This is from my Perverse Economy:
The treatment of the national helium reserves illustrates this troubling relationship between discounting and scarcity. Helium is a remarkable substance. Because it is inert, it does not combine with other substances. Because of its perceived military importance in dirigibles, during the 1920s the United States began to collect helium under a federal monopoly. Helium has properties other than being lighter than air. No other element can reach the low temperature of liquid helium. This property makes it useful in a broad array of high‑tech industrial, research, and medical technologies, such as fiber‑optic cables and magnetic‑resonance imaging systems (National Research Council 2000). The government later established a facility in Texas to store crude helium (National Research Council 2000). The Texas location is not accidental. Although atmospheric helium is plentiful, it is dispersed. Extracting this helium from the air is a very expensive proposition since only minute quantities of helium exist within a fairly large volume of air. The sedimentary rocks that form the gas carry about one part per million of uranium. According to Kenneth Deffeyes, "During the slow decay to lead, each uranium atom spits out six to eight alpha particles. An alpha particle in physics is identical to the nucleus of a helium atom in chemistry. The helium gas that we put in party balloons is simply used alpha particles" (Deffeyes 2001, p. 66). In contrast to its dispersion in the atmosphere, helium in natural gas deposits is relatively concentrated. Some natural gas deposits have helium concentrations as high as 8 percent, making them the most economical source of this element (National Research Council 2000, p. 40). Separating helium from natural gas costs only about 1/1000 as much as obtaining it from the atmosphere (Koopmans 1979). In 1960, Congress amended the Helium Act, which had originally authorized the helium depository. This new legislation eliminated the federal monopoly of helium, although the Bureau of Mines continued to collect helium. Several companies in the United States entered the market to collect and sell the gas. These companies sold their excess helium to the federal government, which stored it in the National Helium Reserve in Texas. Private consumption of helium reached a low point in the 1970s, even though private production was still vigorous. As a result, the government continued to accumulate more helium in the reserves until around 1980. With the build‑up of federal stockpiles, conservatives singled out the helium reserves as a particularly egregious example of government waste (see Stroup and Shaw 1985). Christopher Cox, the California Congressman who led the fight to privatize helium labeled the reserve: "The poster child of Government waste" (Verhovek 1997). In 1996, Congress eliminated the National Helium Reserve, leaving the management of helium to the free market and the likes of Enron, Exxon, and Panhandle Eastern Corporation. Well, not exactly, the free market. The law required that the government dispose of its helium over a couple of decades to prevent privatization from decreasing the price that the private producers charge. The promised cost savings have yet to appear. The American Physical Society, a prominent group of physicists, has warned that the privatization plan is dangerous, because it has no requirement that a large stockpile will be maintained (Verhovek 1997; Powell 1996). Helium demand is now increasing at about 10 percent per year. The supply may be largely depleted by 2015, the date by which Congress proposes to phase out the reserve. Indeed, a federal report says that the current trends indicate that shortages will appear within less than 20 years, unless private business develops new technologies. However, these experts are confident that business will somehow meet the challenge, although they give no indication of what this new technology might be (Natioal Research Council 2000). -- Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901 www.michaelperelman.wordpress.com
