Energy and helium : a crisis in future energy technology

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96th Congress {TT{ PRIT COMMITTEE
1st Session COMMITTEE PRINT PRINT 96-IFC 25






ENERGY AND HELIUM:


A CRISIS


IN FUTURE ENERGY TECHNOLOGY


PREPARED FOR THE USE OF THE


SUBCOMMITTEE


ON ENERGY


AND POWER


COMMITTEE ON
INTERSTATE AND FOREIGN COMMERCE


UNITED


STATES


HOUSE OF REPRESENTATIVES


Printed for the use of the Committee on Interstate and Foreign
Commerce, United States House of Representatives

U.S. GOVERNMENT PRINTING OFFICE


WASHINGTON : 1979


49-2990







COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE


HARLEY 0. STAGGERS, West Virginia, Chairman


JOHN D. DINGELL, Michigan
LIONEL VAN DEERLIN, California
JOHN M. MURPHY, New York
DAVID E. SATTERFIELD III, Virginia
BOB ECKHARDT, Texas
RICHARDSON PREYER, North Carolina
JAMES H. SCHEUER, New York
RICHARD L. OTTINGER, New York
HENRY A. WAXMAN, California
TIMOTHY E. WIRTH, Colorado
PHILIP R. SHARP, Indiana
JAMES J. FLORIO, New Jersey
ANTHONY TOBY MOFFETT, Connecticut
JIM SANTINI, Nevada
ANDREW MAGUIRE, New Jersey
MARTY RUSSO, Illinois
EDWARD J. MARKEY, Massachusetts
THOMAS A. LUKEN, Ohio
DOUG WALGREN, Pennsylvania
ALBERT GORE, JR., Tennessee
BARBARA A. MIKULSKI, Maryland
RONALD M. MOTTL, Ohio
PHIL GRAMM, Texas
AL SWIFT, Washington
MICKEY LELAND, Texas
RICHARD C. SHELBY, Alabama


JAMES T. BROYHILL, North Carolina
SAMUEL L. DEVINE, Ohio
TIM LEE CARTER, Kentucky
CLARENCE J. BROWN, Ohio
JAMES M. COLLINS, Texas
NORMAN F. LENT, New York
EDWARD R. MADIGAN, Illinois
CARLOS J. MOORHEAD, California
MATTHEW J. RINALDO, New Jersey
DAVE STOCKMAN, Michigan
MARC L. MARKS, Pennsylvania
TOM CORCORAN, Illinois
GARY A. LEE, New York
TOM LOEFFLER, Texas
WILLIAM E. DANNEMEYER, California


KENNETH J. PAINTER, Acting Clerk
ELEANOR A. DINKINS, Assistant Clerk
WM. MICHAEL KITZMILLER, Profess88ional Staff
MICHAEL J. P. BOLAND, Minority 6taff Assistant



SUBCOMMITTEE ON ENERGY AND POWEB
JOHN D. DINGELL, Michigan, Chairman


RICHARD L. OTTINGER, New York
PHILIP R. SHARP, Indiana
ANTHONY TOBY MOFFETT, Connecticut
DAVID E. SATTERFIELD III, Virginia
TIMOTHY E. WIRTH, Colorado
EDWARD J. MARKEY, Massachusetts
PHIL GRAMM, Texas
AL SWIFT, Washington
RICHARD C. SHELBY, Alabama
ANDREW MAGUIRE, New Jersey
ALBERT GORE. JR., Tennessee
MICKEY LELAND, Texas "
HARLEY 0. STAGGERS, West Virginia
(Ex Officio)


CLARENCE J. BROWN, Ohio
CARLOS J. MOORHEAD, California
JAMES M. COLLINS, Texas
DAVE STOCKMAN, Michigan
TOM CORCORAN, Illinois
TOM LOEFFLER, Texas
JAMES T. BROYHILL, North Carolina
(Ex Officio)


FRANK M. POTTER, Jr., Staff Director and Counsel
MICHAEL F. BARRETT, Jr., Counsel
(II)












LETTER OF TRANSMITTAL


CONGRESS OF THE UNITED STATES,
HOUSE OF REPRESENTATIVES,
SUBCOMMITrEE ON ENERGY AND POWER,
COMMITrEE ON INTERSTATE AND FOREIGN COMMERCE,
Washington, D.C., July 30, 1978.
Hon. HARLEY 0. STAGGERS,
Chairman, Committee on Interstate and Foreign Commerce, U.S. House
of Representatives, Washington, D.C.
DEAR MR. CHAIRMAN: The report "Energy and Helium: A Crisis in
Future Energy Technology," prepared by the staff of the Energy and
Power Subcommittee, deals with an issue of the utmost national
significance. It is my belief that it would be useful if the report were
published as a Committee Print.
The study, which was conducted by staff assistant Bruce Judson,
describes the current lack of national policy regarding the conservation
of helium and explains the consequences of failure to take timely
action. It also sets forth the various options for action and describes
their impact on helium conservation and on future energy technology.
I believe that all Members of the House will find the study to be of
interest.
Sincerely,
JOHN D. DINGELL,
Chairman.
Enclosure.
(ill)




















Digitized by the Internet Archive
in 2013














http://archive.org/detaiIs/enheliumcris00unit












CONTENTS


Introduction................................................................................................................................ 1
Helium Uses ............................................................................................................................... 2
The Federal Legacy.................................................................................................................. 3
The Private M market .................................................................................................................... 4
Helium Litigation ...................................................................................................................... 6
U united States H elium Resources .............................................................................................. 6
Helium D demand ........................................................................................................................ 8
Helium Production and Prices................................................................................................. 9
From N natural G as............................................................................................................ 9
From the Atm osphere..................................................................................................... 10
Foreign Sources of H elium ....................................................................................................... 11
Supply Dem and Analysis .......................................................................................................... 12
Scenario O ne: Base Case................................................................................................. 12
Scenario Two: Maximum Use of Current Capacity................................................. ... 13
Scenario Three: Recovery G greater than .1 Percent...................................................... 14
Scenario Four: H elium -Energy Act of 1979 ................................................................ 14
H elium Surplus Charts................................................................................................... 15
Appendix One............................................................................................................................ 16
N natural G as Flaring in the U united States...................................................................... 16
Appendix Two............................................................................................................................ 17
Supply............................................................................................................................... 17
D em and ............................................................................................................................ 18
Appendix Three......................................................................................................................... 19
Figure 1: Projected Annual Recoverable Helium by Average Concentration
from Depleting Natural Gas in the United States 1979-2000................... 19
Figure 2: Projected Annual Recoverable Helium by Degree of Geologic Assur-
ance from Depleting Natural Gas in the United States 1979-2030........... 20
Figure 3: Projected Annual Helium Demand in the United States 1979-2030....... 21
Figure 4: Cumulative Helium Surplus in the United States 1979-2030-
High D em and Scenario.................................................................................. 22
Figure 5: Cumulative Helium Surplus in the United States 1979-2030-
Interm ediate D em and Scenario.................................................................... 23
Figure 6: Cumulative Helium Surplus in the United States 2979-2030-
Low D em and Scenario.................................................................................. 24
MV)












ENERGY AND HELIUM:
A Crisis In Future Energy Technology

INTRODUCTION
Helium, a nonrenewable resource, is the sole element which remains
liquid at temperatures near absolute zero (-459.4 Farenheit). This
unique feature makes helium essential for developing energy technolo-
gies such as fusion, superconductive power transmission lines,
superconductive magnetic energy storage systems, and magnetohydrody-
namics (MHD). Helium is also critical to the development and opera-
tion of certain lasers with applications in energy production, defense,
and medicine. The future large-scale development of these lasers for
defense or any of these new energy technologies will require great
quantities of helium.
Helium occurs naturally in the atmosphere and in natural gas fields.
Historically, United States helium requirements have been met through
the extraction of helium from natural gas. Those natural gas fields con-
taining significant quantities of helium are rapidly depleting, and in the
near future the capacity of the United States to produce helium from
this source will be severely reduced. Helium may also be extracted from
the atmosphere; however, the tremendous energy requirements associ-
ated with this process make the extraction of large quantities of helium
from the atmosphere infeasible.
Valuable future energy technologies are thus likely to become avail-
able at a time when the United States can no longer produce the
helium the technologies require.
This analysis, prepared by the Staff of the House Subcommittee on
Energy and Power, assesses the long-term helium options confronting
the Congress. Issues relevant to the current helium controversy such as
helium uses, previous Federal efforts at helium conservation, current
helium litigation, the existing private helium market, and alternate
methods of helium production are examined. The maximum volume of
helium recoverable from natural gas in the United States is estimated,
and a base case, the future available supply of helium if Congress takes
no action, is also projected. Finally, potential legislative strategies for
increasing future helium supplies, including the proposed Helium-
Energy Act of 1979, are discussed, and the costs as well as estimated
effects of these are presented.
The proposed Helium-Energy Act of 1979 provides for the increased
conservation of helium. It would require the recovery, for beneficial
use, of all significant quantities of both federally and privately owned
helium. In addition, the Act would:
-permit the inexpensive storage of such helium in Federal facilities,


(1)







-end the current role of the Federal government as a seller of helium
to both the private market and Federal agencies,
-provide Federal loans for the construction of additional privately
owned helium extraction plants, and
-free private helium producers from the need to pay royalties or
inventory taxes on stored helium until the time of its sale for use.
The basic conclusion of this analysis is that Congress must act, and
act soon, to ensure adequate supplies of helium in the future. If
Congress takes no legislative action, the United States may be unable to
meet its helium needs after the year 2017. The Helium-Energy Act of
1979 would prevent United States helium shortages until at least 2040.
HELIUM USES
Helium is considered indispensable in cryogenic technologies
requiring temperatures below -435 Farenheit. Without the use of
helium, there is no known method for obtaining such temperatures.
The cryogenic applications of helium with the greatest potential are
those involving superconductivity where, because of the low tempera-
tures obtained with helium, the electrical resistance of the material
becomes virtually nonexistent. Superconductivity, when commercially
developed, will have extremely valuable applications for the production,
transmission and storage of electrical energy. Superconductive power
transmission lines will be able to transmit at least 10,000 times the
electrical power of comparable conventional cables. Superconductive
magnets, which are already highly developed, produce high magnetic
fields at less than one-tenth the operating cost of conventional
magnets, and are essential for plasma containment in fusion and
magnetohydrodynamics (MHD).1 These magnets, when used in super-
conductive magnetic energy storage systems, will provide for loss-free,
long-term energy storage. Such storage is not possible with ordinary
electrical conductors. In addition, superconductive generators, which
will be more efficient and powerful than their conventional
counterparts, will have a variety of uses in both manufacturing indus-
tries and electric utilities.
Superconductivity will also play an important role in developing
energy-efficient transportation. Superconductive technology will
produce smaller size, light-weight motors. Such motors are being
developed for naval and merchant marine vessels as well as for
aerospace applications. Superconductors may be used to produce
magnetically levitated and propelled high-speed ground transportation
systems. Renewed interest is also being given to the development of
cargo-carrying lighter than air ships. These vessels will require helium
as well as superconductive magnets for levitation. Superconductivity
also has important applications in high-energy physics, computers, and
instrumentation.
In addition to its cryogenic properties, the transparency of helium to
radiation and its high heat transfer rate make the element important in
1 Due to its extreme heat, the plasma must be confined by high magnetic fields rather than physical
substances.







nuclear power generation.2 Fusion, high-temperature conventional gas-
cooled reactors, and gas-cooled breeder reactors all require helium as a
heat transfer agent. In these reactors, helium is used as a working fluid
to shift heat from the reactor core to central heat exchangers. Such
reactors are more efficient and safer than those which operate at lower
temperatures. Closed cycle helium cooling also eliminates the need for
water cooling. This reduces the environmental impact of nuclear power
facilities and permits greater choice in siting.
The operation and development of certain ultra-high-powered con-
tinuous gas lasers, with important applications in defense as well as
energy production and sophisticated medical procedures, also require
helium. These lasers represent a use from which the helium may not be
retrieved. Each laser pulse expends a given quantity of helium, and the
operation of high-power laser weapons would utilize enormous
quantities of the element.
Similarly, helium is critical to the future operation of the space
shuttle and the solar power satellite. Helium is the sole agent which
affords the necessary safety and reliability for pressurizing and purging
space vehicles.
Existing cryogenic applications of helium include its use in research
for space science, cancer treatment, communications, and nuclear
science. Helium has additional important uses in controlled atmos-
pheres, welding, chromatography, synthetic breathing mixtures required
for certain types of deep sea and space activities, and leak detection.
THE FEDERAL LEGACY
Until 1960, the government maintained a monopoly on the
production and sale of helium. All production facilities were operated
y the Bureau of Mines (BoM). However, by the late 1950s, the
growing uses for helium in rocketry, research, and commercial
applications taxed the capacity of the BoM to produce helium.
A 1958 interagency study, known as the Chilson report,
recommended helium conservation on a large scale, as well as the
involvement of private industry in the production of helium. The report
noted that the free world's greatest supplies of helium were contained
in natural gas streams centered around the Texas Panhandle, Oklahoma,
and Kansas. These natural gas streams were, or were expected to soon
be, committed to market, so that helium not extracted would be
dissipated into the atmosphere during burning of the natural gas.
Helium, once dissipated into the atmosphere, would be effectively lost
to the United States. In the fall of 1960, Congress passed The Helium
Act Amendments of 1960 (P.L. 86-777) which embodied the
recommendations of the Chilson report.
The Helium Act Amendments of 1960 provided for the Federal
acquisition and conservation of helium. It authorized the Secretary of
the Interior to purchase large quantities of helium from private
producers under long-term contracts, and in 1962 the Department of
2 In this context, mtransparency to radiation mean that helium will not interfere with the nuclear reaction
and that should any of this helium cxcape It will not be radioactive.








the Interior initiated a large volume helium storage operation at
Cliffside, Texas. In 1971, claiming that the purpose of P.L. 86-777
had been satisfied, the United States cancelled the helium purchase
contracts. As of September 30, 1978, 37.7 billion cubic feet (Bcf) of
federally owned helium and 1.9 Bcf of privately owned helium were
stored in the Cliffside stockpile.
Under the authority of P.L. 86-777, Federal helium purchases were
financed by annual loans of up to $47.5 million per year from the
United States Treasury. The underlying premise of the law was the
expectation that helium sales by Interior to other Federal agencies and
private users, would eventually make the program self-supporting.
Under P.L. 86-777, all Federal agencies were required to purchase
helium from the Department of the Interior, and the price for United
States helium was set at $35 per thousand cubic feet (Mcf). Private
producers subsequently undercut government helium sales to the
private market by selling helium for $20-$25 per Mcf. As a
consequence, actual Federal sales of helium were substantially below
expectations and Interior incurred a helium debt which it has not been
able to repay. As of September 30, 1978, the helium debt totaled $493
million with the compound interest accruing at a rate of approximately
$30 million per year.
The early cancellation of the helium purchase contracts in 1971 left
the United States with a helium extraction capacity which exceeded
immediate national and export demand. The four former Federal
helium contractors (Northern Helex Co., Phillips Petroleum Co., Cities
Service Helex Co., and National Helium Corp.) were left without a
market for helium. As a result, these producers either vented their
excess helium production or shut down the helium extraction sections
of their processing plants. In the latter case, the helium was dissipated
into the atmosphere during burning of the natural gas.3 Ventings and
plant shutdowns have thus far resulted in a loss to the United States of
11 Bcf of helium, an amount equivalent to 28 percent of current
storage.
Beginning in 1974, the BoM offered to store inexpensively the excess
helium production of private helium producers in the Federal facility at
Cliffside. Private companies largely rejected such offers for several
reasons: the future price of helium was uncertain and might not justify
the investment; companies feared the need to pay royalties, State
inventory taxes, and Federal income taxes on stored helium which
might not be sold for many years: and several companies worried about
the effect accepting the BoM offers would have on pending litigation.
THE PRIVATE MARKET
Seven privately owned plants currently extract helium from natural
gas fields which will be almost totally exhausted by 2000. The helium
available for recovery from those fields decreases constantly. Four of
the plants produce only crude helium; three others, plus the two
government owned plants at Keyes, Oklahoma, and Excell, Texas, pro-
3 Producers who vented their excess production-Northern Helex Co, Cities Service Helex Co, and Phillips
Petroleum Co.-all had constructed gas processing plants which. In order to operate, were required to extract
any contained helium during the upgrade of natural gas to fuel quality. Because of a different plant design,
National Helium Corp. was able to close the helium extraction section of its natural gas processing plant while
continuing all other operations.








duce Grade A helium.4 Neither of the government owned plants will be
able to make a major contribution toward meeting the nation's
future helium demand as the reserves at the Keyes plant will be
exhausted by 1986, and the Excell plant operates primarily to inject and
remove helium at the Cliffside storage field.
Despite the existing barriers to long-term private helium storage, the
Phillips Petroleum Co. and the Northern Helex Co. recently began
storing their excess helium production. At present, the majority of the
helium processed by the other two former Federal helium contractors
continues to go unrecovered. The helium extraction section of the
National Helium Corp. plant remains closed, and Cities Service Helex
Co. continues to vent helium.
In 1978, the United States extracted only 10 percent of the helium
contained in the produced natural gas stream; the remaining helium
was dissipated into the atmosphere. This represents tremendous waste
of a valuable natural resource; yet, in the short term (1979-1995),
private firms are unlikely to construct additional or replacement helium
extraction capacity. No incentives exist for such construction because,
during this period, private helium production will exceed projected
private helium demand. The Subcommittee staff analysis indicates that,
as a result of these factors, the United States will lose 54 Bcf of
recoverable helium contained in natural gas production during these
years, an amount equal to almost 150 percent of the volume of helium
currently stored.5
The uncertainties in the helium market created by the Federal
stockpile also make it extremely unlikely even in the long-term (1995
and beyond) that private producers will be willing$ to incur the risk of
constructing new helium extraction plants on remaining privately owned
natural gas fields. The first problem is cost. Assuming no sudden
technological advances, the future production costs of helium from such
fields will be significantly greater than those in the recent past. An even
bigger problem is the Federal role in the helium market. Since 1961,
Federal policy, as required by P.L. 86-777, has been to sell helium at a
breakeven price which the BoM set at $35 per Mcf. If this policy
continues, sales from the Federal helium stockpile will undercut any
future helium price of private producers. Private firms will thus be wary
of investing in the future production of a commodity for which the
government has effective price setting ability. If Congress takes no
action, this market uncertainty will disappear only when the stockpile
has been depleted, at which time virtually all privately owned natural
gas fields containing significant quantities of helium will have been
exhausted and the helium produced from these fields will have been
lost to the atmosphere.
As noted earlier, P.L. 86-777 requires that Federal agencies purchase
all the helium they use from the Department of the Interior. In 1980,
the helium output of the remaining federally owned helium extraction
facilities will be insufficient to meet Federal helium demand. In order
to meet the Federal demand for helium, the Department of the Interior
4 Crude helium is a gas mixture of helium and nitr'ogen which varies In composition from 40 to 70 percent
helium. Grade A (99.995 percent) helium, results from the further purification of crude helium.
5 The analyses included In this section are based on projections of future helium supply, demand, and
prices, which are discussed in detail on pages 12-15 in this report.







will then be forced to draw on the limited government stockpile of
helium. While the government begins tapping its stockpile, private
producers may be expected to continue venting or leave unrecovered
their potential helium production in excess of private helium demand.
This unnecessary separation of the Federal and private helium markets
will result in an unjustifiable waste of helium totaling at least 6.5 Bcf by
1995.
HELIUM LITIGATION
The early cancellation of the helium purchase contracts in 1971 has
resulted in four lawsuits currently before the Court of Claims. Cities
Service Helex Inc., National Helium Corp., Phillips Petroleum Co., and
Northern Helium Co., are all seeking damages for breach of contract by
the Federal government. In pending suits, Cities Service Helex is
seeking damages of $101 million; National Helium Corp., $171 million;
and Phillips, $102 million. In 1975, the Court of Claims indicated that
Northern Helex Co. was entitled to damages no greater than $35
million, and returned the case to the trial judge for final action.
Six additional lawsuits currently before the courts involve pipeline
companies, their helium extraction subsidiaries, landowners, and
producers of natural gas. Pipeline companies and their helium
extraction subsidiaries are defendants in these cases, while the plaintiffs
are the landowners and producers of natural gas containing the helium.
These lawsuits seek to determine (a) which of the parties, landowners,
producers, or helium extraction companies, own the helium contained
in the natural gas stream, (b) whether landowners and producers are
entitled to royalties for previously valueless helium extracted from
natural gas, and (c) what is the reasonable value of helium for these
royalty payments.
The United States has an interest in the outcome of the litigation
over the value of helium as, under the terms of the original helium
purchase contracts, the United States may be required to indemnify
elium extraction companies for any amount over $3.00 per Mcf for
which the companies are found liable on helium sold to the
government.
To date, two courts have ruled on the reasonable value of helium in
the reservoir. In a suit currently being appealed, Northern Natural Gas
Co., el al. v. Ralph Ground, el al. [393 F. Supp. 949 (1974)], the United
States District Court of Kansas held that the value of helium before
extraction from natural gas ranged from $.61 per Mcf in 1962 to $.70
per Mcf in 1972. In Ashland Oil Inc. v. Phillips Petroleum Co. [463 F.
Supp. 619], the United States District Court for Northern Oklahoma
recently reduced the maximum value of helium determined in an
earlier ruling from $17.00 per Mcf to $3.00 per Mcf. The parties
involved are appealing this decision.
UNITED STATES HELIUM RESOURCES
The BoM estimates that as of January 1, 1978, the United States had
total remaining helium resources of 718 Bcf. Of this estimated resource
base, only 198 Bcf (including helium stored at Cliffside) are measured
or proved resources. An additional 153 Bcf are classified as indicated or






probable resources, and 179 Bcf are considered hypothetical or possible
resources. The remaining 188 Bcf are termed speculative resources. Both
the hypothetical and speculative resources, which together represent
over 50 percent of estimated United States helium resources, are
actually undiscovered. This information is summarized in Table 1 below
where United States helium resources are classified by degree of
geologic assurance.
Table 1. Total United States Helium Resources As Estimated By
United States Bureau ofMines*
Classification Mf Percentage of Total
Measured (Proved) 198 28
Indicated (Probable) 153 21
Hypothetical (Possible) 179 25
Speculative 188 26
Total 718 100
*Helium at 14.7 PSIA and 700 F
Helium resources are also classified as depleting or nondepleting.
Depleting helium resources are those contained in natural gas currently
being produced; nondepleting helium resources are those contained in
natural gas not currently being produced, helium deposits not associated
with significant quantities of natural gas, and helium stored in the
Federal facility at Cliffside. The BoM estimates that of our total
remaining helium resources, 593 Bcf are depleting and 125 Bcf are
nondepleting. Of nondepleting resources which are not stored, 60 Bcf
are federally owned and 25 Bcf are privately owned.
Not all of the helium contained in natural gas is recoverable. Only a
fraction of the available helium supply can feasibly be gathered into a
feed stream large enough to be processed by an extraction plant.
Technical factors also impose limits on the amount of helium that can
be recovered from the gas processed by the plant.
The Subcommittee staff analysis indicates that the maximum
recoverable volume of helium in the United States prior to 2030 is only
289 Bcf. This includes 38 Bcf of currently stored helium and 78 Bcf of
other nondepleting resources. In addition, estimates of recoverable
helium resources contained in depleting natural gas at helium
concentrations in the natural gas of .3 percent or more are 45 Bcf, at
concentrations between .3 percent and .1 percent, 73 Bcf, and
concentrations below .1 percent, 55 Bcf.
The BoM projects that currently proved and probable depleting
helium resources will be exhausted by 2014. Additional supplies of
natural gas currently classified as possible resources and containing at
least 130 Bcf of helium will be verified and produced before 2030.
These BoM projections were utilized in calculating the Subcommittee
staff estimates of recoverable helium resources.
It should be noted that other governmental sources indicate that
future discoveries of natural gas will be far fewer than those anticipated








by this data.6 If these studies are correct, the actual volume of
recoverable helium would be reduced proportionally. Other assumptions
employed in estimating recoverable helium resources are discussed in
Appendix Two (page 17) of this report.
Figure One in Appendix Three (page 19) displays the Subcommittee
staff estimates of maximum recoverable helium from depleting natural
gas at varying average helium concentrations computed on an annual
basis. Figure Two in Appendix Three (page 20) displays these same
volumes of recoverable helium according to current degree of geologic
assurance. Helium available in stored and nondepleting resources is not
represented in Figure One or Figure Two. Both graphs rise sharply
after 1982 since a 3 1/2-year lead time is necessary for the construction
of any new helium extraction plants.
Historically, the natural gas containing substanital quantities of
nondepleting helium has not been produced because of its low value as
fuel. Increasingly, this is no longer the case, and there is now danger
that this helium will be lost. Production of the federally owned Tip Top
field, with estimated helium resources of 44 Bcf, is expected to begin in
1983. By the year 2000, increasing natural gas prices may make it
profitable to begin production of federally owned natural gas containing
an additional 18 Bcf of helium now classified as nondepleting.
Existing Federal law reserves the right of the United States to extract
helium from all gas to which the United States has title; however, the
law does not require that the government exercise this option. As
demonstrated by the early cancellation of the helium purchase
contracts, the government may choose to allow the production of
federally owned natural gas without recovering the contained helium
for short term budgetary concerns or other unknown reasons. Such
actions would obviously result in the loss of significant quantities of
helium.
HELIUM DEMAND
In fiscal year 1978, the United States consumed 896 million cubic
feet (MMcf) of helium and exported 170 MMcf. The Interagency
Helium Committee (IHC) estimates that annual helium demand
including exports will be 1,690 MMcf in the year 2000, with a
cumulative helium demand from 1979-2000 of.29.4 Bcf.7
After 2000, estimates of demand for United States helium depend
largely on assumptions concerning the development of new technologies
utilizing helium. For the period between 2000 and 2030, the IHC has
developed three demand scenarios. The low demand scenario represents
a "business as usual" case with a slight annual growth rate in helium
use for private industries and Federal agencies but with the
introduction of no new technologies requiring significant quantities of
helium. The IHC low demand scenario projects annual demand for
United States helium in 2030 to be 2.7 Bcf and a cumulative helium
demand between 1979 and 2030 of 95.9 Bcf.
6 See M. King Hubbert U.S. Energy Resource. A Review as of 1972 (U.S. Senate Committee on Interior
and Insular Affairs 193-40]; United Slates Government Printing Office: 1974).
7 Representatives from the Departments of Interior, Energy. Defense and NASA served on this Committee.
In February), 1978. the Committee issued The Interagency Helium Study (see p. 85). A follow-up Suplementary
Report on Helium was completed by the Office of Minerals Policy Analysis, US. Department of the Interior,
in August, 1978.






The IHC intermediate helium demand scenario projects moderate
domestic utilization of new helium-related energy, space, or defense
technologies. This intermediate demand scenario projects annual
demand for United States helium at 4.3 Bcf in 2030 and a cumulative
helium demand from 1979-2030 of 132.9 Bcf.
Finally, the IHC high demand scenario represents the anticipated
demand for United States helium resulting from a major domestic shift
to helium dependent technologies such as superconductive power
transmission lines, superconductive magnetic energy storage facilities,
fusion and the solar power satellite. The high demand scenario
estimates an annual helium demand of 8.1 Bcf in 2030 and a
cumulative helium demand between 1979 and 2030 of 225.4 Bcf.
In all three IHC demand scenarios, cumulative export demand
between 1979 and 2030 is equal to 12 Bcf. This represents the expected
foreign demand for United States helium arising from existing
technologies. These scenarios assume that the helium demands of other
nations for use in new technologies will be met by sources of helium
outside the United States.
Figure Three in Appendix Three on page 21 displays the IHC
estimates of future demand for United States helium on an annual
basis.
HELIUM PRODUCTION AND PRICES
From Natural Gas
The cost of helium recovery increases as the helium concentration in
the natural gas decreases. All operating helium extraction plants are
built on natural gas fields with helium concentrations of .4 percent or
greater. In the near future, if the nation wishes to recover additional
quantities of helium from natural gas, it will be necessary to construct
extraction plants on natural gas streams with considerably lower
concentrations of helium.
On the basis of calculations by the BoM, the Subcommittee staff has
estimated the cost in 1978 dollars of recovering helium contained in
depleting natural gas:
Table 2. Cost ofRecovery-Currently Depleting Helium
%Helium-Range %Helium-Average Bcf $/Mcf/Heliurn
.3% and greater .522 44.8 13.29
.1% to .3 .109 73.0 50.26
less than .1% .041 54.8 129.86
These estimates assume that facilities for helium separation and
purification are added to existing gas processing plants.
The costs given above all assume the production of helium by
cryogenic extraction plants which also upgrade natural gas to fuel
quality. Such plants utilize a cooling process which separates the helium
fom the other components of the natural gas by the successive
liquefaction of contained gases. It is important to note that this process
utilizes a great deal of energy. Should these plants continue to run on
natural gas, any significant increases in the price of this fuel would raise
the price of helium extraction.







In a joint project, the Alberta Research Council and Alberta Helium,
Limited are currently constructing a pilot plant in Edmonton, Alberta,
for the extraction of helium from natural gas through differential
permeation. This completely non-cryogenic method of production
separates the helium from the natural gas stream by selective diffusion
through certain types of glass membranes. This plant is expected to
separate only 60 percent of the helium contained in the natural gas
stream, as compared with 95 percent in a cryogenic facility, and will
produce helium from concentrations of .1 and .05 percent in natural
gas. The Canadians expect that this plant will require one-third the
energy of a similar cryogenic extraction plant. Since this project is still
experimental, its potential impact on the cost of helium extraction from
natural gas is uncertain.
Crude helium is currently purified using either a cryogenic process or
the recently developed pressure swing adsorption (PSA) technique. In
PSA, molecular sieves and other materials act as adsorbers that remove
impurities from the helium. At present, the extraction of crude helium
from natural gas using the PSA method is impractical as it requires
more energy, and is consequently more expensive, than cryogenic
extraction. Future advances in adsorption technology may alter this
situation.
From the Atmosphere
Production of helium from the atmosphere, where the element occurs
in concentrations of only 5 parts per million, must utilize a cryogenic
process. For a given amount of helium, this extraction requires roughly
one thousand times more energy than the cryogenic extraction of
helium from natural gas concentrations of .5 percent.
Helium may be produced as a byproduct of the air separation
industry. In this case, the energy cost of extracting helium from the
atmosphere is largely paid for by production of other gases. The helium
available as a byproduct of this industry is largely dependent on the
demand for oxygen. This demand, which totaled 450 Bcf in 1978, is
expected to reach four trillion cubic feet (Tcf) by 2000 and thereafter
increase at a growth rate of 3 percent per year. Assuming such oxygen
production, the helium available annually as a byproduct of air
separation will increase from 100 MMcf in 2000 to 250 MMcf in 2030.
At present, no air separation plants produce helium. Industry sources
indicate that at a helium price of $350 per Mcf most of these producers
would be induced to recover helium as a byproduct. Depending upon
the price for neon, the principal co-product with helium, some
producers might find it profitable to recover helium at prices as low as
200 per Mcf. In either case, these prices are well above those that can
be expected for helium produced from natural gas. As a result, this
source is not likely to make any contribution to the nation's helium
production until supplies of helium from natural gas are unable to meet
national demand.
When other sources become insufficient or unavailable, it will be
necessary to extract helium, as a primary product, from the atmos-






phere.8 The cost of producing such helium is largely dependent on the
cost of the energy needed for the extraction process. In a conventional
plant, a unit cost for electricity of 10 mills per kilowatt hour (kwh)
would yield a cost of $3,800 per Mcf of helium produced. Likewise,
unit electricity costs of 20 mills and 40 mills per kwh would yield costs
for helium of $5,500 and $9,000 respectively per Mcf. Economies of
scale may be achieved by designing large power plants, producing the
equivalent of 1200 megawatts of electricity, whose turbines directly
drive the extraction plant compressors. The selling price for this helium,
in 1978 dollars, would be $3,400 per Mcf.
The extraction of one Bcf of helium from the atmosphere, the
approximate current United States annual helium production, would
require the energy equivalent of 500 million barrels of oil to process
200 trillion cubic feet of air. Thus, tremendous energy and monetary
costs and technical difficulties render the large-scale extraction of
helium from the atmosphere infeasible.
FOREIGN SOURCES OF HELIUM
The BoM estimates foreign helium resources, excluding nations with
centrally controlled economies, to be 184 Bcf, with 89 Bcf in Algeria, 39
Bcf in Canada, 23 Bcf in the Netherlands, 21 Bcf in Australia, and
others totaling 12 Bcf. The helium concentrations of the Canadian fields
varies from .02 percent to 1.9%, but only 4.3 Bcf exceed concentrations
of .3 -percent. Where helium occurs in natural gas, the average
concentrations are .17 percent in Algeria, .08 percent in Australia, and
.06 percent in the Netherlands. Little is known about the helium
resources in countries with centrally controlled economies; however,
Russian natural gas resources, estimated at 900 trillion cubic feet (Tcf),
represent a large potential source of helium.
The United States is currently the largest helium producer in the
world, as well as the only nation with a substantial helium stockpile. In
1978, world production of helium totaled 1,762 MMcf. Of this total, the
United States produced 1,583 MMcf, Canada produced 18 MMcf,
France produced 11 MMcf, and nations with centrally controlled
economies, principally Russia and Poland, produced 150 MMcf. Poland
recently completed its 150 MMcf per annum crude helium extraction
plant. The output of this plant, which totaled 38 MMcf in 1978, is
expected to increase in the near future.
Due primarily to the current world surplus of helium, the majority of
nations with helium resources are not seeking to prevent their
dissipation of the element into the atmosphere. As future helium
demand and prices increase, this situation may change, but substantial
quantities of helium will have been wasted in the interim. One
potentially large economical source of helium is the gaseous waste
stream from plants producing liquid natural gas (LNG) in Algeria and
elsewhere.
8 The environmental Impact statement (FES 72-41: p. 40), "Termination of Helium Purchase Contract.,"
Issued by the BoM in 1972, mentions the possibility of obtaining helium as a byproduct of fusion. In actuality,
the amount of helium obtainable in this manner represents a volume which is virtually negligible when
compared to even current demand levels. See Charles Laverick, Heltum-n-tis Siorage and Use in Future Years
(U.S. Energy Research and Development Administration; 1974), p. 93







Any increases in the use of technologies utilizing helium in the
United States will almost certainly be paralleled by the development of
these technologies in other industrialized nations. Hence, foreign
sources of helium will most likely be sought by a number of nations.
Purchases of foreign helium by the United States would also exacerbate
any existing balance of payments problems. Obviously, this country
cannot be certain of the future availability of foreign helium supplies.
SUPPLY DEMAND ANALYSIS
This section projects the future available supply of helium in the
United States i Congress takes no legislative action. This base case,
scenario one, is then compared with three alternate scenarios of future
helium supply. In scenario two, the effects of utilizing existing helium
extraction plants to the maximum amount possible are estimated. In
scenario three, the effects of producing all recoverable helium in the
United States in natural gas concentrations greater than .1 percent are
calculated. Scenario four projects the likely results of the Helium-
Energy Act of 1979.
In the order presented here, each successive scenario represents an
increasing national commitment to helium conservation. As such, the
actions taken in scenario two are an intrinsic part of scenario three.
Likewise, the requirements of both scenarios two and three are
incorporated in the Helium-Energy Act.
In all four scenarios, the results of helium supply-demand anal sis
are presented with reference to all three IHC demand projections. The
IHC contends that the most probable future helium demand forecast
lies between the low and intermediate demand scenarios. The
Subcommittee staff concludes that the high demand scenario most
nearly approximates the likely future demand for helium. This study
indicates what will happen under each set of demand assumptions.
Estimates included below cite years beyond 2030, and are based on a
continuation of trends expected to begin between 1979 and 2030. All
projections in the following section, especially those beyond 2030, are
meant to be illustrative, indicating not specific years but the general
time-frames involved. The sources and methodology for these
calculations are discussed in Appendix Two, pages 17-18.
Scenario One: Base Case
Our analysis indicates that if Congress takes no legislative action,
United States helium production from depleting natural gas will be
unable to supply national demand in 1985. If all available nondepleting
helium were recovered, according to the high demand scenario, the
United States would be unable to meet its helium needs after 2019.
Under these same assumptions, the intermediate demand scenario
indicates that this inability to meet national needs would occur in 2031,
and the low demand scenario projects 2044. As discussed in Appendix
Two, it is possible that some helium will still be contained in United
States natural gas production after the years indicated, but, even if
recovered, this helium would be far less than that needed to supply
projected national demand.






Should the government choose not to recover helium from federally
owned natural gas fields, the producer-lessees of the field might
contract for this right: however, no private producers would seek to do
this while a helium surplus continued to exist. After the disappearance
of this excess, continuing inflation and increases in the price of natural
gas would likely affect the profitability of such helium production,
further inhibiting private initiative. Our analysis suggests that private
industry would choose not to produce at least 10 Bcf of currently
nondepleting helium. Under the high demand scenario, this loss would
result in the United States being unable to meet its helium needs by
2017, while the intermediate demand scenario projects that this will
occur in 2029, and the low demand scenario projects 2041.
Both of the above possibilities assume:
-the continued sale of available helium by the BoM,
-the continued separation of the Federal and private helium
markets,
-continued venting as long as no market for such helium exists,
-the construction of additional helium extraction capacity only for
the recovery of currently nondepleting helium.
The base case findings are summarized in the table below:
Table 3. Year In Which United States Is First Unable To Meet
Helium Needs-Scenario One
Demand Assumption. ....
High Intermediate Low
Base Case 2017 2031 2044
Scenario Two: Maximum Use of Current Capacity
This analysis examines the future United States helium
supply-demand situation if the maximum use were made of existing
helium extraction capacity, but no new helium extraction plants were
constructed for the recovery of privately owned depleting natural gas.
This scenario assumes that:
-the BoM discontinues the sale of helium,
-Federal agencies purchase their helium requirements from the pri-
vate market,
-currently shut down helium extraction plants with remaining he-
lium reserves are opened immediately,
-all of the recoverable helium contained in both federally and
private owned nondepleting natural gas is extracted for use.
Under the conditions described above, United States helium demand
would not exceed production from depleting natural gas until the year
1990, and the additional helium stored between 1979 and 1990 could
supply total United States helium demand until 2001 (high demand
scenario) or 2004 (low demand scenario). The primary difference
between this scenario and the base case, after 2000, is the guaranteed
full recovery of federal owned currently nondepleting helium.
After 2020 in the high demand scenario, the additional helium saved
from existing private extraction plants would represent only a few years
supply. Thus, assuming the high demand situation, the U.S would be
unable to meet its helium demand in 2021. The intermediate demand
scenario predicts this situation by 2034, while the low demand scenario
projects 2049. These findings are summarized in the table below:





14

Table 4. Year In Which United States Is First Unable To Meet
Helium Needs-Scenario Two
Demand Assumption .....
High Intermediate Low
Maximum Use, 2021 2034 2049
Existing Facilities
Scenario Three: Recovery Greater than. 1 percent
This analysis projects the likely effects of extracting for storage or use
all recoverable helium in the United States in natural gas concentrations
greater than .1 percent.
This scenario assumes that:
-all measures described in scenario two, and
-private firms invest $206 million, two-thirds of which is available
through Federal loans, in the construction of new helium extraction
plants.
If the United States follows the high demand path, helium demand
would first exceed supply in 2031. According to the intermediate
demand scenario, this would occur in 2056, while the low demand
scenario indicates some time after 2070. The table below summarizes
these conclusions:
Table 5. Year In Which United States Is First Unable To Meet
Helium Needs-Scenario Three
Demand Assumption
High Intermediate Low
.1% Recovery 2031 2056 after 2070
Scenario Four: Helium-Energy Act of 1979
This analysis examines the full effects of the Helium-Energy Act of
1979 as introduced, and assumes the extraction for storage or -beneficial
use of all recoverable helium in the United States as measured in this
report.
As provided by the Helium-Energy Act, this recovery is undertaken
by
-all measures described in scenario two;
-private investment of $700 million, two-thirds of which is available
through Federal loans, in the construction of new helium extraction
plants; and
-ending all United States helium exports.
The high demand scenario projects that under these conditions the
United States would first be unable to meet its helium requirements in
2040. The intermediate demand scenario predicts this situation in 2069,
while the low demand scenario indicates that this would not occur until
after 2070. These findings are summarized in the table on the following
page:





Table 6. Year In Which United States Is First Unable To Meet
Helium Needs-Scenario Four
Demand Assumdtion
Him Intemediate L&I
Helium-Energy Act 2040 2069 after 2070
Helium Surplus Charts
The cumulative helium surplus charts in Appendix Three, (Figures
four on page 22, five on page 23, and six on page 24) summarize the
findings of the four supply-demand analyses for each of the three IHC
demand projections. In each case, the horizontal line at zero indicates
the point at which helium produced from depleting natural gas after
1979 would be unable to supply projected national helium demand. A
supply line entering the negative ranges of numbers indicates that the
United States is drawing on the supplies of helium currently stored or
held in nondepleting natural gas. The sections labeled "currently
nondcpleting" represent the supplies of recoverable helium held in
these categories. The bottom horizontal line occurring at -116 Bcf
represents the total depletion of these helium resources. A supply line
crossing the horizontal line at -116 Bcf indicates that the United States
is no longer able to supply its helium needs.









APPENDIX ONE
This appendix discusses an earlier historical parallel to the current
helium situation.
Natural Gas Flaring In The United States
We estimate that between 1930 and 1960 the United States flared or
otherwise failed to recover at the wellhead approximately 119 trillion
cubic feet (Tcf) of natural gas. This represents a close historical parallel
to the current helium situation. During this time period, natural gas was
produced primarily as a byproduct of petroleum recovery. Technology
existed for the reinjection of natural gas; yet this process was generally
considered to be uneconomical. Thus, when the available supply of
natural gas exceeded immediate demand, the excess quantities were
burned at the wellhead. Individual states finally banned this practice in
about 1960.
The amount of gas lost is the equivalent of 58 percent of proved
natural gas reserves in the United States as of year-end 1977. Had our
predecessors prevented this waste of natural gas, the United States
would be in a better energy situation today. A strong possibility exists
that future generations will view helium in the same manner.


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APPENDIX Two


This appendix discusses the sources and methodology for the helium
supply-demand analyses included in this report.
Supply
The estimates of recoverable resources (i.e., helium which can be
brought to market prior to 2030) are derived from BoM projections of
the supplies of helium likely to be contained in the future annual
production of fuel natural gas. The BoM calculations are in turn based
on: estimates by the American Gas Association (AGA) of proved
natural gas reserves in the United States; estimates by the Potential Gas
Committee (PGC) of undiscovered natural gas reserves in the United
States; estimates by the Gas Requirements Committee (GRC) of future
gas consumption in the United States; and the BoM estimates of
helium concentrations in various natural gas streams in the United
States
Estimates of recoverable helium after 2030 are derived from a natural
gas production curve fitted to a declining exponential with a rate of 1.7
percent a year. This production curve, if extended indefinitely from
1976, adds up to about 1150 Tcf which agrees with industry reserve
estimates.9 The production of resources currently classified as
speculative begins in approximately 2040. Assuming these conditions,
the maximum volume of helium recoverable annually in the United
States would be 1.4 Bcf in 2050 and .9 Bcf in 2070.
On the basis of information obtained from the BoM and industry
sources, this analysis considered that virtually all depleting helium in
natural &as concentrations equal to or greater than .3 percent enters a
major pipeline system and thus is available for processing. Only 58
percent of helium in concentrations less than .3 percent is believed to
e available for recovery. Operating extraction plants are considered to
recover 95 percent of the helium contained in the available plant feed
stream. Plant downtime, both scheduled and unscheduled, is assumed at
15 days annually, while purification is also believed to result in a 95
percent recovery. These recovery factors are presented in the following
table:
Table 7. Recovery Factors For Helium From Natural Gas
%Helium In Natural Gas
.3% Or Greater Less Than .3%
Streams Available 100% 58%
Recovery Efficiency 95% 95%
Plant Operating Days 350/365 350/365
Purification 95% 95%
Overall Recovery Factors 87% 50%
9 See H. R. Howland. Economic and Budgetary Study of Federal Helium Resource Management (Draft report
prepared for the U.S. Department of the Interior; 1978). p. 22.


(17)








The overall recovery factor for each of the two categories was then
applied on an annual basis to the appropriate projections of available
helium supply. The resulting quantities represent the staff estimates of
recoverable helium reserves from depleting natural gas in the United
States. The estimates of recoverable helium reserves from nondepleting
natural gas, utilized here, were calculated using a 92 percent overall
recovery factor. A 95 percent purification factor was also assumed for
the recovery of stored helium.
The BoM estimates a minimum three and one-half year lead time for
the construction of any new helium extraction plants. This lead time is
incorporated in our estimates; prior to 1982 only helium which can be
produced by existing extraction plants is considered recoverable.
Demand
Where necessary, the three IHC helium demand scenarios were
extended beyond the 1979-2030 time period. In such cases, helium
demand was increased annually by the average yearly percentage rate of
increase for each scenario between 2010 and 2030. This results in an
annual helium demand of 3.4 Bcf in 2050 and 4.2 Bcf in 2070 for the
low demand scenario, 5.5 Bcf in 2050 and 6.8 Bcf in 2070 for the
intermediate demand scenario, and 9.7 Bcf in 2050 and 11.6 Bcf in 2070
for the high demand scenario.
The four supply-demand analyses prepared for this report do not
include an elasticity factor for helium prices. The staff concluded that
for both current and future uses the unique properties of helium and
general lack of substitutes make helium demand largely insensitive to
price. We recognize that increases in the price of helium will certainly
lead to greater efforts at recycling the material as well as further
stimulate the search for substitutes; however, it is not expected that this
will significantly effect the overall demand for helium.10
10 This view agrees with that expressed In The Energy Related Applications of Helium (U.S. Enery Research
and Development Administration, 1975).





Appendix Three


Figure 1


PROJECTED ANNUAL RECOVERABLE HELIUM
BY AVERAGE CONCENTRATION
FROM DEPLETING NATURAL GAS IN THE UNITED STATES
1979-2030


1990 2000


YEAR


(Helium at 14.7 PSIA and 70F)


10:


8;


6:
BCF
4


2:


0
1






Figure 2


PROJECTED ANNUAL RECOVERABLE HELIUM
BY DEGREE OF GEOLOGIC ASSURANCE
FROM DEPLETING NATURAL GAS IN THE UNITED STATES
1979-2030


10


8:


6
BCF
4


2:


1990 2000 2010 2020 2030
YEAR
(Helium at 14.7 PSIA and 70F)


1980






Figure 3


PROJECTED ANNUAL HELIUM DEMAND
IN THE UNITED STATES
1979-2030


HIGH DEMAND
- SCENARIO


INTERMEDIATE
DEMAND SCENARIO


LOW DEMAND
" SCENARIO


0 2020 2030


(Helium at 14.7 PSIA and 70F)


Source: Interagency Helium Study (Interagency Helium Committee:
February, 1978) p. 88


10:


8:


6
BCF:
4


2:


0:


2000


YEAR






Figure 4


CUMULATIVE HELIUM SURPLUS
IN THE UNITED STATES 1979-2030
HIGH DEMAND SCENARIO


HELIUM-ENERGY ACT



\ .1% RECOVERY


MAXIMUM USE
. \CURRENT CAPACITY


A A
1990 2000


A A A
2010 2020 2030
Year


(Helium at 14.7 PSIA and 70)


100


50


0
Bcf
-50


-100


-150


-200


1980





Figure 5


CUMULATIVE HELIUM SURPLUS
IN THE UNITED STATES 1979-2030
INTERMEDIATE DEMAND SCENARIO


'. HELUM-ENERGY ACT


\- ------------,--% RECOVERY



Currently MAXIMUM USE
Nondepleting / CURRENT CAPACITY
(Including Stored) ,

----BASE CASE


1990


2000


2030


2010
Year


(Helium at 14.7 PSIA and 70F)


100


50


0
Bcf

-50


-100


-150


-200






Figure 6


CUMULATIVE HELIUM SURPLUS
IN THE UNITED STATES 1979-2030
LOW DEMAND SCENARIO


HELIUM-ENERGY ACT


MAXIMUM USE
CURRENT CAPACITY


Currently
Nondepleting u
(Including Stored) ^


CASE


1980 1990


2010
Year


2020 2030

(Helium at 14.7 PSIA and 70F)


100


50


0
Bcf

-50


.100


-150


-200









UNIVERSITY OF FLORIDA


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