Helium Bill Could Pop Uncle Sam's Business

WHAT do party balloons, particle accelerators, deep-sea diving, and space flight have in common? They all use helium.

A bill in Congress is trying to knock the federal government out of the helium business.

Helium is the only commodity the government produces in competition with the private sector. But opponents of the federal helium program contend such competition is inappropriate for the government.

More than 150 congressmen have co-sponsored a bill by Rep. Christopher Cox (R) of California. Representative Cox says reliance on modern, efficient private suppliers would snip $24 million from the federal government's $1.5 trillion annual budget.

Eliminating the government would certainly provide more sales for private helium refiners, but it is unclear whether it would boost helium prices for consumers.

Private helium suppliers offer taxpayers no assurance of any savings if the Cox bill passes. Rather, the effect will be "uncertain," says Carl Johnson, chairman of the industry's Helium Advisory Council. "That's life," he adds.

Defenders of the little-known federal helium program include its 180 employees, their union, their customers in other federal agencies, and Amarillo, the Texas community where the helium refinery and storage facility are located. Amarillo gets a $35 million economic boost from the operation, it is estimated. Eliminating the program, Cox-bill critics say, would enable private refiners - there are now only three - to raise helium prices.

The government got into the helium business in the 1920s with the purchase of Cliffside, a helium-rich natural-gas field. Washington wanted to ensure a supply of the lighter-than-air gas for dirigibles. No private companies were saving the rare gas because of its low price.

That changed in the 1960s, when Congress set the price of helium high enough to encourage private companies to make the necessary investment in a refinery to separate the helium from other gases.

Demand for helium doubles every seven years, Mr. Johnson says. The United States consumed 2.7 billion cubic feet and exported 0.9 billion cf last year, the Bureau of Mines reports. Private applications include magnetic resonance imaging, semiconductor and fiber optics manufacturing, and low-temperature superconductivity. Space, defense, and other federal programs account for just 9 percent of US helium consumption.

By law, federal users must buy helium from the Bureau of Mines' stockpile. The hoard would meet current federal needs for 133 years. The bureau also operates an aged refinery.

Currently, the $20 million revenues of the federal helium program exceed costs by $5 million a year.

"If it puts money back in the Treasury, why would you want to close it?" asks Sharon Oeschger, vice president of Jack B. Kelly Inc., an Amarillo-based distributor of helium that buys from both the government and private refiners.

Sherrill Johnson, a General Accounting Office regional manager in Dallas, analyzed the helium operation in 1992. "We were pretty impressed," he says. It is "one of the few programs in which the taxpayer is better off letting things continue as is." The GAO concluded that taxpayers will pay more if the government stops supplying its own helium needs.

But Cox charges that the helium program is an anachronism. His bill would close the government refinery immediately and sell it for a hoped-for $6 million. Under the bill, though, private refiners would still have to buy helium from the government in quantities equal to their sales to federal government users.

Between 2004 and 2014, the bureau would sell off most of the helium reserve, provided it can obtain a price of $1.3 billion, adjusted for inflation. That would require a 30 percent increase over today's prices.

That may be possible. The Hugoton natural-gas field, which stretches across Texas, Oklahoma, and Kansas, is the "Saudi Arabia of helium," Johnson says. Most of the world's supply comes from this rapidly waning field.

The Cox bill would leave intact some helium-program functions. Those cost $2 million a year and require 40 employees.

One quirk of the 1960 law haunts the federal program: Rather than appropriating the money to buy crude helium, Congress only "loaned" the amounts to the Bureau of Mines. The money, plus interest, supposedly was to be repaid to the Treasury out of sales of refined helium at a higher price. But that policy was defeated by the other policy of staying uncompetitive with the newly created private refiners, who captured the market.

Thus, $250 million actually spent to buy crude helium ballooned with interest to a $1.3 billion "debt" by 1993. Because of interest payments, this debt makes the program technically "money losing."