of the auctions have had just one purchaser. Spectra Gases owns the only facility in the United States that is licensed by the Nuclear Regulatory Commission to remove trace amounts of tritium from raw helium-3, which is necessary for most uses. Despite declining supply and increasing demand, the historical auction price of helium-3 has been relatively steady, ranging from about $40 to $85 per liter. Before about 2001, production of helium-3 exceeded consumption. In the past decade consumption has risen rapidly, in part because of the deployment of neutron detectors using helium-3 at the U.S. border to help secure the nation against smuggled nuclear and radiological material. Thus starting in about 2001, and more rapidly since about 2005, the stockpile has been drawn down. By 2009, the government and others recognized that ongoing demand would soon exceed the remaining supply. In March 2009, the Departments of Defense, Energy, and Homeland Security formed an Integrated Product Team (IPT) to examine helium-3 supply and demand. The team concluded that further allocations of helium-3 from the federal stockpile would be made only by interagency agreement. In July 2009, the White House National Security Staff established an interagency policy committee (IPC) to investigate helium-3 strategies. The IPC consisted of representatives of officials from the Departments of Commerce, Defense, Energy, Homeland Security, and State, as well as other government agencies. In September 2009, the IPC concluded that the auctions should cease and that no further allocations should be made to DHS for radiation portal monitors. The IPC also determined that allocations to agencies and others would henceforth be based on three priorities: 1. applications for which there are no alternatives to helium-3, 2. programs for detecting nuclear material at foreign ports and borders, and 3. programs for which substantial costs have already been incurred. If helium-3 traded in a free marketplace, price could mediate supply and demand, with the available supply of helium-3 being allocated on the basis of the willingness of users to pay the price. Because of the peculiar market arrangement for helium-3, however, supply and demand are effectively disjoined; the price does not reflect the marginal cost of additional supply. In fact, the price of helium-3 appears to be much lower than the likely cost of additional supply, so it is not surprising that demand is exceeding supply. In the face of demand outrunning supply, therefore, the supply of helium-3 is currently being allocated by the interagency policy committee on the basis of criteria derived from an assessment of national needs. As a result, a set of interrelated public policy issues arise: (1) whether it is in the public interest to augment supply, and if so, how best to do so; (2) whether it is in the public interest to curtail demand, and if so, how best to do so; (3) whether the current process for allocating existing supplies of helium-3 is acceptable and in the public interest; and (4) whether, looking to the future, an alternative process for allocating existing helium-3 supplies is warranted—such as a revised set of allocation criteria derived from further assessment of needs and priorities, or a market-based process based on aligning price with marginal cost. Until 2001, helium-3 production by the nuclear weapons program exceeded the demand, and the program accumulated a stockpile. After the terrorist attacks of September 11, 2001, the federal government began deploying neutron detectors at the U.S. border to help secure the nation against smuggled nuclear and radiological material. The deployment of this equipment created new federal demand for helium-3. Use of the polarized helium-3 medical imaging technique also increased. Annual demand for helium-3 quickly exceeded the annual supply. As a result, the stockpile shrank. After several years of demand exceeding supply, federal officials realized that insufficient helium-3 was available to meet the likely future demand. The federal government and others have projected that future demand for helium-3 will significantly increase in future years, causing the disparity between supply and demand to grow. Other sources of helium-3 exist, both domestically and internationally. Drawing on these sources might require the development of new technologies and approaches, as well as addressing potential international export control concerns. The supply available from the alternative sources and the ease with which helium-3 could be extracted is unclear. Similarly, demand for helium-3 might be reduced through rationing or the development of alternative technologies, but these alternatives are not yet readily available. No single policy approach will likely yield sufficient additional supply, reduce predicted demand, or successfully allocate helium-3 to all who wish to have it. Policymakers may have to use a combination of supply- and demand-based approaches to address the helium-3 shortage. Policymakers now face a number of challenging decisions. Currently, these decisions are mainly about how to allocate a scarce resource in the face of competing priorities: science versus security, the private sector versus the public sector, and national needs versus international obligations. Applications with unique needs may pose particular challenges. For example, some types of cryogenic research can only be accomplished using helium-3, whereas in medical imaging and neutron detection, helium-3 has advantages but also alternatives. To address future helium-3 concerns, policymakers also face choices about how or whether to increase helium-3 supply or reduce helium-3 demand and about possible alternative processes for allocating the supply. Finally, policymakers will likely weigh how to set the appropriate price for the remaining limited helium-3 supply given the diverse potential end-users. While the federal response to the events of 2001 increased the profile and use of helium-3, the federal government did not foresee the impending shortage. Thus, the executive branch response to the helium-3 shortage began after the shortage had occurred. First an ad-hoc interagency group formed by the Departments of Energy (DOE), Homeland Security (DHS), and Defense (DOD) set policy, then that role passed to an interagency policy committee established by the National Security Staff. The interagency policy committee developed a rationing scheme for allocating the available helium-3. As a result, some federal and private-sector users received no allocation or an amount less than they had previously planned. Several federal agencies are investigating alternative sources of helium-3 and ways to reduce the demand. The DOE, the agency responsible for manufacture and disbursement of helium-3, did not predict the imminent shortage.