A Different Kind of Gas Shortage
The politics of helium
May 5, 2014, Vol. 19, No. 32 • By KELLY JANE TORRANCE
The U.S. government recognized the potential of helium early, not long after the element was first detected during a solar eclipse in 1868 and formally isolated in 1895. Second in the periodic table, the helium atom has less mass than that of any other element except hydrogen; as the Earth’s atmosphere is made up mostly of heavier nitrogen and oxygen, helium is lighter than air. The Navy began experimenting with helium during the First World War to hoist airships, and its strategic possibilities were soon apparent; the Department of Defense still uses it for surveillance blimps. But it was the liquid form that would eventually soar in importance. Dutch scientist Heike Kamerlingh Onnes liquefied helium in 1908, using it to discover superconductivity three years later. He won the Nobel Prize in physics in 1913 for his work, which led directly to the research that’s given us MRIs.
In 1925, the U.S. government created the Federal Helium Reserve in a giant cave near Amarillo, Texas. (The natural formation containing the gas is now called the Bush Dome Reservoir.) Helium contributed to the development of the atomic bomb during the Second World War, but it wasn’t until the Cold War that the feds began stockpiling the element in earnest. After 1989 brought, as one commentator had it, the End of History, politicians soon began to see the reserve more as a liability than an asset. You might not be able to put a price on national security, but bureaucrats can: The helium reserve had cost the Treasury $1.5 billion, and spending had begun to matter again. The federal government shut down in 1995 when the Republican Congress and the Democratic president couldn’t agree on how many more years of unbalanced budgets were permissible (an argument that seems quaint now). “There was a large stockpile of a good commodity sitting in a reserve in the government coffers here in Amarillo, Texas,” recalls Robert Jolley, a civil engineer and head of the Amarillo field office of the Bureau of Land Management, the Department of the Interior agency in charge of the Federal Helium Reserve. So in 1996, Congress passed and Bill Clinton signed the Helium Privatization Act.
Even in Washington, where doublespeak is common, to privatize usually means to expose a product or service to the forces of the market—for the benefit of taxpayers and consumers alike. But the legislators who wrote the Helium Privatization Act didn’t really care how much the government got for the crucial commodity that had helped win wars. The bill instructed the secretary of the interior to sell helium at a price that “shall be adequate to cover all costs incurred in carrying out the provision of this Act and to repay to the United States by deposit in the Treasury all funds required to be repaid to the United States as of October 1, 1995.” In other words, the government just wanted to recoup the costs of its investment. Rather than sell its helium to the highest bidder, Interior was instructed to find a minimum price by “dividing the outstanding amount of such repayable amounts by the volume (in million cubic feet) of crude helium owned by the United States . . . at the time of the sale concerned.” Interior was to adjust that amount, as time went on, only by the Consumer Price Index.
“The price of helium should go up and down as a commodity from year to year,” Jolley notes. “We were just recovering costs. We were charging a set amount for the year without doing any market survey data. We paid back $1 billion to the U.S. Treasury for the operation of the helium plant, the cost of storing it in the ground, all that.”
Keep in mind that, as the National Academy of Sciences (NAS) observed in its 2010 report, “Selling the Nation’s Helium Reserve,” the Federal Helium Reserve was “the only significant depository of crude helium in the world.” In 2004, 84 percent of the world’s helium production came from the United States; by 2011, it was still 77 percent. You can probably guess what would happen if the world’s primary supplier of a resource began pricing it based on cost rather than market value. But lawmakers in 1996 didn’t.
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