A statistical analysis of Alaskan oil and natural gas lease bids

Abstract

This study statistically analyzes the behavior of oil and gas lease bidders in Alaska using pooled cross-sectional time series data from 1959 to 1998. The two players associated with this data set are the corporate or major players and the independent or non-major players. The behavior of each group is statistically distinct. Majors maximize profit by exploiting oil and gas; non-majors maximize profit by reselling the leases. The effect of joint bidding is also investigated. The consequence of ownership of the Trans Alaska Pipeline System or TAPS is also considered (all owners of the TAPS are major firms). The findings intimate that owners have a distinct advantage over non-owners. Owners bid significantly higher. Another aspect of the pipeline is the tariff associated with the TAPS. While North Slope sales are more profitable than other sales, the tariff combined with diminishing productivity of leases results in fewer bidders for northern sales.