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Tech Sector Quakes As America Edges Closer to the “Helium Cliff”

I want to talk to you about gas.

No… not that kind of gas!

I’m referring to one that probably never crosses your mind, unless you’re blowing up a balloon, or trying to sound like Mickey Mouse.

Helium.

But aside from party tricks, helium is infinitely more important than you might think.

Helium is the second-most abundant substance in the world and accounts for almost one-quarter of the mass of everything.

And for technology companies, it’s absolutely crucial.

However, a little-known 17-year-old law is threatening their prospects.

And the collision is imminent…

Don’t Put a Cork in it…

Ever heard of the Federal Helium Reserve?

Not many folks have… but during Bill Clinton’s presidency, it was the focal point of a messy budget struggle.

Based near Amarillo, Texas, it’s a strategic reserve of over one billion cubic meters of helium. It supplies half of America’s helium and one-third of the world’s supply.

But there’s a problem: It was set up in 1925 to store helium for airships and was a crucial asset during the Space Race and Cold War. Needless to say, those days are over and due to a combination of helium stockpiling and poor pricing, the reserve has become unprofitable. In fact, by 1995, it had racked up $1.4 billion worth of debt.

With critics branding it a wartime relic and the “poster-child of government waste,” Congress passed the Helium Privatization Act of 1996. It mandated the liquidation of the government’s helium ownership, starting in 2005.

In other words, the government has been slowly selling off helium to private buyers to pay off its debt.

That debt is now paid. Which means, by law, the reserve will officially shut on October 7 – leaving a huge amount of helium unsold and untapped.

This potential crisis – dubbed the “Helium Cliff” – would have dire consequences for the technology sector, given that helium is crucial in so many technologies.

That’s why the Semiconductor Industry Association, the Information Technology Industry Council and tech giants like Intel (INTC), Samsung (SSNLF), Qualcomm (QCOM) and General Electric (GE) are fiercely lobbying the Obama administration and Congress for a resolution.

Quoted in the Chicago Sun-Times, David Isaacs, Vice President of Government Affairs for the Semiconductor Industry Association, warns, “We want to emphasize the urgency of the situation… this is a real deadline. If this reserve was to go offline, it would create problems.”

Specifically, plugging the enormous helium supply would disastrously affect many technologies…

~ Particle Accelerators: The U.S. Geological Survey says roughly one-third of helium goes towards cryogenics.

Specifically, it’s used to study the effects that helium has at very low temperatures. You see, helium is able to cool objects to minus 450 degrees Fahrenheit. No other coolant can compare.

For example, liquid helium cools superconductor equipment in particle accelerators. That’s important because there are roughly 26,000 accelerators in the world, which require a large amount of helium for radiotherapy research, ion implantation and biomedical studies.

~ Medicine: Helium is critical in medical technology. In fact, medical imaging scanners account for one-third of the helium market. Take MRI machines, for example. At roughly $2 million each, they need liquid helium to cool the superconducting magnets, or risk damage and inaccurate readings.

And while newer MRIs use less helium than older versions, we’re still a long way from developing a magnet that doesn’t need to use liquid helium to operate.

In brain research, liquid helium is used to cool devices that measure small magnetic fields in brain cells.

~ Military Technology and Aviation: Helium is used in several ways across the U.S. military. For example, the Air Force uses helium when experimenting how to use superconductors as a power source.

Submarines use liquid helium to clean noise signals from their detectors. Heat-guided missiles use liquid helium, too.

Boeing (BA) also uses helium to cool parts of aircraft and check for leaks in fuel tanks.

~ Digital Devices: Many of today’s most popular consumer gadgets require helium in the manufacturing process. The fiber-optic cables used for internet access and cable television require an all-helium environment to be made. It’s the only way to prevent bubbles from getting trapped inside.

And the semiconductor chips that control your electronics need liquid helium to cool the magnets. Plus, these materials conduct electricity much faster at colder temperatures, while remaining inflammable due to the helium.

The Price of Privatization

It’s clear that a helium shortage caused by shutting down the reserve would prove devastating to technology.

In addition, putting helium in the hands of private buyers causes two more problems…

  1. Like anything that’s privatized, the price of doing business will rise. Industries that rely heavily on helium will be forced to pay more. And higher costs will inevitably be passed down to consumers.
  2. In terms of the best methods to extract helium, they have far less knowledge than the government, which has extracted and sold it since the 1920s. That could cause supply and demand problems and affect deliveries. In fact, a severe shortage could even eliminate some products from the market entirely. That’s why in May, Congress extended the government’s involvement in supplying helium.

But it needs to do more. It’s not like it hasn’t had fair warning, either. In 2010, the National Research Council warned of disastrous consequences if the reserve were shut down: The United States would become a net helium importer for the first time – primarily from our “friends” in the Middle East and Russia.

Congress’ upcoming decision is critical. Stop-gap measures aren’t going to work. It urgently needs to maintain the reserve. It’s the difference between technologies advancing, versus potentially getting wiped off the map.

Your eyes in the Pipeline,

Martin Biancuzzo

Marty Biancuzzo

, Technology Analyst

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