Last month, the General Services Administration held an auction. Normally, that means used federal cars and trucks, office supplies and buildings are under the gavel. But this time, it was the Federal Helium Reserve that was up for sale.

For about 100 years, the government has stockpiled helium in underground caverns near Amarillo, Texas. Originally, it was for lighter-than-air aircrafts, blimps and the like, but now it’s used to provide an essential element for MRI machines, semiconductor manufacturing and, of course, party balloons.

The government’s been trying to get the stockpile off its hands for nearly three decades. Some industries that rely on helium, however, are pushing back against privatizing it. So, why exactly are we selling off the Federal Helium Reserve?

“A laughingstock”

To answer that, we have to go back to a Congressional session on April 30, 1996 — a time when Republicans in Congress were enthusiastic about cutting government spending.

“The National Helium Reserve has really been a laughingstock, I think, for several decades,” then-Wisconsin Representative Scott Klug said on the House floor. The old helium reserve, he said, was a perfect example of ballooning government waste.

“In 1996, it’s clear that blimps have absolutely nothing to do with national security,” Klug said. “They may have to do with some intriguing shots at the halftime of a Monday Night Football game, but I think they manage to do that without support from the federal government.”

The Helium Privatization Act passed later that year, and President Bill Clinton signed it. A few years later, the government started selling off its stockpile of helium.

Then, the market went crazy. Martha Morton experienced this. She runs a biology and chemistry lab at the University of Nebraska-Lincoln which relies on liquid helium to cool huge magnets inside devices that can analyze the makeup of a cell. 

“At that point, helium cost went from $2 or $4 a liter and jumped to $5 or $6 a liter,” she said. “I’m now paying $19 a liter.”

There have also been several severe helium shortages over the past 20 years. So what went wrong?

Helium on the cheap

“They didn’t foresee the demand in the early 2000s,” said Bo Sears, who runs Helix Exploration, a helium exploration business. He said just after the U.S. government decided to start selling off its helium, demand started rising — due mostly to the growing production of computer chips — and there weren’t many other sources at the time.

That drove up prices. But in that 1996 bill, Congress set a price formula for its helium that was not tied to the market.

“And it just became very cheap helium,” Sears said. “So you and I, as U.S. taxpayers, were selling the stuff off for a song. Meanwhile, the major industrial gas companies were, you know, making big margins off helium sales.”

Private sector companies didn’t really have any incentive to go look for more helium themselves, Sears said, leading to those shortages. Finally, in 2013, Congress stepped in again to stabilize the market and mandated that most of the remaining government helium and the entire helium facility in Amarillo be sold by 2021.

“For a lot of people, it was like a kick the can down the road kind of thing,” said Phil Kornbluth, an industry analyst and consultant.

A potential shutdown of the reserve

Now, we’ve reached the can again. After a few more years of delays, in January, federal officials revealed bids from private companies that want to buy the helium reserve. There were just two.

Meanwhile, some industry groups don’t want a sale to go through.

“That transfer is when we believe things are going to go sideways,” said Rich Gottwald, head of the Compressed Gas Association, a trade group. 

Right now, to get to refineries, the helium from the reserve flows through a pipeline that crosses three states. The federal government doesn’t need to worry about state regulations in those areas, Gottwald said — but a private owner will.

“Whether they be environmental regulations, whether they be gaining rights of way for certain areas where the pipeline goes through,” he said.

Getting into compliance could take up to 18 months, Gottwald added. He thinks the reserve would need to be shut down that whole time.

“And when it shuts down, that means 20% of the U.S. supply of helium will go offline,” he said.

That would cause more supply problems for MRI operators, semiconductor companies, research labs and more.

So, Gottwald wants the government to halt the sale process, work out the regulatory kinks and hold another auction in a few years. The government has until early June to decide whether to accept a bid.

Searching for alternative sources

But some helium buyers aren’t waiting to find workarounds. A few years ago, Martha Morton, the lab director in Nebraska, installed a system that captures most of the helium that escapes from her magnets.

“I now recover 80% of what I use over a year,” she said. That means she’s less reliant on the turbulent market, but, she said, the recovery system needs almost constant maintenance. 

“And so me going off for a two week vacation hasn’t happened in a couple years,” Morton said.

But, at least she’s less worried about the fate of the Federal Helium Reserve.

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