When the US House of Representatives unanimously backed measures to re-authorize the Federal Helium Program at the end of September, in many respects it was a case of crisis averted. For the helium business and end-users alike, it brings an element of conclusion to a storyline in the making for some time. The market is able to take a step back from the edge of the ‘Helium Cliff’.
September 25, 2013 was almost a momentous day; the US House of Representatives passed the resolution that would suspend its procedural rules and adopt the Senate version of legislation, to thereby re-authorize the Federal Helium Program, a vote unanimously in favor at 367 - 0.
This eliminated the need for a conference committee, as both the House and Senate had backed the Bill and all that remained was a journey to the White House for President Obama’s signature. The long hoped for Helium Stewardship Act of 2013 is, in effect, now law and the industry’s access to one of the world’s biggest sources of helium - the BLM-operated Federal Helium Reserve in Texas - is secure for the immediate future.
There had been fears that the Federal Helium Reserve would stop selling commercial helium this October (7th) as it would have technically paid off the Federal Helium Program’s debt and funding was not provided for to take it beyond that point - a move that would have cut access to half of the domestic (US) supply and caused significant disruption to a helium supply chain that continues to experience supply shortages.
With no new legislation in place for this resource, and the possibility that funding for the BLM’s helium program would run out at the end of 2013’s third quarter, it had been feared that up to 4 BCF per year of capacity linked to the BLM Pipeline could be at risk.
The passing of the Act is, therefore, a major development in the helium business, providing continued stable access to the taxpayer-owned helium supplies while industry commissions and continues to develop new helium supplies. SGR understands the BLM program will continue to offer helium from the stored reserves, albeit under different terms, until it reaches the strategic level of 3 BSCF, at which time the BLM will only sell to Federal Helium Users.
Work to do?
The news appears to have been met with widespread satisfaction from some of the biggest names in the gases industry. Air Products, Praxair, Inc. and Linde North America have all been quick to issue statements to this effect.
But the work doesn’t end with President Obama’s signature on the Bill, however. In fact, it is the start of a considerable deal of work to be done in the rulemaking. SGR understands there is a great deal more discussion to be had concerning the terms and intent of the legislation. The rulemaking process itself means that there are still several stages of the document to be thrashed out; the legislative language needs to be clarified via drafting of regulatory language consistent with the legislative intent and there is room for both interpretation and negotiation.
SGR understands there is a great deal more discussion to be had concerning the terms and intent of the legislation.
There are also thought to be several ‘flaws’ in the draft Bill, with potentially difficult issues including the process for determining the price for crude helium sold from the Federal Reserve, price auction mechanisms for crude helium sold via auction, and clarifying the cost and availability of third-party tolling of crude helium by the helium refiners. Much of the doubt or debate in this area is derived from the current language of the Bill; the intent is to provide greater access to the Federal Helium Reserve for non-refiners so that the stockpile is no longer the private reserve of four companies. The tolling language, however, is currently considered vague. With this in mind, there will likely be continued maneuvering between the helium refiners and non-refiners in the coming months as they seek to exert their influence on the implementation of the legislation.
Activity has also begun within the US House of Representatives’ Committee on Natural Resources to develop a second helium bill. While this bill is primarily intended to address existing bottlenecks which slow the development of new helium sources on federal lands, it could also be a vehicle for fixing some flaws in HR 527.
With the passing of the Helium Stewardship Act (HSA), there will be continued stable access to the taxpayer-owned helium supplies while industry starts-up and continues to develop new helium supplies. Speaking of which, IACX Energy has reportedly commenced helium production and sales from a new facility at the Harley Dome in Utah. The facility is the first helium-only application to extract the rare gas from federal lands and is IACX’s third helium plant.
But neither the Harley Dome project or the passing of the HSA is the end of a currently tight helium market. Shortages still exist around the world; the start of production from new sources in Qatar, Algeria and the US is thought to have either been delayed or is ramping up slower than anticipated. Even with new legislation in place, there is no escaping the fact that the Federal Helium Reserve is slowly depleting - its current security merely averts an even bigger crisis in the global market.