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115th Congress }                                          { REPORT
                        HOUSE OF REPRESENTATIVES
 1st Session   }                                          { 115-365

======================================================================
 
                     HELIUM EXTRACTION ACT OF 2017

                                _______
                                

October 23, 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Bishop of Utah, from the Committee on Natural Resources, submitted 
                             the following

                              R E P O R T

                        [To accompany H.R. 3279]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Natural Resources, to whom was referred 
the bill (H.R. 3279) to amend the Mineral Leasing Act to 
provide that extraction of helium from gas produced under a 
Federal mineral lease shall maintain the lease as if the helium 
were oil and gas, having considered the same, report favorably 
thereon without amendment and recommend that the bill do pass.

                          Purpose of the Bill

    The purpose of H.R. 3279 is to amend the Mineral Leasing 
Act to provide that the extraction of helium from gas produced 
under a Federal mineral lease shall maintain the lease as if 
the helium were oil and gas.

                  Background and Need for Legislation

    H.R. 3279, the Helium Extraction Act of 2017, amends the 
Mineral Leasing Act (30 U.S.C. 181 et seq.) to allow helium 
extraction from gas on federal lands under the same lease terms 
as oil and gas. The impending closure of the Bureau of Land 
Management's Federal Helium Reserve in 2021 threatens the 
stability of the domestic helium market. H.R. 3279 works to 
alleviate some of these supply concerns by facilitating the 
production of helium on federal lands, while simultaneously 
providing a fair return to the taxpayer.
    Refined helium continues to serve as an essential component 
of America's economy, particularly in the fields of medicine, 
science, and defense. Liquefying at the ultra-low temperature 
of 4.2 +K (-452 +F), helium's unique properties as a coolant 
and nonreactive, nonflammable gas make it irreplaceable in 
these and other industries.
    Historically, much of the American demand for helium has 
been satisfied by the Federal Helium Reserve. First developed 
in 1926 to keep up with global advancements in military 
technologies, the Federal Helium Reserve is maintained by a 
reservoir and pipeline system spanning Oklahoma, Kansas and the 
panhandle of Texas. The Bureau of Land Management (BLM) 
estimates that the Reserve provides enough helium to meet more 
than 40 percent of domestic demand for the gas.
    In 2013, Congress passed the Helium Stewardship Act (HSA, 
Public Law 113-40) with broad bipartisan support, thus avoiding 
a closure of the Reserve and the immense market shortages that 
would have followed. The HSA presented a competitive, free 
market approach to sell off the remaining helium in the Federal 
Reserve, such that by fiscal year 2021, all helium would be 
auctioned by BLM to interested buyers.
    Acknowledging the vital role of helium in our space, 
defense and medical research and development endeavors, one of 
the principal aims of the HSA was to ensure continued access to 
federal helium users at a fair price, including federal grant 
recipients. The Natural Resources Committee bill report on the 
HSA articulated this intention, directing a portion of helium 
be preserved for federal use ``when the remaining Reserve 
volume equals 3 billion cubic feet,'' and continuing ``until 
the recoverable helium in the reserve is expended.'' H. Report 
113-42.
    Unfortunately, major concerns remain regarding the future 
of our domestic helium supply. BLM has interpreted the HSA to 
mean that it should sell off the Federal Helium Reserve in its 
entirety, including the 3 billion cubic feet designated for 
federal users. The helium supply for researchers is already in 
a state of crisis, with end-user prices for helium increasing 
by as much as 250 percent in the last six years. And as the 
single largest producer of helium in the world, uncertainty in 
the American market could have far-reaching impacts on global 
supply as well.
    Not providing land leases for federal helium production 
would deprive the United States a supply of this precious, 
natural commodity and a significant revenue source for 
taxpayers. H.R. 3279 would help secure our domestic helium 
supply for years into the future.
    Although helium is one of the most abundant elements in the 
universe, it is rare on earth, formed in the earth's crust by 
the decay of radioactive elements. Helium is typically a 
byproduct of the natural gas extraction process. To be viewed 
as economically viable for extraction, helium must have a 
concentration of more than 0.3 percent or higher in natural 
gas, and some helium-rich natural gas reserves can contain up 
to 8 percent helium. When it is not considered economically or 
logistically feasible to extract and store crude helium for 
later purification, it may simply be vented into the 
atmosphere.
    The value of helium has changed over time, and varies 
significantly depending on whether it is supplied by the 
government or by private industry. In the private sector, 
Grade-A helium (99.997% purity or better) extracted in 2016 was 
estimated at a value of $650 million. Approximate domestic 
consumption of Grade-A helium in 2016 was 1.7 billion cubic 
feet and its primary uses can be broken down as follows: 30% 
for magnetic resonance imaging; 17% as a lifting gas; 14% for 
analytical and laboratory applications; 9% for welding; 6% for 
engineering and scientific applications; 5% each toward both 
leak detection and semiconductor manufacturing; and 14% for 
other applications.
    The privatization process outlined in the HSA continued in 
2016, with BLM conducting its third helium auction. This 
yielded an average price to private users of $104 per thousand 
cubic feet. Total sales generated almost $43 million in 
revenue.
    The United States Geological Survey (USGS) estimates that 
international helium extraction plants will become the main 
source for global helium buyers by the end of the decade, with 
seven international facilities currently in operation and 
others planned over the next three to five years. However, the 
recent political and diplomatic turmoil involving Qatar may 
cast into question the ability of the world's second-largest 
producer to provide a stable supply of helium to the market.
    Today, the United States leads the world in helium supply, 
with the most recent USGS data estimating total resources and 
reserves to be 744 billion cubic feet. The volume of helium in 
the rest of the world is approximated at 1.13 trillion cubic 
feet. The largest three suppliers after the United States are 
Qatar (357 billion cubic feet), Algeria (290 billion cubic 
feet), and Russia (240 billion cubic feet).
    An increased reliance on foreign nations for helium could 
be of particular concern, considering the national security 
challenges that exist between the United States and the three 
largest foreign suppliers.
    The complexity of the issue has become even clearer in 
recent months. Beginning in early June, Saudi Arabia and its 
regional allies broke off economic and diplomatic relations 
with Qatar, accusing Qatar of sponsoring terrorism and enabling 
Islamist movements such as the Muslim Brotherhood. The nation 
was systematically isolated by its neighbors, with air, land 
and sea routes cut off and sanctions levied by multiple 
countries including Egypt, the United Arab Emirates and 
Bahrain. A regional crisis on multiple fronts, this 
geopolitical struggle may have major implications on American 
foreign policy in the Middle East, as American allies in the 
fight against ISIS have landed on opposing sides of the 
conflict.
    The ultimate effects of Qatar's diplomatic crisis and its 
impact on America's relationship with its allies may not be 
apparent for some time. Suffice it to say, the regional turmoil 
and the functional isolation of the world's second largest 
helium producer is one concern among a plethora of 
complications. Qatar supplied 95 percent of U.S. helium imports 
over the 2012-2015 period. Also troubling is, as of June 13, 
2017, Qatar had already closed two of its helium plants due to 
the rift with its neighboring states.
    Another foreign source of helium is Algeria, currently the 
world's third largest producer. The United States is a major 
trading partner of Algeria, despite the U.S. State Department's 
acknowledgment of the necessary changes Algeria must make to 
achieve economic diversity and transparency. Our active trading 
operations notwithstanding, the 290 billion cubic feet of 
Algerian helium reserves would not be nearly sufficient to 
satisfy American users' demand for the element.
    Russia also possesses a substantial helium supply. Like 
Algeria, however, Russia's helium resources would not be able 
to sustain American domestic demand, let alone global demand.
    Given the vast political, economic, and diplomatic 
uncertainty surrounding many of the largest foreign suppliers 
of helium, it would be imprudent to rely on these nations to 
fully satisfy global demand. Past supply shortages have had 
drastically negative effects on the price of the product, and 
introducing more unpredictability into the future of helium 
supply has the potential to destabilize the market.
    With the impending closure of the Federal Helium Reserve in 
2021, and without other means for the United States government 
to produce its own helium, the future of the domestic and 
global helium markets will face ever increasing uncertainty.
    Venting off helium, or otherwise not facilitating its 
extraction from natural gas reserves on federal lands, would be 
a neglectful waste of a valuable and finite natural resource. 
With the complete sale of the Federal Helium Reserve fast 
approaching, alternative routes to helium acquisition for 
future use, particularly for federal users, remains largely 
unclear.
    Easing America's ability to actively extract helium on 
federal lands under the Helium Extraction Act of 2017 would not 
only help secure the future of the American helium supply, but 
also has the potential to be a substantial revenue source, 
through both land lease royalties and foreign exports to 
support international demand.

                            Committee Action

    H.R. 3279 was introduced on July 18, 2017, by Congressman 
Paul Cook (R-CA). The bill was referred to the Committee on 
Natural Resources. Previously, the Subcommittee on Energy and 
Mineral Resources held a hearing on a discussion draft of the 
bill on June 21, 2017. On July 25, 2017, the Natural Resources 
Committee met to consider the bill. No amendments were offered, 
and the bill was ordered favorably reported to the House of 
Representatives by unanimous consent on July 26, 2017.

            Committee Oversight Findings and Recommendations

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Natural Resources' oversight findings and 
recommendations are reflected in the body of this report.

      Compliance With House Rule XIII and Congressional Budget Act

    1. Cost of Legislation and the Congressional Budget Act. 
With respect to the requirements of clause 3(c)(2) and (3) of 
rule XIII of the Rules of the House of Representatives and 
sections 308(a) and 402 of the Congressional Budget Act of 
1974, the Committee has received the following estimate for the 
bill from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 23, 2017.
Hon. Rob Bishop,
Chairman, Committee on Natural Resources,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3279, the Helium 
Extraction Act of 2017.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Jeff LaFave.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 3279--Helium Extraction Act of 2017

    Summary: H.R. 3279 would allow firms to retain federal oil 
and gas leases that would otherwise expire for the purpose of 
extracting helium. Based on information provided by the Bureau 
of Land Management (BLM) and firms operating in the mineral 
extraction industry, CBO estimates that enacting the bill would 
increase offsetting receipts, which are treated as reductions 
in direct spending, by $9 million over the 2018-2027 period. 
Because enacting the bill would affect direct spending, pay-as-
you procedures apply. Enacting the bill would not affect 
revenues.
    CBO estimates that enacting H.R. 3279 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2028.
    H.R. 3279 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary effect of H.R. 3279 is shown in the following table. 
The costs of this legislation fall within budget function 300 
(natural resources and environment).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  By fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2018    2019    2020    2021    2022    2023    2024    2025    2026    2027   2018-2022  2018-2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              DECREASES IN DIRECT SPENDING
 
Estimated Budget Authority........................       *      -1      -1      -1      -1      -1      -1      -1      -1      -1        -4         -9
Estimated Outlays.................................       *      -1      -1      -1      -1      -1      -1      -1      -1      -1        -4         -9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: * = between -$500,000 and zero.

    Basis of estimate: For this estimate, CBO assumes that H.R. 
3279 will be enacted near the beginning of fiscal year 2018.
    H.R. 3279 would allow firms to retain federal oil and gas 
leases beyond 10 years to extract helium. Under current law, 
firms enter into agreements with BLM to extract helium from 
active oil and gas leases. Those leases expire after 10 years 
if they are no longer producing commercial quantities of oil or 
gas, even if commercial quantities of helium are still being 
extracted. In recent years, BLM has granted waivers that allow 
firms to continue extracting helium on leases that otherwise 
would have expired. In 2016, royalties for helium produced on 
federal oil and gas leases totaled $17 million. All proceeds 
from the production of helium are deposited in the Treasury.
    CBO expects that, under the bill, firms would be more 
likely to acquire oil and gas leases containing noncommercial 
quantities of hydrocarbons but high volumes of helium. Based on 
an analysis of information provided by firms in the mineral 
extraction industry, we estimate that royalties from helium 
production on those new leases would average about $1 million a 
year. Because CBO expects that the number of firms seeking to 
develop such leases over the next 10 years would be small, we 
estimate that receipts from bonus bids for those leases would 
be negligible. Finally, CBO estimates that enacting H.R. 3279 
would have no significant effect on production from existing 
leases because firms extracting helium on leases that may 
expire would probably obtain permission from BLM to continue 
their extraction of helium. In total CBO estimates that 
enacting H.R. 3279 would increase offsetting receipts by $9 
million over the 2018-2027 period.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays that are subject to those 
pay-as-you-go procedures are shown in the following table.

          CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 3279 AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON NATURAL RESOURCES ON JULY 26, 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  By fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2018    2019    2020    2021    2022    2023    2024    2025    2026    2027   2018-2022  2018-2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact....................       0      -1      -1      -1      -1      -1      -1      -1      -1      -1        -4         -9
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term direct spending and deficits: CBO 
also estimates that enacting H.R. 3279 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2028.
    Intergovernmental and private-sector impact: H.R. 3279 
contains no intergovernmental or private-sector mandates as 
defined in UMRA.
    Estimate prepared by: Federal costs: Jeff LaFave; Impact on 
State, local, and tribal governments: Jon Sperl; Impact on the 
private sector: Amy Petz.
    Estimate approved by: H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.
    2. General Performance Goals and Objectives. As required by 
clause 3(c)(4) of rule XIII, the general performance goal or 
objective of this bill is to amend the Mineral Leasing Act to 
provide that the extraction of helium from gas produced under a 
Federal mineral lease shall maintain the lease as if the helium 
were oil and gas.

                           Earmark Statement

    This bill does not contain any Congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined 
under clause 9(e), 9(f), and 9(g) of rule XXI of the Rules of 
the House of Representatives.

                    Compliance With Public Law 104-4

    This bill contains no unfunded mandates.

                       Compliance With H. Res. 5

    Directed Rule Making. This bill does not contain any 
directed rule makings.
    Duplication of Existing Programs. This bill does not 
establish or reauthorize a program of the federal government 
known to be duplicative of another program. Such program was 
not included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-139 
or identified in the most recent Catalog of Federal Domestic 
Assistance published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169) as relating to other programs.

                Preemption of State, Local or Tribal Law

    This bill is not intended to preempt any State, local or 
tribal law.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                          MINERAL LEASING ACT

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, That deposits 
of coal, phosphate, sodium, potassium, oil, oil shale, 
gilsonite (including all vein-type solid hydrocarbons), or gas, 
and lands containing such deposits owned by the United States, 
including those in national forests, but excluding lands 
acquired under the Act known as the Appalachian Forest Act, 
approved March 1, 1911 (36 Stat. 961), and those in 
incorporated cities, towns, and villages and in national parks 
and monuments, those acquired under other Acts subsequent to 
February 25, 1920, and lands within the naval petroleum and 
oil-shale reserves, except as hereinafter provided, shall be 
subject to disposition in the form and manner provided by this 
Act to citizens of the United States, or to associations of 
such citizens, or to any corporation organized under the laws 
of the United States, or of any State or Territory thereof, or 
in the case of coal, oil, oil shale, or gas, to municipalities. 
Citizens of another country, the laws, customs, or regulations 
of which deny similar or like privileges to citizens or 
corporations of this country, shall not by stock ownership, 
stock holding, or stock control, own any interest in any lease 
acquired under the provisions of this Act.
   The term ``oil'' shall embrace all nongaseous hydrocarbon 
substances other than those substances leasable as coal, oil 
shale, or gilsonite (including all vein-type solid 
hydrocarbons).
   The term ``combined hydrocarbon lease'' shall refer to a 
lease issued in a special tar sand area pursuant to section 17 
after the date of enactment of the Combined Hydrocarbon Leasing 
Act of 1981.
   The term ``special tar sand area'' means (1) an area 
designated by the Secretary of the Interior's orders of 
November 20, 1980 (45 FR 76800-76801) and January 21, 1981 (46 
FR 6077-6078) as containing substantial deposits of tar sand.
   The United States reserves the ownership of and the right to 
extract helium from all gas produced from lands leased or 
otherwise granted under the provisions of this Act, under such 
rules and regulations as shall be prescribed by the Secretary 
of the Interior: Provided further, That in the extraction of 
helium from gas produced from such lands it shall be so 
extracted as to cause no substantial delay in the delivery of 
gas produced from the well to the purchaser thereof, and that 
extraction of helium from gas produced from such lands shall 
maintain the lease as if the extracted helium were oil and gas.

           *       *       *       *       *       *       *


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