Congress created the strategic helium reserve in 1925 mainly to ensure a steady supply of helium for military applications such as dirigibles. In 1960 the program was expanded to include refining and storage facilities and a permanent stockpile. The reserve now holds 32 billion cubic feet of the gas in an abandoned natural gas cavern called the Cliffside Dome near Amarillo, Tex. To create the reserve, the Department of the Interior and the Treasury offered the reserve a $252 million loan to purchase the needed helium supplies, mostly from private natural gas refineries, to be repaid in 25 years. But sales of helium to private industry have not generated enough revenue to repay the loan and accumulated interest. The result is a $1.4 billion “debt” owed by the reserve to the U.S. Treasury.Critics of the helium reserve have cited this debt as a measure of the reserve’s inefficiency. But this is misleading. The so-called debt is an accounting formality, owed by one agency of the federal government to another; it could be written off without significant consequence to the federal budget, according to the General Accounting Office and the Department of the Interior’s inspector general.
Nevertheless, the Helium Privatization Act of 1996, introduced by Rep. Cox last September, moved through Congress with speed rare for a measure killing a federal program, and President Clinton promptly signed it into law. The bill instructs the secretary of the interior to eliminate all federally operated helium refining activities and to dispose of all equipment and facilities. By January 1, 2005, the Department of the Interior is to begin selling all remaining helium reserves.
In a concession to scientists and advocates of the helium industry, the bill also requires the National Academy of Sciences to study the sales of the helium reserve to determine if the reserve’s elimination will hurt U.S. industry. The Secretary of the Interior is also directed to monitor the sale of helium from the reserve to ensure that the sale of so much of the gas does not disrupt the commercial helium industry.
By eliminating the reserve, the federal government, which consumes nearly 75 percent of the gaseous helium market, has placed itself at the mercies of the market. Private markets often see periodic shortages and supply swings; without a guaranteed supply, NASA and other government agencies might find themselves forced to bid against private concerns for limited supplies, whose prices would be driven considerably higher in times of shortage. This rise in helium prices may wind up costing the government more in the long term than it would have to maintain the helium reserve.
It may be possible to reach a compromise position between those who favor abolishing the reserve and those who seek to protect it. Organizations such as the American Physical Society do not oppose privatizing the reserve per se, so long as it is not destroyed. If the federal government, burdened by budgetary problems and bureaucratic sprawl, is no longer willing to manage the reserve, it could be turned over to some form of private partnership involving helium suppliers organized to preserve and administer the stockpile.
The federal government could implement such a partnership easily enough by forgiving the helium reserve’s artificial $1.4 billion debt and seeking the participation of private suppliers. Those suppliers have an interest in keeping the reserve-if only to prevent the market price of helium from plunging in the wake of a wholesale sell-off of the stockpile. Such a partnership would ensure the nation a steady supply of helium while still satisfying the desire of congressional budget hawks to shrink the federal government.