House, Senate Take Different Approaches To Helium Legislation

GAWDA CONSULTANT CORNER GOVERNMENT AFFAIRS & HUMAN RESOURCES

The U.S. House of Representatives and the Senate are each considering legislation to reauthorize the sale of helium from the Federal Helium Reserve, but the two houses have very different approaches to their bills.

The House has passed H.R. 527, which would establish a periodic auction mechanism under which any party may bid for certain tranches of helium from the reserve. This is a change from the current system under which sales of crude helium are allocated to refiners based on their relative refining capacity.

GAWDA’s concern with the House approach is that if an established refiner is not able to secure all of the crude helium that it requires to meet the supply obligations set out in its contracts, then some distributor customers will receive less than their contractual allotments of helium, or perhaps none at all. The distributor will be forced to seek other sources of supply, presumably only if a force majeure clause in the agreement allows the distributor to obtain replacement product from another supplier.

Moreover, as many of the contracts between distributors and gas suppliers are exclusive for all of the gas products together, it is difficult to predict how a disruption in the ability to supply the required amounts of helium in one period will affect the distributor’s contractual obligation to purchase, and the manufacturer’s contractual obligation to sell, all of the other gases contemplated in the agreement.

Similarly, the distributor unable to obtain all of its requirements for helium in a period in turn could end up defaulting on its contracts to supply helium to its customers. The distributor’s customers might be forced to seek alternative supplies of helium for at least part of their needs for that period, and to pay above market prices to the winning auction bidder(s) to ensure a continuous supply of product. This also raises questions of the effect on the contractual obligations to sell and purchase the other gases in the contracts.

GAWDA had supported an amendment to the bill offered on the House floor by Representatives Charles Dent (R-PA), Brian Higgins (D-NY) and Elizabeth Esty (D-CT). The Dent amendment would have preserved existing contracts between the Bureau of Land Management and refiners through 2015, which would have allowed sufficient time to transition to a new system of purchasing refined helium by distributors.

Representative Dent quoted a letter from GAWDA on the House floor stating our concerns about “the effect of the remedies fashioned in H.R. 527 on the stability of the existing market for helium particularly as they affect the ability to meet contractual obligations for product supply.” His amendment was opposed by the Chairman and Ranking Minority Member of the House Natural Resources Committee, however, and was defeated by a vote of 312-87. The bill passed by a vote of 394-1.

The Senate also has a bill, S. 783, sponsored by Senators Ron Wyden (D-OR) and Lisa Murkowski (R-AK), the Chairman and Ranking Minority Member, respectively, of the Senate Committee on Energy and Natural Resources.

The Senate bill would establish a more gradual transition to an auction process. Under S. 783, the BLM would continue to sell helium from the reserve under the current allocation system through September 30, 2014. In fiscal year 2015, the BLM would set aside ten percent of the crude helium available from reserve to be sold at auction (in contrast, under H.R. 527, as much as 100 percent of the amounts available from the reserve would be auctioned effective immediately). The Senate bill would then add an additional ten percent of the available amounts from the reserve to the auction each fiscal year.

Once there are three billion cubic feet of crude helium left in the reserve (there currently are about 11 billion cubic feet in inventory), the Senate bill would limit sales to only federal users such as NASA and the Department of Defense.

The Senate approach would also attempt to sell helium at market-driven prices, which would maximize revenue to the U.S. Treasury and address one of the main complaints about the current sales program.

Unlike the House bill, the Senate bill would require refiners to offer their excess refining capacity, at commercially reasonable rates, to any party that is a successful bidder at the BLM auction.

The Senate bill is also on a fast track for passage; Congress must act before October 1, 2013, so that the BLM may continue to sell helium from the reserve. Once the Senate passes its version of the bill, the House and Senate will meet in a conference committee to negotiate an agreed joint version, which will then be voted on by each chamber.

I thank all GAWDA members who have contacted your members of Congress on this important issue for the industry.

Richard P. Schweitzer, Esq.

Richard P. Schweitzer, Esq.

GAWDA’s Government Affairs and Human Resources Legal Consultant Richard P. Schweitzer, Esq., is president of Richard P. Schweitzer, PLLC in Washington, D.C. Members can reach him at 202-223-3040 and rpschweitzer@rpslegal.com.



  • GAWDA’s Comments on H.R. 527 submitted to the House Natural Resources Committee
  • GAWDA’s Submitted Comments on Senate Bill S. 783
  • Congress Struggles With Helium Shortage
  • Distributors React To Helium Supply Shortage
  • An Insider Look at The Numbers
  • A visit to the Federal Helium Reserve