May 252012

Image courtesy of Arizona Geological Survey -- Some of the richest helium-bearing gas in the world was historically extracted from fields in northeastern Arizona, including the Holbrook Basin about 35 miles northeast of Holbrook, according to the Arizona Geological Survey.

By Teri Walker —

The U.S. Congress and the helium industry are scrambling to address a pending worldwide helium shortage and State Geologist Lee Allison says helium fields in northeastern Arizona, including the rich deposits in and surrounding the Holbrook Basin, could help shore up supply.

Congress convened hearings earlier this month to hear testimony supporting the Helium Stewardship Act of 2012. The premise behind development of the act, whose chief sponsor is Senator Jeff Bingaman, D-NM, chair of the Committee on Energy and Natural Resources, is the United States has been selling off its strategic reserve of helium at “fire sale” prices since 1996, and unless Congress acts now, the federal helium program will disappear altogether by 2015.

In 1920, when the U.S. had its sights set on blimps and other helium-fueled airships as military resources, a national helium program was developed. In the 1960s, the Federal Helium Reserve was opened in the Hugo-ton-Panhandle Gas Field of Texas, Kansas and Oklahoma. Helium’s importance to military technology dimin-ished and over time, the reserve ended up $1.4 billion in debt after paying drillers for decades to extract helium from natural gas.

In a bid to save money, Congress in 1996 passed the Helium Privatization Act, opting to sell off the coun-try’s helium reserve by the end of 2014. The U.S. has been aggressive in this endeavor and is now selling the country’s helium at about half the price it would fetch on the open market.

The bill sponsors, along with members of the medical and scientific communities, are concerned that a significant chunk of the world’s helium supply is vanishing at alarming rates even as the demand for the gas continues to rise worldwide. Complicating the issue is that under current law, the Federal Helium Reserve may run out of operating funds by 2013, locking up 30 percent of the world’s supply in a reservoir that no one could touch.

“Helium is critical to a wide range of industrial, scientific and medical markets, including medical devices such as MRIs, industrial welding, high tech manufacturing of microchips and fiber optic cables, manufacturing of magnets for wind turbines, space exploration at NASA, and many other important scientific research activi-ties that are conducted at laboratories around the country,” Bingaman said in his opening remarks to Congress on May 10.

In short: “It’s about a lot more than helium balloons,” says Allison.

With the Helium Stewardship Act, lawmakers would slow down the sale of the federal helium reserves, extending the sell off beyond 2015, and set pricing closer to open market rates, with both acts intended to pro-vide time for other helium resources to be developed and brought to market.

And that’s where northeastern Arizona and other portions of the Four Corners region could come in, says Allison.

In a 2003 report entitled, Review of Helium Production and Potential in Arizona, Arizona Oil & Gas Ad-ministrator Steve Rauzi noted, “Some of the richest helium-bearing gas in the world was produced from fields completed specifically for helium in northeastern Arizona in the 1960s and 1970s.”

The production came from fields in Apache County: Three fields were in the Holbrook Basin about 35 miles northeast of Holbrook; one field was in the Four Corners area near Teec Nos Pos; and helium-rich gas was discovered in the Dineh-bi-Keyah oil field in the late 1960s, but wasn’t brought into production until 2003.

Rauzi reported helium concentrations were recorded from trace amounts up to 10 percent in the Holbrook Basin and Four Corners area, and he concluded that both areas still have “good potential for additional discov-ery and production of helium.”

Allison explains that helium concentrations of three-tenths of one percent are considered rich enough to warrant commercial development, so the concentrations found in northeastern Arizona are considered very rich and are significantly above minimum industry development criteria.

The below-market value pricing of the federal helium reserve has discouraged companies from developing new helium fields, but that could change, Allison says, if Congress passes the proposed Helium Stewardship Act or if the Bureau of Land Management, which has jurisdiction over the helium reserves, raises prices.

Movement on the issue has already caused rumblings in the industry. Allison says the Arizona Geological Survey has begun receiving inquiries and contacts from companies and individuals interested in gathering his-toric data about the helium fields of northeastern Arizona.

Allison notes while it may be too early to be economical to start production on a helium field, people may be beginning to contemplate land purchases and lease agreements that would position companies to strike when the time is right.

One company well positioned to take advantage of a blooming helium market would be Kinder Morgan, which recently briefed the Arizona Oil & Gas Conservation Commission about plans to complete evaluation of the St. Johns carbon dioxide and helium field, and develop it as a major supplier to oil fields in New Mexico and Texas.

Based on exploration the company plans to continue in 2012, Kinder Morgan expects it could eventually drill 250 wells in the field and build a 400-mile long pipeline to Denver City on the Texas-New Mexico bor-der.

Kinder Morgan is developing the field primarily for its carbon dioxide resource. With a change in the he-lium market, there could be cause, Allison says, for the company to look at also capturing the helium that is present with the carbon dioxide, rather than letting it release into the atmosphere where it is lost to develop-ment.

According to Allison, while the Holbrook Basin helium fields produce at a lower pressure than some other locations, the richness in concentration could still make the basin an attractive development location.

Allison says regardless of where new helium deposits are developed, there is growing recognition some-thing has to be done. His sentiment is shared by those urging Congress to act quickly to stem the sale of the federal helium reserve and encourage new development.

“The result of inaction will be to take 30 percent of the world’s supply off the market, causing enormous dislocations in the affected industries and ripple effects beyond them–patients forced to travel long distances to find working MRIs, semiconductor manufacturer, and other industrial and commercial businesses uncertain where they will turn for essential helium, creating new dependencies on unstable foreign sources. Essential scientific research could suffer major adverse impacts,” members of the Medical Imaging & Technology Alli-ance said in a statement to Congress.

“The Helium Stewardship Act will protect our economy and national security from unpredictable supply sources across the globe. It will ensure that a safe supply of domestic helium is available for many years to come.”