A Different Kind of Gas Shortage

At a Harris Teeter in suburban Washington, what used to be Harry’s Balloon Corral is, to young eyes, disappointingly empty. The grocery store has posted a notice explaining why. Children accustomed to alleviating the boredom of the weekly trip to the supermarket with the serious task of keeping a helium-filled balloon from floating out of their reach aren’t likely to understand it, however. “Due to a national helium shortage, we are currently unable to offer Harry the Dragon balloons to our customers in training. We apologize for the inconvenience.” Few of their parents will get the sign, either. Helium is one of the most common elements in the universe, second only to hydrogen. How could there possibly be a shortage? It seemed plentiful enough back in high school, when everyone took a turn at the helium tank, inhaling just enough of the gas between giggles to sound like Donald Duck. The end of free balloons might be the first sign you see of the helium shortage—which is global and not just, as Harris Teeter has it, national. It’s unlikely to be the last. If you’ve read anything about the helium shortage, you might know that the element in its liquid form is crucial for cooling the magnets that power the MRI scanners used to diagnose disease. But, ever since airplanes displaced airships, what else do we need helium for?“The real answer is everything,” says Richard Shoemaker, a research professor in the department of chemistry and biochemistry at the University of Colorado Boulder, and director of its nuclear magnetic resonance (NMR) facility. Scientists engaged in NMR spectroscopy use giant magnets—one in the Colorado facility is 10-feet wide and almost 30-feet tall—to study the properties of matter. “In my lab, I have people from chemistry who are synthesizing molecules that might be used eventually to cure a disease—more than one of our research groups are working on ways of curing cancer. People are doing molecular research on extracting more energy out of solar cells.” NMR, he explains, is used to study the structure of everything from pollutants in air and water to the polymers that could purify them, from our DNA to the liquid crystals that make up the displays in the electronic gadgets that have practically become new appendages. Few people appreciate, Shoemaker says, how much now depends on helium, a nonrenewable resource that is found in usable amounts only in certain natural gas fields, is expensive to extract and refine, and is one we can’t just make more of (until we master nuclear fusion, anyway). He rattles off a list: “science and technology, aerospace, construction, fabrication, building cars out of lighter alloys for better gas mileage—you can’t weld the frames together without helium.” He speaks without exaggeration when he says that “at the core of everything we hold dear in society, NMR is in the background. NMR makes it possible for you to go to the drugstore to get your Lipitor if you have high blood pressure. Pharmaceutical companies cannot make drugs and sell them if they’re not characterized by NMR because of the FDA’s requirements for proving purity.” Once you begin to realize how much of modern civilization depends on this noble gas, it’s not surprising that free balloons disappear during a shortage—it’s surprising that helium balloons still spot the skies at all. “Every time I see a party balloon, it makes me mad,” Shoemaker fumes. “Every time I watch the Macy’s parade, I get furious.” The giant floating figures in the annual Thanksgiving procession through Manhattan require about 400,000 cubic feet of helium, which is simply released into the atmosphere to dissipate into space when the day is done. Macy’s has a big budget. But with hospitals, research laboratories, pharmaceutical companies, industrial plants, and even government agencies competing for part of a scarce supply, shouldn’t the price of the lighter-than-air gas have risen so high that almost no one would pay for a balloon full of the stuff? It hasn’t. And the reason goes a long way toward explaining why there’s a shortage in the first place. The world’s biggest supplier of helium, you see, has been selling it at a cut-rate price that has no connection to its actual value. That might sound like an imprudent business decision that should soon correct itself, but, of course, it wasn’t a business decision at all. The world’s biggest supplier of helium is the United States government.The U.S. government recognized the potential of helium early, not long after the element was first detected during a solar eclipse in 1868 and formally isolated in 1895. Second in the periodic table, the helium atom has less mass than that of any other element except hydrogen; as the Earth’s atmosphere is made up mostly of heavier nitrogen and oxygen, helium is lighter than air. The Navy began experimenting with helium during the First World War to hoist airships, and its strategic possibilities were soon apparent; the Department of Defense still uses it for surveillance blimps. But it was the liquid form that would eventually soar in importance. Dutch scientist Heike Kamerlingh Onnes liquefied helium in 1908, using it to discover superconductivity three years later. He won the Nobel Prize in physics in 1913 for his work, which led directly to the research that’s given us MRIs. In 1925, the U.S. government created the Federal Helium Reserve in a giant cave near Amarillo, Texas. (The natural formation containing the gas is now called the Bush Dome Reservoir.) Helium contributed to the development of the atomic bomb during the Second World War, but it wasn’t until the Cold War that the feds began stockpiling the element in earnest. After 1989 brought, as one commentator had it, the End of History, politicians soon began to see the reserve more as a liability than an asset. You might not be able to put a price on national security, but bureaucrats can: The helium reserve had cost the Treasury $1.5 billion, and spending had begun to matter again. The federal government shut down in 1995 when the Republican Congress and the Democratic president couldn’t agree on how many more years of unbalanced budgets were permissible (an argument that seems quaint now). “There was a large stockpile of a good commodity sitting in a reserve in the government coffers here in Amarillo, Texas,” recalls Robert Jolley, a civil engineer and head of the Amarillo field office of the Bureau of Land Management, the Department of the Interior agency in charge of the Federal Helium Reserve. So in 1996, Congress passed and Bill Clinton signed the Helium Privatization Act. Even in Washington, where doublespeak is common, to privatize usually means to expose a product or service to the forces of the market—for the benefit of taxpayers and consumers alike. But the legislators who wrote the Helium Privatization Act didn’t really care how much the government got for the crucial commodity that had helped win wars. The bill instructed the secretary of the interior to sell helium at a price that “shall be adequate to cover all costs incurred in carrying out the provision of this Act and to repay to the United States by deposit in the Treasury all funds required to be repaid to the United States as of October 1, 1995.” In other words, the government just wanted to recoup the costs of its investment. Rather than sell its helium to the highest bidder, Interior was instructed to find a minimum price by “dividing the outstanding amount of such repayable amounts by the volume (in million cubic feet) of crude helium owned by the United States .  .  . at the time of the sale concerned.” Interior was to adjust that amount, as time went on, only by the Consumer Price Index. “The price of helium should go up and down as a commodity from year to year,” Jolley notes. “We were just recovering costs. We were charging a set amount for the year without doing any market survey data. We paid back $1 billion to the U.S. Treasury for the operation of the helium plant, the cost of storing it in the ground, all that.” Keep in mind that, as the National Academy of Sciences (NAS) observed in its 2010 report, “Selling the Nation’s Helium Reserve,” the Federal Helium Reserve was “the only significant depository of crude helium in the world.” In 2004, 84 percent of the world’s helium production came from the United States; by 2011, it was still 77 percent. You can probably guess what would happen if the world’s primary supplier of a resource began pricing it based on cost rather than market value. But lawmakers in 1996 didn’t. “An unintended consequence of the act is that we would publish our crude helium sales price every year, and soon after we started doing that, almost all the helium contracts were tied to the BLM-published price,” says Sam Burton, biochemist and chief of helium operations at the BLM’s Amarillo field office. The BLM price, in other words, became the world price: The NAS report declared that the “legislatively set price for federally owned helium is now setting the price for crude helium, and there is no assurance that this price has any relationship to the current market value of that helium.” Burton thinks the price the BLM initially set—$47 per thousand cubic feet—was a little higher than what it would have been on the open market. But since the legislation directed BLM only to recover costs—and to raise the price only in line with inflation—helium was soon being sold for below what it would have been were it dictated by the product’s actual value. BLM’s 2014 price is $95 per thousand cubic feet. It’s Economics 101: As prices fall, demand increases. But in this case, demand was already beginning to increase because whole new categories of customers had emerged. In 1972, Raymond Damadian had developed the first magnetic resonance imaging machine. The American doctor, who’d spent his boyhood studying the violin at Juilliard, hadn’t yet figured out how to use the technology to scan the body to get images that would detect tissue changes like those indicative of cancer. But others would. In 1980, a Scottish team used an MRI machine to produce the technology’s first diagnosis of cancer. The breakthrough wouldn’t have happened without helium; the powerful MRI magnets can’t function without it.

Read more