The federal government has been extensively involved in the production,  storage, and use of helium since the early part of the 20th Century. As directed by the Congress, the National Academies’ National Research  Council reviewed the helium program and released a report in 2000 that  evaluated changes made in the program, effects of these changes on the  program, and several scenarios for managing the federal helium reserve in  the future. GAO Reported on Helium Debt, Pricing, Purity, and Alternatives for Meeting Federal Helium Needs in the Early 1990s

Our November 1991 and October 1992 reports included findings and  recommendations on the helium program’s debt, the pricing of crude  helium, the purity of helium in storage, and three alternatives for meeting  federal needs for helium. In 1992, GAO Recommended that Congress Cancel the Debt in the Helium Fund

In October 1992, we reported that the Helium Fund debt had grown to  about $1.3 billion, as of September 30, 1991. Section 6(c) of the Helium  Act Amendments of 1960 stipulated that (1) the price of federal helium  should cover all of the helium program’s costs, including interest on the  program’s debt; and (2) the debt should be repaid within 25 years, unless  the Secretary of the Interior determines that the deadline should be  extended by not more than 10 years. In 1991, GAO Made a Recommendation on the Purity of the Helium in Storage

In our November 1991 report on helium purity, we found that the Bureau  of Mines was not restricting the rate at which helium was being extracted  from the helium reserve, causing the purity of the crude helium to degrade  faster than would otherwise occur. In 1992, GAO Recommended That Congress Reassess the Objectives of the Helium Program

In our October 1992 report, we evaluated three alternatives for meeting  federal needs for helium: (1) continue the Bureau of Mines’ existing  program, (2) require that all federal needs be supplied by private industry,  and (3) allow all federal agencies to choose to purchase helium from the  Bureau of Mines or private industry. Two Key Developments Have Affected the Issues That GAO Reported on in the Early 1990s

Since our reports in the early 1990s, two key developments—the Helium  Privatization Act of 1996 and the construction of the Cliffside Helium  Enrichment Unit in 2003—have caused considerable changes to the  federal helium program. The Helium Privatization Act of 1996 Affected the Helium Debt, Pricing, and the Program’s Objectives

After our reports in the early 1990s, the Congress passed the Helium  Privatization Act of 1996, which significantly changed the objectives and  functions of Interior’s helium program. § 167b(a)); and    established a modified “in-kind” program to meet federal needs for helium. These changes affected the federal helium program in various ways. For  example, because the 1996 act effectively froze the debt at $1.37 billion  and interest no longer accrued, BLM has been able to pay off a large  portion of its debt. 1). In addition, since the 1996 act required a specific method for pricing crude  helium, the initial minimum BLM selling price for crude helium after the  act was passed was almost double the price for private crude helium at  that time. As part of the resetting of the helium program’s objectives, the 1996 act  established a revised approach for meeting federal needs for helium. 3). The Helium Program’s Direction after 2015 Is Uncertain

Changes in helium prices, production, and demand have generated  concerns about the future availability of helium for the federal government  and other critical purposes. As a result of these factors, there is uncertainty about the  program’s direction after 2015. According to the recent report by  the National Academies’ National Research Council, the United States  could become a net importer of helium within the next 10 to 15 years, and  the principal new sources of helium will be in the Middle East and Russia. How will the helium program be funded after 2015? However, if the helium debt is  paid off in 2015 as currently projected and the revolving helium fund is  terminated, it is not clear how the operations of the helium program will  be paid for. The revenues generated by the  program go into the Helium Fund and the program has access to those  funds to pay for its day-to-day operations. At what price should BLM sell its crude helium? If the debt is paid off in  2015 as projected, the debt will no longer be a factor in setting helium  prices. As the end point for the actions that were required to be taken  under the act come upon us in the next 5 years, the Congress may need to  address some unresolved issues such as how to use the remaining helium  in storage, how the helium program will operate once the Helium Fund  expires in 2015, and how to set the price for the helium owned by the  federal government.
Why GAO Did This Study

The federal government has been extensively involved in the production, storage, and use of helium since the early part of the 20th Century. The federal helium program is currently managed by the Department of the Interior's Bureau of Land Management (BLM). During the 1960s and early 1970s, Interior purchased about 34 billion cubic feet of crude helium for conservation purposes and to meet federal helium needs, such as for the space program and scientific research. Crude helium is a gas of 50 to 85 percent helium. While some of the helium was used to meet federal needs, most of it was retained in storage. The funds used to purchase the helium became a debt owed by the program. GAO reported on the management of the helium program in the 1990s (GAO/RCED-92-44 and GAO/RCED-93-1). Since GAO's reviews of the program in the 1990s, key changes have affected the federal helium program and a recent report by the National Academy of Sciences concluded that it is time to reassess the program. This testimony discusses (1) GAO's findings and recommendations in the early 1990s, (2) key changes that have occurred since the early 1990s, and (3) some of the issues facing the helium program in the near future. To address these issues, GAO reviewed prior reports, applicable laws and regulations, National Academy of Sciences' reports, and BLM data. GAO is not making any new recommendations.

What GAO Found

In 1991 and 1992, GAO reported on various aspects of the federal helium program including the helium debt, pricing, purity, and alternatives for meeting federal helium needs, and made recommendations to the Congress. For example, in 1992 GAO recommended that the Congress cancel the helium program's debt. As of September 1991, the debt had grown to about $1.3 billion, over $1 billion of which was interest that had accrued on the original debt principle of about $290 million. The debt was also a factor in setting the price of federal helium because the Helium Act Amendments of 1960 stipulated that the price of federal helium cover all program costs, including interest on the debt. In addition, in 1991, GAO recommended that Interior take action to preserve the purity of the helium in storage. GAO found that the unrestricted extraction of helium from the reserve was causing the purity of the crude helium to degrade faster than would otherwise occur, which in turn had increased the program's operating costs. In 1992, GAO also recommended that the Congress reassess the conservation objectives of the helium program and consider other alternatives to meet federal helium needs. Since GAO's reports in the early 1990s, two key developments--the Helium Privatization Act of 1996 and the construction of the Cliffside Helium Enrichment Unit in 2003--have caused considerable changes to the helium program and addressed or altered GAO's prior concerns. Specifically, the 1996 act froze the program's debt and as a result over half the debt has been paid off and the remainder should be paid off by 2015. The 1996 act also required a specific method for pricing helium. This along with other changes in the supply and demand for helium, has resulted in BLM's price to be at or below the market price. Lastly, in resetting the program's objectives, the act directed Interior to stop refining helium and it established a modified in-kind approach for meeting federal helium needs. Agencies must purchase helium from refiners who then purchase an equivalent amount of crude helium from BLM. The Cliffside Helium Enrichment Unit has addressed concerns about helium purity by enriching the crude helium through extracting excess natural gas. Changes in the helium market have generated concerns about the future availability of helium for federal and other needs. The 1996 act did not provide a specific direction for the federal helium program past 2015. Some of the uncertainties facing the program include: (1) How should the helium owned by the federal government be used? BLM's effort to sell off the helium in storage is going slowly and will not be completed by 2015; and some believe that the United States could become a net importer of helium within the next 10 to 15 years. (2) How will the helium program be funded after 2015? If the helium program's debt is paid off by 2015, the revolving Helium Fund that is used to pay for the program's day-to-day operations will be terminated. (3) At what price should BLM sell its helium? In the past, the debt has been a factor in the price and the price has been above the market price. After 2015 the debt will be paid off and the current price is at or below market.