Air Products sues to block auction of US Federal Helium System

The industrial gas supplier Air Products has filed a lawsuit against the US government seeking to block the ongoing sale of the Federal Helium System. The firm is asking a US District Court for an immediate injunction pausing all proceedings and a set of judgments declaring the sale unlawful as currently structured.

The US Federal Helium System is a set of assets for storing, refining, and distributing helium. It includes a large geological dome formation near Amarillo, Texas; nearly 23 million m ³ of raw helium inside the dome; a set of pipelines that distribute helium to refining sites in Texas, Oklahoma, and Kansas; and supporting equipment and infrastructure. The system, established in the 1920s to fill military dirigibles, currently supplies more than 9% of global helium demand.

The US Congress passed laws in 1996 and 2013 requiring the helium system to be privatized. In response, the government began accepting bids for the system in July of this year. It plans to close bidding on Nov. 15 and sell the system to the winning bidder by mid-March 2024. The legislation requires the government to ensure the stability of helium supplies and markets while disposing of the system.

Air Products cites three main reasons the auction plan sets up any private owner to fail—possibly causing the system to shut down.

One is that the system, especially the pipelines, would struggle to meet state workplace safety, transportation, and environmental standards. The federal government is exempt from state regulations, but a private owner would have to comply. Air Products also says the government lacks complete documentation for several spots where the pipeline runs through private land, “and it takes only one bad right-of-way to shut down the entire pipeline.”

A third complaint is that the sale does not include the crude helium enrichment unit that takes helium out of the dome and prepares it for transfer through the pipelines, nor does it convey to the buyer the operating agreement the government has with the unit’s owner, Cliffside Refiners. Cliffside is a limited partnership consisting of Air Products and the industrial gas firms Praxair, Kinder Morgan, and Messer.

To solve any such problems, a private owner would have to shut off production for a time, the complaint says, resulting in “grave public and private harms that can never be undone.”

The lawsuit is an escalation of ongoing opposition to the auction by Air Products and other industry players, according to Phil Kornbluth, a helium consultant who worked for the industrial gas firm BOC. “Clearly the intent is to postpone the sale,” he says. “And if they are unable to postpone the sale, they want potential bidders to have second thoughts about bidding. Folks may not want to buy an asset that could be entangled in litigation.”

Air Products doesn’t want the system to be owned by a competitor or an unqualified operator, Kornbluth says. “On the other hand, they don’t want to buy it themselves, because it’s a messy, risky asset. The preferred state is the status quo.”

The law doesn’t put a specific deadline on the sale of the government’s helium assets, so the system could run as is until the dome is empty, many in the industry argue. Proceeds from continued sale of the government’s helium stock could pay the operation’s bills until then.

The status quo would be a good outcome for end users too, Kornbluth says, including the many scientists who use liquid helium to cool superconducting magnets in laboratory instruments. The system is currently operated by Messer under a contract with the government, a setup that has resulted in stable operation, he says. A delayed sale helps users, because in a few years, new helium supplies comming on line around the world should make the market less sensitive to disruptions in Amarillo, Kornbluth says.

Though prices matter to helium users, what they really want is reliability, according to Bo Sears, chief technical officer at the industrial gas advisory firm Edelgas. Scientific users are particularly vulnerable because they are small compared with industrial customers in the semiconductor and aerospace industries, he says, and often aren’t prioritized during shortages. But a missed shipment can destroy nuclear magnetic resonance spectrometers and other expensive equipment.