Photo by Joyce Marshall/Fort Worth Star-Telegram/MCT

Gas for blimps and Musk’s rockets may get a boost from Congress

November 1, 2017 Sarah Babbage

This analysis was first available to Bloomberg Government subscribers

It’s the second most common element in the universe and plays a crucial role in medical and defense products, as well as children’s birthday parties. Yet helium is in short supply in the U.S. Now, Congress is floating an idea to boost private extraction.

Producers of the gas — used in everything from balloons and blimps to medical equipment and Elon Musk’s SpaceX rockets – – would gain under a bill (H.R. 3279; see BGOV Bill Summary) that would allow helium to be extracted from federal land on the same terms as oil and gas.

The U.S. Federal Helium Reserve near Amarillo, Texas, has traditionally been a major supplier of helium in the U.S., but now meets only about 40 percent of domestic demand. A 2013 law requires the government to sell any remaining supply in the reserve by Sept. 30, 2021, leaving companies that use the gas in their products looking elsewhere.

That means geopolitical risk. Qatar, Algeria, and Russia are the next-largest producers of helium, and Qatar’s supply was disrupted in June by a political dispute when a Saudi Arabia-led group of neighboring countries imposed a blockade of the nation.

Global helium consumption is about 8 billion cubic feet a year and the U.S. Federal Helium Reserve, which is the world’s largest supplier, had just 24.2 Bcf Bloomberg News reported in June 2016. Total known reserves in the U.S. are about 153 Bcf.

The Bureau of Land Management, which oversees the U.S. reserve, increased production in response to the Qatari disruption, but still can’t satisfy demand, said Walter L. Nelson, vice president of Air Products and Chemicals Inc., an industrial gas company, in testimony on a draft of the bill.

“Without this bill, we could become dangerously dependent on unstable foreign countries for our supply of helium,” Paul Cook, a Republican from California and the bill’s sponsor, said in a statement.

Helium Leases

Helium is mostly obtained as a by-product of natural gas production. Companies enter into agreements with BLM to extract helium at sites where they have oil and gas leases. These expire 10 years after a company stops using them for oil and gas output, even if they are still being used for helium extraction.

The bill would extend leases for as long as helium is being produced.

BLM has been granting waivers to extend companies’ oil and gas leases where helium is being extracted, according to a cost estimate from the Congressional Budget Office (CBO). The bill would codify that practice.

The bill would increase royalties paid to the government from helium production by about $1 million a year starting in fiscal 2019, CBO said. Royalties totaled $17 million in 2016.

Industry Position

The bill is supported by Air Products and Tacitus Ventures Corp. Entities reporting lobbying on the bill include Air Liquide SA, the American Chemical Society, the Association of Air Medical Services, and the Balloon Council.

An attorney for Oregon-based Stoel Rives LLP wrote in a party supply industry publication that the bill doesn’t go far enough to facilitate extraction because it wouldn’t eliminate the need for companies to have a helium sales agreement in addition to a federal oil and gas lease, among other issues.

Outlook

The House is scheduled to vote on the bill Nov. 1 under suspension of the rules. A two-thirds majority would be required for passage.

Prospects for Senate action are unclear. Orrin Hatch, a Republican from Utah, introduced a companion bill (S. 1572), which was referred to the Senate Energy and Natural Resources Committee and hasn’t been considered.

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