Major impediments to a feasibility study in the case of Smith Bay development

Abstract

The State of Alaska is one of the energy-producing states which rely on revenue from energy extraction, but faces several challenges, especially significant fluctuations in revenue generated by taxes. In the past, oil production from established oil fields on state land yielded sufficient tax revenue. For new sources of oil, oil company owners must make a decision about developing the prospects based on a feasibility study which produces preliminary design, cost estimates, project schedule, including many permits and other uncertainties, financing, and tax credits. When this study is done, the decision can be made to begin development. This paper considers the feasibility studies on main obstacles in the development path of Smith Bay. The evaluation of major tasks needed for a feasibility study, uncertainty and obstacles, combined with our estimation of the time period required for the oil fields to produce oil, led to an estimate of the time before tax money will be provided to the state.