Exploration announced at critical time for Helium
As Energy Minister Peter Guthrie gets set to meet with industry stakeholders this week for discussions on the province’s critical minerals strategy, two major land acquisition announcements from Calgary-based Global Helium could provide promising developments in helium exploration.
The helium exploration and development company is the latest player to snap up major swaths of land.
On January 10, the company announced a deal with a mineral land owner for a land position in the Manyberries Helium trend in Southeast Alberta. As part of the deal, Global Helium has the option to lease up to 32 sections of land on a proven helium well.
A week later, the company announced a 50 per cent expansion of its landholdings in partnership with Calgary-based Perpetual Energy Inc. with the expectation that two wells will be drilled by the end of the year.
In 2018, testing at a well showed 1.2 per cent concentration of helium, far above the 0.3 per cent threshold necessary for commercial helium extraction.
The company already staked out a drilling location and the permitting process is underway, with drilling expected to start later this year.
Global Helium executive chairman and interim CEO Brad Nichol told AB Today the short answer to what they’re seeking from the province is “nothing.” He called Alberta’s environmental and technical structures “world-renowned” and “incredibly robust.”
These discussions take place at a time when the world’s supply of helium is dwindling, while demand for the element in the use of semiconductors, fibre optics, small modular reactors, Magnetic Resonance Imaging (MRI) and Nuclear Magnetic Resonance (NMR) is rising.
He said the history of helium exploration is only around five years old.
“The helium that has been produced for the last few decades was all found by mistake,” Nichol said. “It was found by somebody that was looking for natural gas, usually, typically, and they stumbled across this stuff that didn’t burn.”
According to Dunn, for decades helium was a novelty, practically given away for free. But now helium prices have skyrocketed as demand increases and supply plummets.
Last year the U.S. Congress passed the Creating Helpful Incentive to Produce Semiconductors and Science Act, or CHIPS Act, to spur domestic semiconductor manufacturing and to reduce reliance on China.
Earlier this month at the “Three Amigos” summit, Prime Minister Justin Trudeau, U.S. President Joe Biden and Mexican President Andrés Manuel López Obrador agreed to increase co-operation on supply chains and critical minerals.
Nichol said about 30 to 35 per cent of demand for helium is in semiconductors, with 35 per cent in MRIs.
When the company was founded seven years ago by a manufacturer of superconducting magnets used in MRI machines, it was with an eye on supplying liquid helium to customers rather than selling helium to be liquefied at the production facility in Colorado.
“The mindset that we’ve had since day one is, we’re not just ex-oil and gas people that maybe [were] laid off, or we changed jobs, or we’re looking for something new — we’re helium producers that want to supply liquid helium to our customers,” Nichol said.
He said if the exploration proves fruitful, Global Helium could have six to 10 producing wells within a year, and open an $80-to-100-million liquefaction plant within two or three years.
Helium crisis kneecapping research opportunity
A Western Canadian helium liquefaction facility is exactly what Ryan McKay, NMR facility manager at the University of Alberta’s College of Natural and Applied Sciences, has been calling for amid the helium supply shortage.
McKay spoke to AB Today one afternoon after dealing with a morning helium emergency in the midst of what he calls, “helium crisis No. 4.”
The top of the thermos-like container carrying a precious 100-litre shipment of helium had been stripped in its release valve. The super-cool element, required to be pure for the multi-million-dollar machinery at the post-secondary institution, was contaminated by elements in the air, turning the nitrogen and other elements from the air, instantly freezing them and turning it into an unusable “slurpee.”
It’s helium supply he could not afford to lose, calling it the “most non-renewable resource on earth.” It can only be created in nuclear fusion of hydrogen in stars, or by decay of certain elements beneath the earth’s surface.
Helium is used for imaging equipment — including that on the University of Alberta’s campus — powered by superconducting magnets that gain their charge through the supercooling properties of liquid helium, which is still in a liquid state at -269C.
Unlike a computer that can be switched on and off. If the magnets heat up, there is a chance they will fail, never to be restarted — or, as McKay contextualized it, “Your $10-million MRI just got fed to a landfill.”
Restarting it takes thousands of litres of helium to cool it back down again — supply that is not available.
The University of Alberta told McKay last year his helium supplies would be cut to 75 per cent, meaning they had to triage equipment.
He reached out to the CEO of Calgary-headquartered North American Helium, which agreed to direct a 44,000 litre batch of liquid helium to around 20 Canadian customers, including the University of Alberta and the University of Calgary.
From that incident, McKay and others joined to create the Canadian Helium Users Group, petitioning local, provincial and federal governments to ensure a Canadian supply of liquid helium.
“We now know that the border can be shut down on a moment’s notice,” McKay said. “If we get all of our helium only from the U.S., then it’s only a matter of weeks or months until we lose all of our systems.”
The one-time North American Helium shipment was a temporary solution. With years of cutbacks to research grants, labs did not have the funding to cover the rising open market costs to secure an ongoing supply.
McKay has had to decommission two spectrometers in a two-year span, including an NMR spectrometer he used to publish his graduate research. His graduate professor was “devastated.”
“These are instruments he’s had for decades and published hundreds of papers on them, and is now being forced to shut them down — not because they’re damaged, not because they don’t work, but because we can’t afford to keep them running,” McKay said.
Helium reserve shut down, geopolitical tensions worsening shortage
Dwindling supplies are the result of a perfect storm of circumstances among suppliers across the globe.
The world’s only strategic helium reserve was located in the U.S., until it shut down in 2021. At the same time, demand is growing by about six per cent per year, Nichol said.
The largest global supply comes from Qatar, which Nichol says “isn’t the friendliest jurisdiction.”
Besides Qatar, much of the world’s helium comes from Russia. The country’s invasion of Ukraine has meant that supply, too, is disrupted.
Russia’s supply situation worsened as an explosion at Gazprom’s Amur natural gas processing plant in Siberia took out another potential manufacturer of the world’s helium supply. McKay described the footage as something out of a Bond film.
“This one tower just goes, boom, boom, boom, boom, the explosion comes down the tower and this security camera gets shaken by the explosion and there’s pipes flying everywhere,” McKay said. “And you’re looking at it going, OK, so that’s not going to be producing anything for a while.”
Saskatchewan leads, Alberta follows
Western Canada is emerging as another potential supplier. Most of the 80 or so wells —15 of which are currently producing — are in Saskatchewan.
Both provinces sit on the Western Canada Sedimentary Basin, which has been a magnet for oil and gas, but with greater interest in lithium and helium, other resources are found in the same formations. It is estimated that Western Canada has the world’s fifth-largest helium resources.
The Alberta Geological Survey conducted in 2020 explored potential for the minerals, both in oil field brine samples for lithium, and for helium, with the greatest stores found to be in Peace River and southeastern Alberta.
In May 2020, the provincial government announced a new helium royalty rate of 4.25 per cent for five years. At the time, Energy Minister Sonya Savage said companies approached the province about developing and investing, but the uncertainty of not having royalty rate was a disincentive to investment.
Currently, the only company in Alberta approved to produce helium is Thor Resources, with Imperial Helium, First Helium and Avanti Energy also in the exploratory phases.
In an interview with AB Today, Trade, Immigration and Multiculturalism Minister Rajan Sawhney said helium is part of Alberta’s overall energy mix, with the province sitting on an ample supply and looking to meet the world’s needs.
“We’re just on the cusp of really making things happen,” she said.
Sawhney said the government has a limited role to play, mainly by setting up the right fiscal conditions. But she sees her ministry as playing a “concierge” role in the future — setting up suppliers with organizations looking to access that supply.
She said an investor in India’s capital markets told her, “Alberta is sitting on a bundle of hope.”
Nichol noted the regulatory pendulum has swung from not stringent enough in the 1950s to 1970s to a place where approval applications now take months to process.
For example, while there are many wellsites drilled in the region, the integrity of the wellbore steel casing and the cement would be too much of a liability, and modern technologies and materials are better and preserve the integrity of the sites.
Pre-budget call for tax code changes
Richard Dunn, consultant at Capilano Policy Group, has been lobbying the provincial and federal governments on behalf of helium companies, including Global Helium, to amend federal tax codes to bring helium in line with other drilling types, and to get helium recognized as a critical mineral under the Critical Mineral Exploration Tax Credit.
Because helium exploration is still in its infancy, it can be challenging to access capital for deep drilling in risk-averse markets. Dunn has called for helium companies to be eligible for tax incentives accessed by other mining companies — the Canadian Exploration Expense and Canadian Development Expense.
Similarly, Dunn said he has also called for flow-through shares, a mechanism used by mining companies during the exploratory phase of projects to allow investors to deduct expenses on their individual income tax before the projects generate revenue.
Currently, there are 31 critical minerals recognized by the federal government, including helium, but only 15 are eligible for the Critical Mineral Exploration Tax Credit. Dunn wants to see the tax credit extended to helium in the upcoming 2023-24 federal budget.
While the tax credit was meant to spur exploration of critical minerals and rare earth elements used in electric vehicles, such as lithium, Dunn said EVs use significantly more semiconductors than combustion engines and helium will be necessary.
Dunn said while the federal government has recognized the importance of lithium as a critical mineral for the use of batteries in electric vehicles, helium has been overlooked for its importance in semiconductor manufacturing.
Nichol agreed that Alberta should help meet increasing world demand.
“This industry is unbelievably rock solid, it’s incredibly under-supplied and it will be for as long as we can see,” he said.