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By Michael Lucibella
In the absence of Congressional action, the United States is facing a “Helium Cliff,” resulting in an acute helium shortage and price spike even more dramatic than the current supply problems that are seriously impacting researchers, industry and clowns. Proposed legislation would prevent the worst disruptions in the market, but helium prices are almost certainly going to jump substantially by the end of the year.
The United States is the largest single supplier of helium in the world, but it’s authorized to keep selling it for only a few more months. In addition, the low cost of crude helium from the federal government has led to over-consumption resulting in supply shortages.
“The pricing for the helium is not correct. The helium is being priced well below what the demand reflects,” said Jodi Lieberman, senior government relations specialist at APS. “It’s essentially underpriced and has been for many years.”
In February, Congressman Doc Hastings (R-Wash.) introduced a bill in the House of Representatives to let the Bureau of Land Management’s (BLM) National Helium Reserve continue to sell its helium for years at a cost that will more closely reflect market rates.
A similar bill is likely to be introduced soon in the Senate. It should prevent current shortages from worsening, but it is not likely to add excess capacity to the global helium market.
The reserve dates back to the 1920s. It was established to stockpile helium to loft the army’s fleet of dirigibles. In the 1960s the reserve purchased another large supply of helium with the expectation that demand would increase.
That demand never materialized, and left the reserve $1.4 billion in debt. In 1996 Congress froze the reserve’s debt, declared that it was no longer necessary to maintain a strategic reserve of the gas, and would start selling down its 900 billion liters of gas.
The ’96 legislation set the price of the reserve’s helium to pay off the reserve’s debt by 2015, not to reflect market conditions. At the time, the market price of helium was much lower than the price set by the government, so it was expected that the government would be the supplier of last resort.
However since then, the demand for helium in electronics manufacturing, industry and research has increased dramatically, while the government’s price has not, resulting in shortages. Right now, the federal government supplies about 40 percent of the helium nationally and 30 percent globally. A study by the National Research Council in 2010, (and reflected in the bill introduced in the House) recommended continuing to sell helium at market rates, even after the loss has been recouped. Once only 85 billion liters remain, likely around 2020, the BLM would stop selling the helium except to the federal government itself and recipients of federal research grants.
For all consumers of helium, it will cost more to buy helium, but the question is how much. If no legislation is passed, the price of helium will skyrocket because of a dramatic reduction in supply, and shortages will likely become even more acute. If legislation is passed allowing the BLM to continue to sell helium after it pays off its debt, the price will be refigured to more accurately reflect its higher market prices.
“It’s clear that the price of BLM crude [helium] is going to go up,” said Omar Vargas, the director of governmental relations at Praxair, a leading helium supplier.
However the price is not likely to rise high enough to attract many if any new vendors to the market.
“The House bill will not result in additional helium...to come to market,” Vargas said. “Helium is a contaminant of natural gas…they are not driven by the economics of helium in their decisions.”
Helium is extracted along with natural gas. Though production of natural gas has increased dramatically in recent years because of advancements in “fracking,” helium can’t be isolated from that process, and escapes through the porous ground into the atmosphere.
There are a few companies around the world hoping to enter the market as helium suppliers. However, construction at the new plants in Algeria, Qatar and Russia has been delayed, and won’t be online for some time.
“There isn’t any more incentive to develop more helium,” said Moses Chan, a physicist at Penn State and co-author of the NRC study. “In the long run, the helium price has no place to go but up.”
Already, the distortions in helium prices and subsequent shortages have made it difficult for researchers to access a reliable supply. Helium remains a liquid at temperatures lower than 4 Kelvin making it invaluable to cool superconductors and other low temperature experiments. The high cost of helium has eaten into scientists’ grant money, while disruptions and delays in supply have hindered experiments reliant on the coolant.
“If there is no new replenishment of it coming in, I would have to warm [the experiment] up,” Chan said. “All that calibration, my four to five months of work, would go down the drain.”
Other cooling systems exist, but each has its drawbacks. Systems that recycle helium are available but expensive, costing $100,000 extra or more. Liquid nitrogen dips down only to 77 Kelvin, too warm for many low temperature experiments. Mechanical refrigerators, which use more moving parts, vibrate as they cool, which can also throw off sensitive experiments.
Rachael Floyd, the sales manager at Janis Research Company, a supplier of cryogenics equipment, said that she’s already seen changes in the way researchers are buying equipment, and that will likely continue.
“If they are having a hard time getting liquid helium, they will have to outlay a lot more capital in the beginning,” Floyd said. “Instead of spending a lot of money on liquid helium as time goes on, they’re spending it upfront on a refrigerator.”
Doctors who rely on helium to run MRI machines have had to invest in expensive recycling systems to ensure a more reliable supply. Helium is also widely used by industry in microchip manufacturing and welding.
Researchers using federal grants are allowed to participate in the government’s “In-Kind” purchasing program. It prioritizes federal grant recipients, and sells them helium at a lower price. The federal government does not sell direct to consumers, but sells to distributors who then resell the helium at the two price tiers.
Some researchers, including Sam Aronson, APS’s vice-President and former Director of Brookhaven National Laboratory, have charged that the distributors are not fully prioritizing federal grant recipients, instead selling first to commercial consumers at the higher price.
The Bureau of Land Management and the distributors deny this is happening, but in testimony before the House Committee on Natural Resources, Aronson stated “... small researchers reliant on federal research grants continue to be subject to severe supply constraints and price shocks which their research grants cannot accommodate....I also note that some large federal users are having their allocations cut back.”
Historically, helium legislation has enjoyed bipartisan support, and Congress is likely to pass some version of the bill this year. Both bills permit the reserve to continue to sell helium past the date it breaks even. The version introduced in the House auctions off an amount of helium to distributors every six months. The Senate has not yet released its version of the bill. Last year, proposed legislation in the Senate would have collected information about the market value of the helium and sold it at similar prices.
Vargas from Praxair said that most distributors prefer the Senate’s version because of concerns over continued disruptions in supply. It’s possible that too much or too little would be auctioned off at any given time, resulting in shortages and surpluses and big swings in price over the year.
“That bill proposal…will inject considerable uncertainty into the supply chain, and at the end of the day that will affect jobs,” Vargas said. “It doesn’t take into consideration the very complicated mechanics of the helium market.”
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