SCHUMER: HOUSE BILL ON PENDING CLOSURE OF FEDERAL HELIUM RESERVE COULD DISRUPT CRITICAL SUPPLY FOR PRAXAIR - LAUNCHES NEW SENATE PLAN THAT WILL STOP RESERVE FROM CLOSING AS EARLY AS OCTOBER, KEEP SUPPLY FLOWING TO PRAXAIR & HIGH-TECH, MEDICAL CUSTOMERS
Helium Is a Rare & Crucial Ingredient Supplied by Praxair to High-tech Manufacturing of & Medical Firms in WNY– Current Federal Law Could Force Closure of the National Helium Reserve This Year
Schumer Plan Would Authorize Continued Sale of Helium at Responsible, Market- Based Prices to Conserve Existing Supply – House-Passed Bill Could Disrupt Critical Flow of Current Supply; Shutdown Will Drive Up Helium Costs for NY Chip Makers
Schumer: If Helium Reserve Dries Up, Praxair & Jobs Could Suffer
Yesterday, U.S. Senator Charles E. Schumer announced his new plan to prevent the Federal Helium Reserve in Amarillo, Texas from pending closure in the coming months, which could have a negative impact on the availability of helium for Praxair, which supplies helium to companies throughout Western New York in critical applications like high-tech manufacturing and medical procedures. Schumer is a cosponsor of the Helium Stewardship Act of 2013, introduced by Sens. Ron Wyden (D-OR) and Lisa Murkowski (R-AK), which aims to re-authorize the operation of the federal helium reserve, promote the responsible management of Federally-held crude helium assets, and to stimulate future development of private sources of helium. Praxair is a lead supporter of this must-pass legislation, as a failure to pass the Senate legislation could have a serious impact on the company and its over 1,100 employees in Tonawanda. Schumer said this legislation will help secure and preserve reliable helium supplies for important commercial users like the New York semiconductor industry, a major job-creator in upstate New York. Schumer said that the House of Representatives passed a more extreme, impractical bill that could disrupt supply for Upstate New York high-tech chip manufacturers like GlobalFoundries because of an aggressive approach that would almost immediately open up 100% of the reserve to semi-annual private auctions, as opposed to honoring existing supplier contracts.
The Federal Helium Reserve currently provides approximately half of all domestic helium needs. Instability in the domestic helium supply and the pending closure of the federal helium reserve could have ramifications for suppliers like Praxair in Buffalo, and a number of their customers in Upstate NY, including: Corning Inc., Roswell Park Cancer Institute, Dresser-Rand, and Buffalo based research engine CUBRC. It would also impact chip manufacturing at GlobalFoundries and IBM. IBM has also noted that a steady supply of helium is critical to the success of a new line of mainframe computers the company has developed, which is being partially assembled in New York.
“If our federal helium reserve dries up, Praxair – one of the largest helium suppliers worldwide- will suffer,” said Senator Schumer. “We cannot let our national helium supply float away, especially because a healthy reserve means a healthy Praxair, and allows them to fuel high-tech jobs in upstate New York. If Congress does not act quickly, these key job-creating industries will face very real economic troubles from helium price increases and supply issues and I will push the Senate bill to make sure we have a sure and steady future supply.”
Schumer continued, “Though the House bill and Senate bill are largely similar, opening so much of the helium – almost 100% – up for semi-annual auction so quickly is too aggressive. The Senate bill opens up the reserve in smaller more gradual increments, allowing us to prevent some unpredictability that could arise. Industries depend on this critical element, and the Senate bill would be a better approach for our hospitals, manufacturers, and federal research occurring at places like NASA and our national labs.”
“The Senate proposal provides a thoughtful approach that institutes free-market reforms while also ensuring access to all market participants. Unlike legislation recently passed by the U.S. House of Representatives, the Senate proposal protects the stability of the helium supply chain, avoids entanglements with existing contracts, and respects private property rights. By contrast, H.R. 527, the Responsible Helium Administration and Stewardship Act, if enacted into law as proposed, would replace the current, highly predictable helium supply system with a semi-annual auction that destabilizes the entire helium supply system” said Scott Kaltrider, Praxair’s vice president of business management and helium.
In 1996, Congress passed the Helium Privatization Act, requiring the Federal Helium Reserve to shut down once the reserves run out of supply or when the reserve's $1.3 billion debt, incurred over 50 years in order to build up the nation's helium stockpile, is re-paid. The intention of the 1996 law was to wind down the Reserve’s debt by selling the majority of all the available crude helium left in federal lands by 2015 and have private suppliers fill the void in domestic helium supplies. However, due to price controls and other logistical hurdles, billions of cubic feet of helium that could last through 2020 still sit in the Reserve and industry still relies on the Reserve for half of its domestic supply needs. The current authority to operate the Federal Helium Reserve expires on October 7, 2013. Schumer noted that time is running out, and Congress must act swiftly to extend the life of this critical resource for companies like GlobalFoundries and IBM.
The Helium Stewardship Act of 2013, that Schumer is pushing to bring to the Senate floor would authorize the Secretary of the Interior to continue selling federally-owned crude helium at market prices and promote new strategies to produce and preserve domestic helium sources. Schumer has been discussing the need for the legislation with major New York chip-makers like GlobalFoundries and IBM, who consider reliable and inexpensive helium a critical aspect of their business, and urged the Senator to prioritize passage of the reforms.
The Senate bill aims to secure long-term access to the Bureau of Land Management's crude helium for all federal users at a fair market value for US taxpayers. This proposal would rework the Federal Helium Reserve program so that it doesn’t shut its doors, while working to establish a more reliable domestic supply. Helium would be sold off more carefully, and at market rates, to encourage private producers to extract more helium, or recycle helium they already have. This impending crisis would have far-reaching effects on the US economy. According to the Semiconductor Industry Association (SIA), a stable and reliable supply of helium is "critical to the manufacturing process and continued health of the U.S. semiconductor manufacturing industry." Though perhaps most famous for being the crucial ingredient in party balloons, helium gas is also a necessity in a range of technologies including medical scanners, LCD screens, welding tools, and high-tech computer chips. The bill would ensure a secure, reliable, and continuous supply of helium for end users through a market based approach that would also add $340 million in revenue to the Treasury.
This measured, phased approach the Senate is taking is gradual and would work in three phases:
· First, the reserve would operate as it is now under the current system through September 30, 2014.
· Second, the bill ensures a smooth transition away from federal ownership by establishing an auction of 10 percent of the helium in the reserve, beginning in fiscal year 2015, with an additional 10 percentage points added to the auction every year.
· In the third phase, the reserve would continue to operate only to supply federal customers. Senator Schumer believes this transitional approach would provide certainty and flexibility through the auction process, and would honor existing contracts for the supply and delivery of helium for refiners who have invested hundreds of millions of dollars in infrastructure that supports the Reserve and the end users they provide helium to.
The House passed legislation, HR 527, would move to auction off almost 100% of the reserve’s helium semi-annually when it begins auctions, potentially creating market disruptions in supply to end users, creating uncertainty around existing agreements for critical technologies, and open the door for unintended consequences such as litigation. Senator Schumer believes the Senate bill offers more reliability and certainty.
BACKGROUND & IMPACT OF PENDING CLOSURE:
The Federal Helium Reserve (FHR) is the world’s only helium gas stockpile, and is located just outside of Amarillo, Texas. The FHR is connected by a Federal pipeline to private helium refiners spread throughout Northern Texas, the Oklahoma panhandle, and Southern Kansas. Currently, the Federal Helium Reserve represents around 40% of the US supply of helium and 30% of global supplies, and closure of the Reserve would result in significant supply line disruptions affecting multiple industries within our country. Unrefined “crude” helium sales from the FHR supply roughly half of all domestic helium needs and one third of global helium demand each year. Closure of this reserve could force U.S. companies to rely on unpredictable sources for helium, like Russia, Algeria and Qatar, which have all recently built processing facilities for helium.
Praxair provides atmospheric, high-performance coatings, as well as process and specialty gases such as oxygen, nitrogen, argon, carbon dioxide, helium, and hydrogen. The corporation also specializes in engineering organizational designs and constructing air separation systems, known as cryogenic and non-cryogenic, as well as technologies, such as coatings and powders for metal surfaces, which protects from wear, high temperatures, and corrosion. The company’s primary engineering and operation center, Praxair Technology Center (PTC), is located in Tonawanda. Praxair supports the global industrial gases business, employing over 1,000 workers and it represents the largest center in the Americas, and one of the largest worldwide. The center has over 1,500 active patents, and the research and development team in Tonawanda has continually set standards of excellence for the entire industry to follow. The International Monitoring and Production Assistance Center (IMPAC), is also located in Tonawanda. IMPAC remotely monitors plants, which allows them to operate more efficiently and is equipped with immediate alarm responses and plant shutdowns.
Without prompt action, BLM’s authority to sell helium from the Reserve will expire later this year, and 30% of the world’s supply of helium will no longer be available to important sectors of the economy. This potential result would be harmful to the economy, and is completely avoidable. The Helium Stewardship Act of 2013 would help continue the supply of helium, while also transitioning the program to a more market-based, transparent system.
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