In a move that is sure to change the face of the helium supply market as we currently know it, the US’ Bureau of Land Management (BLM) has recently revised its methodology for calculating the price of crude helium for open market sales.
Representing more than just the average cost pass-through news announcements, the BLM has revised its methodology for calculating the price of the crude helium offered during its yearly Open Market Sale – a move that could now have far reaching consequences.
As a result, Federal Crude Helium will be sold at $75.00 per thousand cubic feet in FY2011, compared to $64.75 in 2010, signaling a 15.8% price increase. This price covers helium debt repayment and interest and includes administrative and storage costs.
The BLM is responsible for administering the Department of the Interior’s Federal Helium Program, following the intent and requirements of the Federal Helium Privatization Act of 1996 (Act).
The Act established a minimum pricing for the helium based on a calculation that would retire the program’s total debt to the US Treasury by 2015. BLM has been charging the minimum price established by the Act, a price that represents the cost of the helium not its value on the open market.
According to a statement released by the BLM, the new pricing methodology is in response to recommendations from the recently released National Academy of Sciences (NAS) report, entitled ‘Selling the Nation’s Helium Reserve’. The report identified recommendations that serve the US national interests and the interests of US taxpayers. The NAS report suggests that selling crude helium at market price, rather than the legislated minimum, could, “enable more rapid retirement of BLM facilities debt to the US Treasury – a central goal of the 1996 Act.”
The new pricing methodology is being applied to open market helium sales only. The cost of helium sold for federal purposes will continue to be the minimum allowed by the Act, the statement continues.
The BLM’s Amarillo Field Office oversees the Federal Helium Program. “Our goal is to get a fair price for a scarce government resource” said Leslie Theiss, the Amarillo Field Manager.
Watch out for gasworld's October issue Hot Topic feature, where we discuss the shifting helium market as a result of the BLM's announcement.