Good news! Congress just averted a global helium crisis.

September 27, 2013

Sure, Congress can't agree on things like how to fund day-to-day government operations. But the nation's lawmakers can at least band together to solve truly important problems... like the global helium crisis.


(MZ-3A, the U.S. Navy's only airship currently in operation, in this handout photo provided by the U.S. Navy. Helium is considered a vital element in industries including aerospace and defense. (Adam Henderson/U.S. Navy/Handout via Reuters)

That's right, there's a global helium crisis. Thanks to an obscure 1996 law, the Federal Helium Reserve is scheduled to shut its doors on Oct. 7, locking 10 billion cubic feet of helium underground and immediately shutting off 35 percent of the world's helium supply.

Party-balloon enthusiasts would suffer, sure. But more importantly, a shortage would cause chaos in large swaths of the economy dependent on helium, from medical scanners to welders to manufacturers of optical fibers and LCD screens.

But here's good news: The helium cliff is no longer nigh! On Thursday, the House and Senate both approved a bill that would keep the Federal Helium Reserve open for years to come. (President Obama has indicated he will sign the bill.) Lawmakers have essentially averted a fiasco of their own making.

On top of that, the bill would also end, slowly, the Helium Reserve's practice of giving away the gas for below-market rates, a practice that has led to excessive waste and has prevented the private sector from developing its own sources of the scarce resource.

The helium crisis

The U.S. government first set up a national helium program in the 1920s, when blimps and other airships seemed like a useful military technology. That included a sprawling underground Federal Helium Reserve stretching from Kansas to Texas.

But by the 1990s, the program looked frivolous. So, Congress passed a bill requiring the Helium Reserve to sell off its helium in relatively short order and then shutter its doors once it recouped its costs (a milestone that will come in October).


That law turned out to have large unintended consequences. For years, the reserve has been selling off its helium for below-market rates — something it has been required to do (see graphic). And, since the Federal Helium Reserve provides about one-third of the world’s helium each year, this has distorted the entire market. No one has incentive to conserve, recycle or find new sources of helium. Instead, we’ve been frittering it away. And that's a bad idea, since helium is ultimately a non-renewable resource.

Fixing the market for helium

The House and Senate-passed bill will try to correct these errors. For starters, the reserve will no longer close on Oct. 7. Instead, for the next year, the Helium Reserve will continue giving away its helium for cheap. After that, the reserve will slowly begin auctioning off a portion of its helium each year to the highest bidder. (After 6 years, the reserve will auction off all the helium.)

The hope is that those auctions will ultimately end the distortions in the helium market. Countries like Qatar and Russia will be able to ramp up their production of helium from natural-gas fields. Medical companies will have incentives to do things like install gas-capture technology in MRIs to limit waste and promote recycling. We'll have a normal market for helium.

The House and Senate bills also try to ensure that scientists will continue to have access to helium for research purposes. Once the Helium Reserve dwindles down to about 3 billion cubic feet of gas (in about six or seven years), the remaining amount will be set aside for federal users, especially those receiving research grants.

Not all scientists are happy with this new arrangement. Supplies of liquid helium can often constitute 30 percent of the budget for certain low-temperature physics projects. And helium prices are inevitably set to rise in the years ahead, as the market takes over. That could make some research projects more difficult to do.

Yet it's not clear there would ever be a completely painless way to fix a helium market that has been distorted by years of price controls. The bill in Congress, at least, will stave off an immediate shortage come Oct. 7. And it should slowly bring the market back to balance over time.

Now back to fretting about the debt ceiling...

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