The resource is in short supply — and vital to MRIs, computer chips, space exploration and party balloons
CHEYENNE WELLS — Out on Colorado’s southeastern plains, not far from the Kansas state line, there’s a rare kind of plant that processes a natural resource found in limited amounts globally and produces something the world literally can’t get enough of. The Ladder Creek plant just west of Cheyenne Wells is one of a handful of sites that extracts helium from natural gas after an involved process that freezes it, turns helium gas into a liquid and funnels it into waiting tanker trucks. Helium might make most people think of party balloons, but birthdays and election night celebrations aren’t the reason why the price of helium has more than doubled over the last 18 months or so. And it’s not the reason Durell Johnson decided to buy the plant that he helped design and build in 1997 while working for Union Pacific Resources. His company, Tumbleweed Midstream, acquired the plant in December from Denver-based DCP Midstream. “I spent pretty much my entire career, 35 years, in the natural gas business,” said Johnson, a Texas native. “When I look back, this was the most fun time of my career, building this helium plant. From an engineering standpoint, helium is just really cool.” It’s also in short supply right now. Helium is a product of radioactive decay in the center of the Earth that gets trapped with natural gas as it migrates up, Johnson said. However, not all natural gas contains helium, at least not in high enough concentrations to make extracting it economically worthwhile. “It’s not uncommon to find very small concentrations, but you really need to be up in the half percent or so range to where it really starts affecting the the bottom line,” Johnson said. “The gas here in Cheyenne County is phenomenal. Across the country it goes anywhere from 1.5% to 5 or 6% helium.” That’s good news for Johnson, the employees at the Ladder Creek plant and the local economy. Helium prices, like the element itself in gaseous form, have been rising. Natural gas prices are about $2 per thousand cubic feet right now, Johnson said. “Helium can easily be $200 or more” per thousand cubic feet, Johnson said. “It’s in such demand that every molecule of it is spoken for.” A run on party balloons isn’t behind the demand. The biggest use of helium, about 24%, is in magnetic resonance imaging, or MRI, machines. Liquid helium is the only substance cold enough — about minus 458 degrees Fahrenheit — to chill the superconductive magnets in the machine so images of the body can be produced.
Liquid helium is also used in computer chip manufacturing; welding; fiber optics; to cool the liquid oxygen and hydrogen that power space vehicles; and to mix with the oxygen used by deep-sea divers to prevent the harmful effects associated with nitrogen under pressure in the bloodstream. All vital purposes, which makes the gap in supply a challenge. Johnson said the world is using roughly 6.6 billion cubic feet of helium annually, but the supply is only about 5.9 billion cubic feet. He said a federal helium reserve in Texas can be tapped to help cover the shortfall. “We’re two years into a shortage and it’s really more of a supply-driven shortage than a demand-driven shortage,” said Phil Kornbluth, president of Kornbluth Helium Consulting in Bridgewater, N.J. Some of the world’s helium sources have been in decline, Kornbluth said, most notably the Bureau of Land Management’s helium storage reservoir near Amarillo, Texas. A pipeline from the federal reservoir runs through Oklahoma to Kansas and connects to four helium processing plants. The federal government is in the process of privatizing its helium assets and the plants’ production has dropped. “So, cumulatively, over a period of quite a few years, about 2 billion cubic feet of capacity has been lost in the system that’s connected to the BLM pipeline,” Kornbluth said. While there’s little solid data “to grab hold of in the helium business,” Kornbluth said most people believe demand for the resource likely peaked in 2011. Since then, the market has experienced one boost in supply and extended shortages. There are only 14 plants in the world that process helium, and seven of those are in the U.S. In fact, the U.S. accounts for 51% of the world’s supply, followed by Qatar at 33%, Algeria at 11%, Russia at 3% and Australia at 2%. New sources of the substance are in development and are expected to hit the market in the next few years, Kornbluth said. A plant in Algeria is being expand and new projects are expected in Qatar and Russia. “The industry consensus is that the shortage will end in mid-2021,” Kornbluth said. He sees a lot of opportunity for the Ladder Creek plant to expand its “tolling” operation, which takes another company’s crude helium, purifies it and turns it into the final liquid product. Kornbluth once worked for a company that was one of the original buyers of the plant’s helium.
Johnson sees nothing but opportunity at Ladder Creek. There’s the economic opportunity and being on the vanguard of a market with worldwide implications. For Johnson, there’s also the opportunity to follow through on a vision he helped form more than two decades ago. He was working for Union Pacific Resources in 1996 when the geologists talked about the helium they were finding as the company drilled for oil in Cheyenne County. “We had just thrown out the idea that, ‘Hey, do you think there’s enough gas out there to build a helium plant?’ I was in that conference room in the meeting,” Johnson said. “We of course chased it down and sure enough, there was a huge reservoir here, so we built the plant.” Johnson was the project manager. He oversaw the design work and construction and hired and trained the employees. He stayed on until 1999 when the company’s assets were acquired by Anadarko and Duke Energy. Johnson returned to Texas and headed engineering and operations for a number of natural gas companies. But Johnson and his family kept in touch with friends they made in Cheyenne Wells. And through the years, Johnson kept tabs on Ladder Creek. He formed Tumbleweed Midstream to acquire the plant. Johnson, the company’s CEO, declined to disclose the financial terms. During a recent tour of the site, which includes 36 acres of land, the buzz among employees about the turn of events was nearly as loud as the machinery running the natural gas and its components — methane, nitrogen, helium — through the processing. “Oh my gosh, I am so excited about this. I had worked with Durell (Johnson) when we built this plant and I enjoyed working with him then,” said Tami Brown, who has worked in administration since Ladder Creek began operations in 1997. Since then, production had decreased and the plant was working “with a skeletal crew,” Brown said. “DCP (Midstream) had planned on closing this, shutting us down,” Brown said. “A lot of us could’ve been out of jobs.” Cheyenne County Commissioner Ron Smith is happy that instead of closing, Ladder Creek is expanding. Johnson has added nine employees since December, increasing the workforce to 27. “It’s a big boost for the economy,” Smith said. “I was on the fire department when they built the plant out there. Former Gov. Roy Romer came down and set off the grand opening. It was big for us.” Smith owns a hardware store in Cheyenne Wells. He said the helium plant supported his business when it was under construction and still does. The plant is producing at about 15% of its capacity, Johnson said. The plant can handle processing about 40 million cubic feet of natural gas a day from the wells in the area. It can produce up to 1.5 million cubic feet of helium a day. Johnson said the plant could end up doubling its production rate in the next two to three months.
The plant has contracts to buy natural gas from about 20 companies producing in the area. Johnson said the wells don’t require fracking because the geology is more permeable than in other parts of Colorado. The Ladder Creek system includes 190 miles of interstate pipeline, 420 miles of natural gas gathering lines and 10 compressor stations. Laine Mitchek, a 10-year Ladder Creek employee, walks through the grounds and inside the processing plant, pointing out where the natural gas enters what’s called a cold box, a 100-foot-tall structure outside and where the extraction of helium begins. Through a series of chilling and compression and expansion cycles, propane, butane, methane are condensed and separated out, leaving nitrogen and helium. Finally, the nitrogen is removed. The helium is processed to the point of being 99.999% pure, is turned into liquid and funneled to a tanker that contains a liquid nitrogen shell and a vacuum. Those shield the liquid helium to keep it frigid and prevent it from reverting back to its gaseous form. Air Liquide, a French company that buys the plant’s helium, then picks up its truck and distributes the product. Helium is second-most abundant element in the universe, behind hydrogen, but is far more scarce on earth. Helium has the lowest boiling point of any element and is the second-lightest, next to hydrogen. It will revert back to gas if steps aren’t taken to stop it, Johnson said. It’s easier and more economical to ship liquid helium than helium gas, he said. It would take seven trailers of helium gas to transport the equivalent of one trailer of liquid helium. Many customers want helium in its liquid form. Some of the natural gas is sold to Colorado Interstate Gas. The natural gas liquids, propane and butane, are shipped via pipeline to a plant in Kansas. Ladder Creek uses residual natural gas to power the plant. Johnson has high hopes for Ladder Creek. He said there are only two other helium plants in the country that can do what his does: one in Wyoming and one in Utah. He is also confident that there’s plenty of helium in the area to keep the plant humming for a long time. “When we were with (Union Pacific Resources), it was a $100 million investment back in 1997. To justify that we had to be comfortable that there was enough resource here to keep that plant full for 30 years,” Johnson said.